UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|
|
|
þ
|
|
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
For Quarterly Period Ended April 1, 2007
|
|
|
o
|
|
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
For the transition period from
to
Commission File Number
000-30361
Illumina, Inc.
(Exact name of registrant as specified in its charter)
|
|
|
Delaware
|
|
33-0804655
|
|
|
|
(State or other Jurisdiction of
Incorporation or Organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
|
|
9885 Towne Centre Drive, San Diego, CA
|
|
92121
|
|
|
|
(Address of Principal Executive Offices)
|
|
(Zip Code)
|
(858) 202-4500
(Registrants 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
þ
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
þ
Accelerated filer
o
Non-accelerated filer
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes
o
No
þ
As of April 10, 2007, there were 53,605,794 shares of the Registrants Common Stock outstanding.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Illumina, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
April 1, 2007
|
|
|
December 31, 2006 (1)
|
|
|
|
(unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
123,529
|
|
|
$
|
38,386
|
|
Short-term investments
|
|
|
203,292
|
|
|
|
92,418
|
|
Accounts receivable, net
|
|
|
53,127
|
|
|
|
39,984
|
|
Inventory, net
|
|
|
36,340
|
|
|
|
20,169
|
|
Prepaid expenses and other current assets
|
|
|
8,248
|
|
|
|
2,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
424,536
|
|
|
|
193,726
|
|
|
Property and equipment, net
|
|
|
32,807
|
|
|
|
25,634
|
|
Investment in Solexa
|
|
|
|
|
|
|
67,784
|
|
Goodwill
|
|
|
248,543
|
|
|
|
2,125
|
|
Acquired intangible assets, net
|
|
|
23,958
|
|
|
|
|
|
Other assets, net
|
|
|
12,993
|
|
|
|
11,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
742,837
|
|
|
$
|
300,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
66,661
|
|
|
$
|
33,713
|
|
Current portion of long-term debt
|
|
|
67
|
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
66,728
|
|
|
|
33,776
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, less current portion
|
|
|
400,006
|
|
|
|
|
|
Other long-term liabilities
|
|
|
10,143
|
|
|
|
19,466
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
265,960
|
|
|
|
247,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
742,837
|
|
|
$
|
300,584
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The Condensed Consolidated Balance Sheet at December 31, 2006 has been derived from the
audited financial statements as of that date.
|
See accompanying notes to the condensed consolidated financial statements.
3
Illumina, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
April 1, 2007
|
|
|
April 2, 2006
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Product revenue
|
|
$
|
61,266
|
|
|
$
|
23,261
|
|
Service and other revenue
|
|
|
10,761
|
|
|
|
5,267
|
|
Research revenue
|
|
|
123
|
|
|
|
574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
72,150
|
|
|
|
29,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
Cost of product revenue (including non-cash stock
compensation expense of $883 and $198, respectively, and
excluding amortization of acquired intangible assets)
|
|
|
21,815
|
|
|
|
7,676
|
|
Cost of service and other revenue (including non-cash stock
compensation expense of $63 and $52, respectively)
|
|
|
3,305
|
|
|
|
1,617
|
|
Research and development (including non-cash stock
compensation expense of $1,931 and $958, respectively)
|
|
|
15,956
|
|
|
|
8,216
|
|
Selling, general and administrative (including non-cash
stock compensation expense of $4,801 and $1,923,
respectively)
|
|
|
23,633
|
|
|
|
12,134
|
|
Amortization of acquired intangible assets
|
|
|
442
|
|
|
|
|
|
Acquired in-process research and development
|
|
|
303,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
368,551
|
|
|
|
29,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(296,401
|
)
|
|
|
(541
|
)
|
|
|
|
|
|
|
|
|
|
Interest and other income, net
|
|
|
2,722
|
|
|
|
568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(293,679
|
)
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
4,397
|
|
|
|
131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(298,076
|
)
|
|
$
|
(104
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per basic and diluted share
|
|
$
|
(5.58
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in calculating basic and diluted net loss per share
|
|
|
53,422
|
|
|
|
41,475
|
|
|
|
|
|
|
|
|
See accompanying notes to the condensed consolidated financial statements.
4
Illumina, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
April 1, 2007
|
|
|
April 2, 2006
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(298,076
|
)
|
|
$
|
(104
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Acquired in-process research and development
|
|
|
303,400
|
|
|
|
|
|
Amortization of increase in inventory valuation
|
|
|
816
|
|
|
|
|
|
Amortization of intangible assets
|
|
|
453
|
|
|
|
7
|
|
Amortization of debt issuance costs
|
|
|
165
|
|
|
|
|
|
Depreciation expense
|
|
|
2,594
|
|
|
|
1,093
|
|
Loss on disposal of property and equipment
|
|
|
2
|
|
|
|
20
|
|
Stock-based compensation expense
|
|
|
7,678
|
|
|
|
3,131
|
|
Amortization of gain on sale of land and building
|
|
|
(60
|
)
|
|
|
(94
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(8,209
|
)
|
|
|
(3,742
|
)
|
Inventory
|
|
|
(8,203
|
)
|
|
|
(3,549
|
)
|
Prepaid expenses and other current assets
|
|
|
(400
|
)
|
|
|
(236
|
)
|
Other assets
|
|
|
1,419
|
|
|
|
54
|
|
Accounts payable and accrued liabilities
|
|
|
9,583
|
|
|
|
2,961
|
|
Accrued income taxes
|
|
|
3,659
|
|
|
|
|
|
Other long-term liabilities
|
|
|
(178
|
)
|
|
|
2,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
14,643
|
|
|
|
2,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
Cash obtained in acquisition, net of cash paid for transaction costs
|
|
|
76,745
|
|
|
|
|
|
Investment in secured convertible debentures
|
|
|
|
|
|
|
(3,036
|
)
|
Purchases of available-for-sale securities
|
|
|
(157,550
|
)
|
|
|
|
|
Sales and maturities of available-for-sale securities
|
|
|
49,634
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(3,239
|
)
|
|
|
(4,192
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(34,410
|
)
|
|
|
(7,228
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
Payments on long-term debt
|
|
|
(37
|
)
|
|
|
(29
|
)
|
Proceeds from issuance of convertible debt, net of issuance costs
|
|
|
390,745
|
|
|
|
|
|
Purchase of convertible note hedges
|
|
|
(139,040
|
)
|
|
|
|
|
Sale of warrants
|
|
|
92,440
|
|
|
|
|
|
Common stock repurchases
|
|
|
(250,889
|
)
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
11,731
|
|
|
|
3,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
104,950
|
|
|
|
3,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency translation on cash and cash equivalents
|
|
|
(40
|
)
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
85,143
|
|
|
|
(1,778
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
38,386
|
|
|
|
50,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
123,529
|
|
|
$
|
49,044
|
|
|
|
|
|
|
|
|
See accompanying notes to the condensed consolidated financial statements.
5
Illumina, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Summary of Significant Accounting Principles
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with U.S. generally accepted accounting principles for interim financial information and
the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by U.S. generally accepted accounting principles for
complete financial statements. The unaudited condensed consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and
balances have been eliminated in consolidation. In managements opinion, the accompanying financial
statements reflect all adjustments, consisting of normal recurring accruals, considered necessary
for a fair presentation of the results for the interim periods presented.
Interim financial results are not necessarily indicative of results anticipated for the full
year. These unaudited financial statements should be read in conjunction with the Companys 2006
audited financial statements and footnotes included in the Companys Annual Report on Form 10-K for
the year ended December 31, 2006, as filed with the Securities and Exchange Commission (SEC) on
February 28, 2007.
The preparation of financial statements requires that management make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and
related disclosure of contingent assets and liabilities. Actual results could differ from those
estimates.
Fiscal Year
The Companys fiscal year consists of 52 or 53 weeks ending the Sunday closest to December 31,
with quarters of 13 or 14 weeks ending the Sunday closest to March 31, June 30, and September 30.
The three months ended April 1, 2007 and April 2, 2006 were both 13 weeks.
Revenue Recognition
The Companys revenue is generated primarily from the sale of products and services. Product
revenue consists of sales of arrays, reagents, instrumentation, and
oligonucleotides (oligos), which are short
sequences of DNA. Service and other revenue consists of revenue received for performing
genotyping services, extended warranty sales and revenue earned from milestone payments.
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has
occurred or services have been rendered, the sellers price to the buyer is fixed or determinable
and collectibility is reasonably assured. In instances where final acceptance of the product or
system is required, revenue is deferred until all the acceptance criteria have been met. All
revenue is recorded net of any applicable allowances for returns or discounts.
Revenue for product sales is recognized generally upon shipment and transfer of title to the
customer, provided no significant obligations remain and collection of the receivables is
reasonably assured. Revenue from the sale of instrumentation is recognized when earned, which is
generally upon shipment. However, in the case of BeadLabs, revenue is recognized upon the
completion of installation, training and the receipt of customer acceptance. Revenue for genotyping
services is recognized when earned, which is generally at the time the genotyping analysis data is
delivered to the customer or as specific milestones are achieved.
In order to assess whether the price is fixed and determinable, the Company ensures there are
no refund rights. If payment terms are based on future performance, the Company defers revenue
recognition until the price becomes fixed and determinable. The Company assesses collectibility
based on a number of factors, including past transaction history with the customer and the
creditworthiness of the customer. If the Company determines that collection of a payment is not
reasonably assured, revenue recognition is deferred until the time collection becomes reasonably
assured, which is generally upon receipt of payment.
Sales of instrumentation generally include a standard one-year warranty. The Company also
sells separately priced maintenance (extended warranty) contracts, which are generally for one or
two years, upon the expiration of the initial warranty. Revenue for extended warranty sales is
recognized ratably over the term of the extended warranty period. Reserves are provided for
estimated
6
product warranty expenses at the time the associated revenue is recognized. If the Company
were to experience an increase in warranty claims or if costs of servicing its warrantied products
were greater than its estimates, gross margins could be adversely affected.
While the majority of its sales agreements contain standard terms and conditions, the Company
does enter into agreements that contain multiple elements or non-standard terms and conditions.
Emerging Issues Task Force (EITF) No. 00-21,
Revenue Arrangements with Multiple Deliverables,
provides guidance on accounting for arrangements that involve the delivery or performance of
multiple products, services, or rights to use assets within contractually binding arrangements.
Significant contract interpretation is sometimes required to determine the appropriate accounting,
including whether the deliverables specified in a multiple element arrangement should be treated as
separate units of accounting for revenue recognition purposes, and if so, how the price should be
allocated among the deliverable elements, when to recognize revenue for each element, and the
period over which revenue should be recognized. The Company recognizes revenue for delivered
elements only when it determines that the fair values of undelivered elements are known and there
are no uncertainties regarding customer acceptance.
A third source of revenue, research revenue, consists of amounts performed under government
grants, which is recognized in the period during which the related costs are incurred. All revenue
is recorded net of any applicable allowances for returns or discounts.
Cash and Cash Equivalents
Cash and cash equivalents are comprised of short-term, highly liquid investments primarily
consisting of commercial paper and money market-type funds.
Investments
The Company applies Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for
Certain Investments in Debt and Equity Securities
, to its investments. Under SFAS No. 115, the
Company classifies its investments as available-for-sale and records such assets at estimated
fair value in the balance sheet, with unrealized gains and losses, if any, reported in
stockholders equity. As of April 1, 2007, the Companys excess cash balances were primarily
invested in marketable debt securities, including commercial paper, auction rate certificates and
corporate bonds and notes, with strong credit ratings or short maturity mutual funds providing
similar financial returns. The Company limits the amount of investment exposure as to institutions,
maturity and investment type.
Restricted Cash
As of April 1, 2007, restricted cash,
included in cash and cash equivalents, consisted of bank
guarantees totaling approximately $2.8 million primarily
associated with two sales contracts entered into during
2006 and 2007. Both guarantees are scheduled to be released during 2007. There was no restricted
cash as of April 2, 2006.
Stock-Based Compensation
On January 2, 2006, the Company adopted SFAS No. 123 (revised 2004),
Share-Based Payment
,
which addresses the accounting for stock-based payment transactions in which an enterprise receives
employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that
are based on the fair value of the enterprises equity instruments or that may be settled by the
issuance of such equity instruments. The Company uses the Black-Scholes-Merton option-pricing model
to determine the fair-value of stock-based awards under SFAS No. 123R.
Net
loss per basic and diluted share was increased by $0.14 for the three months ended April
1, 2007 as a result of the adoption of SFAS No. 123R. Stock-based compensation expense capitalized
as part of inventory as of April 1, 2007 was approximately $0.3 million. As of April 1, 2007,
approximately $107.5 million of total unrecognized compensation cost related to stock options,
restricted stock and ESPP shares issued to date is expected to be recognized over a
weighted-average period of approximately two and a half years.
The Company has elected to use the Black-Scholes-Merton option-pricing model, which
incorporates various assumptions including volatility, expected life, and interest rates. The
expected volatility is based on the historical volatility of the Companys
7
common stock over the most recent period generally commensurate with the estimated expected
life of the Companys stock options, adjusted for the impact of unusual fluctuations not reasonably
expected to recur and other relevant factors. The expected life of an award is based on historical
experience and on the terms and conditions of the stock awards granted to employees.
The assumptions used for the specified reporting periods and the resulting estimates of
weighted-average fair value per share of options granted and for stock purchases under the ESPP
during those periods are as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
April 1, 2007
|
|
April 2, 2006
|
Interest rate stock options
|
|
|
4.71 4.75
|
%
|
|
|
4.36 4.57
|
%
|
Interest rate stock purchases
|
|
|
4.83 4.86
|
%
|
|
|
4.85 4.86
|
%
|
Volatility stock options
|
|
|
69 70
|
%
|
|
|
76 77
|
%
|
Volatility stock purchases
|
|
|
75 76
|
%
|
|
|
76
|
%
|
Expected life stock options
|
|
6 years
|
|
|
6 years
|
|
Expected life stock purchases
|
|
6-12 months
|
|
|
6 12 months
|
|
Expected dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
Weighted average fair value per share of options granted
|
|
$
|
25.82
|
|
|
$
|
14.91
|
|
Weighted average fair value per share of employee stock purchases
|
|
$
|
11.84
|
|
|
$
|
8.11
|
|
Net Loss per Share
Basic and diluted net loss per share is presented in conformity with SFAS No. 128,
Earnings
per Share
, for all periods presented. In accordance with SFAS No. 128, basic net loss per share is
computed using the weighted-average number of shares of common stock outstanding during the period,
less shares subject to repurchase. Diluted net loss per share is typically computed using the
weighted average number of common and dilutive common equivalent shares from stock options using
the treasury stock method. However, for all periods presented, diluted net loss per share is the
same as basic net loss per share because the Company reported a net loss and therefore the
inclusion of weighted average shares of common stock issuable upon the exercise of stock options
and warrants would be anti-dilutive. The following table presents the calculation of
weighted-average shares used to calculate basic and diluted net loss per share (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
April 1, 2007
|
|
April 2, 2006
|
Weighted-average shares outstanding
|
|
|
53,455
|
|
|
|
41,515
|
|
Less: Weighted-average shares of common stock subject to repurchase
|
|
|
(33
|
)
|
|
|
(40
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares used in calculating basic and diluted net loss per share
|
|
|
53,422
|
|
|
|
41,475
|
|
|
|
|
|
|
|
|
|
|
The total number of shares excluded from the calculation of diluted net loss per share, prior
to application of the treasury stock method, was 9,210,422 and 8,189,566 for the three months ended
April 1, 2007 and April 2, 2006, respectively. The total number of warrants excluded from the
calculation of diluted net loss per share was 1,894,560 for the three months ended April 1, 2007.
These warrants were assumed as part of the Companys merger with Solexa, Inc. on January 26, 2007.
Comprehensive Income (Loss)
Comprehensive income (loss) is comprised of net loss and other comprehensive income (loss).
Other comprehensive income (loss) includes unrealized gains and losses on the Companys
available-for-sale securities, changes in the fair value of derivatives designated as effective
cash flow hedges, and foreign currency translation adjustments.
The components of other comprehensive income (loss) are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
April 1, 2007
|
|
|
April 2, 2006
|
|
Net loss
|
|
$
|
(298,076
|
)
|
|
$
|
(104
|
)
|
Foreign currency translation adjustments
|
|
|
136
|
|
|
|
285
|
|
Unrealized loss on investments
|
|
|
(10,824
|
)
|
|
|
(42
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss)
|
|
$
|
(308,764
|
)
|
|
$
|
139
|
|
|
|
|
|
|
|
|
8
Recent Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements
. SFAS No. 157 defines
fair value, establishes a framework for measuring fair value in generally accepted accounting
principles and expands disclosures about fair value measurements. This Statement applies only to
fair value measurements that are already required or permitted by other accounting standards.
Accordingly, this Statement does not require any new fair value measurements. SFAS No. 157 is
effective for fiscal years beginning after December 15, 2007. The Company is currently evaluating
the impact, if any, the adoption of SFAS No. 157 will have on its consolidated results of
operations and financial position.
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and
Financial LiabilitiesIncluding an amendment of FASB Statement No. 115
. SFAS No. 159 expands the
use of fair value accounting but does not affect existing standards which require assets or
liabilities to be carried at fair value. Under SFAS No. 159, a company may elect to use fair value
to measure accounts and loans receivable, available-for-sale and held-to-maturity securities,
equity method investments, accounts payable, guarantees and issued debt. Other eligible items
include firm commitments for financial instruments that otherwise would not be recognized at
inception and non-cash warranty obligations where a warrantor is permitted to pay a third party to
provide the warranty goods or services. If the use of fair value is elected, any upfront costs and
fees related to the item must be recognized in earnings and cannot be deferred,
e.g.
, debt issue
costs. The fair value election is irrevocable and generally made on an instrument-by-instrument
basis, even if a company has similar instruments that it elects not to measure based on fair value.
At the adoption date, unrealized gains and losses on existing items for which fair value has been
elected are reported as a cumulative adjustment to beginning retained earnings. Subsequent to the
adoption of SFAS No. 159, changes in fair value are recognized in earnings. SFAS No. 159 is
effective for fiscal years beginning after November 15, 2007 and is required to be adopted by the
Company in the first quarter of fiscal 2008. The Company is currently determining whether fair
value accounting is appropriate for any of its eligible items and cannot estimate the impact, if
any, which SFAS No. 159 will have on its consolidated results of operations and financial condition.
Recently Adopted Accounting Pronouncements
Effective January 1, 2007, the Company adopted FASB Interpretation (FIN) No. 48,
Accounting
for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109
, which clarifies the
accounting for uncertainty in tax positions. FIN No. 48 requires that the Company recognize the
impact of a tax position in its financial statements only if that position is more likely than not
to be sustained on audit, based on the technical merits of the position. The adoption of FIN No.
48 did not result in an adjustment to the Companys opening retained earnings since there was no
cumulative effect from the change in accounting principle due to the Company maintaining a full
valuation allowance against its U.S. deferred tax assets. At the date of adoption, the Company
reduced its deferred tax assets and related valuation allowance by approximately $5.1 million for
uncertain tax positions. As of April 1, 2007, the Company has reduced its deferred tax assets and
related valuation allowance by approximately $6.8 million for uncertain tax positions. Interest
and penalties related to uncertain tax positions will be reflected in income tax expense. All of
the Companys tax years remain subject to future examination by the major tax jurisdictions in
which it is subject to tax.
2. Acquisition of Solexa, Inc.
On January 26, 2007, the Company completed its acquisition of Solexa, Inc. (Solexa), a
Delaware corporation, in a stock-for-stock merger transaction. The results of Solexas operations
have been included in the Companys consolidated financial statements since the acquisition date of
January 26, 2007.
Solexa develops genetic analysis technologies
primarily in the United States and the United
Kingdom. The combined Company has recently commercialized the Illumina Genome
Analyzer System (renamed from the Solexa 1G Analyzer post-merger), which performs DNA sequencing
based on Solexas proprietary reversible terminator Sequencing-by-Synthesis (SBS) chemistry and
Clonal Single Molecule Array technology.
Pursuant to the merger agreement, Solexa shareholders received 0.344 of a share of the
Companys common stock in exchange for each share of Solexa common stock held. The Company issued
approximately 13.1 million shares of its common stock as consideration for this merger. In
addition, certain executives at Solexa received change in control bonuses totaling approximately
$7.9 million upon consummation of the merger. These bonuses were paid both in cash and in shares
of Illumina common stock and were based on a percentage of the amount by which the consideration
received by Solexa stockholders as a direct result of the
9
change in control exceeded the sum of $150 million plus the aggregate gross proceeds received
by Solexa through sales of equity securities after the effective date of such bonus arrangement.
The total number of shares issued in connection with such change in control bonuses was
approximately 0.1 million shares of the Companys common stock.
Upon the closing of the merger on January 26, 2007, there were approximately 3.7 million
shares of the Companys restricted stock and shares issuable upon the exercise of outstanding
options and warrants assumed as part of the acquisition. Total estimated merger consideration also
includes approximately $75.3 million, which represents the fair market value of the vested options,
warrants and restricted stock assumed. The Company also expects to recognize approximately $14.7
million of non-cash stock-based compensation expense related to unvested stock options and
restricted stock at the acquisition date. This expense will be recognized beginning from the
acquisition date over a weighted-average period of approximately two years. These awards were
valued using the following assumptions as of January 25, 2007 (the measurement date, as discussed
below):
|
|
|
|
|
Interest rate
|
|
|
4.56 5.05
|
%
|
Volatility
|
|
|
54.26
|
%
|
Expected life
|
|
0.35 3.98 years
|
Expected dividend yield
|
|
|
0
|
%
|
The purchase price of the acquisition is as follows (in thousands):
|
|
|
|
|
Fair market value of securities issued
|
|
$
|
527,067
|
|
Fair market value of change of control bonuses and related taxes
|
|
|
8,182
|
|
Transaction costs not included in Solexa net tangible assets acquired
|
|
|
7,902
|
|
Fair market value of vested stock options, warrants and restricted stock assumed
|
|
|
75,334
|
|
|
|
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
618,485
|
|
|
|
|
|
The fair value of the Companys shares used in determining the purchase price was based on the
average of the closing price of the Companys common stock for a range of four trading days,
including two days prior to and two days subsequent to January 25, 2007, the measurement date. The
measurement date was determined per the guidance in EITF No. 99-12,
Determination of the
Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business
Combination
. Based on these closing prices, the Company estimated the fair value of its common
stock to be $40.1425 per share, which equates to a total fair value
of common stock issued of $527.1 million.
Purchase Price Allocation
The Solexa purchase price was allocated to tangible and intangible assets acquired and
liabilities assumed based on their estimated fair values at the acquisition date (January 26,
2007). The excess of the purchase price over the fair value of net assets acquired was allocated
to goodwill.
10
The Company believes the fair values assigned to the assets acquired and liabilities assumed
were based on reasonable assumptions. The following table summarizes the estimated fair values of
net assets acquired (in thousands):
|
|
|
|
|
Current assets
|
|
$
|
51,665
|
|
Property, plant and equipment, net
|
|
|
6,515
|
|
Other assets
|
|
|
786
|
|
Current liabilities
|
|
|
(13,244
|
)
|
Other long-term liabilities
|
|
|
(1,455
|
)
|
|
|
|
|
|
|
|
|
|
Net tangible assets acquired
|
|
|
44,267
|
|
|
Identifiable intangible assets (core technology and customer relationships)
|
|
|
24,400
|
|
In-process research and development
|
|
|
303,400
|
|
Goodwill
|
|
|
246,418
|
|
|
|
|
|
|
|
|
|
|
Total net assets acquired
|
|
$
|
618,485
|
|
|
|
|
|
The Companys fair value estimates for the purchase price allocation may change during the
allowable allocation period, which is up to one year from the acquisition date, if additional
information becomes available.
In accordance with SFAS No. 142,
Goodwill and Other Intangible Assets,
the goodwill is not
amortized, but will be subject to a periodic assessment for impairment by applying a
fair-value-based test. None of this goodwill is expected to be deductible for tax purposes. The
Company performs its annual test for impairment of goodwill in May of each year. The Company is
required to perform a periodic assessment between annual tests in certain circumstances. The
Company has determined there was no impairment of the Solexa goodwill during the first quarter of
2007.
In-Process Research and Development
The Company allocated $303.4 million of the purchase price to in-process research and
development projects. In-process research and development (IPR&D) represents the valuation of
acquired, to-be-completed research projects. At the acquisition date, Solexas ongoing research and
development initiatives were primarily involved with the development of its genetic analysis
platform for sequencing and expression profiling. These in-process research and development
projects are composed of Solexas reversible terminating nucleotide biochemistry platform, referred
to as sequencing-by-synthesis (SBS) biochemistry, as well as Solexas reagent, analyzer and genomic
services related technologies, which were valued at $237.2 million, $44.2 million, $19.1 million
and $2.9 million, respectively, at the acquisition date.
Although these projects were approximately 95% complete
at the acquisition date, they had not reached technological feasibility and had no alternative
future use. Accordingly, the amounts allocated to those projects were written off in the first
quarter of 2007, the period the acquisition was consummated.
The values of the research projects were determined by estimating the costs to develop the
acquired technology into commercially viable products, estimating the resulting net cash flows from
the projects, and discounting the net cash flows to their present value. These cash flows were
estimated by forecasting total revenue expected from these products and then deducting appropriate
operating expenses, cash flow adjustments and contributory asset returns to establish a forecast of
net cash flows arising from the in-process technology. These cash flows were substantially reduced
to take into account the time value of money and the risks associated with the inherent
difficulties and uncertainties given the projected stage of development of these projects at
closing. Due to the nature of the forecast and the risks associated with the projected growth and
profitability of the developmental projects, discount rates of 19.5% were considered appropriate
for valuation of the IPR&D. The Company believes that these discount rates were commensurate with
the projects stage of development and the uncertainties in the economic estimates described above.
If these projects are not successfully developed, the sales and profitability of the combined
company may be adversely affected in future periods. The Company believes that the foregoing
assumptions used in the IPR&D analysis were reasonable at the time of the acquisition. No assurance
can be given, however, that the underlying assumptions used to estimate expected project sales,
development costs or profitability, or the events associated with such projects, will transpire as
estimated.
11
Identifiable Intangible Assets
Acquired identifiable assets include various patents that are separate and distinct from the
intellectual property surrounding the SBS biochemistry platform (core technology) as well as
customer relationships. These patents are held in both the U.S. and Europe. The Company valued the
patents and developed technology utilizing a discounted cash flow model which uses forecasts of
future royalty savings and expenses related to the intangible assets. The Company utilized a
discount rate of 19.5% when preparing this model. The value of the customer relationships is the
benefit derived, based upon estimated cash flows, from having a customer in place versus having to
incur the time, cost and foregone cash flow required to develop or replace the customer. The
amounts assigned to the core technology and customer relationships are $23.5 million and $0.9
million, respectively. The remaining useful lives of the core technology and customer
relationships are ten and three years, respectively.
Goodwill
Goodwill represents the excess of the Solexa purchase price over the sum of the amounts
assigned to assets acquired less liabilities assumed. The Company believes that the acquisition of
Solexa will produce the following significant benefits:
|
|
|
Increased Market Presence and Opportunities.
The combination of the Company and Solexa
should increase the combined Companys market presence and opportunities for growth in
revenue, earnings and stockholder return. The Company believes that the Solexa technology
is highly complementary to the Companys own portfolio of products and services and will
enhance the Companys capabilities to service its existing customers, as well as accelerate
the development of additional technologies, products and services. The Company believes
that integrating Solexas capabilities with the Companys technologies will better position
the Company to address the emerging biomarker research and development and in-vitro and
molecular diagnostic markets. The Company began to recognize revenue from products shipped
as a result of this acquisition during the first quarter of 2007.
|
|
|
|
|
Operating Efficiencies.
The combination of the Company and Solexa provides the
opportunity for potential economies of scale and cost savings.
|
The Company believes that these primary factors support the amount of goodwill recognized as a
result of the purchase price paid for Solexa, in relation to other acquired tangible and intangible
assets, including in-process research and development.
The following unaudited pro forma information shows the results of the Companys operations
for the specified reporting periods as though the acquisition had occurred as of the beginning of
that period (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Three Months Ended
|
|
|
April 1, 2007
|
|
April 2, 2006
|
Revenue
|
|
$
|
72,205
|
|
|
$
|
29,870
|
|
Net loss
|
|
$
|
(2,329
|
)
|
|
$
|
(12,279
|
)
|
Basic and diluted net loss per share
|
|
$
|
(0.04
|
)
|
|
$
|
(0.22
|
)
|
The pro forma results have been prepared for comparative purposes only and are not necessarily
indicative of the actual results of operations had the acquisition taken place as of the beginning
of the periods presented, or the results that may occur in the future. The pro forma results
exclude the $303.4 million non-cash acquired IPR&D charge recorded upon the closing of the
acquisition during the first quarter of 2007.
Investment in Solexa
On November 12, 2006, the Company entered into a definitive securities purchase agreement with Solexa in which the
Company invested approximately $50 million in Solexa in exchange for 5,154,639 newly issued shares of Solexa
common stock in conjunction with the merger of the two companies. This investment was
valued at $67.8 million as of December 31, 2006, which represented a market value
of $13.15 per share of Solexa common stock. This investment was eliminated as part of the
Companys purchase accounting upon the closing of the merger on January 26, 2007.
3. Segment Information
The Company has determined that, in accordance with SFAS No. 131,
Disclosures about Segments
of an Enterprise and Related Information
, it operates in one segment as it only reports operating
results on an aggregate basis to its chief operating decision maker of the Company.
12
4. Inventories
Inventories are stated at the lower of standard cost (which approximates actual cost) or
market. Inventory includes raw materials and finished goods that may be used in the research and
development process and such items are expensed as consumed. Provisions for slow moving, excess and
obsolete inventories are provided based on product life cycle and development plans, product
expiration and quality issues, historical experience and inventory levels. The components of net
inventories are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
April 1, 2007
|
|
|
December 31, 2006
|
|
Raw materials
|
|
$
|
16,725
|
|
|
$
|
8,365
|
|
Work in process
|
|
|
14,640
|
|
|
|
8,907
|
|
Finished goods
|
|
|
4,975
|
|
|
|
2,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
36,340
|
|
|
$
|
20,169
|
|
|
|
|
|
|
|
|
5. Goodwill and Intangible Assets
The Company accounts for goodwill and intangibles under SFAS No. 142,
Goodwill and Other
Intangible Assets
. As such, goodwill and other indefinite-lived intangible assets are not
amortized, but are subject to annual impairment reviews, or more frequent reviews if events or
circumstances indicate there may be an impairment. The Company performs its test of goodwill
annually in May.
The carrying amount of goodwill was $248.5 million as of April 1, 2007, compared to $2.1
million at December 31, 2006. The increase in goodwill was due to the acquisition of Solexa in
January 2007. The $2.1 million balance at December 31, 2006 was related to the acquisition of
CyVera in April 2005. This balance is included in goodwill as of April 1, 2007 and there
has been no impairment of goodwill as of that date.
Intangible assets other than goodwill are required to be separated into two categories:
finite-lived and indefinite-lived. Intangible assets with finite useful lives are amortized over
their estimated useful life, while intangible assets with indefinite useful lives are not
amortized. The Company currently has no intangible assets with indefinite lives.
Following is a summary of the Companys amortizable intangible assets as of the respective
balance sheet dates (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 1, 2007
|
|
|
December 31, 2006
|
|
|
|
Gross Carrying
|
|
|
Accumulated
|
|
|
Gross Carrying
|
|
|
Accumulated
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Amortization
|
|
Acquired intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core technology
|
|
$
|
23,500
|
|
|
$
|
(392
|
)
|
|
$
|
|
|
|
$
|
|
|
Customer relationships
|
|
|
900
|
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total acquired intangible assets
|
|
|
24,400
|
|
|
|
(442
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License agreements
|
|
|
944
|
|
|
|
(847
|
)
|
|
|
944
|
|
|
|
(836
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
$
|
25,344
|
|
|
$
|
(1,289
|
)
|
|
$
|
944
|
|
|
$
|
(836
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in the gross carrying amount of the Companys amortizable intangible assets as of
April 1, 2007 was due to the acquisition of Solexa in January 2007. The core technology is being
amortized over a ten-year life and customer relationships are being amortized over a three-year
life. The amortization of the core technology and customer relationships is excluded from product
cost of revenue and is separately classified as amortization of acquired intangible assets on the
condensed consolidated statement of operations.
6. Warranties
The Company generally provides a one-year warranty on instrument systems. At the time revenue
is recognized, the Company establishes an accrual for estimated warranty expenses associated with
system sales. This expense is recorded as a component of
13
cost of product revenue. Estimated warranty expenses associated with extended maintenance
contracts are recorded as a component of cost of service and other revenue and are recognized
ratably over the term of the maintenance contract.
Changes in the Companys warranty liability during the specified reporting period are as
follows (in thousands):
|
|
|
|
|
Balance at December 31, 2006
|
|
$
|
996
|
|
Additions charged to cost of revenue
|
|
|
1,402
|
|
Repairs and replacements
|
|
|
(810
|
)
|
|
|
|
|
|
|
|
|
|
Balance at April 1, 2007
|
|
$
|
1,588
|
|
|
|
|
|
7. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
April 1, 2007
|
|
|
December 31, 2006
|
|
Accounts payable
|
|
$
|
20,015
|
|
|
$
|
9,853
|
|
Compensation
|
|
|
9,557
|
|
|
|
8,239
|
|
Taxes
|
|
|
7,004
|
|
|
|
1,804
|
|
Legal and other professional fees
|
|
|
6,357
|
|
|
|
3,831
|
|
Short-term deferred revenue
|
|
|
8,951
|
|
|
|
3,382
|
|
Customer deposits
|
|
|
9,933
|
|
|
|
3,703
|
|
Reserve for product warranties
|
|
|
1,588
|
|
|
|
996
|
|
Short-term deferred rent
|
|
|
1,194
|
|
|
|
|
|
Short-term deferred gain on sale of building
|
|
|
170
|
|
|
|
375
|
|
Other
|
|
|
1,892
|
|
|
|
1,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
66,661
|
|
|
$
|
33,713
|
|
|
|
|
|
|
|
|
8. Stockholders Equity
As of April 1, 2007, the Company had 53,580,525 shares of common stock outstanding, of which
4,817,328 shares were sold to employees and consultants subject to restricted stock agreements. The
restricted common shares vest in accordance with the provisions of the agreements, generally over
five years. All unvested shares are subject to repurchase by the Company at the original purchase
price. As of April 1, 2007, 32,417 shares of common stock were subject to repurchase. In addition,
the Company also issued 12,000 shares for a restricted stock award to an employee under the
Companys 2005 Stock and Incentive Plan based on service performance. These shares vest monthly
over a three-year period.
2005 Stock and Incentive Plan
In June 2005, the stockholders of the
Company approved the 2005 Stock and Incentive Plan (the
2005 Stock Plan). Upon adoption of the 2005 Stock Plan, issuance of options under the Companys
existing 2000 Stock Plan ceased. The 2005 Stock Plan initially
provided that an aggregate of up to 11,542,358
shares of the Companys common stock be reserved and available to be issued. In addition, the 2005
Stock Plan provides for an automatic annual increase in the shares reserved for issuance by the
lesser of 5% of the number of outstanding shares of the Companys common stock on the last day of
the immediately preceding fiscal year, 1,200,000 shares or such lesser amount as determined by the
Companys board of directors. As of April 1, 2007, options to purchase 2,560,668 shares remained
available for future grant under the 2005 Stock Plan.
14
The Companys stock option activity under all stock option plans during the specified
reporting period is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
Options
|
|
|
Exercise Price
|
|
Outstanding at December 31, 2006
|
|
|
8,359,120
|
|
|
$
|
13.94
|
|
Granted
|
|
|
2,435,108
|
|
|
$
|
39.17
|
|
Options assumed through business combination
|
|
|
1,424,332
|
|
|
$
|
21.37
|
|
Exercised
|
|
|
(498,504
|
)
|
|
$
|
9.30
|
|
Cancelled
|
|
|
(233,578
|
)
|
|
$
|
14.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at April 1, 2007
|
|
|
11,486,478
|
|
|
$
|
20.38
|
|
|
|
|
|
|
|
|
|
Following is a further breakdown of the options outstanding as of April 1, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
|
Remaining
|
|
Weighted
|
|
|
|
|
|
Price
|
Range of
|
|
Options
|
|
Life
|
|
Average
|
|
Options
|
|
of Options
|
Exercise Prices
|
|
Outstanding
|
|
in Years
|
|
Exercise Price
|
|
Exercisable
|
|
Exercisable
|
$0.03 5.99
|
|
|
1,792,150
|
|
|
|
5.80
|
|
|
$
|
4.31
|
|
|
|
1,074,361
|
|
|
$
|
3.83
|
|
$6.00 8.52
|
|
|
1,596,790
|
|
|
|
7.02
|
|
|
$
|
7.90
|
|
|
|
707,566
|
|
|
$
|
7.66
|
|
$8.60 13.69
|
|
|
1,854,277
|
|
|
|
7.31
|
|
|
$
|
10.68
|
|
|
|
862,932
|
|
|
$
|
10.38
|
|
$13.74 20.97
|
|
|
1,657,638
|
|
|
|
8.30
|
|
|
$
|
19.21
|
|
|
|
650,572
|
|
|
$
|
18.58
|
|
$21.31 31.30
|
|
|
1,477,880
|
|
|
|
9.05
|
|
|
$
|
26.52
|
|
|
|
166,685
|
|
|
$
|
25.05
|
|
$31.41 39.22
|
|
|
1,668,923
|
|
|
|
9.48
|
|
|
$
|
37.48
|
|
|
|
87,425
|
|
|
$
|
36.61
|
|
$39.42 45.00
|
|
|
1,435,258
|
|
|
|
9.80
|
|
|
$
|
40.18
|
|
|
|
46,325
|
|
|
$
|
40.20
|
|
$45.69 3,123.55
|
|
|
3,562
|
|
|
|
4.41
|
|
|
$
|
755.79
|
|
|
|
2,783
|
|
|
$
|
954.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.03 3,123.55
|
|
|
11,486,478
|
|
|
|
8.03
|
|
|
$
|
20.38
|
|
|
|
3,598,649
|
|
|
$
|
11.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value of options outstanding and options exercisable as of April 1,
2007 was $134.6 million and $66.7 million, respectively. Aggregate intrinsic value represents the
difference between the Companys closing stock price on the last trading day of the fiscal period,
which was $29.30 as of March 30, 2007, and the exercise price multiplied by the number of options
outstanding. Total intrinsic value of options exercised was $12.8 million for the three months
ended April 1, 2007.
2000 Employee Stock Purchase Plan
In February 2000, the board of directors and stockholders adopted the 2000 Employee Stock
Purchase Plan (the Purchase Plan). A total of 6,233,713 shares of the Companys common stock have
been reserved for issuance under the Purchase Plan. The Purchase Plan permits eligible employees to
purchase common stock at a discount, but only through payroll deductions, during defined offering
periods.
The price at which stock is purchased under the Purchase Plan is equal to 85% of the fair
market value of the common stock on the first or last day of the offering period, whichever is
lower. The initial offering period commenced in July 2000. In addition, beginning with fiscal 2001,
the Purchase Plan provides for annual increases of shares available for issuance by the lesser of
3% of the number of outstanding shares of the Companys common stock on the last day of the
immediately preceding fiscal year, 1,500,000 shares or such lesser amount as determined by the
Companys board of directors. 61,787 shares were issued under the Purchase Plan during the three
months ended April 1, 2007. As of April 1, 2007, there were 4,106,874 shares available for issuance
under the Purchase Plan.
Warrants
In conjunction with its acquisition of Solexa, Inc. on January 26, 2007, the Company assumed
2,244,843 warrants issued by Solexa prior to the acquisition. During the three months ended April
1, 2007, there were 350,283 warrants exercised, resulting in cash proceeds to the Company of
approximately $5.3 million.
15
A summary of the warrants outstanding as of April 1, 2007 is as follows:
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Exercise Price
|
|
|
Expiration Date
|
|
126,082
|
|
$
|
78.96
|
|
|
|
4/29/07
|
|
31,989
|
|
$
|
57.62
|
|
|
|
9/24/08
|
|
136,423
|
|
$
|
14.54
|
|
|
|
4/25/10
|
|
549,222
|
|
$
|
14.54
|
|
|
|
7/12/10
|
|
408,691
|
|
$
|
21.81
|
|
|
|
11/23/10
|
|
642,153
|
|
$
|
21.81
|
|
|
|
1/19/11
|
|
|
|
|
|
|
|
|
|
|
1,894,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury Stock
In conjunction with its issuance of
$400 million principal amount of 0.625% Convertible Senior
Notes due 2014 on February 16, 2007, the Company repurchased 5.8 million shares of its
outstanding common stock for approximately $201.6 million in privately negotiated transactions
concurrently with the offering.
On February 20, 2007, the Company executed a Rule 10b5-1 trading plan to repurchase up to
$75.0 million of its outstanding common stock over a period of six months. During the three months
ended April 1, 2007, the Company repurchased approximately 1.6 million shares of its common stock
under this plan for approximately $50.0 million. In any period, cash used in financing
activities related to common stock repurchases may differ from the comparable change in
stockholders equity, reflecting timing differences between the recognition of share repurchase
transactions and their settlement for cash.
9. Convertible Senior Notes
On February 16, 2007, the Company issued $400.0 million principal amount of 0.625% Convertible
Senior Notes due 2014 (the Notes), which included the exercise of the initial purchasers option to purchase up
to an additional $50.0 million aggregate principal amount of Notes. The net proceeds from the
offering, after deducting the initial purchasers discount and offering expenses, were
approximately $390.7 million. The Company will pay 0.625% interest per annum on the principal
amount of the Notes, payable semi-annually in arrears in cash on February 15 and August 15 of each
year, starting on August 15, 2007. The Notes mature on February 15, 2014.
The Notes will be convertible into cash and, if applicable, shares of the Companys common
stock, $0.01 par value per share, based on an initial conversion rate, subject to adjustment, of
22.9029 shares per $1,000 principal amount of Notes (which represents an initial conversion price
of approximately $43.66 per share), only in the following circumstances and to the following
extent: (1) during the five business-day period after any five consecutive trading period (the
measurement period) in which the trading price per note for each day of such measurement period was
less than 97% of the product of the last reported sale price of the Companys common stock and the
conversion rate on each such day; (2) during any calendar quarter after the calendar quarter ending
March 31, 2007, if the last reported sale price of the Companys common stock for 20 or more
trading days in a period of 30 consecutive trading days ending on the last trading day of the
immediately preceding calendar quarter exceeds 130% of the applicable conversion price in effect on
the last trading day of the immediately preceding calendar quarter; (3) upon the occurrence of
specified events; and (4) the notes will be convertible at any time on or after November 15, 2013
through the third scheduled trading day immediately preceding the maturity date.
In connection with the offering of the notes, the Company entered into convertible note hedge
transactions (the hedge) with the initial purchasers and/or their affiliates (the counterparties)
entitling the Company to purchase a maximum of 11,451,480 shares of the Companys common stock at
an initial strike price of $43.66 per share, subject to adjustment. In addition, the Company sold
to these counterparties warrants to acquire a maximum of 18,322,320 shares of the Companys common
stock (the warrants) at an initial strike price of $62.87 per share, subject to adjustment. The
cost of the hedge that was not covered by the proceeds from the sale of the warrants was
approximately $46.6 million. The hedge is expected to reduce the potential equity dilution upon
conversion of the notes if the daily volume-weighted average price per share of the Companys
common stock exceeds the strike
16
price of the hedge. The warrants could have a dilutive effect on the Companys earnings per
share to the extent that the price of the Companys common stock during the measurement period at
maturity of the warrants exceeds the strike price of the warrants.
10. Commitments and Long-Term Debt
Deferred Gain / Building Loan
In July 2000, the Company entered into a ten-year lease to rent space in two newly constructed
buildings in San Diego that are now occupied by the Company. That lease contained an option to
purchase the buildings together with certain adjacent land that has been approved for construction
of an additional building. The Company exercised that option and purchased the properties in
January 2002 and assumed a $26.0 million, ten-year mortgage on the property at a fixed interest
rate of 8.36%. The Company made monthly payments of $208,974, representing interest and principal,
through August 2004.
In June 2004, the Company entered into a conditional agreement to sell its land and buildings
for $42.0 million and to lease back such property for an initial term of ten years. The sale was
completed in August 2004 at which time the lease was signed. After the repayment of the remaining
$25.2 million debt and other related transaction expenses, the Company received $15.5 million in
net cash proceeds. The Company removed the land and net book value of the buildings of $36.9
million from its balance sheet, deferred the resulting $3.7 million gain on the sale of the
property, and is amortizing the deferred gain over the ten-year lease term in accordance with SFAS
No. 13,
Accounting for Leases
.
Operating Leases
In August 2004, the Company entered into a ten-year lease for its San Diego facility after the
land and building were sold (as discussed above). Under the terms of the lease, the Company paid a
$1.9 million security deposit and monthly rent is set at $318,643 for the first year with an annual
increase of 3% in each subsequent year through 2014. The current monthly rent under this lease is
$338,048. On February 14, 2007, the Company extended this lease. The terms of the new lease provide
for monthly rent increases each year to a maximum of $504,710 per month during the last year of the
lease, which is now 2023. Under the terms of the new lease,
approximately $1.0 million of the original $1.9 million security
deposit was refunded to the Company during the three months ended
April 1, 2007. The Company has the option to extend the term of the lease for three
additional five-year periods. In accordance with SFAS No. 13, the Company records rent expense on a
straight-line basis and the resulting deferred rent is included in other long-term liabilities in
the accompanying consolidated balance sheet.
On February 14, 2007, the Company also entered into an operating lease agreement with BioMed
Realty Trust, Inc. (BioMed) to expand into a new office building BioMed will build in San Diego,
California. The new building will be used for research and development, manufacturing and
administrative purposes. The lease expires 15 years from the date the first phase is occupied
(October 1, 2008), subject to the Companys right to extend the term for up to three additional
five-year periods. The Company will begin paying rent once the first phase is occupied, at an
initial rate of $114,425 per month, which will increase as the remaining two phases are occupied,
based on an initial monthly base rent of $2.80 per rentable square foot. The monthly rent will
increase by 5% every 24 months.
As of April 1, 2007, the Company also leased an office and laboratory facility in Connecticut,
additional office, distribution and storage facilities in San Diego, and four foreign facilities
located in Japan, Singapore, China and the Netherlands under non-cancelable operating leases that
expire at various times through June 2011. These leases contain renewal options ranging from one to
five years.
As part of our acquisition of Solexa on January 26, 2007, we assumed a non-cancelable
operating lease for facilities in Hayward, California. One of the buildings is utilized for
administrative operations, research and development, as well as genomic services and instrument
production. The remaining space may be developed and occupied in phases, depending on growth. The
Hayward lease runs through December 2008. We have an option to extend the lease for an additional
five-year period, subject to certain conditions. We also lease a facility in Little Chesterford,
United Kingdom, which is occupied by Solexa Limited, our wholly-owned subsidiary, which expires in
July 2008.
17
11. Legal Proceedings
The Company has incurred substantial costs in defending itself against patent infringement
claims, and expects to devote substantial financial and managerial resources to protect its
intellectual property and to defend against the claims described below as well as any future claims
asserted against it.
Affymetrix Litigation
On July 26, 2004, Affymetrix, Inc. (Affymetrix) filed a complaint in the U.S. District Court
for the District of Delaware alleging that the use, manufacture and sale of the Companys BeadArray
products and services, including the Companys Array Matrix and BeadChip products, infringe six
Affymetrix patents. Affymetrix seeks an injunction against the sale of any products that may
ultimately be determined to infringe these patents, unspecified monetary damages, interest and
attorneys fees. On September 15, 2004, the Company filed its answer to Affymetrix complaint,
seeking declaratory judgments from the court that it does not infringe the Affymetrix patents and
that such patents are invalid, and the Company filed counterclaims against Affymetrix for unfair
competition and interference with actual and prospective economic advantage.
On February 15, 2006, the court allowed the Company to file its first amended answer and
counterclaims, adding allegations of inequitable conduct with respect to all six asserted
Affymetrix patents, violation of Section 2 of the Sherman Act, and unclean hands. In March 2006,
Affymetrix notified the Company of its decision to drop one of the six patents from the suit, and
of its intention to assert infringement of certain additional claims of the remaining five patents.
On June 30, 2006, the court dismissed the patent Affymetrix had sought to withdraw from the suit.
Both parties filed summary judgment motions by the July 14, 2006 deadline established by the court,
and all such motions have now been stayed or denied. On August 16, 2006, the court issued a ruling
on the Markman (claim construction) hearing it held on April 20, 2006. At the parties request,
the trial was rescheduled to March 5, 2007 from October 16, 2006. In a February 2007 pre-trial
order, the court established a multi-phase trial structure. The court explained that it decided to
address the Companys defenses of invalidity and enforceability of the patents-in-suit, as well as
the Companys claims for unfair competition and antitrust violations, in subsequent trials.
The first phase, which began on March 5, 2007, addressed the issues of infringement and
damages. On March 13, 2007, the jury returned a verdict finding infringement of the five patents
asserted by Affymetrix. That finding was made without consideration of the validity and
enforceability of these five Affymetrix patents. The jury awarded retroactive damages for certain
product sales prior to the end of 2005 at a royalty rate of 15% in an amount of approximately $16.7
million. This first-phase verdict remains subject to the Companys post-trial motions and appeals.
A judgment on this verdict has not been entered in the case and the Company does not believe such
judgment, along with any final damages award, will be entered until after the subsequent phases of
the trial are completed.
To the extent the Company succeeds in proving some or all of Affymetrix patents invalid or
unenforceable, the damages amount may be reduced, including to zero, and the court may require a
new trial on the damages amount. If the Company is not successful in the subsequent phases,
damages may be assessed, in addition to the $16.7 million amount, on post-2005 sales of the
Companys products that were found to infringe the Affymetrix patents. Affymetrix has also
asserted that the Companys products launched post-2005 infringe these patents, but these other
products were not at issue in the prior jury trial, and the court has yet to indicate how the
issues of infringement and potential damages will be judged for these other products. In addition,
Affymetrix is contending that the Companys infringement was willful, and if a jury finds the
Companys infringement to be willful, the judge will have the discretion to increase any damage
award by up to three times. Affymetrix has also contended that it should be awarded its attorneys
fees and pre-judgment interest on any damages award.
The second phase of the trial, which will include trial as to the validity of the Affymetrix
patents being asserted, will be tried before a different jury and is expected to be scheduled later
in 2007. The Companys defense of inequitable conduct, and its counterclaims for tortious
interference and unfair competition by Affymetrix, will be addressed in a third phase of the trial.
In order for Affymetrix to prevail in the case and receive a judgment in its favor, the patent
claims found to have been infringed must also be found to be valid and enforceable in the remaining
phases of the trial, and then such findings must be upheld on appeal. The Company believes it has
prior art that pre-dates and invalidates the Affymetrix patents. The Company is also claiming that
the inventors or their agents engaged in inequitable conduct before the United States Patent and
Trademark Office in connection with the prosecution of one or more of the patents in-suit, and the
Company believes that this conduct should render the affected patents unenforceable.
18
In the second and third phases of the trial, the Affymetrix patents will be presumed to be
valid and the Company will have the burden of proving, by clear and convincing evidence, that the
patents are invalid and/or unenforceable. To the extent the Company is unable to prove invalidity
or unenforceability, the court will likely enter a judgment against the Company and assess damages.
Affymetrix is also seeking an injunction to prevent the Company from making, selling or offering to
sell products that infringe patents that are found valid and enforceable.
Although the Company believes that it has strong defenses to Affymetrix patent claims, the
results of litigation are difficult to predict and no assurance can be given that the Company will
succeed in proving the patents were not infringed, or are invalid or unenforceable. As discussed
above, the judge overseeing the case has discretion over how and when issues in the case will be
tried, and over the granting and scope of any injunction against the Company. Any damages award or
injunction would be subject to appeal and the Company will carefully consider an appeal at the
appropriate time. In such a case, if the Company chooses to appeal, the Company would likely be
required to post a bond or provide other security for some or the entire amount of the final
damages award during the appeal, and such amount may be material.
The Company has analyzed the potential for a loss from this litigation in accordance with SFAS
No. 5,
Accounting for Contingencies.
Due to the Companys beliefs about its position in the case,
and because the Company is unable to reasonably estimate the amount of loss the Company would incur
if the Company does not prevail, the Company has not recorded a reserve for contingent loss. Should
the Company ultimately lose the lawsuit, such result could have a material adverse effect on its
consolidated results of operations for the period in which the loss is recorded.
Dr. Anthony W. Czarnik v. Illumina, Inc.
On June 15, 2005, Dr. Anthony Czarnik, a former employee, filed suit against the Company in
the U.S. District Court for the District of Delaware seeking correction of inventorship of certain
of the Companys patents and patent applications, and alleging that the Company committed
inequitable conduct and fraud in not naming him as an inventor. Dr. Czarnik seeks an order
requiring the Company and the U.S. Patent and Trademark Office to correct the inventorship of
certain of the Companys patents and patent applications by adding Dr. Czarnik as an inventor, a
judgment declaring certain of the Companys patents and patent applications unenforceable,
unspecified monetary damages and attorneys fees. On August 4, 2005, the Company filed a motion to
dismiss the complaint for lack of standing and failure to state a claim. While this motion was
pending, Dr. Czarnik filed an amended complaint on September 23, 2005. On October 7, 2005, the
Company filed a motion to dismiss the amended complaint for lack of standing and failure to state a
claim. On July 13, 2006, the court granted the Companys motion to dismiss the counts of Dr.
Czarniks complaint dealing with correction of inventorship in pending applications and inequitable
conduct. On July 27, 2006, the Company filed its answer to the two remaining counts of the amended
complaint (correction of inventorship in issued patents, and fraud). On March 28, 2007, the court
issued a Scheduling Order in which it contemplates holding a claim construction hearing in January
2008 if it deems claim construction to be necessary. A trial date has yet to be set for this
case. The Company believes it has meritorious defenses against these claims.
12. Collaborative Agreements
deCODE genetics
In May 2006, the Company and deCODE genetics, ehf. (deCODE) executed a Joint Development and
Licensing Agreement (the Development Agreement). Pursuant to the Development Agreement, the parties
agreed to collaborate exclusively to develop, validate and commercialize specific diagnostic tests
for variants in genes involved in three disease-related pathways: the gene-encoding leukotriene A4
hydrolase, linked to heart attack; the gene-encoding transcription factor 7-like 2 (TCF7L2), linked
to type 2 diabetes; and the gene-encoding BARD1, linked to breast cancer. The Company and deCODE
are developing diagnostic tests based on these variants for use on the Companys BeadXpress system.
Under the agreement, the Company will be responsible for the manufacturing, marketing and
selling of the diagnostic products. The companies will share the development costs of these
products and split the profits from sales of the diagnostics tests. The Development Agreement may
be terminated as to a particular product under development if one party decides to discontinue
funding the development of that product, and may be terminated in whole by either party if the
other party commits an uncured material breach, files for bankruptcy or becomes insolvent. Under a
separate supply agreement, the Company installed instrumentation at deCODE that will enable deCODE
to perform whole genome association studies on up to 100,000 samples using the Companys Sentrix
HumanHap300 BeadChips and associated reagents. The Company has deferred approximately $2.0 million
of revenue for instruments installed during the third quarter of 2006 under guidance provided by
SFAS No. 48,
Revenue
19
Recognition When Right of Return Exists.
This amount is classified as a long-term liability as
of April 1, 2007. The Company has also deferred approximately $1.3 million of costs related to
product shipments to deCODE, which are classified as a long-term asset as of April 1, 2007.
13. Investment in Genizon BioSciences Inc.
In January 2006, Genizon BioSciences Inc. (Genizon), a Canadian company focused on gene
discovery, purchased from the Company approximately $1.9 million in equipment and committed to
purchase an additional $4.3 million in consumables. Genizon is using Illuminas HumanHap300
BeadChip along with the Infinium
®
assay to perform whole-genome association studies involving
thousands of members of the Quebec Founder Population. The goal of the studies is to provide
understanding of the genetic origins and mechanisms of common diseases which may then lead to
possible drug targets.
In March 2006, the Company entered into a Subscription Agreement for Secured Convertible
Debentures with Genizon. Pursuant to the agreement, the Company purchased a secured convertible
debenture (the debenture) of Genizon and certain warrants for CDN$3.5 million (approximately U.S.
$3.0 million).
The debenture is convertible, automatically upon the occurrence of a liquidity event, as
defined in the debenture, into Class H Preferred Shares of Genizon. Upon the occurrence of certain
events, Illumina may be entitled to receive additional shares of Genizons Class H Preferred
Shares. The debenture matures two years from issuance and bears interest, payable semiannually, at
a rate of 5% per annum for the first year and 12.5% per annum for the second year. Unless the
debenture is converted before maturity, 112.5% of the principal amount of the debenture is due upon
maturity. Illumina also received warrants to purchase 226,721 shares of Genizon Class H Preferred
Shares at an exercise price of $1.5437 per share.
As of April 1, 2007, the debenture was recorded at face value, which is the fair value, and is
classified in accordance with SFAS No. 115,
Accounting for Certain Investments in Debt and Equity
Securities
, as an available-for-sale security.
The Company concluded that the purchase of the debenture and the concurrent purchase by
Genizon of Illuminas products are linked transactions under guidance contained in EITF No.
00-21. Since the transactions are considered linked, the Company deferred approximately $3.0
million of revenue (the face value of the Debentures) in the first quarter of 2006, related to the
Genizon product shipments. The deferred revenue is classified as a short-term liability as of April
1, 2007. This amount is expected to remain in deferred revenue until Genizon settles the Debenture
in cash or when a liquidity event occurs that generates cash or a security that is readily
convertible into cash. The Company has deferred approximately $1.1 million of costs related to
product shipments to Genizon, in the first quarter of 2006, which is classified as an other current
asset as of April 1, 2007. All Genizon shipments that generate revenue over the face value of the
debenture will be evaluated under the Companys revenue recognition policy, which is outlined in
Note 1.
20
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
This discussion and analysis should be read in conjunction with our financial statements and
accompanying notes included in this Quarterly Report on Form 10-Q and the financial statements and
notes thereto for the year ended December 31, 2006 included in our Annual Report on Form 10-K.
Operating results are not necessarily indicative of results that may occur in future periods.
The discussion and analysis in this Quarterly Report on Form 10-Q contain forward-looking
statements that involve risk and uncertainties, such as statements of our plans, objectives,
expectations and intentions. Words such as anticipate, believe, continue, estimate,
expect, intend, may, plan, potential, predict, project, or similar words or phrases,
or the negatives of these words, may identify forward-looking statements, but the absence of these
words does not necessarily mean that a statement is not forward-looking. Examples of
forward-looking statements include, among others, statements regarding the costs and outcome of our
litigation with Affymetrix, the integration of Solexas technology with our existing technology,
the commercial launch of new products, including products based on Solexas and our VeraCode
technologies, and the duration which our existing cash and other resources is expected to fund our
operating activities.
Forward-looking statements are subject to known and unknown risks and uncertainties and are
based on potentially inaccurate assumptions that could cause actual results to differ materially
from those expected or implied by the forward-looking statements. Factors that could cause or
contribute to these differences include, but are not limited to, those discussed in the subsection
entitled Item 1A. Risk Factors. below as well as those discussed elsewhere. Accordingly, you
should not unduly rely on these forward-looking statements, which speak only as of the date of this
Quarterly Report. We undertake no obligation to publicly revise these forward-looking statements to
reflect circumstances or events after the date of this Quarterly Report or to reflect the
occurrence of unanticipated events. You should, however, review the factors and risks we describe
in the reports we file from time to time with the Securities and Exchange Commission (SEC).
Overview
We are a leading developer, manufacturer and marketer of next-generation life science tools
and integrated systems for the large scale analysis of genetic variation and biological function.
Using our proprietary technologies, we provide a comprehensive line of products and services that
currently serve the sequencing, genotyping and gene expression markets, and we expect to enter the
market for molecular diagnostics. Our customers include leading genomic research centers,
pharmaceutical companies, academic institutions, clinical research organizations and biotechnology
companies. Our tools provide researchers around the world with the performance, throughput, cost
effectiveness and flexibility necessary to perform the billions of genetic tests needed to extract
valuable medical information from advances in genomics and proteomics. We believe this information
will enable researchers to correlate genetic variation and biological function, which will enhance
drug discovery and clinical research, allow diseases to be detected earlier and permit better
choices of drugs for individual patients.
Our Technologies
BeadArray Technology
We have developed a proprietary array technology that enables the large-scale analysis of
genetic variation and biological function. Our BeadArray technology combines microscopic beads and
a substrate in a simple proprietary manufacturing process to produce arrays that can perform many
assays simultaneously. Our BeadArray technology provides a unique combination of high throughput,
cost effectiveness, and flexibility. We believe that these features have enabled our BeadArray
technology to become a leading platform for the emerging high-growth market of SNP genotyping and
expect they will enable us to become a key player in the gene expression market.
VeraCode Technology
The BeadArray technology is most effective in applications which require mid- to high levels
of multiplexing from low to high levels of throughput. Multiplexing refers to the number of
individual pieces of information that are simultaneously extracted from one sample. We believe the
molecular diagnostics market will require systems which are extremely high throughput and cost
effective in the mid- to low-multiplex range. To address this market, we acquired our VeraCode
technology through the acquisition of CyVera Corporation in April 2005. We began shipping the
BeadXpress system, which uses the VeraCode technology, during the first quarter of 2007, along with
several assays for the system.
21
Sequencing Technology
Our DNA sequencing technology, acquired as part of
the Solexa, Inc. (Solexa) merger that was completed on
January 26, 2007, is based on use of our sequencing-by-synthesis (SBS) biochemistry. We believe
that this technology, which can potentially generate over a billion bases of DNA sequence from a
single experiment with a single sample preparation, will dramatically reduce the cost, and improve
the practicality, of human resequencing relative to conventional technologies.
Product Developments
During the first quarter of 2007, we announced the following new product developments:
|
|
|
High-throughput DNA methylation profiling on the BeadArray platform.
This technology is
capable of surveying up to 1,536 methylation sites across 96 samples simultaneously. By
pairing our BeadArray platform with the GoldenGate assay approach, researchers have the
ability to perform genome-wide methylation profiling across multiple areas such as cancer
and human embryonic stem cell research. The GoldenGate Methylation Cancer Panel I, the
first standard panel, covers 1,505 methylation sites over 800 cancer genes. Shipments of
the GoldenGate Methylation Cancer Panel I began during the first quarter of 2007
|
|
|
|
|
BeadXpress System.
The BeadXpress Reader System is a high-throughput, dual-color laser
detection system that enables scanning of a broad range of multiplexed assays developed
using the VeraCode digital microbead technology. Shipments of the BeadXpress System began
during the first quarter of 2007.
|
|
|
|
|
Illumina Genome Analyzer.
This product can generate more than one billion bases of data
in a single run using a massively parallel sequencing approach. The system leverages Solexa
sequencing technology and novel reversible terminator chemistry, optimized to achieve
unprecedented levels of cost effectiveness and throughput. Shipments of the Illumina Genome
Analyzer began during the first quarter of 2007.
|
|
|
|
|
Human 1M BeadChip.
This product is expected to combine an unprecedented level of
content for both whole-genome and copy number variation (CNV) analysis, along with
additional unique, high-value genomic regions of interest all on a single microarray
chip.
|
|
|
|
|
Human 450S BeadChip.
This product is expected to enable customers using our HumanHap550
BeadChip to further extend their genetic studies to include the one million content level.
|
|
|
|
|
HumanCNV370-Duo BeadChip.
The HumanCNV370-Duo is expected to enable researchers to
analyze two samples simultaneously and access novel content for detecting disease-relevant
CNV regions.
|
|
|
|
|
Custom methylation application.
Custom-content design provides researchers with the
flexibility to perform genome-wide methylation profiling specific to individual study
goals. Joining our GoldenGate Methylation Cancer Panel I, investigators will have the
option to select their favorite genes or gene regions to cost-effectively survey up to
1,536 methylation sites of choice across 96 samples simultaneously.
|
Critical Accounting Policies and Estimates
General
Our discussion and analysis of our financial condition and results of operations is based upon
our condensed unaudited consolidated financial statements, which have been prepared in accordance
with U.S. generally accepted accounting principles. The preparation of financial statements
requires that management make estimates, assumptions and judgments with respect to the application
of accounting policies that affect the reported amounts of assets, liabilities, revenue and
expenses, and the disclosures of contingent assets and liabilities. Actual results could differ
from those estimates. Our significant accounting policies are described in Note 1 to our unaudited
condensed consolidated financial statements. Certain accounting policies are deemed critical if 1)
they require an accounting estimate to be made based on assumptions that were highly uncertain at
the time the estimate was made, and
22
2) changes in the estimate that are reasonably likely to occur, or different estimates that we
reasonably could have used would have a material effect on our unaudited condensed consolidated
financial statements.
Management has discussed the development and selection of these critical accounting policies
with the Audit Committee of our Board of Directors, and the Audit Committee has reviewed the
disclosure. In addition, there are other items within our financial statements that require
estimation, but are not deemed critical as defined above. We believe the following critical
accounting policies reflect our more significant estimates and assumptions used in the preparation
of the unaudited condensed consolidated financial statements.
Revenue Recognition
Our revenue is generated primarily from the sale of products and services. Product revenue
consists of sales of arrays, reagents, instrumentation and
oligonucleotides (oligos), which are short pieces of DNA.
Service and other revenue consists of revenue received for performing genotyping services, extended
warranty sales and revenue earned from milestone payments.
We recognize revenue in accordance with the guidelines established by SEC Staff Accounting
Bulletin (SAB) No. 104. Under SAB No. 104, revenue cannot be recorded until all of the following
criteria have been met: persuasive evidence of an arrangement exists; delivery has occurred or
services have been rendered; the sellers price to the buyer is fixed or determinable; and
collectibility is reasonably assured. All revenue is recorded net of any applicable allowances for
returns or discounts.
Revenue for product sales is recognized generally upon shipment and transfer of title to the
customer, provided no significant obligations remain and collection of the receivables is
reasonably assured. Revenue from the sale of instrumentation is recognized when earned, which is
generally upon shipment. However, in the case of BeadLabs, revenue is recognized upon the
completion of installation, training and customer acceptance. Revenue for genotyping services is
recognized when earned, which is generally at the time the genotyping analysis data is delivered to
the customer or as specific milestones are achieved.
In order to assess whether the price is fixed and determinable, we ensure there are no refund
rights. If payment terms are based on future performance or a right of return exists, we defer
revenue recognition until the price becomes fixed and determinable. We assess collectibility based
on a number of factors, including past transaction history with the customer and the
creditworthiness of the customer. If we determine that collection of a payment is not reasonably
assured, revenue recognition is deferred until the time collection becomes reasonably assured,
which is generally upon receipt of payment. Changes in judgments and estimates regarding
application of SAB No. 104 might result in a change in the timing or amount of revenue recognized.
Sales of instrumentation generally include a standard one-year warranty. We also sell
separately priced maintenance (extended warranty) contracts, which are generally for one or two
years, upon the expiration of the initial warranty. Revenue for extended warranty sales is
recognized ratably over the term of the extended warranty period. Reserves are provided for
estimated product warranty expenses at the time the associated revenue is recognized. If we were to
experience an increase in warranty claims or if costs of servicing our warrantied products were
greater than our estimates, gross margins could be adversely affected.
While the majority of our sales agreements contain standard terms and conditions, we do enter
into agreements that contain multiple elements or non-standard terms and conditions. Emerging
Issues Task Force (EITF) No. 00-21,
Revenue Arrangements with Multiple Deliverables,
provides
guidance on accounting for arrangements that involve the delivery or performance of multiple
products, services, or rights to use assets within contractually binding arrangements. Significant
contract interpretation is sometimes required to determine the appropriate accounting, including
whether the deliverables specified in a multiple element arrangement should be treated as separate
units of accounting for revenue recognition purposes, and if so, how the price should be allocated
among the deliverable elements, when to recognize revenue for each element, and the period over
which revenue should be recognized. We recognize revenue for delivered elements only when we
determine that the fair values of undelivered elements are known and there are no uncertainties
regarding customer acceptance.
Research revenue consists of amounts earned under research agreements with government grants,
which is recognized in the period during which the related costs are incurred.
Allowance for Doubtful Accounts
We maintain an allowance for doubtful accounts for estimated losses resulting from the
inability of our customers to make required payments. We evaluate the collectibility of our
accounts receivable based on a combination of factors. We regularly
23
analyze customer accounts, review the length of time receivables are outstanding and review
historical loss rates. If the financial condition of our customers were to deteriorate, additional
allowances could be required.
Inventory Valuation
We record adjustments to inventory for potentially excess, obsolete or impaired goods in order
to state inventory at net realizable value. We must make assumptions about future demand, market
conditions and the release of new products that will supercede old ones. We regularly review
inventory for excess and obsolete products and components, taking into account product life cycle
and development plans, product expiration and quality issues, historical experience and our current
inventory levels. If actual market conditions are less favorable than anticipated, additional
inventory adjustments could be required.
Contingencies
We are subject to legal proceedings primarily related to intellectual property matters. Based
on the information available at the balance sheet dates and through consultation with our legal
counsel, we assess the likelihood of any adverse judgments or outcomes of these matters, as well as
the potential ranges of probable losses. If losses are probable and reasonably estimable, we will
record a liability in accordance with Statement of Financial Accounting Standards (SFAS) No. 5,
Accounting for Contingencies
. Currently, we have no such liabilities recorded. This may change in
the future depending upon new developments in each matter.
Goodwill and Intangible Asset Valuation
The purchase method of accounting for acquisitions requires extensive use of accounting
estimates and judgments to allocate the purchase price to the fair value of the net tangible and
intangible assets acquired, including in-process research and development (IPR&D). Goodwill and
intangible assets deemed to have indefinite lives are not amortized, but are subject to at least
annual impairment tests. The amounts and useful lives assigned to other acquired intangible assets
impact future amortization, and the amount assigned to IPR&D is expensed immediately. Determining
the fair values and useful lives of intangible assets especially requires the exercise of judgment.
While there are a number of different acceptable generally accepted valuation methods to estimate
the value of intangible assets acquired, we primarily use the discounted cash flow method. This
method requires significant management judgment to forecast the future operating results used in
the analysis. In addition, other significant estimates are required such as residual growth rates
and discount factors. The estimates we use to value and amortize intangible assets are consistent
with the plans and estimates that we use to manage our business and are based on available
historical information and industry estimates and averages. These judgments can significantly
affect our net operating results.
SFAS No. 142,
Goodwill and Other Intangible Assets,
requires that goodwill and certain
intangible assets be assessed for impairment using fair value measurement techniques. If the
carrying amount of a reporting unit exceeds its fair value, then a goodwill impairment test is
performed to measure the amount of the impairment loss, if any. The goodwill impairment test
compares the implied fair value of the reporting units goodwill with the carrying amount of that
goodwill. The implied fair value of goodwill is determined in the same manner as in a business
combination. Determining the fair value of the implied goodwill is judgmental in nature and often
involves the use of significant estimates and assumptions. These estimates and assumptions could
have a significant impact on whether or not an impairment charge is recognized and also the
magnitude of any such charge. Estimates of fair value are primarily determined using discounted
cash flows and market comparisons. These approaches use significant estimates and assumptions,
including projection and timing of future cash flows, discount rates reflecting the risk inherent
in future cash flows, perpetual growth rates, determination of appropriate market comparables, and
determination of whether a premium or discount should be applied to comparables. It is reasonably
possible that the plans and estimates used to value these assets may be incorrect. If our actual
results, or the plans and estimates used in future impairment analyses, are lower than the original
estimates used to assess the recoverability of these assets, we could incur additional impairment
charges. As of April 1, 2007, we had $248.5 million of goodwill. This goodwill is reported as a
separate line item in the balance sheet. We perform our test of
goodwill annually in May. We
have determined there has been no impairment of goodwill as of April 1, 2007.
Stock-Based Compensation
We account for stock-based compensation in accordance with SFAS No. 123R,
Share-Based Payment
.
Under the provisions of SFAS No. 123R, stock-based compensation cost is estimated at the grant date
based on the awards fair-value as calculated by the Black-Scholes-Merton (BSM) option-pricing
model and is recognized as expense over the requisite service period. The BSM model requires
various highly judgmental assumptions including volatility, forfeiture rates, and expected option
life. If any of these
24
assumptions used in the BSM model change significantly, stock-based compensation expense may
differ materially in the future from that recorded in the current period.
Income Taxes
In accordance with SFAS No. 109,
Accounting for Income Taxes
, the provision for income taxes
is computed using the asset and liability method, under which deferred tax assets and liabilities
are recognized for the expected future tax consequences of temporary differences between the
financial reporting and tax bases of assets and liabilities, and for the expected future tax
benefit to be derived from tax loss and credit carryforwards. Deferred tax assets and liabilities
are determined using the enacted tax rates in effect for the years in which those tax assets are
expected to be realized. A valuation allowance is established when it is more likely than not that
the future realization of all or some of the deferred tax assets will not be achieved. The
evaluation of the need for a valuation allowance is performed on a jurisdiction by jurisdiction
basis, and includes a review of all available positive and negative evidence. As of April 1, 2007
we have maintained a full valuation allowance against all of our U.S. deferred tax assets, and
certain foreign deferred tax assets, since we have not met the more likely than not threshold
required under SFAS No. 109.
Due to the adoption of SFAS No. 123 (revised 2004),
Share-Based Payment
, we recognize excess
tax benefits associated with share-based compensation to stockholders equity only when realized.
When assessing whether excess tax benefits relating to share-based compensation have been realized,
we follow the with-and-without approach excluding any indirect effects of the excess tax
deductions. Under this approach, excess tax benefits related to share-based compensation are not
deemed to be realized until after the utilization of all other tax benefits available to us.
Effective January 1, 2007, we adopted FASB Interpretation (FIN) No. 48,
Accounting for
Uncertainty in Income Taxes an interpretation of FASB Statement No. 109
, which clarifies the
accounting for uncertainty in tax positions. FIN No. 48 requires that we recognize the impact of a
tax position in our financial statements only if that position is more likely than not to be
sustained on audit, based on the technical merits of the position. The adoption of FIN No. 48 did
not result in an adjustment to our opening retained earnings since there was no cumulative effect
from the change in accounting principle due to our maintaining a full valuation allowance against
our U.S. deferred tax assets. At the date of adoption, we reduced our deferred tax assets and
related valuation allowance by approximately $5.1 million for uncertain tax positions. As of April
1, 2007, we have reduced our deferred tax assets and related valuation allowance by approximately
$6.8 million for uncertain tax positions. Interest and penalties related to uncertain tax
positions will be reflected in income tax expense. All of our tax years remain subject to future
examination by the major tax jurisdictions in which we are subject to tax.
25
Results of Operations
To enhance comparability, the following table sets forth our unaudited condensed consolidated
statements of operations for the specified reporting periods stated as a percentage of total
revenue.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
April 1,
|
|
April 2,
|
|
|
2007
|
|
2006
|
Revenue:
|
|
|
|
|
|
|
|
|
Product revenue
|
|
|
85
|
%
|
|
|
80
|
%
|
Service and other revenue
|
|
|
15
|
|
|
|
18
|
|
Research revenue
|
|
|
0
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
100
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
Cost of product revenue
|
|
|
30
|
|
|
|
26
|
|
Cost of service and other revenue
|
|
|
5
|
|
|
|
6
|
|
Research and development
|
|
|
22
|
|
|
|
28
|
|
Selling, general and administrative
|
|
|
33
|
|
|
|
42
|
|
Amortization of acquired intangible assets
|
|
|
1
|
|
|
|
|
|
Acquired in-process research and development
|
|
|
420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
511
|
|
|
|
102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(411
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
Interest and other income, net
|
|
|
4
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(407
|
)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
6
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(413
|
)%
|
|
|
(0
|
)%
|
|
|
|
|
|
|
|
|
|
Three Months Ended April 1, 2007 and April 2, 2006
Our fiscal year consists of 52 or 53 weeks ending the Sunday closest to December 31, with
quarters of 13 or 14 weeks ending the Sunday closest to March 31, June 30, and September 30. The
three months ended April 1, 2007 and April 2, 2006 were both 13 weeks.
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
April 1,
|
|
|
April 2,
|
|
|
Percentage
|
|
|
|
2007
|
|
|
2006
|
|
|
Change
|
|
|
|
(in thousands)
|
|
|
|
|
|
Product revenue
|
|
$
|
61,266
|
|
|
$
|
23,261
|
|
|
|
163
|
%
|
Service and other revenue
|
|
|
10,761
|
|
|
|
5,267
|
|
|
|
104
|
%
|
Research revenue
|
|
|
123
|
|
|
|
574
|
|
|
|
(79
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
72,150
|
|
|
$
|
29,102
|
|
|
|
148
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue for the three months ended April 1, 2007 and April 2, 2006 was $72.2 million and
$29.1 million, respectively. This represents an increase of
$43.0 million, or 148%, compared to the
three months ended April 2, 2006.
Product revenue increased to $61.3 million for the three months ended April 1, 2007 from $23.3
million for the three months ended April 2, 2006. The increase resulted primarily from higher
consumable sales, as well as sales of the Illumina Genome
26
Analyzer, which was introduced during the first quarter of 2007. Growth in consumable revenue
was primarily attributable to a significant demand for our Infinium products, which we began
selling during the second quarter of 2006. In addition, growth in consumable revenue can be
attributed to the growth in our installed base of BeadArray Readers. We expect to see continued growth in product revenue, which
can be partially attributed to the launch of several new products, including the Illumina Genome
Analyzer and BeadXpress System, both introduced during the first quarter of 2007, as well as the
growth of our installed base of instruments.
Service and other revenue increased to $10.8 million for the three months ended April 1, 2007
from $5.3 million for the three months ended April 2, 2006. The increase in service and other
revenue is primarily due to the completion of several significant Infinium and iSelect custom SNP
genotyping service contracts. We expect sales from SNP genotyping services contracts to fluctuate
on a yearly and quarterly basis, depending on the mix and number of contracts that are completed.
The timing of completion of a SNP genotyping services contract is highly dependent on the
customers schedule for delivering the SNPs and samples to us.
Government grants and other research funding decreased to $0.1 million for the three months
ended April 1, 2007 from $0.6 million for the three months ended April 2, 2006. We do not expect
research revenue to be a material component of our revenue going forward.
Cost of Product and Service and Other Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
April 1,
|
|
|
April 2,
|
|
|
Percentage
|
|
|
|
2007
|
|
|
2006
|
|
|
Change
|
|
|
|
(in thousands)
|
|
|
|
|
|
Cost of product revenue
|
|
$
|
21,815
|
|
|
$
|
7,676
|
|
|
|
184
|
%
|
Cost of service and other revenue
|
|
|
3,305
|
|
|
|
1,617
|
|
|
|
104
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of product and service and other revenue
|
|
$
|
25,120
|
|
|
$
|
9,293
|
|
|
|
170
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product and service and other revenue represents manufacturing costs incurred in the
production process, including component materials, assembly labor and overhead, installation,
warranty, packaging and delivery costs, as well as costs associated with performing genotyping
services on behalf of our customers. Costs related to research revenue are included in research and
development expense. Cost of product revenue increased to $21.8 million for the three months ended
April 1, 2007, compared to $7.7 million for the three months ended April 2, 2006, primarily driven
by higher consumable and instrument sales. Cost of product revenue for the three months ended April
1, 2007 and April 2, 2006 included stock-based compensation expenses totaling $0.9 million and $0.2 million, respectively. Gross margin on product revenue
decreased to 64.4% for the three months ended April 1, 2007, compared to 67.0% for the three months
ended April 2, 2006. The decrease in gross margin percentage is primarily due to the additional
expense of $0.6 million for the amortization of inventory revaluation costs related to our
acquisition of Solexa in January 2007, unfavorable product mix
and the increase in stock-based compensation charges.
The inventory revaluation costs decreased our gross margin by 105 basis points in 2007 compared to
2006. The impact of stock-based compensation charges decreased our gross margin by 59 basis points
in 2007 compared to 2006.
Cost of service and other revenue increased to $3.3 million for the three months ended April
1, 2007, compared to $1.6 million for the three months ended April 2, 2006, primarily due to higher
service revenue. Cost of service and other revenue for the three months ended April 1, 2007 and
April 2, 2006 included stock-based compensation expenses totaling $0.1 million in each period.
Gross margin on service and other revenue was 69.3% for the three months ended April 1, 2007 and
April 2, 2006.
We expect product mix to continue to affect our future gross margins. However, we expect our
market to continue to be increasingly price competitive and our margins may fluctuate from year to
year and quarter to quarter.
27
Research and Development Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
April 1,
|
|
April 2,
|
|
Percentage
|
|
|
2007
|
|
2006
|
|
Change
|
|
|
(in thousands)
|
|
|
|
|
Research and development
|
|
$
|
15,956
|
|
|
$
|
8,216
|
|
|
|
94
|
%
|
Our research and development expenses consist primarily of salaries and other
personnel-related expenses, laboratory supplies and other expenses related to the design,
development, testing and enhancement of our products. We expense our research and development
expenses as they are incurred.
Research and development expenses increased $7.7 million to $16.0 million for the three months
ended April 1, 2007, compared to $8.2 million for the three months ended April 2, 2006.
Approximately $5.4 million of the increase is due to higher research and development expenses
associated with our recent acquisition of Solexa that closed on January 26, 2007. Costs to support
our Oligator technology platform and BeadArray research activities increased approximately $1.8
million for the three months ended April 1, 2007, compared to the three months ended April 2, 2006
primarily due to an overall increase in personnel-related expenses, as well as increased project
spending. In addition, stock-based compensation expense increased approximately $0.9 million
compared to the three months ended April 2, 2006. These increases were partially offset by a
decrease of $0.4 million in research and development expenses related to the VeraCode technology.
We began shipping our BeadXpress System, which is based on our VeraCode technology, during the
first quarter of 2007. As a result, the related research and development expenses have decreased.
We believe a substantial investment in research and development is essential to remaining
competitive and expanding into additional markets. Accordingly, we expect our research and
development expenses to increase in absolute dollars as we expand our product base and integrate
the operations of Solexa into our business.
Selling, General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
April 1,
|
|
April 2,
|
|
Percentage
|
|
|
2007
|
|
2006
|
|
Change
|
|
|
(in thousands)
|
|
|
|
|
Selling, general and administrative
|
|
$
|
23,633
|
|
|
$
|
12,134
|
|
|
|
95
|
%
|
Our selling, general and administrative expenses consist primarily of personnel costs for
sales and marketing, finance, human resources, business development, legal and general management,
as well as professional fees, such as expenses for legal and accounting services. Selling, general
and administrative expenses increased to $23.6 million for the three months ended April 1, 2007,
compared to $12.1 million for the three months ended April 2, 2006. Selling, general and
administrative expenses for the three months ended April 2, 2007 and April 2, 2006 included
stock-based compensation expenses totaling $4.8 million and $1.9 million, respectively.
Sales and marketing expenses increased $4.0 million for the three months ended April 1, 2007,
compared to the three months ended April 2, 2006. The increase is primarily due to increases of
$3.1 million attributable to personnel-related expenses to support the growth of our business, $0.7
million of stock-based compensation expense and $0.2 million attributable to other
non-personnel-related costs, mainly sales and marketing activities for our existing and new
products. General and administrative expenses increased $7.5 million during the three months ended
April 1, 2007, compared to the three months ended April 2,
2006, due to increases of $3.0 million
in outside legal costs primarily related to the Affymetrix litigation, $2.2 million of stock-based
compensation expense, $1.6 million in personnel-related expenses associated with the growth of our
business and $0.7 million in other outside services, primarily due to increases in consulting fees.
We expect our selling, general and administrative expenses to increase in absolute dollars as
we expand our staff, add sales and marketing infrastructure, incur increased litigation costs and
incur additional costs to support the growth in our business.
28
Interest and Other Income, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
April 1,
|
|
April 2,
|
|
Percentage
|
|
|
2007
|
|
2006
|
|
Change
|
|
|
(in thousands)
|
|
|
|
|
Interest and other income, net
|
|
$
|
2,722
|
|
|
$
|
568
|
|
|
|
379
|
%
|
Interest income on our cash and cash equivalents
and investments was $3.2 million for the
three months ended April 1, 2007, compared to $0.5 million for the three months ended April 2,
2006. The increase is primarily due to higher cash balances from the proceeds of our May 2006 stock
offering, our February 2007 convertible debt offering and operating cash flow, as well as higher
effective interest rates on our cash equivalents and short-term investments. This increase was
partially offset by approximately $0.5 million of interest
expense mainly related to our convertible debt offering in February 2007.
Provision for Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
April 1,
|
|
April 2,
|
|
Percentage
|
|
|
2007
|
|
2006
|
|
Change
|
|
|
(in thousands)
|
|
|
|
|
Provision for income taxes
|
|
$
|
4,397
|
|
|
$
|
131
|
|
|
|
3256
|
%
|
The provision for income taxes was approximately $4.4 million for the three months ended April
1, 2007, up from $0.1 million for the three months ended April 2, 2006. For the three months ended
April 1, 2007, the provision consists of federal, state, and foreign income tax expenses. For the
three months ended April 2, 2006, the provision for income taxes consisted of income tax expense
related to foreign operations.
As of January 1, 2007, we had net operating loss carryforwards for federal and state tax
purposes of approximately $76.4 million and $39.1 million,
respectively, which begin to expire in
2022 and 2013, respectively, unless previously utilized. In addition, we also had U.S. federal and
state research and development tax credit carryforwards of approximately $6.4 million and $6.3
million, respectively, which begin to expire in 2018 and 2019, respectively, unless previously
utilized. As result of the Solexa acquisition on January 26, 2007, we obtained additional net
operating loss carryforwards for federal and state tax purposes of approximately $27.9 million and
$70.2 million, respectively, which begin to expire in 2025 and 2015, respectively, unless
previously utilized. To the extent these assets are recognized, the adjustment will be applied
first to reduce to zero any goodwill related to the acquisition, and then as a reduction to the
income tax provision.
Pursuant to Section 382 and 383 of the Internal Revenue Code, utilization of our net operating
losses and credits may be subject to annual limitations in the event of any significant future
changes in our ownership structure. These annual limitations may result in the expiration of net
operating losses and credits prior to utilization. Previous limitations due to Section 382 and 383
have been reflected in the deferred tax assets as of April 1, 2007.
Based upon the available evidence as of April 1, 2007, we are not able to conclude it is more
likely than not the remaining deferred tax assets in the U.S. or certain foreign jurisdictions will
be realized. Therefore, we have recorded a full valuation allowance against all of our U.S.
deferred tax assets and certain foreign deferred tax assets of
approximately $92.5 million, and
$15.2 million, respectively.
29
Liquidity and Capital Resources
Cashflow (in thousands)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
April 1, 2007
|
|
|
April 2, 2006
|
|
Net cash provided by operating activities
|
|
$
|
14,643
|
|
|
$
|
2,360
|
|
Net cash used in investing activities
|
|
|
(34,410
|
)
|
|
|
(7,228
|
)
|
Net cash provided by financing activities
|
|
|
104,950
|
|
|
|
3,102
|
|
Effect of foreign currency translation on cash and cash equivalents
|
|
|
(40
|
)
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
$
|
85,143
|
|
|
$
|
(1,778
|
)
|
|
|
|
|
|
|
|
Historically, our sources of cash have included:
|
|
|
issuance of equity and debt securities, including cash generated from the exercise of
stock options and participation in our ESPP;
|
|
|
|
|
cash generated from operations, primarily from the collection of accounts receivable
resulting from product sales; and
|
|
|
|
|
interest income.
|
Our historical cash outflows have primarily been associated with:
|
|
|
cash used for operating activities such as the purchase and growth of inventory,
expansion of our sales and marketing and research and development infrastructure and
other working capital needs;
|
|
|
|
|
expenditures related to increasing our manufacturing capacity
and improving our manufacturing efficiency; and
|
|
|
|
|
cash used for our stock repurchases.
|
Other factors that impact our cash inflow and outflow include the following:
|
|
|
significant increases in our product and services revenue, leading to gross margins
greater than 67% in each of the last three years. As our product sales have increased
significantly since 2001, our gross profit and operating income have increased
significantly as well, providing us with an increased source of cash to finance the
expansion of our operations; and
|
|
|
|
|
fluctuations in our working capital.
|
As of April 1, 2007, we had cash, cash
equivalents and marketable securities of $326.8 million
compared to $130.8 million as of December 31, 2006. The primary inflows of cash during the three
months ended April 1, 2007 were approximately $390.7 million and $92.4 million generated from the
net proceeds of our convertible debt offering and sale of warrants, respectively, in February 2007.
In addition, on January 26, 2007, we completed the merger with Solexa, which resulted in net
cash acquired of $76.7 million. The primary cash outflows during the three months ended April 1,
2007 were attributable to the repurchase of an aggregate of 7.4 million shares of our common stock
for approximately $250.9 million, as well as approximately $139.0 million for the purchase of
convertible note hedges. These convertible note transactions and our stock repurchase program are
discussed in detail below.
On February 16, 2007, we issued $400 million principal amount of 0.625% Convertible Senior
Notes due 2014 (the Notes). The net proceeds from the offering, after deducting the initial
purchasers discount and offering expenses, were approximately $390.7 million. We used
approximately $201.6 million of the net proceeds to purchase
approximately 5.8 million shares of our common stock in
privately negotiated transactions concurrently with the offering. We used $46.6
million of the net proceeds of this offering to pay the cost of convertible note hedge and warrant
transactions, which are designed to reduce the potential dilution upon conversion of the notes. We
intend to use the balance of the net proceeds for other general corporate purposes, which may
include
30
acquisitions
and additional repurchases of our common stock. The notes mature on February 15,
2014 and bear interest semi-annually at a rate of 0.625% per year, payable on February 15 and
August 15 of each year, beginning on August 15, 2007. In addition, we may in certain circumstances
be obligated to pay additional interest. If a designated event, as defined in the indenture for
the notes, occurs, holders of the notes may require us to repurchase all or a portion of their
notes for cash at a repurchase price equal to the principal amount of the notes to be repurchased,
plus accrued and unpaid interest. In addition, upon conversion of the notes, we must pay the
principal portion in cash. The notes will become convertible only in certain circumstances based on
conditions relating to the trading price of the notes and our common stock or upon the occurrence
of specified corporate events. However, the notes will be convertible at any time from, and
including, November 15, 2013 through the third scheduled trading day immediately preceding February
15, 2014.
On February 20, 2007, we executed a Rule 10b5-1 trading
plan to repurchase up to $75.0 million of our outstanding common stock over a period of six months.
During the three months ended April 1, 2007, we repurchased approximately 1.6 million shares of
our common stock under this plan for approximately $49.3 million in cash. In any period, cash used
in financing activities related to common stock repurchases may differ from the comparable change
in stockholders equity, reflecting timing differences between the recognition of share repurchase
transactions and their settlement for cash.
Our primary short-term needs for capital, which are subject to change, include expenditures related to:
|
|
|
the repurchase of our common stock;
|
|
|
|
|
the continued advancement of research and development efforts;
|
|
|
|
|
support of our commercialization efforts related to our current and future products,
including expansion of our direct sales force and field support resources both in the
United States and abroad;
|
|
|
|
|
improvements in our manufacturing capacity and efficiency;
|
|
|
|
|
our facilities expansion needs, including costs of leasing additional facilities;
|
|
|
|
|
the acquisition of equipment and other fixed assets for use in our current and future
manufacturing and research and development facilities; and
|
|
|
|
|
ongoing costs associated with our litigation with Affymetrix, including any potential
damages and/or royalties that may be awarded to Affymetrix.
|
For 2007, we plan to spend approximately $16.5 million in cash for capital expenditures,
primarily for manufacturing and research and development equipment, furniture, fixtures and
computer equipment. However, this estimate may change significantly based on the factors described
in this section. As of April 1, 2007, we have expended $3.2 million of this amount. We intend to
use our currently available cash and cash we expect to generate from operating activities to
address our capital requirements. We expect that the performance of our product sales and the
resulting operating income, as well as the status of each of our new product development programs,
will significantly impact our cash management decisions.
We anticipate that our current cash and cash equivalents and income from operations will be
sufficient to fund our operating needs for at least the next twelve months. Operating needs include
the planned costs to operate our business, including amounts required to fund working capital and
capital expenditures. At the present time, we have no material commitments for capital
expenditures. However, our future capital requirements and the adequacy of our available funds will
depend on many factors, including:
|
|
|
the successful resolution of our litigation with Affymetrix;
|
|
|
|
|
our ability to successfully commercialize our sequencing and VeraCode technologies and
to expand our SNP genotyping services product lines;
|
31
|
|
|
scientific progress in our research and development programs and the magnitude of those programs;
|
|
|
|
|
competing technological and market developments; and
|
|
|
|
|
the need to enter into collaborations with other companies or acquire other companies
or technologies to enhance or complement our product and service offerings.
|
As a result of the factors listed above, we may require additional funding in the future. Our
failure to raise capital on acceptable terms, when needed, could have a material adverse effect on
our business.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Sensitivity
Our exposure to market risk for changes in interest rates relates primarily to our investment
portfolio. The fair market value of fixed rate securities may be adversely impacted by fluctuations
in interest rates while income earned on floating rate securities may decline as a result of
decreases in interest rates. Under our current policies, we do not use interest rate derivative
instruments to manage exposure to interest rate changes. We attempt to ensure the safety and
preservation of our invested principal funds by limiting default risk, market risk and reinvestment
risk. We mitigate default risk by investing in investment grade securities. We have historically
maintained a relatively short average maturity for our investment portfolio, and we believe a
hypothetical 100 basis point adverse move in interest rates along the entire interest rate yield
curve would not materially affect the fair value of our interest-sensitive financial instruments.
Foreign Currency Exchange Risk
Although most of our revenue is realized in U.S. dollars, some portions of our revenue are
realized in foreign currencies. As a result, our financial results could be affected by factors
such as changes in foreign currency exchange rates or weak economic conditions in foreign markets.
The functional currencies of our subsidiaries are their respective local currencies. Accordingly,
the accounts of these operations are translated from the local currency to the U.S. dollar using
the current exchange rate in effect at the balance sheet date for the balance sheet accounts, and
using an approximated weighted average exchange rate during the period for revenue and expense accounts. The effects of
translation are recorded in accumulated other comprehensive income as a separate component of
stockholders equity.
Periodically, we hedge significant foreign currency firm sales commitments and accounts
receivable with forward contracts. We only use derivative financial instruments to reduce foreign
currency exchange rate risks; we do not hold any derivative financial instruments for trading or
speculative purposes. We primarily use forward exchange contracts to hedge foreign currency
exposures and they generally have terms of one year or less. These contracts have been designated
as cash flow hedges and accordingly, to the extent effective, any unrealized gains or losses on
these foreign currency forward contracts are reported in other comprehensive income. Realized gains
and losses for the effective portion are recognized with the underlying hedge transaction. As of
April 1, 2007, we had no foreign currency forward contracts outstanding. The notional settlement
amount of the foreign currency forward contracts outstanding at April 1, 2007 and April 2, 2006 was
$0 and $0.1 million, respectively. For the three months ended April 1, 2007 and April 2, 2006,
there were no amounts recognized in earnings due to hedge ineffectiveness and we settled foreign
exchange contracts of $0 and $0.1 million, respectively.
Item 4. Controls and Procedures.
We design our internal controls to provide reasonable assurance that (1) our transactions are
properly authorized; (2) our assets are safeguarded against unauthorized or improper use; and (3)
our transactions are properly recorded and reported in conformity with U.S. generally accepted
accounting principles. We also maintain internal controls and procedures to ensure that we comply
with applicable laws and our established financial policies.
We have carried out an evaluation, under the supervision and with the participation of our
management, including our principal executive officer and principal financial officer, of the
effectiveness of the design and operation of our disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the
Securities Exchange Act), as of April 1, 2007. Based upon that evaluation, our principal executive
officer and principal financial officer concluded that, as of April 1, 2007, our disclosure
controls and procedures are effective to ensure that (a) the information required
32
to be disclosed by us in the reports that we file or submit under the Securities Exchange Act
is recorded, processed, summarized and reported within the time periods specified in the SECs
rules and forms, and (b) such information is accumulated and communicated to our management,
including our principal executive officer and principal financial officers, or persons performing
similar functions, as appropriate to allow timely decisions regarding required disclosure. In
designing and evaluating our disclosure controls and procedures, our management recognized that any
controls and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives, and our management have concluded that the
disclosure controls and procedures are effective at the reasonable assurance level. Because of
inherent limitations in all control systems, no evaluation of controls can provide absolute
assurance that all control issues, if any, within a company have been detected.
An evaluation was also performed under the supervision and with the participation of our
management, including our chief executive officer and chief financial officer, of any change in our
internal control over financial reporting that occurred during the first quarter of 2007 and that
has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting. That evaluation did not identify any such change.
33
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
We have incurred substantial costs in defending ourselves against patent infringement claims
and expect to devote substantial financial and managerial resources to protect our intellectual
property and to defend against the claims described below as well as any future claims asserted
against us.
Affymetrix Litigation
On July 26, 2004, Affymetrix, Inc. (Affymetrix) filed a complaint in the U.S. District Court
for the District of Delaware alleging that the use, manufacture and sale of our BeadArray products
and services, including our Array Matrix and BeadChip products, infringe six Affymetrix patents.
Affymetrix seeks an injunction against the sale of any products that may ultimately be determined
to infringe these patents, unspecified monetary damages, interest and attorneys fees. On September
15, 2004, we filed our answer to Affymetrix complaint, seeking declaratory judgments from the
court that we do not infringe the Affymetrix patents and that such patents are invalid, and we
filed counterclaims against Affymetrix for unfair competition and interference with actual and
prospective economic advantage.
On February 15, 2006, the court allowed us to file our first amended answer and counterclaims,
adding allegations of inequitable conduct with respect to all six asserted Affymetrix patents,
violation of Section 2 of the Sherman Act, and unclean hands. In March 2006, Affymetrix notified us
of its decision to drop one of the six patents from the suit, and of its intention to assert
infringement of certain additional claims of the remaining five patents. On June 30, 2006, the
court dismissed the patent Affymetrix had sought to withdraw from the suit. Both parties filed
summary judgment motions by the July 14, 2006 deadline established by the court, and all such
motions have now been stayed or denied. On August 16, 2006, the court issued a ruling on the
Markman (claim construction) hearing it held on April 20, 2006. At the parties request, the trial
was rescheduled to March 5, 2007 from October 16, 2006. In a February 2007 pre-trial order, the
court established a multi-phase trial structure. The court explained that it decided to address
our defenses of invalidity and enforceability of the patents-in-suit, as well as our claims for
unfair competition and antitrust violations, in subsequent trials.
The first phase, which began on March 5, 2007, addressed the issues of infringement and
damages. On March 13, 2007, the jury returned a verdict finding infringement of the five patents
asserted by Affymetrix. That finding was made without consideration of the validity and
enforceability of these five Affymetrix patents. The jury awarded retroactive damages for certain
product sales prior to the end of 2005 at a royalty rate of 15% in an amount of approximately $16.7
million. This first-phase verdict remains subject to our post-trial motions and appeals. A
judgment on this verdict has not been entered in the case and we do not believe such judgment,
along with any final damages award, will be entered until after the subsequent phases of the trial
are completed.
To the extent we succeed in proving some or all of Affymetrix patents invalid or
unenforceable, the damages amount may be reduced, including to zero, and the court may require a
new trial on the damages amount. If we are not successful in the subsequent phases, damages may be
assessed, in addition to the $16.7 million amount, on post-2005 sales of our products that were
found to infringe the Affymetrix patents. Affymetrix has also asserted that our products launched
post-2005 infringe these patents, but these other products were not at issue in the prior jury
trial, and the court has yet to indicate how the issues of infringement and potential damages will
be judged for these other products. In addition, Affymetrix is contending that our infringement was
willful, and if a jury finds our infringement to be willful, the judge will have the discretion to
increase any damage award by up to three times. Affymetrix has also contended that it should be
awarded its attorneys fees and pre-judgment interest on any damages award.
The second phase of the trial, which will include trial as to the validity of the Affymetrix
patents being asserted, will be tried before a different jury and is expected to be scheduled later
in 2007. Our defense of inequitable conduct, and our counterclaims for tortious interference and
unfair competition by Affymetrix, will be addressed in a third phase of the trial. In order for
Affymetrix to prevail in the case and receive a judgment in its favor, the patent claims found to
have been infringed must also be found to be valid and enforceable in the remaining phases of the
trial, and then such findings must be upheld on appeal. We believe we have prior art that pre-dates
and invalidates the Affymetrix patents. We are also claiming that the inventors or their agents
engaged in inequitable conduct before the United States Patent and Trademark Office in connection
with the prosecution of one or more of the patents in-suit, and we believe that this conduct should
render the affected patents unenforceable.
In the second and third phases of the trial, the Affymetrix patents will be presumed to be
valid and we will have the burden of proving, by clear and convincing evidence, that the patents
are invalid and/or unenforceable. To the extent we are unable to prove
34
invalidity or unenforceability, the court will likely enter a judgment against us and assess
damages. Affymetrix is also seeking an injunction to prevent us from making, selling or offering to
sell products that infringe patents that are found valid and enforceable.
Although
we believe that we have strong defenses to Affymetrix patent claims, the results of
litigation are difficult to predict and no assurance can be given that we will succeed in proving
the patents were not infringed, or are invalid or unenforceable. As discussed above, the judge
overseeing the case has discretion over how and when issues in the case will be tried, and over the
granting and scope of any injunction against us. Any damages award or injunction would be subject
to appeal and we will carefully consider an appeal at the appropriate time. In such a case, if we
choose to appeal, we would likely be required to post a bond or provide other security for some or
the entire amount of the final damages award during the appeal, and such amount may be material.
We have analyzed the potential for a loss from this litigation in accordance with SFAS No. 5,
Accounting for Contingencies.
Due to our beliefs about our position in the case, and because we
are unable to reasonably estimate the amount of loss we would incur if we do not prevail, we have
not recorded a reserve for contingent loss. Should we ultimately lose the lawsuit, such result
could have a material adverse effect on our consolidated results of operations for the period in
which the loss is recorded.
Dr. Anthony W. Czarnik v. Illumina, Inc.
On June 15, 2005, Dr. Anthony Czarnik, a former employee, filed suit against us in the U.S.
District Court for the District of Delaware seeking correction of inventorship of certain of our
patents and patent applications and alleging that we committed inequitable conduct and fraud in not
naming him as an inventor. Dr. Czarnik seeks an order requiring us and the U.S. Patent and
Trademark Office to correct the inventorship of certain of our patents and patent applications by
adding Dr. Czarnik as an inventor, a judgment declaring certain of our patents and patent
applications unenforceable, unspecified monetary damages and attorneys fees. On August 4, 2005, we
filed a motion to dismiss the complaint for lack of standing and failure to state a claim. While
this motion was pending, Dr. Czarnik filed an amended complaint on September 23, 2005. On October
7, 2005, we filed a motion to dismiss the amended complaint for lack of standing and failure to
state a claim. On July 13, 2006, the court granted our motion to dismiss the counts of Dr.
Czarniks complaint dealing with correction of inventorship in pending applications and inequitable
conduct. On July 27, 2006, we filed an answer to the two remaining counts of the amended complaint
(correction of inventorship in issued patents, and fraud). On March 28, 2007, the court issued a
Scheduling Order in which it contemplates holding a claim construction hearing in January 2008
if it deems claim construction to be necessary. A trial date has yet to be set for this case. We
believe we have meritorious defenses against these claims.
ITEM 1A. Risk Factors.
Our business is subject to various risks, including those described below. In addition to the
other information included in this Form 10-Q, the following issues could adversely affect our
operating results or our stock price.
Litigation or other proceedings or third party claims of intellectual property infringement could
require us to spend significant time and money and could prevent us from selling our products or
services or impact our stock price.
Our commercial success depends in part on our non-infringement of the patents or proprietary
rights of third parties and on our ability to protect our own intellectual property. As we have
previously disclosed, Affymetrix, Inc. filed a complaint against us in July 2004 in federal court
in Wilmington, Delaware, alleging infringement of six of its patents.
On June 30, 2006, the court dismissed a patent Affymetrix had sought to withdraw from its suit
leaving five patents being asserted against us. On August 16, 2006, the court issued a ruling on
the claim construction hearing that it had held on April 20, 2006 as part of this litigation. At
the request of both parties, the trial was rescheduled to March 5, 2007 from October 16, 2006. In a
February 2007 pre-trial order, the court explained that it had decided to address our defenses of
invalidity and enforceability of the patents-in-suit, as well as our claims for unfair competition
and antitrust violations, in subsequent trials. The March 5, 2007 trial led to a jury finding of
infringement of the five patents asserted by Affymetrix. That finding was made without
consideration of the validity and enforceability of these five Affymetrix patents. The jury also
ordered us to pay damages based on a royalty of 15% for certain products that we launched and sold
before the end of 2005. The total amount of damages awarded by the jury was $16.7 million.
Although we believe the subsequent trials will confirm the invalidity and unenforceability
positions we have taken with respect to the patents asserted by Affymetrix, we cannot assure you
that the court will find these patents to be invalid or unenforceable. In addition, patents enjoy a
presumption of validity that can be rebutted only by clear and convincing evidence. Any
35
adverse ruling or perception of an adverse ruling throughout these proceedings will likely
have a material adverse impact on our stock price, which may be disproportionate to the actual
import of the ruling itself.
Third parties, including Affymetrix, have asserted or may assert that we are employing their
proprietary technology without authorization. As we enter new markets, we expect that competitors
will likely assert that our products infringe their intellectual property rights as part of a
business strategy to impede our successful entry into those markets. In addition, third parties may
have obtained and may in the future obtain patents allowing them to claim that the use of our
technologies infringes these patents. We could incur substantial costs and divert the attention of
our management and technical personnel in defending ourselves against any of these claims.
Furthermore, parties making claims against us may be able to obtain injunctive or other relief,
which effectively could block our ability to develop further, commercialize and sell products, and
could result in the award of substantial damages against us. In the event of a successful claim of
infringement against us, we may be required to pay damages and obtain one or more licenses from
third parties, or be prohibited from selling certain products. We may not be able to obtain these
licenses at a reasonable cost, if at all. We could therefore incur substantial costs related to
royalty payments for licenses obtained from third parties, which could negatively affect our gross
margins. In addition, we could encounter delays in product introductions while we attempt to
develop alternative methods or products. Defense of any lawsuit or failure to obtain any of these
licenses on favorable terms could prevent us from commercializing products, and the prohibition of
sale of any of our products could materially affect our ability to grow and maintain profitability.
We expect intense competition in our target markets, which could render our products obsolete,
result in significant price reductions or substantially limit the volume of products that we sell.
This would limit our ability to compete and maintain profitability. If we cannot continuously
develop and commercialize new products, our revenue may not grow as intended.
We compete with life sciences companies that design, manufacture and market instruments for
analysis of genetic variation and biological function and other applications using technologies
such as two-dimensional electrophoresis, capillary electrophoresis, mass spectrometry, flow
cytometry, microfluidics, nanotechnology, next-generation DNA sequencing and mechanically
deposited, inkjet and photolithographic arrays. We anticipate that we will face increased
competition in the future as existing companies develop new or improved products and as new
companies enter the market with new technologies. The markets for our products are characterized by
rapidly changing technology, evolving industry standards, changes in customer needs, emerging
competition, new product introductions and strong price competition. For example, prices per data
point for genotyping have fallen significantly over the last two years and we anticipate that
prices will continue to fall. One or more of our competitors may render our technology obsolete or
uneconomical. Some of our competitors have greater financial and personnel resources, broader
product lines, a more established customer base and more experience in research and development
than we do. Furthermore, life sciences and pharmaceutical companies, which are our potential
customers and strategic partners, could develop competing products. If we are unable to develop
enhancements to our technology and rapidly deploy new product offerings, our business, financial
condition and results of operations will suffer.
We may encounter difficulties in integrating acquisitions that could adversely affect our business.
We
acquired Solexa, Inc. (Solexa) in January 2007 and CyVera Corporation in April 2005 and we may in
the future acquire technology, products or businesses related to our current or future business. We
have limited experience in acquisition activities and may have to devote substantial time and
resources in order to complete acquisitions. Further, these potential acquisitions entail risks,
uncertainties and potential disruptions to our business. For example, we may not be able to
successfully integrate a companys operations, technologies, products and services, information
systems and personnel into our business. An acquisition may further strain our existing financial
and managerial resources, and divert managements attention away from our other business concerns.
In connection with these acquisitions, we assumed certain liabilities and hired certain employees,
which is expected to continue to result in an increase in our research and development expenses and
capital expenditures. There may also be unanticipated costs and liabilities associated with an
acquisition that could adversely affect our operating results. To finance any acquisitions, we may
choose to issue shares of our common stock as consideration, which would result in dilution to our
stockholders. Additionally, an acquisition may have a substantial negative impact on near-term
expected financial results.
The success of the Solexa merger will depend, in part, on our ability to realize the
anticipated synergies, growth opportunities and cost savings from integrating Solexas businesses
with our businesses. Our success in realizing these benefits and the timing of this realization
depend upon the successful integration of the operations of Solexa. The integration of two
independent companies is a complex, costly and time-consuming process. The difficulties of
combining the operations of the companies include, among other factors:
36
|
|
|
lost sales and customers as a result of certain customers of either of the two companies
deciding not to do business with the combined company;
|
|
|
|
|
complexities associated with managing the combined businesses;
|
|
|
|
|
integrating personnel from diverse corporate cultures while maintaining focus on
providing consistent, high quality products and customer service;
|
|
|
|
|
coordinating geographically separated organizations, systems and facilities;
|
|
|
|
|
potential unknown liabilities and unforeseen increased expenses or delays associated with the merger; and
|
|
|
|
|
performance shortfalls at one or both of the companies as a result of the diversion of
managements attention to the merger.
|
If we are unable to successfully combine the businesses in a manner that permits the combined
company to achieve the cost savings and operating synergies anticipated to result from the merger,
such anticipated benefits of the merger may not be realized fully or at all or may take longer to
realize than expected. In addition, we and Solexa have operated and will continue to operate
independently. It is possible that the integration process could result in the loss of key
employees, diversion of each companys managements attention, the disruption or interruption of,
or the loss of momentum in, each companys ongoing businesses or inconsistencies in standards,
controls, procedures and policies, any of which could adversely affect our ability to maintain
relationships with customers and employees or our ability to achieve the anticipated benefits of
the merger, or could reduce our earnings or otherwise adversely affect the business and financial
results of the combined company.
The combined company may fail to realize the anticipated benefits of the merger as a result of our
failure to achieve anticipated revenue growth following the merger.
For various reasons, including significant competition, low market acceptance or market
growth, and lack of technology advantage, the Solexa acquisition may not grow as anticipated and if
so, we may not realize the expected value from this transaction.
The merger will cause dilution of our earnings per share.
The merger and the transactions contemplated by the merger agreement are expected to have a
dilutive effect on our earnings per share at least through 2007 due to losses of Solexa, the
additional shares of our common stock that were issued in the merger, the transaction and
integration-related costs and other factors such as the potential failure to realize any benefit
from synergies anticipated in the merger. These factors could adversely affect the market price of
our common stock.
Solexa had a material weakness in its internal controls over financial reporting as of December 31,
2005. If additional material weaknesses are identified in the future, current and potential
stockholders could lose confidence in our consolidated financial reporting, which could harm our
business and the trading of our common stock.
As of December 31, 2005, Solexa did not maintain effective control over the application of
GAAP related to the financial reporting process. This control deficiency resulted in numerous
adjustments being required to bring Solexas financial statements into compliance with GAAP.
Additionally, this deficiency could have resulted in material misstatement of the annual or interim
consolidated financial statements that would not be prevented or detected. Accordingly, Solexas
management determined that this control deficiency constituted a material weakness. Because of this
material weakness, Solexas management concluded that, as of December 31, 2005, it did not maintain
effective internal control over financial reporting based on those criteria. Should we, or our
independent registered public accounting firm, determine in future fiscal periods that there are
material weaknesses in our consolidated internal controls over financial reporting (including
Solexa), the reliability of our financial reports may be impacted, and our results of operations or
financial condition may be harmed and the price of our common stock may decline.
37
Any inability to adequately protect our proprietary technologies could harm our competitive
position.
Our success will depend in part on our ability to obtain patents and maintain adequate
protection of our intellectual property in the United States and other countries. If we do not
protect our intellectual property adequately, competitors may be able to use our technologies and
thereby erode our competitive advantage. The laws of some foreign countries do not protect
proprietary rights to the same extent as the laws of the United States, and many companies have
encountered significant challenges in protecting their proprietary rights abroad. These challenges
can be caused by the absence of rules and methods for the establishment and enforcement of
intellectual property rights abroad.
The patent positions of companies developing tools for the life sciences and pharmaceutical
industries, including our patent position, generally are uncertain and involve complex legal and
factual questions. We will be able to protect our proprietary rights from unauthorized use by third
parties only to the extent that our proprietary technologies are covered by valid and enforceable
patents or are effectively maintained as trade secrets. We intend to apply for patents covering our
technologies and products, as we deem appropriate. However, our patent applications may be
challenged and may not result in issued patents or may be invalidated or narrowed in scope after
they are issued. Questions as to inventorship may also arise. For example, in June 2005, a former
employee filed a complaint against us, claiming he is entitled to be named as joint inventor of
certain of our U.S. patents and pending U.S. and foreign patent applications, and seeking a
judgment that the related patents and applications are unenforceable. Any finding that our patents
and applications are unenforceable could harm our ability to prevent others from practicing the
related technology, and a finding that others have inventorship rights to our patents and
applications could require us to obtain certain rights to practice related technologies, which may
not be available on favorable terms, if at all.
In addition, our existing patents and any future patents we obtain may not be sufficiently
broad to prevent others from practicing our technologies or from developing competing products.
There also is risk that others may independently develop similar or alternative technologies or
design around our patented technologies. Also, our patents may fail to provide us with any
competitive advantage. We may need to initiate additional lawsuits to protect or enforce our
patents, or litigate against third party claims, which would be expensive and, if we lose, may
cause us to lose some of our intellectual property rights and reduce our ability to compete in the
marketplace. Furthermore, these lawsuits may divert the attention of our management and technical
personnel.
We also rely upon trade secret protection for our confidential and proprietary information. We
have taken security measures to protect our confidential information. These measures, however, may
not provide adequate protection for our trade secrets or other confidential information. Among
other things, we seek to protect our trade secrets and confidential information by entering into
confidentiality agreements with employees, collaborators and consultants. Nevertheless, employees,
collaborators or consultants may still disclose our confidential information, and we may not
otherwise be able to effectively protect our trade secrets. Accordingly, others may gain access to
our confidential information, or may independently develop substantially equivalent information or
techniques.
If we are unable to develop and maintain operation of our manufacturing capability, we may not be
able to launch or support our products in a timely manner, or at all.
We currently possess limited facilities capable of manufacturing our principal products and
services for both sale to our customers and internal use. If a natural disaster were to
significantly damage our facility or if other events were to cause our operations to fail, these
events could prevent us from developing and manufacturing our products and services. Also, many of
our manufacturing processes are automated and are controlled by our custom-designed Laboratory
Information Management System (LIMS). Additionally, as part of the decoding step in our array
manufacturing process, we record several images of each array to identify what bead is in each
location on the array and to validate each bead in the array. This requires significant network and
storage infrastructure. If either our LIMS system or our networks or storage infrastructure were to
fail for an extended period of time, it would adversely impact our ability to manufacture our
products on a timely basis and may prevent us from achieving our expected shipments in any given
period.
Our manufacturing capacity may limit our ability to sell our products.
We continue to ramp up our capacity to meet the anticipated demand for our products. Although
we have significantly increased our manufacturing capacity and we believe that we have sufficient
plans in place to ensure we have adequate capacity to meet our business plan in 2007 and 2008,
there are uncertainties inherent in expanding our manufacturing capabilities and we may not be able
to increase our capacity in a timely manner. For example, manufacturing and product quality issues
may arise as we increase
38
production rates at our manufacturing facility and launch new products. As a result, we may
experience difficulties in meeting customer, collaborator and internal demand, in which case we
could lose customers or be required to delay new product introductions, and demand for our products
could decline. Additionally, in the past, we have experienced variations in manufacturing
conditions that have temporarily reduced production yields. Due to the intricate nature of
manufacturing products that contain DNA, we may encounter similar or previously unknown
manufacturing difficulties in the future that could significantly reduce production yields, impact
our ability to launch or sell these products, or to produce them economically, prevent us from
achieving expected performance levels or cause us to set prices that hinder wide adoption by
customers.
If we are unable to find third-party manufacturers to manufacture components of our products, we
may not be able to launch or support our products in a timely manner, or at all.
The nature of our products requires customized components that currently are available from a
limited number of sources. For example, we currently obtain the fiber optic bundles and BeadChip
slides included in our products from single vendors. If we are unable to secure a sufficient supply
of those or other product components, we will be unable to meet demand for our products. We may
need to enter into contractual relationships with manufacturers for commercial-scale production of
some of our products, or develop these capabilities internally, and we cannot assure you that we
will be able to do this on a timely basis, for sufficient quantities or on commercially reasonable
terms. Accordingly, we may not be able to establish or maintain reliable, high-volume manufacturing
at commercially reasonable costs.
We have a significant amount of indebtedness. We may not be able to make payments on our
indebtedness, and we may incur additional indebtedness in the future, which could adversely affect
our operation and profitability.
In February 2007, we issued $400 million of 0.625% convertible senior notes due February 2014.
The notes bear interest semi-annually, mature on February 15, 2014 and obligate us to repurchase
the notes at the option of the holders if a designated event (as defined in the indenture for the
notes), such as certain merger transactions involving us, occurs. In addition, upon conversion of
the notes, we must pay in cash the principal portion of the notes being converted. Our ability to
make payments on the notes will depend on our future operating performance and our ability to
generate cash and may also depend on our ability to obtain additional debt or equity financing. We
may need to use our cash to pay principal and interest on our debt, which will reduce the funds
available to fund our research and development programs, strategic initiatives and working capital
requirements. Our ability to generate sufficient operating cash flow to service the notes and fund
our operating requirements will depend on our continued ability to commercialize new products and
expand our manufacturing capabilities. Our debt service obligations increase our vulnerabilities to
competitive pressures, because our competitors may be less leveraged than us. If we are unable to
generate sufficient operating cash flow to service our indebtedness and fund our operating
requirements, we may be forced to reduce our development programs or seek additional debt or equity
financing, which may not be available to us on satisfactory terms, or at all, or may dilute the
interests of our existing stockholders. Our level of indebtedness may make us more vulnerable to
economic or industry downturns. If we incur new indebtedness, the risks relating to our business
and our ability to service our indebtedness will intensify.
We expect that our results of operations will fluctuate. This fluctuation could cause our stock
price to decline.
Our revenue is subject to fluctuations due to the timing of sales of high-value products and
services projects, the impact of seasonal spending patterns, the timing and size of research
projects our customers perform, changes in overall spending levels in the life sciences industry,
and other unpredictable factors that may affect customer ordering patterns. Given the difficulty in
predicting the timing and magnitude of sales for our products and services, we may experience
quarter-to-quarter fluctuations in revenue resulting in the potential for a sequential decline in
quarterly revenue. A large portion of our expenses are relatively fixed, including expenses for
facilities, equipment and personnel. In addition, we expect operating expenses to continue to
increase significantly. Accordingly, if revenue does not grow as anticipated, we may not be able to
maintain annual profitability. Any significant delays in the commercial launch of our products,
unfavorable sales trends in our existing product lines, or impacts from the other factors mentioned
above, could adversely affect our future revenue growth or cause a sequential decline in quarterly
revenue. Due to the possibility of fluctuations in our revenue and expenses, we believe that
quarterly comparisons of our operating results are not a good indication of our future performance.
If our operating results fluctuate or do not meet the expectations of stock market analysts and
investors, our stock price could decline.
39
Our sales, marketing and technical support organization may limit our ability to sell our products.
We currently have fewer resources available for sales and marketing and technical support
services compared to some of our primary competitors. In order to effectively commercialize our
sequencing, genotyping and gene expression systems and other products to follow, we will need to
expand our sales, marketing and technical support staff both domestically and internationally. We
may not be successful in establishing or maintaining either a direct sales force or distribution
arrangements to market our products and services. In addition, we compete primarily with much
larger companies that have larger sales and distribution staffs and a significant installed base of
products in place, and the efforts from a limited sales and marketing force may not be sufficient
to build the market acceptance of our products required to support continued growth of our
business.
We have only recently achieved annual operating profitability.
Prior to 2006, we had incurred net losses each year since our inception. As of April 1, 2007,
our accumulated deficit was $402.7 million. Our ability to sustain annual profitability will
depend, in part, on the rate of growth, if any, of our revenue and on the level of our expenses.
Non-cash stock based compensation expense and expenses related to our
acquisition of Solexa in January 2007 are also likely to adversely affect our future profitability. We expect to continue
incurring significant expenses related to research and development, sales and marketing efforts to
commercialize our products and the continued development of our manufacturing capabilities. In
addition, we expect that our research and development and selling and marketing expenses will
increase at a higher rate in the future as a result of the development and launch of new products.
Even if we maintain profitability, we may not be able to increase profitability on a quarterly
basis.
We may encounter difficulties in managing our growth. These difficulties could impair our
profitability.
We have experienced and expect to continue to experience rapid and substantial growth
in order to achieve our operating plans, which will place a strain on our human and capital
resources. If we are unable to manage this growth effectively, our profitability could suffer. Our
ability to manage our operations and growth effectively requires us to continue to expend funds to
enhance our operational, financial and management controls, reporting systems and procedures and to
attract and retain sufficient numbers of talented employees. If we are unable to scale up and
implement improvements to our manufacturing process and control systems in an efficient or timely
manner, or if we encounter deficiencies in existing systems and controls, then we will not be able
to make available the products required to successfully commercialize our technology. Failure to
attract and retain sufficient numbers of talented employees will further strain our human resources
and could impede our growth.
Changes in our effective income tax rate could impact our profitability.
We are subject to income taxes in both the United States and numerous foreign jurisdictions.
Significant judgments based on interpretations of existing tax laws or regulations are required in
determining our provision for income taxes. Our effective income tax rate could be adversely
affected by various factors, including, but not limited to, changes in the mix of earnings in tax
jurisdictions with different statutory tax rates, changes in the valuation of deferred tax assets
and liabilities, changes in existing tax laws or tax rates, changes in the level of non-deductible
expenses, including share-based compensation, changes in our future levels of research and
development spending, mergers and acquisitions, and the result of examinations by various tax
authorities.
If we lose our key personnel or are unable to attract and retain additional personnel, we may be
unable to achieve our goals.
We are highly dependent on our management and scientific personnel, including Jay Flatley, our
president and chief executive officer, John Stuelpnagel, our senior vice president, general manager
of microarrays and chief operating officer and John West, our senior vice president and general
manager of sequencing. The loss of their services could adversely impact our ability to achieve our
business objectives. We will need to hire additional qualified personnel with expertise in
molecular biology, chemistry, biological information processing, sales, marketing and technical
support. We compete for qualified management and scientific personnel with other life science
companies, universities and research institutions, particularly those focusing on genomics.
Competition for these individuals, particularly in the San Diego and
San Francisco area, is intense, and the turnover
rate can be high. Failure to attract and retain management and scientific personnel would prevent
us from pursuing collaborations or developing our products or technologies.
Our planned activities will require additional expertise in specific industries and areas
applicable to the products developed through our technologies, including the life sciences and
healthcare industries. Thus, we will need to add new personnel, including management, and develop
the expertise of existing management. The failure to do so could impair the growth of our business.
40
A significant portion of our sales are to international customers.
Approximately 41% and 47% of our revenue for the three months ended April 1, 2007 and April 2,
2006, respectively, was derived from shipments to customers outside the United States. We intend to
continue to expand our international presence and export sales to international customers and we
expect the total amount of non-U.S. sales to continue to grow. Export sales entail a variety of
risks, including:
|
|
|
currency exchange fluctuations;
|
|
|
|
|
unexpected changes in legislative or regulatory requirements of foreign countries into which we import our products;
|
|
|
|
|
difficulties in obtaining export licenses or in overcoming other trade barriers and
restrictions resulting in delivery delays; and
|
|
|
|
|
significant taxes or other burdens of complying with a variety of foreign laws.
|
In addition, sales to international customers typically result in longer payment cycles and
greater difficulty in accounts receivable collection. We are also subject to general geopolitical
risks, such as political, social and economic instability and changes in diplomatic and trade
relations. One or more of these factors could have a material adverse effect on our business,
financial condition and operating results.
Our success depends upon the continued emergence and growth of markets for analysis of genetic
variation and biological function.
We design our products primarily for applications in the life sciences and pharmaceutical
industries. The usefulness of our technology depends in part upon the availability of genetic data
and its usefulness in identifying or treating disease. We are focusing on markets for
analysis of genetic variation and biological function, namely
sequencing, SNP genotyping and gene expression
profiling. These markets are new and emerging, and they may not develop as quickly as we
anticipate, or reach their full potential. Other methods of analysis of genetic variation and
biological function may emerge and displace the methods we are developing. Also, researchers may
not seek or be able to convert raw genetic data into medically valuable information through the
analysis of genetic variation and biological function. In addition, factors affecting research and
development spending generally, such as changes in the regulatory environment affecting life
sciences and pharmaceutical companies, and changes in government programs that provide funding to
companies and research institutions, could harm our business. If useful genetic data is not
available or if our target markets do not develop in a timely manner, demand for our products may
grow at a slower rate than we expect, and we may not be able to sustain annual
profitability.
41
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
The following table discloses the repurchases of our
common stock during the first fiscal
quarter of 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Dollar
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
Value of Shares
|
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased
|
|
|
that May Yet Be
|
|
|
|
|
|
|
|
Average
|
|
|
as Part of Publicly
|
|
|
Purchased Under
|
|
|
|
Total Number of
|
|
|
Price Paid
|
|
|
Announced Plans
|
|
|
the Plans or
|
|
Period
|
|
Shares Purchased
|
|
|
Per Share
|
|
|
or Programs
|
|
|
Programs (1)
|
|
January 1, 2007 - January 28, 2007
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
January 29, 2007 - February 25, 2007 (2)
|
|
|
5,771,000
|
|
|
$
|
34.93
|
|
|
|
5,771,000
|
|
|
|
|
|
February 26, 2007 - April 1, 2007
|
|
|
1,638,545
|
|
|
$
|
30.54
|
|
|
|
1,638,545
|
|
|
|
25,000,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
7,409,545
|
|
|
|
|
|
|
|
7,409,545
|
|
|
$
|
25,000,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Reflects the maximum dollar value of shares that may be purchased under our Rule 10b5-1 stock
repurchase plan as of April 1, 2007. This plan was announced publicly on February 27, 2007.
|
|
(2)
|
|
Reflects approximately $201.6 million of shares repurchased with proceeds from our $400
million Convertible Senior Notes offering on February 16, 2007.
|
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
A special meeting of stockholders was held on January 26, 2007 to vote on the merger of
Solexa, Inc., which was approved by the stockholders.
PROPOSAL I: To approve the issuance of shares of Illumina common stock, par value $0.01 per
share, in connection with the merger, contemplated by the Agreement and Plan of Merger, dated as of
November 12, 2006, by and among Illumina, Inc., Callisto Acquisition Corp. and Solexa, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For:
|
|
34,738,705
|
|
Against:
|
|
753,808
|
|
Abstain:
|
|
38,499
|
|
Non Votes:
|
|
0
|
PROPOSAL II: If necessary, to adjourn the Illumina special meeting to solicit additional
proxies if there are not sufficient votes for the foregoing proposal.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For:
|
|
31,703,092
|
|
Against:
|
|
3,179,455
|
|
Abstain:
|
|
648,465
|
|
Non Votes:
|
|
0
|
Item 5. Other Information.
None.
42
Item 6. Exhibits.
|
|
|
Exhibit Number
|
|
Description of Document
|
10.5
|
|
License Agreement, dated May 1998, between Tufts University and the Registrant.
|
|
|
|
10.41
|
|
Lease between BMR-9885 Towne Centre
Drive LLC and the Registrant, dated January 26, 2007.
|
|
|
|
10.42
|
|
Lease between BMR-9885 Towne Centre
Drive LLC and the Registrant, dated January 26, 2007.
|
|
|
|
31.1
|
|
Certification of Jay T. Flatley pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
31.2
|
|
Certification of Christian O. Henry pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1
|
|
Certification of Jay T. Flatley pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.2
|
|
Certification of Christian O. Henry pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
|
43
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.
|
|
|
|
|
|
|
Illumina, Inc.
|
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
Date:
May 3, 2007
|
|
/s/ CHRISTIAN O. HENRY
|
|
|
|
|
|
|
|
|
|
Christian O. Henry
|
|
|
|
|
Senior Vice President and Chief Financial Officer
|
|
|
44
Exhibit 10.41
EXECUTION VERSION
AMENDED AND RESTATED LEASE
(Parcels 1&2: 9885 Towne Centre Drive, San Diego, California)
by and between
BMR-9885 TOWNE CENTRE DRIVE LLC
,
a Delaware limited liability company
and
ILLUMINA, INC.,
a Delaware corporation
AMENDED AND RESTATED LEASE
(Parcels 1&2: 9885 Towne Centre Drive, San Diego, California)
THIS LEASE (this
Lease
) is entered into as of this 26
th
day of January,
2007 (the
Execution Date
), by and between BMR-9885 Towne Centre Drive LLC, a Delaware
limited liability company (
Landlord
), and Illumina, Inc., a Delaware corporation
(
Tenant
).
RECITALS
A. WHEREAS, Landlord and Tenant have entered in that certain Single Tenant Lease dated August
18, 2004 (the
Original Lease
), pursuant to which Tenant leased three (3) parcels of real
property located in the City of San Diego, County of San Diego, State of California, legally
described as: (1) Parcel 1 of Parcel Map 18286 filed with the San Diego County Recorder on June 21,
1999 (together with any easements and appurtenances thereto, the
Parcel 1 Land
); (2)
Parcel 2 of Parcel Map 18286 filed with the San Diego County Recorder on June 21, 1999 (together
with any easements and appurtenances thereto, the
Parcel 2 Land
and, together with the
Parcel 1 Land, the
Property
); and (3) Parcel 3 of Parcel Map 18286 filed with the San
Diego County Recorder on June 21, 1999 (together with any easements and appurtenances thereto, the
Parcel 3 Land
and, collectively with the Parcel 1 Land and the Parcel 2 Land, the
Parcels
). The Property is improved by two (2) buildings consisting of approximately
104,870 square feet of space (the
Buildings
), and the Parcel 3 Land is improved by one
(1) building consisting of approximately 11,000 square feet of space (the
Diversified
Building
);
B. WHEREAS, Landlord intends to construct an additional building totaling approximately 83,866
rentable square feet on the Parcel 3 Land (the
New Parcel 3 Building
);
C. WHEREAS, pursuant to the terms and conditions of the Original Lease, Landlord granted
Tenant certain rights in connection with the New Parcel 3 Building, including: (1) a right of first
refusal to lease space in the New Parcel 3 Building as set forth in
Section 25
of the
Original Lease, and (2) a development fee in connection with the New Parcel 3 Building as set forth
in
Section 25
of the Original Lease (the
Tenants Development Rights
);
D. WHEREAS, Concurrently herewith, Landlord and Tenant are entering into a new lease (the
Parcel 3 Lease
) to, among other things, lease the Parcel 3 Land, including the
Diversified Building and the New Parcel 3 Building; and
E. WHEREAS, Landlord and Tenant now wish to amend and restate the Original Lease in its
entirety to, among other things, (1) extend the term of the Original Lease to be co-terminous with
the term of the Parcel 3 Lease, (2) exclude Parcel 3 Land (including the Diversified Building) from
the Premises covered by this Lease, and (3) terminate the Tenants Development Rights.
AGREEMENT
NOW, THEREFORE, Landlord and Tenant, in consideration of the mutual promises contained herein
and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, hereby amend and restate the Original Lease,
effective from and after the Execution Date, to exclude the Parcel 3 Land (including the
Diversified Building) from the Premises covered by this Lease, to terminate the Tenants
Development Rights, and to read in its entirety as follows:
1.
Lease of Premises
. Effective on the Execution Date, Landlord hereby leases to
Tenant, and Tenant hereby leases from Landlord, the Premises (as defined below). The Property and
all landscaping, parking facilities and other improvements and appurtenances related thereto,
including, without limitation, the Buildings, are hereinafter collectively referred to as the
Premises
. For purposes of clarity, the Original Lease controls all of the parties
rights and obligations from the Commencement Date through the Execution Date and this Lease
controls all of the parties rights and obligations from the Execution Date through the Expiration
Date.
2.
Basic Lease Provisions
. For convenience of the parties, certain basic provisions of this Lease are set forth
herein. The provisions set forth herein are subject to the remaining terms and conditions of this
Lease and are to be interpreted in light of such remaining terms and conditions.
2.1.
Binding
. This Lease shall take effect upon the Execution Date and, except as
specifically otherwise provided within this Lease, each of the provisions hereof shall be binding
upon and inure to the benefit of Landlord and Tenant from the Execution Date.
2.2.
Rentable Areas of the Premises
. The term
Rentable Area
of the Premises
shall be deemed to be 104,870 square feet, even if it is determined upon final measurement of the
Buildings, that the Rentable Area of such Buildings are smaller or larger than the amount set forth
in this
Section 2.2.
2.3.
Basic Annual Rent
. Initial monthly and annual installments of Basic Annual Rent
for the Premises (
Basic Annual Rent
) as of the Execution Date, subject to adjustment in
accordance with
Section 6
, shall be as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Rentable S.F.
|
|
|
|
|
Rentable S.F. of
Premises
|
|
of Premises
|
|
Total Annual
|
|
Total Monthly
|
104,870
|
|
$
|
3.09
|
|
|
$
|
3,893,226.97
|
|
|
$
|
324,435.58
|
|
2.4.
Commencement Date
: The Commencement Date shall be August 18, 2004.
2.5.
Expiration Date
: Fifteen (15) years from the Phase 1 Commencement Date (as
defined in the Parcel 3 Lease); provided, however, Tenant shall have the option to extend this
Lease as provided in
Article 38
.
2.6.
Security Deposit
: An amount equal to Eight Hundred Sixty-Five Thousand One
Hundred Seventy-Seven and 50/100 Dollars ($865,177.50).
2.7.
Permitted Use
: (a) Laboratory research, administration, pharmaceutical,
diagnostic, office, manufacturing and related health care and research uses in conformity with
Applicable Laws (as defined below); and (b) such other legally permitted uses as are approved by
Landlord, which approval shall not be unreasonably withheld or delayed.
2.8.
Address for Rent Payment
:
BMR-9885 Towne Centre Drive LLC
Unit E
P.O. Box 51918
Los Angeles, CA 90051-6218
2.9.
Address for Notices to Landlord
:
BMR-9885 Towne Centre Drive LLC
17140 Bernardo Center Drive, Suite 222
San Diego, California 92128
Attn: General Counsel/Real Estate
2.10.
Address for Notices to Tenant
:
Illumina, Inc.
9885 Towne Centre Drive
San Diego, CA 92121
Attn: Christian Henry
2.11. The following Exhibits are attached hereto and incorporated herein by reference:
Exhibit A Tenants Personal Property
Exhibit B Rules and Regulations
Exhibit C Form of Estoppel Certificate
Exhibit D Form of Letter of Credit
Exhibit E Form of Subordination, Non-Disturbance and Attornment Agreement
Exhibit F Reciprocal Easement Agreement
Exhibit G Temporary Construction Easement
2
3.
Term
. The actual term of this Lease (the
Term
) shall be the period from
the Execution Date through the Expiration Date, subject to earlier termination of this Lease as
provided herein.
4.
Possession and Commencement Date
.
4.1.
Possession
. Tenant hereby acknowledges that immediately prior to the Execution
Date, Tenant occupied the Premises and that Tenant is in possession of the Premises, and is
familiar with the condition thereof and accepts the Premises in its as is condition with all
faults, and Landlord makes no representation or warranty of any kind with respect the Premises, and
Landlord will have no obligation to improve, alter or repair the Premises, except as specifically
set forth herein. Tenant acknowledges that Tenant was the prior owner of the Premises and as such
is fully aware of the current conditions of the Premises.
5.
Rent
.
5.1. Tenant shall pay to Landlord as Basic Annual Rent for the Premises, the sums set forth in
Section 2.3
, subject to annual rent adjustments in accordance the provisions of
Article
6
hereof. Basic Annual Rent shall be paid in equal monthly installments on or before the first
day of the applicable month.
5.2. In addition to Basic Annual Rent, Tenant shall pay to Landlord as additional rent
(
Additional Rent
) at times hereinafter specified in this Lease (a) amounts related to
Insurance Costs, Utility Costs and Taxes (each as defined below) and (b) any other amounts that
Tenant agrees to pay under the provisions of this Lease that are owed to Landlord, including,
without limitation, any and all other sums that may become due by reason of any default of Tenant
or failure on Tenants part to comply with the agreements, terms, covenants and conditions of this
Lease to be performed by Tenant, after notice and the lapse of any applicable cure periods.
5.3. Basic Annual Rent and Additional Rent shall together be denominated
Rent
. Rent
shall be paid to Landlord, without, except as otherwise provided herein, abatement, deduction or
offset, in lawful money of the United States of America at the office of Landlord as set forth in
Section 2.9
or to such other person or at such other place as Landlord may from time
designate in writing.
6.
Rent Adjustments
. The Basic Annual Rent shall be adjusted as follows:
6.1. The Basic Annual Rent per rentable square foot of the Premises shall be increased in
accordance with
Schedule 1
attached hereto.
6.2. On the first day of each Extended Term (as defined in
Section 38
), the Basic
Annual Rent shall be adjusted in accordance with
Section 38.1
. During each Extended Term,
the Basic Annual Rent per rentable square foot of the Premises shall be increased, on every other
anniversary (i.e., the second anniversary, the fourth anniversary, the sixth anniversary, etc.) of
the first (1
st
) day of each such Extended Term, by five percent (5%) of the Basic Annual
Rent immediately preceding such increase.
The monthly installment of Basic Annual Rent that is due for the month in which each such
adjustment occurs (the installment due immediately before such month) shall be the first
installment that will be increased to reflect such increase in Basic Annual Rent.
7.
Taxes
.
7.1. Commencing with the Execution Date and continuing for each calendar year or, at
Landlords option, tax year (each such tax year being a period of twelve (12) consecutive
calendar months for which the applicable taxing authority levies or assesses Taxes), for the
balance of the Term, Tenant shall pay to Landlord the amount of all Taxes levied and assessed for
any such year upon the Premises.
Taxes
shall mean all government impositions including,
without limitation, property tax costs consisting of real and personal property taxes and
assessments (including amounts due under any improvement bond upon the Premises or any portion
thereof, including the Parcel or parcels of real property upon which the Buildings are located or
assessments levied in lieu thereof) imposed by any federal, state, regional, local or municipal
governmental authority, agency or subdivision (each, a
Governmental Authority
) on the
Premises or improvements thereon, any tax on or measured by gross rentals received from the rental
of space in the Buildings, or tax based on the square footage of the Premises or the
3
Buildings as
well as any parking charges, utilities surcharges, or any other costs levied, assessed or imposed
by, or at the direction of, or resulting from statutes or regulations, or interpretations thereof,
promulgated by any Governmental Authority in connection with the use or occupancy of the Premises
or the parking facilities exclusively serving the Premises; any tax on this transaction or this
Lease;
provided
,
however
, that
Taxes
shall in no event include any
franchise or federal or state income tax, excess profit taxes, gift taxes, capital stock taxes,
inheritance and succession taxes, estate taxes or any tax based on net rentals received from the
rental of space in the Buildings. Any amount paid by Tenant for any partial year of the Term shall
be prorated on the basis of the number of days of such partial year. Payment shall be made in the
following manner: Tenant shall pay to Landlord the amounts owed under this
Article 7
within thirty (30) days after Landlord gives notice to Tenant of the amount of such Taxes payable
by Tenant (or not less than fifteen (15) days prior to delinquency, whichever is later). Landlord
also shall provide Tenant with a copy of the applicable tax bill or tax statement from the relevant
taxing authority. Notwithstanding the foregoing, if Applicable Laws allow any such Taxes to be
paid in installments, then Tenant may make such payments to Landlord in installments, provided that
each such installment shall be payable to Landlord not less than ten (10) days prior to the date
upon which payment of the applicable installment to the taxing authority becomes delinquent. In
addition to any other amounts due from Tenant to Landlord, if Tenant fails to pay Taxes to Landlord
as herein required, Tenant shall pay to Landlord the amount of any interest, penalties or late
charges imposed by any governmental authority for late payment.
Applicable Laws
means
all federal, state, municipal and local laws, codes, ordinances, rules and regulations of
Governmental Authorities, committees, associations, or other regulatory committees, agencies or
governing bodies having jurisdiction over the Premises, Landlord or Tenant, including both
statutory and common law and hazard waste rules and regulations.
7.1.1 Tenant shall have the right, by appropriate proceedings, to protest or contest in good
faith any assessment or reassessment of Taxes, any special assessment, or the validity of any Taxes
or of any change in assessment or tax rate;
provided
,
however
, that prior to any
such challenge Tenant must either (a) pay the Taxes alleged to be due in their entirety and seek a
refund from the appropriate authority or (b) post a bond in an amount sufficient to ensure full
payment of the Taxes, including any potential interest, late charge and penalties. Upon a final
determination with respect to any such contest or protest, Tenant shall promptly pay to the
appropriate Governmental Authority all sums found to be due with respect thereto. In any such
protest or contest, Tenant may act in its own name, and at the request of Tenant, Landlord shall
cooperate with Tenant in any way Tenant may reasonably require in connection with such contest or
protest, including signing such documents as Tenant reasonably shall request,
provided
that
such cooperation shall be at no expense to Landlord and shall not require Landlord to attend any
appeal or other hearing. Any such contest or protest shall be at Tenants sole expense, and if any
penalties, interest or late charges become payable with respect to the Taxes as a result of such
contest or protest, Tenant shall pay the same.
7.1.2 If Tenant obtains a refund as the result of Tenants protest or contest, and subject to
Tenants obligation to pay Landlords costs (if any) associated therewith, Tenant shall be entitled
to such refund to the extent it relates to the Premises during the Term.
7.2. If, at any time during the Term under the laws of any Governmental Authority, a tax or
excise on rent or any other tax howsoever described is levied or assessed by any such political
body against Landlord on account of rentals payable to Landlord hereunder, such tax or excise shall
be considered
Taxes
for the purposes of this
Article 7
, although any amount
assessed against Landlord as state or federal income tax shall not be deemed
Taxes
.
7.3. To the extent Landlord is required by a lender, Tenant shall timely pay all tax and
insurance impound payments due on the Premises.
7.4.
Taxes on Tenants Property
.
7.4.1 Tenant shall pay at least twenty (20) days prior to delinquency any and all taxes levied
against any personal property or trade fixtures placed by Tenant in or about the Premises.
7.4.2 If any such taxes on Tenants personal property or trade fixtures are levied against
Landlord or Landlords property or, if the assessed valuation of the Buildings are increased by
inclusion therein of a value attributable to Tenants personal property or trade
4
fixtures, and if
Landlord, after written notice to Tenant, pays the taxes based upon any such increase in the
assessed valued of the Buildings, then Tenant shall, upon demand, repay to Landlord the taxes so
paid by Landlord.
7.5.
Cut-Off Date
. Notwithstanding anything herein to the contrary, Tenant shall not
be responsible for Taxes attributable to any calendar year which are first billed to Tenant more
than eighteen (18) months after the expiration of the applicable calendar year, except with respect
to supplemental Taxes.
8.
Security Deposit
.
8.1. Pursuant to the Original Lease, Tenant has deposited with Landlord an amount equal to
$1,911,855 as the security deposit under the Original Lease (the
Original Lease Security
Deposit
), and (a) from and after the Execution Date, Landlord shall continue to hold a portion
of the Original Lease Security Deposit equal to $865,177.50 (the
Security Deposit
) in
accordance with the terms and conditions of this
Section 8
, (b) from and after the
Execution Date, Landlord shall hold a portion of the Original Lease Security Deposit equal to
$40,836.75 in accordance with the terms and conditions of Section 10 of the Parcel 3 Lease, and (c)
Landlord shall return the remaining portion of the Original Lease Security Deposit in an amount
equal to $1,005,840.75 to Tenant
8.2. The Security Deposit shall be held by Landlord as security for the faithful performance
by Tenant of all of the terms, covenants and conditions of this Lease to be kept and performed by
Tenant during the period commencing on the Execution Date and ending upon the expiration or
termination of this Lease. If Tenant defaults with respect to any provision of this Lease,
including, but not limited to, any provision relating to the payment of Rent, then Landlord may
(but shall not be required to) use, apply or retain all or any part of the Security Deposit for the
payment of any Rent or any other sum in default, or to compensate Landlord for any other loss or
damage that Landlord may suffer by reason of Tenants default. If any portion of the Security
Deposit is so used or applied, then Tenant shall, within twenty (20) days following demand
therefor, deposit cash with Landlord in an amount sufficient to restore the Security Deposit to its
original amount, and Tenants failure to do so shall be a material breach of this Lease. Landlord
shall not be required to keep this Security Deposit separate from its general fund, and Tenant
shall not be entitled to interest on the Security Deposit. The provisions of this
Article
8
shall survive the expiration or earlier termination of this Lease.
8.3. In the event of bankruptcy or other debtor-creditor proceedings against Tenant, the
Security Deposit shall be deemed to be applied first to the payment of Rent and other charges due
Landlord for all periods prior to the filing of such proceedings.
8.4. Landlord may deliver to any purchaser of Landlords interest in the Premises the funds
deposited hereunder by Tenant, and thereupon Landlord shall be discharged from any further
liability with respect to such deposit. This provision shall also apply to any subsequent
transfers.
8.5. If Tenant is not then in Default under this Lease nor is any event then occurring which
with the giving of notice or the passage of time, or both, would constitute a Default hereunder,
then the Security Deposit, or any balance thereof, shall be returned to Tenant (or, at Landlords
option, to the last assignee of Tenants interest hereunder) within thirty (30) days after the
expiration or earlier termination of this Lease.
8.6. The Security Deposit may be in the form of cash, a letter of credit or any other security
instrument acceptable to Landlord in its sole discretion. Tenant may at any time, except
during Default, deliver a letter of credit (
L/C Security
) as the entire Security
Deposit, as follows.
8.6.1 If Tenant elects to deliver L/C Security, then Tenant shall provide Landlord, and
maintain in full force and effect throughout the Term, a letter of credit in substantially the form
of
Exhibit D
issued by an issuer reasonably satisfactory to Landlord, in the amount of the Security
Deposit, with an initial term of at least one year. If, at the Expiration Date, any Rent remains
uncalculated or unpaid, then: (a) Landlord shall with reasonable diligence complete any necessary
calculations; (b) Tenant shall extend the expiry date of such L/C Security from time to time as
Landlord reasonably requires; and (c) in such extended period,
5
Landlord shall not unreasonably
refuse to consent to an appropriate reduction of the L/C Security. Tenant shall reimburse
Landlords legal costs (as estimated by Landlords counsel) in handling Landlords acceptance of
L/C Security or its replacement or extension
8.6.2 If Tenant delivers to Landlord satisfactory L/C Security in place of the entire Security
Deposit, Landlord shall promptly remit to Tenant any cash Security Deposit Landlord previously
held.
8.6.3 Landlord may draw upon the L/C Security, and hold and apply the proceeds in the same
manner and for the same purposes as the Security Deposit, if: (a) an uncured Default exists; (b)
as of the date thirty (30) days before any L/C Security expires (even if such scheduled expiry date
is after the Expiration Date) Tenant has not delivered to Landlord an amendment or replacement for
such L/C Security, reasonably satisfactory to Landlord, extending the expiry date to the earlier of
(i) six (6) months after the then-current Expiration Date or (ii) the date one year after the
then-current expiry date of the L/C Security; (c) the L/C Security provides for automatic renewals,
Landlord asks the issuer to confirm the current L/C Security expiry date, and the issuer fails to
do so within ten (10) business days; (d) Tenant fails to pay (when and as Landlord reasonably
requires) any bank charges for Landlords transfer of the L/C Security; or (e) the issuer of the
L/C Security ceases, or announces that it will cease, to maintain an office in the city where
Landlord may present drafts under the L/C Security. This Section does not limit any other
provisions of this Lease allowing Landlord to draw the L/C Security under specified circumstances.
8.6.4 Tenant shall not seek to enjoin, prevent, or otherwise interfere with Landlords draw
under L/C Security, even if it violates this Lease. Tenant acknowledges that the only effect of a
wrongful draw would be to substitute a cash Security Deposit for L/C Security, causing Tenant no
legally recognizable damage. Landlord shall hold the proceeds of any draw in the same manner and
for the same purposes as a cash Security Deposit. In the event of a wrongful draw, the parties
shall cooperate to allow Tenant to post replacement L/C Security simultaneously with the return to
Tenant of the wrongfully drawn sums, and Landlord shall upon request confirm in writing to the
issuer of the L/C Security that Landlords draw was erroneous.
8.6.5 If Landlord transfers its interest in the Premises, then Tenant shall at Tenants
expense, within ten (10) business days after receiving a request from Landlord, deliver (and, if
the issuer requires, Landlord shall consent to) an amendment to the L/C Security naming Landlords
grantee as substitute beneficiary;
provided
,
however
, in the event Landlord
transfers its interest in the Premises more than once in a twelve (12) month period, Landlord shall
pay any fee owed to the issuing bank in connection with any such additional transfer. If the
required Security changes while L/C Security is in force, then Tenant shall deliver (and, if the
issuer requires, Landlord shall consent to) a corresponding amendment to the L/C Security.
9.
Use
.
9.1. Tenant shall use the Premises for the purpose set forth in
Section 2.7
, and shall
not use the Premises, or permit or suffer the Premises to be used, for any other purpose without
Landlords prior written consent, which consent Landlord may withhold in its reasonable discretion.
9.2. Tenant shall not use or occupy the Premises in violation of Applicable Laws; zoning
ordinances; or the certificate of occupancy issued for the Buildings, and shall, upon five (5)
days written notice from Landlord, discontinue any use of the Premises that is declared or claimed
by any Governmental Authority having jurisdiction to be a violation of any of the above, or that
Landlord has a reasonable basis to believe that such use violates any of the above and
Landlord identifies such basis in its notice to Tenant. Tenant shall comply with any
direction of any Governmental Authority having jurisdiction that shall, by reason of the nature of
Tenants use or occupancy of the Premises, impose any duty upon Tenant with respect to the Premises
or with respect to the use or occupation thereof.
9.3. Tenant shall not do or permit to be done anything that will invalidate or increase the
cost of any fire, environmental, extended coverage or any other insurance policy covering the
Premises, and shall comply with all rules, orders, regulations and requirements of the insurers of
the Premises, and Tenant shall promptly, upon demand, reimburse Landlord for any additional
premium charged for such policy by reason of Tenants failure to comply with the provisions of this
Article 9
.
6
9.4. Tenant shall, at its sole cost and expense, promptly and properly observe and comply with
all present and future orders, regulations, directions, rules, laws, ordinances, and requirements
of all Governmental Authorities (including, without limitation, state, municipal, county and
federal governments and their departments, bureaus, boards and officials) arising from the use or
occupancy of the Premises, including, without limitation, the requirements of Americans with
Disabilities Act of 1990 (together with regulations promulgated pursuant thereto, the
ADA
). Tenants obligations under this
Section 9.4
shall include any alterations
to the Premises that Tenant is required or elects to make pursuant to the terms of this Lease.
9.5. Tenant shall keep all doors opening onto public corridors closed, except when in use for
ingress and egress.
9.6. No additional locks or bolts of any kind shall be placed upon any of the doors or windows
by Tenant, nor shall any changes be made to existing locks or the mechanisms thereof without
Landlords prior written consent. Tenant shall, upon termination of this Lease, return to Landlord
all keys to offices and restrooms either furnished to or otherwise procured by Tenant. In the
event any key so furnished to Tenant is lost, Tenant shall pay to Landlord the cost of replacing
the same or of changing the lock or locks opened by such lost key if Landlord shall deem it
necessary to make such change
9.7. No awnings or other projections shall be attached to any outside wall of the Buildings.
No curtains, blinds, shades or screens shall be attached to or hung in, or used in connection with,
any window or door of the Premises other than Landlords standard window coverings. Neither the
interior nor exterior of any windows shall be coated or otherwise sunscreened without Landlords
prior written consent, nor shall any bottles, parcels or other articles be placed on the
windowsills. No equipment, furniture or other items of personal property shall be placed on any
exterior balcony without Landlords prior written consent.
9.8. Tenant shall, at Tenants sole cost and expense, have the exclusive right to install the
maximum amount of any legally permitted signage on the Premises (including any building thereon)
(
Signage
), which Signage shall be subject to Landlords prior written consent, which
consent shall not be unreasonably withheld, conditioned or delayed. Tenant shall keep the Signage
in good condition and repair. The size, design, and other physical aspects of any sign shall be
subject to Landlords written approval prior to installation, which approval will not unreasonably
be withheld, any covenants, conditions, or restrictions encumbering the Premises and, any
Applicable Laws. The cost of the sign(s), including but not limited to the permitting,
installation, maintenance and removal thereof shall be at Tenants sole cost and expense. If Tenant
fails to maintain its sign(s), or if Tenant fails to remove such sign(s) upon termination of this
Lease, or fails to repair any damage caused by such removal (including without limitation, painting
the damaged portions of the Buildings and any other portions of the Buildings that Landlord
reasonably determines in good faith shall be painted so that repainting the damaged portion of the
Buildings does not adversely affect the visual appearance of the Buildings, if required by
Landlord;
provided
,
however
, in no event shall Landlord require Tenant to repaint
an entire Building), Landlord may do so at Tenants expense. Tenant shall on demand reimburse
Landlord for all costs incurred by Landlord to effect such removal, which amounts shall be deemed
Additional Rent and shall include without limitation, all sums disbursed, incurred or deposited by
Landlord, including Landlords costs, expenses and actual attorneys fees with interest thereon.
Tenant shall indemnify, defend and hold harmless Landlord from and against any loss, cost, claim,
lawsuit, liability or expense (including reasonable attorneys fees and disbursements) arising
directly or indirectly out of Tenants failure to perform any of its
obligations under this
Section 9.8
. By executing this Lease, Landlord hereby approves
the signage currently existing on the Premises.
9.9. Tenant shall only place equipment within the Premises with floor loading consistent with
the structural design of the Buildings without Landlords prior written approval, and such
equipment shall be placed in a location designed to carry the weight of such equipment.
7
9.10. Tenant shall not (a) use or allow the Premises to be used for any unlawful or reasonably
objectionable purposes or (b) cause, maintain or permit any nuisance or waste in, on or about the
Premises.
9.11. Notwithstanding any other provision herein to the contrary, Tenant shall be responsible
for all liabilities, costs and expenses arising out of or in connection with the compliance of the
Premises with the ADA, and Tenant shall indemnify, defend and hold harmless Landlord from and
against any loss, cost, claim, lawsuit, liability or expense (including reasonable attorneys fees
and disbursements) arising out of any failure of the Premises to comply with the ADA. The
provisions of this
Section 9.11
shall survive the expiration or earlier termination of this
Lease.
10.
Brokers
.
10.1. Tenant represents and warrants that it has had no dealings with any real estate broker
or agent in connection with the negotiation of this Lease other than Steve Rosetta and Ted Simpson,
Cushman & Wakefield (
Tenants Broker
), and that it knows of no other real estate broker
or agent that is or might be entitled to a commission in connection with this Lease. Landlord
shall compensate Tenants Broker in relation to this Lease pursuant to a separate agreement between
Landlord and Landlords Broker (the
Commission Agreement
).
10.2. Landlord represents and warrants that it has had no dealings with any real estate broker
or agent in connection with the negotiation of this Lease other than Doug Lozier at CB Richard
Ellis, Inc. (
Landlords Broker
), and that it knows of no other real estate broker or
agent that is or might be entitled to a commission in connection with this Lease. Landlord shall
compensate Landlords Broker in relation to this Lease pursuant to the Commission Agreement.
10.3. Tenant acknowledges and agrees that the employment of brokers by Landlord is for the
purpose of solicitation of offers of leases from prospective tenants and that no authority is
granted to any broker to furnish any representation (written or oral) or warranty from Landlord
unless expressly contained within this Lease. Landlord is executing this Lease in reliance upon
Tenants representations, warranties and agreements contained within
Section 10.1
.
10.4. Tenant agrees to indemnify, defend and hold Landlord harmless from any and all cost or
liability for compensation claimed by any other broker or agent, other than Tenants Broker,
employed or engaged by it or claiming to have been employed or engaged by Tenant. Landlord agrees
to indemnify, defend and hold Tenant harmless from any and all cost or liability for compensation
claimed by any other broker or agent, other than Landlords Broker, employed or engaged by it or
claiming to have been employed or engaged by Landlord.
11.
Holding Over
.
11.1. If, with Landlords prior written consent, Tenant holds possession of all or any part of
the Premises after the Term, Tenant shall become a tenant from month to month after the expiration
or earlier termination of the Term, and in such case Tenant shall continue to pay (a) the Basic
Annual Rent in accordance with
Article 5
, as adjusted in accordance with
Article 6
,
and (b) any amounts for which Tenant would otherwise be liable under this Lease if this Lease were
still in effect, including, without limitation, payments for Taxes and insurance. Any such
month-to-month tenancy shall be subject to every other term, covenant and agreement contained
herein.
11.2. Notwithstanding the foregoing, if Tenant remains in possession of the Premises after the
expiration or earlier termination of the Term without Landlords prior written consent, Tenant
shall become a tenant at sufferance subject to the terms and conditions of this Lease, except that
the per diem Basic Annual Rent shall be equal to: (a) for the first three (3) months that Tenant
remains in possession of the Premises after the expiration or earlier termination of
this Lease, one hundred twenty-five percent (125%) of the Basic Annual Rent in effect during
the last thirty (30) days of the Term; and (b) for any time thereafter that Tenant remains in
possession of the Premises after the expiration or earlier termination of this Lease, one hundred
fifty percent (150%) of the Basic Annual Rent in effect during the last thirty (30) days of the
Term.
8
11.3. Acceptance by Landlord of Rent after the expiration or earlier termination of the Term
shall not result in an extension, renewal or reinstatement of this Lease.
11.4. The foregoing provisions of this
Article 11
are in addition to and do not affect
Landlords right of reentry or any other rights of Landlord hereunder or as otherwise provided by
Applicable Laws.
12.
Property Management Fee
. Tenant shall pay to Landlord on the first day of each
calendar month of the Term, as Additional Rent, the
Property Management Fee
, which shall
equal one and a half percent (1.5%) of the Basic Annual Rent due from Tenant.
13.
Condition of Premises
. Except as otherwise provided herein, Tenant acknowledges
that neither Landlord nor any agent of Landlord has made any representation or warranty with
respect to the condition of the Premises or with respect to the suitability of the Premises for the
conduct of Tenants business.
14.
Regulations and Parking; Recreation Facilities
.
14.1.
Rules and Regulations
. Tenant shall faithfully observe and comply with the
rules and regulations adopted by Landlord and attached hereto as
Exhibit B
, together with such
other reasonable and nondiscriminatory rules and regulations as are hereafter promulgated by
Landlord in its reasonable discretion (the
Rules and Regulations
).
14.2.
Reciprocal Easement Agreement
.
14.2.1 Tenant shall have the right to use the fitness center, the full court basketball/sports
courts, outdoor seating areas, dressing, locker and working rooms, restrooms, and showers located
on the Parcel 3 Land (collectively, the
Recreation Facilities
) pursuant to the terms and
conditions of the Reciprocal Easement Agreement attached hereto as
Exhibit F
(the
REA
).
14.2.2 Tenant shall, at Tenants sole cost and expense, comply with the terms and conditions
set forth in, and perform each of the obligations of the Parcels 1&2 Owner (as defined in the REA)
described in,
Sections 2
,
4.1
,
4.2
,
4.3
,
4.4
,
4.8
,
7
,
8
,
9
,
11.3
,
11.10
,
11.11
and
11.12
of
the REA in accordance with the terms of conditions of the REA as if Tenant were the Parcels 1&2
Owner.
14.2.3 Tenant shall, and shall cause Tenants Agents to, faithfully observe and comply with
any rules and regulations adopted pursuant to
Section 4.7
of the REA (the
Recreation
Facilities Rules and Regulations
). The Parcel 3 Owner (as defined in the REA) has the right
to refuse to allow Tenants Agents to access the Recreation Facilities if such Tenants Agent has
not complied with the applicable Recreation Facilities Rules and Regulations after receiving
written notice of such failure to comply.
14.2.4 Notwithstanding anything to the contrary in this Lease, Landlord shall have no
responsibility to Tenant or Tenants Agents (as defined below), for any accidents, claims, demands,
liabilities, causes of action, judgments, costs, liens, damages, injuries, suits, losses or
expenses, including attorneys fees, of any nature, kind or description, arising out of, caused by,
or resulting from Tenant or Tenants Agents use of the Recreational Facilities or the negligence
of Landlord Parties (as defined in
Section 19.3
) or Tenants Agents in connection with the
operation and maintenance of such Recreational Facilities.
14.2.5 So long as this Lease is in full force and effect, Landlord shall not amend or modify
the REA without first obtaining: (a) the prior written consent of the original Tenant
hereunder (but not any assignee or subtenant), which consent shall not be unreasonably
withheld, conditioned or delayed, and (b) solely with respect to amendments or modifications that
could reasonably be expected to have a material adverse effect on obligations assumed by any
successors and assigns of Tenant under the REA, the prior written consent of any such successors
and assigns, which consent shall not be unreasonably withheld, conditioned or delayed. All
amendments or modifications which result in an increase of the costs and expenses to be incurred by
Tenant under
Section 14.2.2
shall be deemed material and adverse.
9
14.3.
Parking
.
14.3.1 Before Landlord commences construction of the New Parcel 3 Building, Landlord shall
coordinate and discuss with Tenant necessary restrictions to the parking spaces located on the
Property in connection with the construction of the New Parcel 3 Building. Landlord shall have the
right to remove or relocate parking spaces on the Property and temporarily erect barricades which
are reasonably necessary, as determined by Landlord, for security and/or safety purposes in
connection with the construction of the New Parcel 3 Building, or are otherwise permitted in
accordance with
Section 14.4
hereof.
14.3.2 From the Execution Date through the Substantial Completion (as defined in the Parcel 3
Lease) of the New Parcel 3 Building, Tenant shall have the right to use, at no additional cost, (i)
subject to
Section 14.3.1
, any parking spaces located on the Property which are not
affected by the construction on the New Parcel 3 Building, and (ii) subject to
Section
14.3.1
and the rights of Diversified under the Diversified Lease, any parking spaces located in
the Temporary Parking Easement (as defined in the REA) pursuant to, and in accordance with, the
terms and conditions of the REA. Furthermore, should Tenant require additional parking other than
as set forth above, Landlord and Tenant will work together to determine a parking solution that is
acceptable to both parties (which may include Landlord obtaining off-site parking for Tenant).
14.3.3 From and after the Substantial Completion of the New Parcel 3 Building, Tenant shall
have the right to use, at no additional cost, the parking facilities serving the Premises, which
shall include, (i) 277 spaces located on the Property (the
Parcels 1&2 Parking Spaces
),
and (ii) 40 spaces located on the Parcel 3 Land pursuant to, and in accordance with, the terms and
conditions of the REA. Tenant shall maintain the Parcels 1&2 Parking Spaces in accordance with
Section 17
. Tenant shall maintain the Parcels 1&2 Parking Spaces and shall not reduce the
number of Parcels 1&2 Parking Spaces below the number referenced in clause (i) above.
15.
Utilities and Services
.
15.1. Tenant shall, at Tenants sole cost and expense, procure and maintain contracts, with
copies furnished promptly to Landlord after execution thereof, in customary form and substance for,
and with contractors specializing and experienced in, the maintenance of the following equipment
and improvements, if any, if and when installed on the Premises (a) HVAC equipment, (b) boilers and
pressure vessels, (c) fire extinguishing systems, including fire alarm and smoke detection devices,
(d) landscaping and irrigation systems, (e) roof coverings and drains, (f) clarifiers, (g) basic
utility feeds to the perimeter of the Buildings
;
and (h) any other equipment reasonably required by
Landlord. Notwithstanding the foregoing, in the event Tenant fails to maintain the contracts
required under this
Section 15.1
within one (1) business day after Landlord provides Tenant
written notice of such failure, Landlord reserves the right, upon notice to Tenant, to procure and
maintain any or all of such contracts, and if Landlord so elects, Tenant shall reimburse Landlord,
upon demand, for the actual documented costs thereof
.
15.2. Within sixty (60) days after the Execution Date, and within sixty (60) days after the
beginning of each calendar year during the Term, Landlord shall give Tenant a written estimate for
such calendar year of the cost of utilities, if not separately metered (
Utility Costs
),
insurance provided by Landlord (
Insurance Costs
). Tenant shall pay such estimated amount
to Landlord in advance in equal monthly installments. Within ninety (90) days after the end of
each calendar year, Landlord shall furnish to Tenant a statement showing in reasonable detail the
costs incurred by Landlord for Utility Costs and Insurance Costs for the Premises during such year
(the
Annual Statement
), and Tenant shall pay to Landlord the costs incurred in excess of
the payments previously made by Tenant within thirty (30) days of receipt of the Annual Statement.
In the event that the payments previously made by Tenant for Utility Costs and
Insurance Costs for the Premises exceed Tenants obligation, such excess amount shall be
credited by Landlord to the Rent or other charges next due and owing,
provided
that, if the
Term has expired, Landlord shall remit such excess amount to Tenant. In the event Tenant disputes
the amounts of any Annual Statement for the particular calendar year delivered by Landlord to
Tenant and Tenant is not in Default hereunder, Tenant shall have the right, at Tenants cost, after
reasonable notice to Landlord, to have Tenants authorized employees inspect, at Landlords office
in San Diego County during normal business hours, Landlords books, records and supporting
documents concerning the expenses set forth in such Annual Statement; provided, however, Tenant
shall have no right to conduct such inspection, have an audit performed by the Accountant as
described below, or object to or otherwise dispute the amount of the expenses set
10
forth in any such
Annual Statement unless Tenant notifies Landlord of such objection and dispute, completes such
inspection, and has the Accountant commence and complete such audit within one hundred and eighty
(180) days immediately following Landlords delivery of the particular Annual Statement in question
(the
Review Period
); provided, further, that notwithstanding any such timely objection,
dispute, inspection, and/or audit, and as a condition precedent to Tenants exercise of its right
of objection, dispute, inspection and/or audit as set forth in this
Section 15.2
, Tenant
shall not be permitted to withhold payment of, and Tenant shall timely pay to Landlord, the full
amounts as required by the provisions of this Lease in accordance with such Annual Statement.
However, such payment may be made under protest pending the outcome of any audit which may be
performed by the Accountant as described below. In connection with any such inspection by Tenant,
Landlord and Tenant shall reasonably cooperate with each other so that such inspection can be
performed pursuant to a mutually acceptable schedule. If after such inspection and/or request for
documentation, Tenant still disputes the amount of the expenses set forth in the Annual Statement,
Tenant shall have the right, within the Review Period, to cause an independent certified public
accountant selected by Tenant and compensated on a non-contingency fee basis (the
Accountant
) to complete an audit of Landlords books and records to determine the proper
amount of the expenses incurred and amounts payable by Tenant for the calendar year which is the
subject of such Annual Statement. Such audit by the Accountant shall be final and binding upon
Landlord and Tenant. If such audit reveals that Landlord has over-charged Tenant, then within
thirty (30) days after the results of such audit are made available to Landlord, Landlord shall
reimburse to Tenant the amount of such over-charge. If the audit reveals that the Tenant was
under-charged, then within thirty (30) days after the results of such audit are made available to
Tenant, Tenant shall reimburse to Landlord the amount of such under-charge. Tenant agrees to pay
the cost of such audit unless it is subsequently determined that Landlords original Annual
Statement which was the subject of such audit overstated expenses by five percent (5%) or more of
the actual expenses which were the subject of such audit. The payment by Tenant of any amounts
pursuant to this
Section 15.2
shall not preclude Tenant from questioning, during the Review
Period, the correctness of the particular Annual Statement in question provided by Landlord, but
the failure of Tenant to object thereto, conduct and complete its inspection and have the
Accountant conduct the audit as described above prior to the expiration of the Review Period for
such Annual Statement shall be conclusively deemed Tenants approval of the Annual Statement in
question and the amount of expenses shown thereon. If following Tenants delivery to Landlord of a
written request to make Landlords books and records regarding the expenses reasonably available to
Tenant and/or the Accountant to conduct any such inspection and/or audit described above in this
Section 15.2
, Landlord fails to make Landlords books reasonably available for such
purposes during Landlords normal business hours, and such failure continues for five (5) business
days after Tenant notifies Landlord thereof, then the Review Period shall be extended one (1) day
for each such additional day that Tenant and/or the Accountant, as the case may be, is so prevented
from accessing such books and records. In connection with any inspection and/or audit conducted by
Tenant pursuant to this
Section 15.2
, Tenant agrees to keep, and to cause all of Tenants
employees and consultants and the Accountant to keep, all of Landlords books and records and the
audit, and all information pertaining thereto and the results thereof, strictly confidential
(except if required by any court to disclose such information or if such information is available
from an inspection of public records).
15.3. Tenant shall make all arrangements for and pay for all water, sewer, gas, heat, light,
power, telephone service and any other service or utility Tenant required at the Premises.
Landlord shall not be liable for, nor shall any eviction of Tenant result from, the failure to
furnish any utility or service, whether or not such failure is caused by Force Majeure (as defined
below) or Landlords inability, despite the exercise of reasonable diligence, to furnish any such
utility or service. In the event of such failure, Tenant shall not be entitled to termination of
this Lease, any abatement or reduction of Rent, or relief from the operation of any covenant or
agreement of this Lease. Tenant shall pay for, prior to delinquency of payment therefor, any
utilities and services that may be furnished to the Premises during or, if Tenant occupies the
Premises after the expiration or earlier termination of the Term, after the Term.
15.4. Notwithstanding the foregoing and subject to
Sections 14.3
and
31
, if
because of (i) any repair, maintenance, alteration, development or construction performed by
Landlord on the Premises after the Commencement Date, which substantially interferes with Tenants
use of the Premises and which was not caused by Tenant, (ii) any material interference by Landlord
with Tenants access to the Premises (including the parking facilities) that is not caused by
11
Tenant, or (iii) the presence of Hazardous Materials in, on or around the Premises in connection
with the Landlords Construction Work or the Tenant Improvements (each as defined in the Parcel 3
Lease) which (a) is not caused by Tenant, and (b) poses a health risk to occupants of the Premises
(each, an
Adverse Condition
), Tenant is unable to conduct its business in a reasonable
manner in a material portion of the Premises as a direct result of the Adverse Condition and Tenant
therefore actually does not occupy or use such portion of the Premises, as the case may be, and
such condition persists for more than the Interruption Period (as defined below), then following
the Interruption Period, Tenant shall be entitled to an abatement of Rent for the portion of the
Premises rendered untenantable. However, in the event that the remaining portion of the Premises
is not sufficient to allow Tenant to conduct its business therein, and if Tenant does not conduct
its business from such remaining portion, then for such time after expiration of the Interruption
Period during which Tenant is so prevented from effectively conducting its business therein, the
Rent for the entire Premises shall be abated;
provided
,
however
, if Tenant
continues to occupy any portion of the Premises, or reoccupies and conducts its business from any
portion of the Premises, during such period, the Rent allocable to such reoccupied portion, based
on the proportion that the rentable area of such reoccupied portion of the Premises bears to the
total rentable area of the Premises, shall be payable by Tenant from the date such business
operations commence. Such abatement shall commence as of the first day after the expiration of the
Interruption Period and terminate upon the cessation of such Adverse Condition. As used herein,
the term
Interruption Period
shall mean seven (7) consecutive business days after written
notice thereof to Landlord, or such shorter period as applicable under the coverage which is or
would be covered by rental abatement insurance required to be carried by Landlord.
16.
Alterations
.
16.1. Tenant shall make no alterations, additions or improvements in or to the Premises or
engage in any construction, demolition, reconstruction, renovation, or other work of any kind in,
at, or serving the Premises (
Alterations
) without Landlords prior written approval,
which approval Landlord may withhold in its sole and absolute discretion;
provided
,
however
, that Landlords approval shall not be unreasonably withheld, conditioned or
delayed in connection with any Alteration that does none of the following (i) adversely affects the
exterior appearance of a Building or the Premises, (ii) adversely affects the structural aspects of
a Building, including, without limitation, the roof, foundation, load bearing walls and structural
elements of the Premises, (iii) adversely affects any base-building system or equipment, including,
without limitation, the base building HVAC, mechanical, electrical, plumbing or life safety
systems; (iv) creates a foreseeable risk of violating any Applicable Law or increasing insurance
premiums; (v) violates any recorded document affecting the Premises; (vi) causes a Building to be
inconsistent with the quality and scope of a class A office buildings in the vicinity of the
Buildings; (vii) involves a use of the Premises that is inconsistent with the current use of the
Premises; nor (viii) in Landlords reasonable judgment, reduces the quality or value of a Building
or the Premises (each, a
Design Problem
). In seeking Landlords approval, Tenant shall
provide Landlord, at least ten (10) business days in advance of any proposed construction, with
plans, specifications, bid proposals, work contracts, requests for laydown areas and such other
information concerning the nature and cost of the Alterations as Landlord may reasonably request.
16.2. Notwithstanding the provisions of
Section 16.1
, Tenant may make non-structural
Alterations to the Premises (
Acceptable Changes
) upon at least ten (10) business days
prior written notice to Landlord but without Landlords prior consent provided (a) the Acceptable
Changes do not involve Design Problems; and (b) the cost of such Acceptable Changes do not exceed
Fifty Thousand Dollars ($50,000) per occurrence or an aggregate amount of One Hundred Thousand
Dollars ($100,000) in any twelve (12) month period.
16.3. All Alterations made by Tenant shall be: (a) performed in a good and workmanlike manner
and in conformance with any and all Applicable Laws and CC&Rs; and (b) shall be made only by a
licensed, bonded contractor and such architects, suppliers and mechanics approved in advance by
Landlord (which shall not be unreasonably withheld, conditioned or delayed);
provided
,
however
, that such contractor need not be bonded or approved and such architects, suppliers
and mechanics need not be approved by Landlord in connection with Acceptable Changes.
16.4. Tenant shall not construct or permit to be constructed partitions or other obstructions
that will interfere with free access to mechanical installation or service facilities of
the Buildings, or interfere with the moving of Landlords equipment to or from the enclosures
containing such installations or facilities.
12
16.5. Tenant shall accomplish any work performed on the Premises in such a manner as to permit
any fire sprinkler system and fire water supply lines to remain fully operable at all times.
16.6. Tenant covenants and agrees that all work done by Tenant or Tenants contractors shall
be performed in full compliance with Applicable Laws. Within thirty (30) days after completion of
any Alterations, Tenant shall provide Landlord with complete as-built drawing print sets and
electronic CADD files on disc (or files in such other current format in common use as Landlord
reasonably approves or requires) showing any changes in the Premises (but only if drawings and
plans were required by this Lease or were prepared in connection with any such Alterations).
16.7. Before commencing any work, Tenant shall give Landlord at least ten (10) business days
prior written notice of the proposed commencement of such work.
16.8. Except for those items listed on
Exhibit A
, all Alterations, attached equipment,
decorations, fixtures, trade fixtures, additions and improvements, subject to
Section 16.8
,
attached to or built into the Premises, made by either of the Parties, including, without
limitation, all floor and wall coverings, built-in cabinet work and paneling, sinks and related
plumbing fixtures, laboratory benches, exterior venting fume hoods and walk-in freezers and
refrigerators, ductwork, conduits, electrical panels and circuits shall (unless, prior to such
construction or installation, Landlord elects otherwise) become the property of Landlord upon the
expiration or earlier termination of the Term, and shall remain upon and be surrendered with the
Premises as a part thereof. The Premises shall at all times remain the property of Landlord and
shall be surrendered to Landlord upon the expiration or earlier termination of this Lease. Except
for those items on
Exhibit A
, all trade fixtures, Alterations and Signage installed by or under
Tenant shall be the property of Landlord. Notwithstanding the foregoing, at any time during the
Term, subject to Landlords prior written approval, which approval shall not be unreasonably
withheld, conditioned or delayed, Tenant shall have the right to update
Exhibit A
.
16.9. Tenant shall repair any damage to the Premises caused by Tenants removal of any
property from the Premises. During any such restoration period, Tenant shall pay Rent to Landlord
as provided herein as if the affected portion of the Premises were otherwise occupied by Tenant.
The provisions of this Section shall survive the expiration or earlier termination of this Lease.
16.10. Except as to those items listed on
Exhibit A
attached hereto, all business and trade
fixtures, machinery and equipment, built-in furniture and cabinets, together with all additions and
accessories thereto, attached to or built into the Premises shall be and remain the property of
Landlord and shall not be moved by Tenant at any time during the Term. If Tenant shall fail to
remove any of its effects from the Premises within ten (10) days after the termination of this
Lease, then Landlord may, at its option, remove the same in any manner that Landlord shall choose
and store said effects without liability to Tenant for loss thereof or damage thereto, and Tenant
shall pay Landlord, upon demand, any actual, documented and reasonable costs and expenses incurred
due to such removal and storage or Landlord may, at its sole option and upon notice to Tenant, sell
such property or any portion thereof at private sale and without legal process for such price as
Landlord may obtain and apply the proceeds of such sale against any (a) amounts due by Tenant to
Landlord under this Lease and (b) any actual and documented expenses incident to the removal,
storage and sale of said personal property.
16.11. Notwithstanding any other provision of this
Article 16
to the contrary, in no
event shall Tenant remove any improvement from the Premises as to which Landlord contributed
payment without Landlords prior written consent, which consent Landlord may withhold in its sole
and absolute discretion.
16.12. Tenant shall pay to Landlord an amount equal to one and one-half percent (1.5%) of the
cost to Tenant of all Alterations installed by Tenant or its contractors or agents to cover
Landlords overhead and expenses for plan review, coordination, scheduling and supervision thereof
but only for those Alterations requiring Landlords consent. For purposes of payment of such sum,
Tenant shall submit to Landlord copies of all bills, invoices and statements covering
13
the costs of
such charges, accompanied by payment to Landlord of the fee set forth in this Section. Tenant shall
reimburse Landlord for any extra expenses incurred by Landlord by reason of faulty work done by
Tenant or its contractors.
16.13. Upon Landlords written request, within sixty (60) days after final completion of any
Alterations performed by Tenant with respect to the Premises, Tenant shall submit to Landlord
documentation showing the amounts expended by Tenant with respect to such Alterations, together
with supporting documentation reasonably acceptable to Landlord.
16.14. Tenant shall require its contractors and subcontractors performing work on the Premises
to name Landlord and its affiliates and lenders as additional insureds on their respective
insurance policies.
17.
Repairs and Maintenance
.
17.1. Subject to Landlords obligations hereunder, Tenant, at its sole cost and expense, shall
maintain and keep the Premises, all improvements thereon, and all appurtenances thereto, including
but not limited to sidewalks, parking areas, curbs, roads, driveways, lighting standards,
landscaping, sewers, water, gas and electrical distribution systems and facilities, drainage
facilities, and all signs, both illuminated and non-illuminated that are now or hereafter on the
Premises, in good condition and in a manner consistent with the Permitted Use. Tenant shall make
all repairs, replacements and improvements, including, without limitation, all HVAC, plumbing and
electrical repairs, replacements and improvements required, and shall keep the same free and clear
from all rubbish and debris, excluding, however, the foundation, slab, structural portions of the
walls and roof (not including the membrane), and structural steel aspects of the Buildings. All
repairs made by Tenant shall be at least equal in quality to the original work, and shall be made
only by a licensed, bonded contractor approved in advance by Landlord (which shall not be
unreasonably withheld, conditioned or delayed);
provided
,
however
, that such
contractor need not be bonded or approved by Landlord if the non-structural alterations, repairs,
additions or improvements to be performed do not exceed Fifty Thousand Dollars ($50,000) per
occurrence or an aggregate amount of One Hundred Thousand Dollars ($100,000) in any twelve (12)
month period. Tenant shall not take or omit to take any action, the taking or omission of which
shall cause waste, damage or injury to the Premises. Tenant shall indemnify, defend (by legal
counsel acceptable to Landlord) and hold harmless Landlord from and against any and all Claims (as
defined below) arising out of the failure of Tenant or Tenants Agents to perform the covenants
contained in this Section.
Tenants Agents
shall be defined to include Tenants
officers, employees, agents, contractors, invitees, customers and subcontractors.
17.2. Tenant shall maintain the lines designating the parking spaces in good condition and
paint the same as often as may be necessary, so that they are easily discernable at all times;
resurface the parking areas as necessary to maintain them in good condition; paint any exterior
portions of the Buildings as necessary to maintain them in good condition; maintain the roof and
landscaping in good condition; maintain sightly screens, barricades or enclosures around any
waste or storage areas; and take all reasonable precautions to insure that the drainage
facilities of the roof are not clogged and are in good and operable condition at all times
17.3. There shall be no abatement of Rent and no liability of Landlord by reason of any injury
to or interference with Tenants business arising from the Tenants making of any repairs,
alterations or improvements in or to any portion of the Premises, or in or to improvements,
fixtures, equipment and personal property therein (unless the necessity for any of the same is due
to Landlords gross negligence or willful misconduct).
17.4. During the Term, Landlord shall, at Landlords sole cost and expense, be responsible for
any and all repairs and replacements to the foundation, slab, structural portions of the walls and
roof (not including the membrane), and structural steel aspects of the Buildings only.
Notwithstanding the foregoing, Tenant shall be responsible for, and shall pay, all costs and
expenses of such repair and replacement if such repair or replacement results from anything done by
Tenant or Tenants Agents or any breach by Tenant under this Lease. For purposes of clarity,
except as provided in the preceding sentence, Landlord shall not be responsible for any repairs or
replacements to the roof, the exterior walls or any other portions of the Premises. Except for the
foregoing and except as otherwise provided in this Lease, Landlord shall not be required to
maintain or make any repairs or replacements of any nature or description whatsoever to the
Premises unless the necessity for such repairs or replacements is due to Landlords gross
14
negligence or willful misconduct. Except as otherwise provided in this Lease, Tenant hereby
expressly waives the right to make repairs at the expense of Landlord as provided for in any
Applicable Laws in effect at the time of execution of this Lease, or in any other Applicable Laws
that may hereafter be enacted, and waives its rights under Applicable Laws relating to a landlords
duty to maintain its premises in a tenantable condition. Notwithstanding the foregoing, if Tenant
shall fail, where such failure shall continue for a period of ten (10) days after written notice
thereof from Landlord to Tenant, to maintain or to commence and thereafter to proceed with
diligence to make any repair required of it pursuant to the terms of this Lease, Landlord, without
being under any obligation to do so and without thereby waiving such default by Tenant, may so
maintain or make such repair and may charge Tenant for the actual and documented costs thereof.
Any expense reasonably incurred by Landlord in connection with the making of such repairs may be
billed by Landlord to Tenant monthly or, at Landlords option, immediately, and shall be due and
payable within thirty (30) days after such billing.
17.5. Landlord and Landlords agents shall have the right to enter upon the Premises or any
portion thereof in accordance with the terms and conditions of
Section 30
, for the purposes
of performing any repairs or maintenance Landlord is permitted or required to make pursuant to this
Lease, and of ascertaining the condition of the Premises or whether Tenant is observing and
performing Tenants obligations hereunder, all without unreasonable interference from Tenant or
Tenants Agents.
17.6. Tenant shall, upon the expiration or sooner termination of the Term, surrender the
Premises to Landlord in as good of a condition as when received, ordinary wear and tear and damage
by casualty excepted. Landlord shall have no obligation to alter, remodel, improve, repair,
decorate or paint the Premises or any part thereof, other than pursuant to the terms and provisions
of this Lease.
17.7. Tenant shall, at its sole cost and expense, perform the maintenance and repair
obligations of the Parcels 1&2 Owner (as defined in the REA) pursuant to, and in accordance with,
Section 4.1
of the REA.
17.8. Landlord shall not be liable for any failure to make any repairs or to perform any
maintenance that is an obligation of Landlord unless such failure shall persist for an unreasonable
time after Tenant provides Landlord with written notice of the need of such repairs or maintenance.
Notwithstanding any provision in this Lease to the contrary, if Tenant provides notice to Landlord
of an event or circumstance which requires the action of Landlord with respect to the provision of
repairs as set forth in
Section 17.4
of this Lease, and Landlord fails to provide such
action as required by the terms of this Lease within thirty (30) days after the date of such notice
from Tenant (or if such repair is reasonably expected to require longer than thirty (30) days to
complete, if Landlord shall fail to commence in a meaningful way such repair within said thirty
(30) day period and diligently prosecutes such repair to completion), then Tenant may provide
Landlord with a second written notice stating in bold and all caps 12 point font that Landlords
failure to commence repair of the damage described below within ten (10) business days after
Landlords receipt of this second notice shall entitle Tenant to repair such damage. If Landlord
does not commence in a meaningful way such repair within such ten (10) business day period, then
Tenant shall have the right to take such action, and if such action was required under the terms of
this Lease to be taken by Landlord, then Tenant shall be entitled to reimbursement by Landlord of
Tenants reasonable actual and documented costs and expenses in taking such action.
Notwithstanding the foregoing, in case of an emergency (where there is an imminent threat of injury
to persons or damage to property), Tenant shall only be required to provide Landlord five (5)
business days notice of the need to make such repairs stating in bold and all caps 12 point font
that EMERGENCY: Landlords failure to commence its repairs of such
damage within five (5) business days after Landlords receipt of this notice shall entitle
Tenant to repair such damage, and if Landlord does not commence in a meaningful way such repair
within such five (5) business day period, then Tenant shall have the right to take such action. In
the event Tenant takes such action, and such work will affect the building systems and equipment,
structural integrity of the Buildings or exterior appearance of the Buildings, Tenant shall use
Reno Construction for such work unless Reno Construction is unwilling or unable to perform such
work or its pricing is unreasonable, in which event Tenant may utilize the services of any other
qualified contractor which normally and regularly performs similar work in comparable first-class,
institutional quality, office buildings in the San Diego, California area whose pricing is
reasonable. If Tenant is entitled to reimbursement by Landlord of Tenants reasonable actual and
documented costs and expenses in taking any action pursuant to this
15
Section 17.8
, Tenant
shall so notify Landlord in writing (the
Reimbursement Notice
), which Reimbursement
Notice shall specify in detail such costs and expenses. Within thirty (30) days after Landlords
receipt of a Reimbursement Notice, Landlord shall pay to Tenant any undisputed portion of such
costs and expenses and shall notify Tenant in writing of those costs and expenses specified by
Tenant in the Reimbursement Notice which Landlord disputes (the
Disputed Amounts
) and the
reasons for such dispute. Any amounts which are not so identified by Landlord as Disputed Amounts
within said thirty (30) day period shall be considered to be undisputed. To the extent Landlord
fails to reimburse Tenant for the actual and documented costs and expenses specified in the
Reimbursement Notice within thirty (30) days after demand therefor, Tenant shall be entitled to
offset the sum of the amount of any undisputed portion of such costs and expenses against Basic
Annual Rent payable by Tenant under this Lease together with interest at the interest rate of eight
percent (8%) per annum from the date of expiration of said thirty (30) day period until the earlier
of (a) the date that Landlord reimburses Tenant such amount and (b) the date of offset (up to a
maximum offset each month of fifteen percent (15%) of the Basic Annual Rent payable for the
Premises) until the full pre-judgment offset amount (plus such interest) has been so offset. If
Tenant obtains a final judgment against Landlord for the Disputed Amount and if Landlord fails to
pay such judgment within thirty (30) days after the date such judgment is rendered, Tenant shall be
entitled to offset such judgment against Basic Annual Rent payable by Tenant under this Lease
together with interest at the interest rate of eight percent (8%) per annum from the date Landlord
failed to timely reimburse Tenant for such costs and expenses until the earlier of (y) the date
that Landlord has reimburses Tenant such amount and (z) the date of offset (up to a maximum offset
each month of fifteen percent (15%) of the Basic Annual Rent payable for the Premises) until the
full amount of such judgment (plus such interest) has been so offset. If Landlord obtains a final
judgment against Tenant for the Disputed Amount, Tenant shall pay to Landlord such judgment within
thirty (30) days after the date such judgment is rendered.
17.9. This
Article 17
relates to repairs and maintenance arising in the ordinary
course of operation of the Premises and any related facilities. In the event of fire, earthquake,
flood, vandalism, war, terrorism, natural disaster or similar cause of damage or destruction,
Article 21
shall apply in lieu of this
Article 17
.
17.10. Notwithstanding anything above to the contrary, if during the Term, any portion of the
Premises which is Tenants responsibility hereunder to repair cannot be repaired other than at a
cost which is in excess of fifty percent (50%) of the cost of replacing such item(s), then such
item(s) shall be replaced by Tenant (subject to Landlords prior approval of the plans and
specifications and the cost of any such replacement), and Landlord shall reimburse Tenant a prorata
share of the cost thereof based upon a fraction, the numerator of which is the number of months of
the useful life of such replacement item beyond the expiration of the Term (including any Extended
Term, if applicable), and the denominator of which is the total number of months of the useful life
of such replacement (as such useful life is specified pursuant to Federal income tax regulations or
guidelines for depreciation thereof);
provided
,
however
, for purposes of
calculating the useful life of such replacement, the useful life of such replacement shall not
exceed seven (7) years from the date that such replacement is made.
18.
Liens
.
18.1. Subject to the immediately succeeding sentence, Tenant shall keep the Premises free from
any liens arising out of work performed, materials furnished or obligations incurred by Tenant.
Tenant further covenants and agrees that any mechanics lien filed against the Premises for work
claimed to have been done for, or materials claimed to have been furnished to, shall be
discharged or bonded by Tenant within ten (10) days after the filing thereof, at Tenants sole
cost and expense.
18.2. Should Tenant fail to discharge or bond against any lien of the nature described in
Section 18.1
, Landlord may, at Landlords election, pay such claim or post a bond or
otherwise provide security to eliminate the lien as a claim against title, and Tenant shall
immediately reimburse Landlord for the actual, documented and reasonable costs thereof as
Additional Rent.
18.3. In the event that Tenant leases or finances the acquisition of office equipment,
furnishings or other personal property of a removable nature utilized by Tenant in the operation of
Tenants business (which Tenant shall have the right to do), Tenant warrants that any Uniform
Commercial Code financing statement executed by Tenant shall, upon its face or by
16
Exhibit thereto,
indicate that such financing statement is applicable only to removable personal property of Tenant
located within the Premises. In no event shall the address of the Premises be furnished on a
financing statement without qualifying language as to applicability of the lien only to removable
personal property located in an identified suite leased by Tenant. Should any holder of a
financing statement executed by Tenant record or place of record a financing statement that appears
to constitute a lien against any interest of Landlord, Tenant shall, within ten (10) days after
filing such financing statement, cause (a) a copy of the lender security agreement or other
documents to which the financing statement pertains to be furnished to Landlord to facilitate
Landlords ability to demonstrate that the lien of such financing statement is not applicable to
Landlords interest and (b) Tenants lender to amend such financing statement and any other
documents of record to clarify that any liens imposed thereby are not applicable to any interest of
Landlord in the Premises.
19.
Indemnification and Exculpation
.
19.1. Subject to
Section 19.5
below, Tenant agrees to indemnify, defend and save
Landlord harmless from and against any and all demands, claims, liabilities, losses, costs,
expenses, actions, causes of action, damages or judgments, and all reasonable expenses (including,
without limitation, reasonable attorneys fees, charges and disbursements) incurred in
investigating or resisting the same (collectively,
Claims
) arising from injury or death
to any person or damage to any property occurring within or about the Premises arising: (a) out of
conditions that exist on the Execution Date; or (b) directly or indirectly out of Tenants or
Tenants employees, agents or guests use or occupancy of the Premises or a breach or default by
Tenant in the performance of any of its obligations hereunder, unless caused solely by Landlords
willful misconduct or gross negligence.
19.2. Notwithstanding any provision of
Section 19.1
to the contrary, but subject to
Section 19.5
below, Landlord shall not be liable to Tenant for, and Tenant assumes all risk
of, damage to personal property or scientific research, including, without limitation, loss of
records kept by Tenant within the Premises and damage or losses caused by fire, electrical
malfunction, gas explosion or water damage of any type (including, without limitation, broken water
lines, malfunctioning fire sprinkler systems, roof leaks or stoppages of lines), unless any such
loss is due to Landlords gross negligence, willful misconduct and/or willful disregard of written
notice by Tenant of need for a repair that Landlord is responsible to make for an unreasonable
period of time. Tenant further waives any claim for injury to Tenants business or loss of income
relating to any such damage or destruction of personal property as described in this
Section
19.2
.
19.3. Landlord shall not be liable for any damages arising from any act, omission or neglect
of any third party other than the gross negligence or willful misconduct of any of Landlords
officers, employees, agents, general partners, members, and Lenders (
Landlord Parties
).
19.4. Tenant acknowledges that security devices and services, if any, while intended to deter
crime, may not in given instances prevent theft or other criminal acts. Landlord shall not be
liable for injuries or losses caused by criminal acts of third parties, and Tenant assumes the risk
that any security device or service may malfunction or otherwise be circumvented by a criminal. If
Tenant desires protection against such criminal acts, then Tenant shall, at Tenants sole cost and
expense, obtain appropriate insurance coverage. Notwithstanding any contrary provision of this
Lease, neither Landlord nor Tenant shall be liable to the other party for any consequential
damages, loss of business or profit for a breach or default under this Lease; provided that this
sentence shall not limit Landlords damages if, as a result of Tenants breach
of this Lease: (a) Landlord does not or is unable to lease the Premises to another party, or
(b) a third party is unable to occupy the Premises on the date specified in such third partys
lease.
19.5. Tenant shall not be required to indemnify and hold Landlord harmless from any Claim to
any person, property or entity resulting from the grossly negligent acts or omissions or willful
misconduct of the Landlord Parties in connection with the Landlord Parties activities in, on or
about the Premises, and Landlord hereby agrees to so indemnify and holds Tenant harmless from any
such Claims.
19.6. The provisions of this
Article 19
shall survive the expiration or earlier
termination of this Lease.
17
20.
Insurance; Waiver of Subrogation
.
20.1. Landlord shall maintain insurance for the Premises in amounts equal to full replacement
cost (exclusive of the costs of excavation, foundations and footings, and without reference to
depreciation taken by Landlord upon its books or tax returns) or such lesser coverage as Landlord
may elect,
provided
that such coverage shall not be less than ninety percent (90%) of such
full replacement cost or the amount of such insurance Landlords lender, mortgagee or beneficiary
(each, a
Lender
), if any, requires Landlord to maintain, providing protection against any
peril generally included within the classification Fire and Extended Coverage, together with
insurance against sprinkler damage (if applicable), vandalism and malicious mischief. Landlord,
subject to availability thereof, shall further insure, if Landlord deems it appropriate, coverage
against flood, environmental hazard, earthquake, loss or failure of building equipment, rental loss
during the period of repairs or rebuilding, workmens compensation insurance and fidelity bonds for
employees employed to perform services. Notwithstanding the foregoing, Landlord may, but shall not
be deemed required to, provide insurance for any improvements installed by Tenant or that are in
addition to the standard improvements customarily furnished by Landlord, without regard to whether
or not such are made a part of or are affixed to the Buildings. Any costs incurred by Landlord
pursuant to this
Section 20.1
shall constitute a portion of Insurance Costs.
20.2. In addition, Landlord shall carry public liability insurance with a single limit of not
less than Ten Million Dollars ($10,000,000) for death or bodily injury, or property damage with
respect to the Premises. Any costs incurred by Landlord pursuant to this
Section 20.2
shall constitute a portion of Insurance Costs.
20.3. Tenant shall, at its own cost and expense, procure and maintain in effect, beginning on
the Commencement Date or the date of occupancy, whichever occurs first, and continuing throughout
the Term (and occupancy by Tenant, if any, after termination of this Lease) comprehensive public
liability insurance with limits of not less than Five Million Dollars ($5,000,000) per occurrence
for death or bodily injury and not less than Two Million Dollars ($2,000,000) for property damage
with respect to the Premises.
20.4. Tenant shall, at its sole cost and expense, procure and maintain in effect, beginning on
the Commencement Date or the date of occupancy, whichever occurs first, and continuing throughout
the Term all insurance required to be maintained by the Parcels 1&2 Owner (as defined in the REA)
in connection with the Property (as defined in the REA) pursuant to Section 6 of the REA.
20.5. The insurance required to be purchased and maintained by Tenant pursuant to this Lease
shall show, as an additional insured in respect of the Premises, Landlord, BioMed Realty, L.P.,
BioMed Realty Trust, Inc., Tenant, any management company retained by Landlord to manage the
Premises, any ground lessor and any mortgagee of Landlord required to be named pursuant to its
mortgage documents. All public liability and property damage policies shall contain a provision
that Landlord, although named as an insured, nevertheless shall be entitled to recovery under said
policies for any loss occasioned to it, its servants, agents and employees by reason of the
negligence of Tenant. Said insurance shall be with companies having a rating of not less than
policyholder rating of A and financial category rating of at least Class XII in Bests Insurance
Guide. Tenant shall obtain for Landlord from the insurance companies or cause the insurance
companies to furnish certificates of coverage to Landlord. No such policy shall be cancelable or
subject to reduction of coverage or other modification or cancellation except after thirty (30)
days prior written notice to Landlord from the insurer. All such policies
shall be written as primary policies, not contributing with and not in excess of the coverage
that Landlord may carry. Tenants policy may be a blanket policy that specifically provides that
the amount of insurance shall not be prejudiced by other losses covered by the policy. Tenant
shall, at least twenty (20) days prior to the expiration of such policies, furnish Landlord with
renewals or binders. Tenant agrees that if Tenant does not take out and maintain such insurance,
Landlord may (but shall not be required to) procure said insurance on Tenants behalf and at its
cost to be paid by Tenant as Additional Rent.
20.6. Tenant assumes the risk of damage to any fixtures, goods, inventory, merchandise,
equipment and leasehold improvements, and Landlord shall not be liable for injury to Tenants
business or any loss of income therefrom, relative to such damage, all as more particularly set
forth within this Lease unless caused by Landlords gross negligence or willful
18
misconduct. Tenant
shall, at Tenants sole cost and expense, carry such insurance as Tenant desires for Tenants
protection with respect to personal property of Tenant or business interruption.
20.7. In each instance where Tenants insurance is to name additional insureds, Tenant shall,
upon Landlords written request, also designate and furnish certificates evidencing the same to (a)
any Lender of Landlord holding a security interest in the Premises or any portion thereof, (b) the
landlord under any lease whereunder Landlord is a tenant of the real property upon which the
Buildings are located if the interest of Landlord is or shall become that of a tenant under a
ground lease rather than that of a fee owner, and (c) any management company retained by Landlord
to manage the Premises.
20.8. Landlord and Tenant each hereby waive any and all rights of recovery against the other
or against the officers, directors, employees, agents and representatives of the other on account
of loss or damage occasioned by such waiving party or its property or the property of others under
such waiving partys control, in each case to the extent that such loss or damage is insured
against under any fire and extended coverage insurance policy that either Landlord or Tenant may
have in force at the time of such loss or damage. Such waivers shall continue so long as their
respective insurers so permit. Any termination of such a waiver shall be by written notice to the
other party, containing a description of the circumstances hereinafter set forth in this
Section 20.8
. Landlord and Tenant, upon obtaining the policies of insurance required or
permitted under this Lease, shall give notice to the insurance carrier or carriers that the
foregoing mutual waiver of subrogation is contained in this Lease. If such policies shall not be
obtainable with such waiver or shall be so obtainable only at a premium over that chargeable
without such waiver, then the party seeking such policy shall notify the other of such conditions,
and the party so notified shall have ten (10) days thereafter to either (a) procure such insurance
with companies reasonably satisfactory to the other party or (b) agree to pay such additional
premium. If the parties do not accomplish either (a) or (b), then this
Section 20.8
shall
have no effect during such time as such policies shall not be obtainable or the party in whose
favor a waiver of subrogation is desired refuses to pay the additional premium. If such policies
shall at any time be unobtainable, but shall be subsequently obtainable, then neither party shall
be subsequently liable for a failure to obtain such insurance until a reasonable time after
notification thereof by the other party. If the release of either Landlord or Tenant, as set forth
in the first sentence of this
Section 20.8
, shall contravene Applicable Laws, then the
liability of the party in question shall be deemed not released but shall be secondary to the other
partys insurer.
21.
Damage or Destruction
.
21.1. Subject to
Section 21.2
, In the event of a partial or complete destruction of
the Premises by fire or other perils, Landlord shall commence and proceed diligently with the work
of repair, reconstruction and restoration of the Premises, and this Lease shall continue in full
force and effect.
21.2. Notwithstanding the terms of this
Article 21
, Landlord may elect not to rebuild
and/or restore the Premises and instead terminate this Lease by notifying Tenant in writing of such
termination within sixty (60) days after the date of damage, such notice to include a termination
date giving Tenant ninety (90) days to vacate the Premises, but Landlord may so elect only if the
Premises or the Buildings shall be damaged by fire or other casualty or cause or be subject to a
condition existing as a result of such a fire or other casualty or cause, and one or more of the
following conditions is present: (i) in the reasonable judgment of a contractor selected by
Landlord and reasonably approved by Tenant, repairs cannot reasonably be
completed within one hundred eighty (180) days of the date of damage (when such repairs are
made without the payment of overtime or other premiums); (ii) the holder of any mortgage on the
Premises or the Buildings, or ground or underlying lessor with respect to the Premises or the
Buildings (a) shall require that the insurance proceeds or any portion thereof be used to retire
the mortgage debt due to an impairment of such holders collateral, and the remaining proceeds are
insufficient to repair the damage and as a result thereof the deficiency of insurance proceeds
exceeds the Maximum Amount, as that term is defined below, and Landlord elects not to commence
repair to the Premises within one (1) year of such damage or destruction, or (b) shall terminate
the ground or underlying lease, as the case may be; (iii) the dollar amount of the damage or
condition arising as a result of such damage which is not fully covered by Landlords insurance
policies (and that would not be fully covered by Landlords insurance policies if Landlord had
carried the coverage required under this Lease) including any deductible amount, is
19
equal to or
greater than Two Hundred and Fifty Thousand Dollars ($250,000) (the
Maximum Amount
),
which Maximum Amount shall, as of the date of termination of this Lease, be equal to the product of
(a) the Maximum Amount and (b) a fraction, the numerator of which is the number of full months
remaining in the Term, or when appropriate the Option Term then applicable, as of the date of the
termination of this Lease, and the denominator of which is 180 (or, if applicable, 60 during an
Option Term) and Landlord elects not to commence repair to the Premises or Buildings within one (1)
year of such damage or destruction; or (iv) the damage occurs during the last twenty-four (24)
months of the Term, as such Term may have been extended by Tenant pursuant to this Lease;
provided
,
however
, that if Landlord does not elect to terminate this Lease pursuant
to Landlords termination right as provided above, and the repairs of such damage cannot, in the
reasonable opinion of a contractor selected by Landlord and reasonably approved by Tenant, be
completed within twelve (12) months after being commenced, Tenant may elect, not later than ten
(10) business days after the date of such damage, to terminate this Lease by written notice to
Landlord effective as of the date specified in the notice. At any time, from time to time, after
the date occurring thirty (30) days after the date of the damage, but in no event more than once
every forty-five (45) days, Tenant may request that Landlord provide Tenant with a certificate from
the architect or contractor described above setting forth such architects or contractors
reasonable opinion of the date of completion of the repairs and Landlord shall respond to such
request within fifteen (15) business days.
21.3. Landlord shall give written notice to Tenant of its election not to repair, reconstruct
or restore the Premises within sixty (60) days following the date of damage or destruction.
21.4. Upon any termination of this Lease under any of the provisions of this
Article
21
, the parties shall be released thereby without further obligation to the other from the date
possession of the Premises is surrendered to Landlord, except with regard to (a) items occurring
prior to the damage or destruction and (b) provisions of this Lease that, by their express terms,
survive the expiration or earlier termination hereof.
21.5. In the event of repair, reconstruction and restoration as provided in this
Article
21
, all Rent to be paid by Tenant under this Lease shall be abated proportionately based on the
extent to which Tenants use of the Premises is impaired during the period of such repair,
reconstruction or restoration, unless Landlord provides Tenant with other space during the period
of repair that, in Tenants reasonable discretion, is suitable for the temporary conduct of
Tenants business;
provided
,
however
, that the amount of such abatement shall be
reduced by the proceeds of lost rental income insurance actually received by Tenant with respect to
the Premises.
21.6. Notwithstanding anything to the contrary contained in this
Article 21
, should
Landlord be delayed or prevented from completing the repair, reconstruction or restoration of the
damage or destruction to the Premises after the occurrence of such damage or destruction by delays
resulting from acts of tenants, acts of God; acts of terrorism; adverse weather conditions; war;
invasion; insurrection; acts of a public enemy; terrorism; riot; mob violence; civil commotion;
sabotage; labor disputes; general shortage of labor, materials, facilities, equipment or supplies
on the open market; delay in transportation; delays caused by new, or changes to existing, laws,
rules, regulations or orders of any Governmental Authority; moratorium or other governmental
action; inability to obtain permits or approvals, including, without limitation, city and public
utility approvals beyond the time periods that generally prevail for obtaining such permits and
approvals; the acts or inaction of the contractor and subcontractors, if any; or any other cause
beyond the reasonable control of Landlord, financial ability excepted, whether
similar or dissimilar to the foregoing (collectively,
Force Majeure
), then the time
for Landlord to commence or complete repairs shall be extended on a day-for-day basis.
21.7. If Landlord is obligated to or elects to repair, reconstruct or restore as herein
provided, then Landlord shall be obligated to make such repair, reconstruction or restoration only
with regard to those portions of the Premises that were originally provided at Landlords expense.
The repair, reconstruction or restoration of improvements not originally provided by Landlord or at
Landlords expense shall be the obligation of Tenant. In the event Tenant has elected to upgrade
certain improvements, Landlord shall, upon the need for replacement due to an insured loss,
construct the improvements to the standard that existed prior to such damage, unless Tenant again
elects to upgrade such improvements and pay any incremental costs related thereto, except to the
extent that excess insurance proceeds, if received, are adequate to provide
such upgrades, in
addition to providing for basic repair, reconstruction and restoration of the Premises.
20
21.8. In addition to its termination right in
Section 21.2
above, Tenant shall have
the right to terminate this Lease if any damage to the Buildings or Premises: (a) occurs during the
last twelve (12) months of the Term of this Lease (including the last twelve (12) months of any
Extended Term, if applicable); (b) Tenant is unable to occupy more than twenty-five percent (25%)
of the Premises; and (c) in the reasonable judgment of a contractor selected by Landlord and
reasonably approved by Tenant, such repairs cannot reasonably be completed within twenty-five
percent (25%) of the remaining term of this Lease (including any Extended Term, if applicable).
22.
Eminent Domain
.
22.1.
Total Taking Termination
. In the event the whole of the Premises, or such
part thereof so that reconstruction of the Premises will not result in the Premises being
reasonably suitable (as reasonably determined by Landlord and Tenant) for Tenants continued
occupancy for the uses and purposes permitted by this Lease, shall be taken for any public or
quasi-public purpose by any lawful power or authority by exercise of the right of appropriation,
condemnation or eminent domain, or sold to prevent such taking, Tenant or Landlord may terminate
this Lease effective as of the date possession is required to be surrendered to said authority.
22.2.
Partial Taking
. In the event of a partial taking of the Premises, or of drives,
walkways or parking areas serving the Premises for any public or quasi-public purpose by any lawful
power or authority by exercise of right of appropriation, condemnation, or eminent domain, or sold
to prevent such taking, then, without regard to whether any portion of the Premises occupied by
Tenant was so taken, Landlord may elect to terminate this Lease as of such taking if such taking
is, in Landlords sole opinion, of a material nature such as to make it uneconomical to continue
use of the unappropriated portion for purposes of renting office or laboratory space.
22.3. Tenant shall be entitled to any award that is specifically awarded as compensation for
(a) the taking of Tenants personal property that was installed at Tenants expense and (b) the
costs of Tenant moving to a new location. Except as set forth in this
Article 22
, any
award for such taking shall be the property of Landlord.
22.4. If, upon any taking of the nature described in
Sections 22.1
and
22.2
,
this Lease continues in effect, then (a) Landlord shall promptly proceed to restore the Premises to
substantially their same condition prior to such partial taking and this Lease shall, as to the
part so taken terminate as of the date that possession of such part of the Premises is taken and
the Basic Annual Rent shall be reduced in the same proportion that the floor area of the portion of
the Buildings so taken (less any addition thereto by reason of any reconstruction) bears to the
original floor area of the Buildings, and (b) in the event of a partial taking of the Diversified
Space (as defined in the Parcel 3 Lease), (i) Tenant agrees to sublease to Diversified, at no cost
to Diversified, up to 6,600 rentable square feet in the New Parcel 3 Building or in the Buildings
in accordance with Diversifieds rights under
Article 20
of the Diversified Lease, (ii)
Tenant shall be entitled to an abatement of (1) fifty percent (50%) of the Expansion Premises Basic
Annual Rent (as defined in the Parcel 3 Lease) for the portion of the Expansion Premises (as
defined in the Parcel 3 Lease) (if any) occupied by Diversified, and (2) fifty percent (50%) of the
Basic Annual Rent for the portion of the Premises (if any) occupied by Diversified, (iii) Landlord
shall pay all costs associated with the relocation of Diversified, including, but not limited to,
costs of tenant improvements and moving costs, and (iv) Tenant shall not be entitled to an
abatement of any of the operating expenses, including Taxes, Utility Costs, Insurance Costs, and
all other utility and insurance costs and expenses in connection with the portion of the Expansion
Premises or the Premises occupied by Diversified.
23.
Defaults and Remedies
.
23.1. Late payment by Tenant to Landlord of Rent and other sums due shall cause Landlord to
incur costs not contemplated by this Lease, the exact amount of which shall be extremely difficult
and impracticable to ascertain. Such costs include, but are not limited to, processing and
accounting charges and late charges that may be imposed on Landlord by the terms of any mortgage or
trust deed covering the Premises. Therefore, if any installment of Rent
21
due from Tenant is not
received by Landlord within five (5) days after written notice that such payment is due, Tenant
shall pay to Landlord an additional sum of three percent (3%) of the overdue Rent as a late charge.
The parties agree that this late charge represents a fair and reasonable estimate of the costs
that Landlord shall incur by reason of late payment by Tenant. Notwithstanding the foregoing,
Landlord shall waive the imposition of such late charge for the first late payment of Rent due
hereunder in any calendar year of the Term. In addition to the late charge, Rent not paid when due
shall bear interest from the fifth (5th) day after the date due until paid at the lesser of (a)
twelve percent (12%) per annum or (b) the maximum rate permitted by Applicable Laws.
23.2. No payment by Tenant or receipt by Landlord of a lesser amount than the Rent payment
herein stipulated shall be deemed to be other than on account of the Rent, nor shall any
endorsement or statement on any check or any letter accompanying any check or payment as Rent be
deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice
to Landlords right to recover the balance of such Rent or pursue any other remedy provided in this
Lease or in equity or at law. If a dispute shall arise as to any amount or sum of money to be paid
by Tenant to Landlord hereunder, Tenant shall have the right to make payment under protest, such
payment shall not be regarded as a voluntary payment, and there shall survive the right on the part
of Tenant to institute suit for recovery of the payment paid under protest.
23.3. If Tenant fails to pay any sum of money (other than Basic Annual Rent) required to be
paid by it hereunder, or shall fail to perform any other act on its part to be performed hereunder,
Landlord may, without waiving or releasing Tenant from any obligations of Tenant, but shall not be
obligated to, make such payment or perform such act;
provided
that (a) such failure by
Tenant continues beyond all applicable notice and cure periods after Landlord delivers notice to
Tenant demanding performance by Tenant; or (b) such failure by Tenant reasonably could be expected
to result in a violation of Applicable Laws, damage to property or injury to any person, or the
cancellation of an insurance policy maintained by Landlord. Notwithstanding the foregoing, in the
event of an emergency, Landlord shall have the right to enter the Premises and act in accordance
with its rights as provided elsewhere in this Lease. Tenant shall pay to Landlord as Additional
Rent all sums so paid or incurred by Landlord, together with interest thereon, from the date such
sums were paid or incurred, at the annual rate equal to twelve percent (12%) per annum or highest
rate permitted by Applicable Laws, whichever is less.
23.4. The occurrence of any one or more of the following events shall constitute a
Default
hereunder by Tenant:
23.4.1 The failure by Tenant to make any payment of Rent, as and when due, where such failure
shall continue for a period of five (5) days after written notice thereof from Landlord to Tenant;
23.4.2 The failure by Tenant to observe or perform any obligation or covenant contained herein
to be performed by Tenant (other than described in
Subsections 23.4.1
and
26.4.2
),
where such failure shall continue for a period of ten (10) business days after written notice
thereof from Landlord to Tenant;
provided
that, if the nature of Tenants default is such
that it reasonably requires more than ten (10) business days to cure, Tenant shall not be deemed to
be in default if Tenant shall commence such cure within said ten (10) business day period and
thereafter diligently prosecute the same to completion;
23.4.3 Tenant makes an assignment for the benefit of creditors;
23.4.4 A receiver, trustee or custodian is appointed to or does take title, possession or
control of all or substantially all of Tenants assets;
23.4.5 Tenant files a voluntary petition under the United States Bankruptcy Code or any
successor statute (the
Bankruptcy Code
) or an order for relief is entered against Tenant
pursuant to a voluntary or involuntary proceeding commenced under any chapter of the Bankruptcy
Code;
23.4.6 Any involuntary petition if filed against Tenant under any chapter of the Bankruptcy
Code and is not dismissed within sixty (60) days;
22
23.4.7 Failure to deliver an estoppel certificate in accordance with
Article 27
;
23.4.8 The occurrence of a monetary or material non-monetary default under the Parcel 3 Lease;
23.4.9 The occurrence of any Transfer that is not in compliance with the provisions of
Article 24
, where such failure shall continue for a period of ten (10) days after written
notice thereof from Landlord to Tenant; or
23.4.10 Tenants interest in this Lease is attached, executed upon or otherwise judicially
seized and such action is not released within one hundred twenty (120) days of the action.
No notice given above shall be deemed a forfeiture or a termination of this Lease unless
Landlord elects otherwise in such notice.
23.5. In the event of a Default by Tenant, and at any time thereafter, with or without notice
or demand and without limiting Landlord in the exercise of any right or remedy that Landlord may
have, Landlord shall be entitled to terminate Tenants right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Tenant shall immediately thereafter,
surrender possession of the Premises to Landlord. In such event, Landlord shall have the right to
re-enter and remove all persons and property, and such property may be removed and stored in a
public warehouse or elsewhere at the cost and for the account of Tenant, all without service of
notice or resort to legal process and without being deemed guilty of trespass or becoming liable
for any loss or damage that may be occasioned thereby. In the event that Landlord shall elect to
so terminate this Lease, then Landlord shall be entitled to recover from Tenant all damages
incurred by Landlord by reason of Tenants default, including, without limitation:
23.5.1 The worth at the time of award of the unpaid Rent that had been earned at the time of
termination; plus
23.5.2 The worth at the time of award of the amount by which the unpaid Rent that would have
been earned during the period commencing with termination of this Lease and ending at the time of
award exceeds that portion of the loss of Landlords rental income from the Premises that Tenant
proves could have been reasonably avoided; plus
23.5.3 The worth at the time of award of the amount by which the unpaid Rent for the balance
of the Term after the time of award exceeds the amount of the loss of Landlords rental income from
the Premises that Tenant proves could be reasonably avoided; plus
23.5.4 Any other amount necessary to compensate Landlord for all the detriment caused by
Tenants failure to perform its obligations under this Lease or that in the ordinary course of
things would be likely to result therefrom, including, without limitation, the cost of restoring
the Premises to the condition required under the terms of this Lease.
As used in
Subsections 23.5.1
and
23.5.2
, worth at the time of award shall be
computed by allowing interest at the rate specified in
Section 23.1
. As used in
Subsection 23.5.3
above, the worth at the time of the award shall be computed by taking
the present value of such amount, using the discount rate of the Federal Reserve Bank of San
Francisco at the time of the award plus one (1) percentage point.
23.6. In addition to any other remedies available to Landlord at law or in equity and under
this Lease, Landlord shall have the remedy described in California Civil Code Section 1951.4
(Landlord may continue this Lease in effect after Tenants Default and abandonment and recover Rent
as it becomes due, provided Tenant has the right to sublet or assign, subject only to reasonable
limitations). In addition, Landlord shall not be liable in any way whatsoever for its failure or
refusal to relet the Premises. For purposes of this
Section 23.6
, the following acts by
Landlord will not constitute the termination of Tenants right to possession of the Premises:
23.6.1 Acts of maintenance or preservation or efforts to relet the Premises, including, but
not limited to, alterations, remodeling, redecorating, repairs, replacements and/or
painting as
Landlord shall consider advisable for the purpose of reletting the Premises or any part thereof, or
23
23.6.2 The appointment of a receiver upon the initiative of Landlord to protect Landlords
interest under this Lease or in the Premises.
Notwithstanding the foregoing, in the event of a Default by Tenant, Landlord may elect at any time
to terminate this Lease and to recover damages to which Landlord is entitled.
23.7. In the event Landlord elects to terminate this Lease and relet the Premises, Landlord
may execute any new lease in its own name. Tenant hereunder shall have no right or authority
whatsoever to collect any Rent from such tenant. The proceeds of any such reletting shall be
applied as follows:
23.7.1 First, to the payment of any indebtedness other than Rent due hereunder from Tenant to
Landlord, including, without limitation, storage charges or brokerage commissions owing from Tenant
to Landlord as the result of such reletting;
23.7.2 Second, to the payment of the costs and expenses of reletting the Premises, including
(a) alterations and repairs that Landlord deems reasonably necessary and advisable and (b)
reasonable attorneys fees, charges and disbursements incurred by Landlord in connection with the
retaking of the Premises and such reletting;
23.7.3 Third, to the payment of Rent and other charges due and unpaid hereunder; and
23.7.4 Fourth, to the payment of future Rent and other damages payable by Tenant under this
Lease.
23.8. All of Landlords rights, options and remedies hereunder shall be construed and held to
be nonexclusive and cumulative. Landlord shall have the right to pursue any one or all of such
remedies, or any other remedy or relief that may be provided by Applicable Laws, whether or not
stated in this Lease. No waiver of any default of Tenant hereunder shall be implied from any
acceptance by Landlord of any Rent or other payments due hereunder or any omission by Landlord to
take any action on account of such default if such default persists or is repeated, and no express
waiver shall affect defaults other than as specified in said waiver.
23.9. Landlords termination of (a) this Lease or (b) Tenants right to possession of the
Premises shall not relieve Tenant of any liability to Landlord that has previously accrued or that
shall arise based upon events that occurred prior to the later to occur of (i) the date of Lease
termination or (ii) the date Tenant surrenders possession of the Premises.
23.10. In the event of a Default by Tenant hereunder, to the fullest extent required by
Applicable Laws (to the extent such Applicable Laws cannot be modified by contract), Landlord shall
use commercially reasonable efforts to mitigate its damages.
23.11. To the extent permitted by Applicable Laws, Tenant waives any and all rights of
redemption granted by or under any present or future Applicable Laws if Tenant is evicted or
dispossessed for any cause, or if Landlord obtains possession of the Premises due to Tenants
default hereunder or otherwise.
23.12. Landlord shall not be in default under this Lease unless Landlord fails to perform
obligations required of Landlord within a reasonable time, but in no event shall such failure
continue for more than thirty (30) days after written notice from Tenant specifying the nature
of Landlords failure;
provided
,
however
, that if the nature of Landlords
obligation is such that more than thirty (30) days are required for its performance, then Landlord
shall not be in default if Landlord commences performance within such thirty (30) day period and
thereafter diligently prosecutes the same to completion. In the event of any default by Landlord
(beyond the expiration of all applicable notice and cure periods), Tenant may exercise any rights
and remedies available at law or in equity.
23.13. In the event of any default by Landlord, Tenant shall give notice by registered or
certified mail to any (a) beneficiary of a deed of trust or (b) mortgagee under a mortgage covering
the Premises or any portion thereof and to any landlord of any lease of land upon or
24
within which
the Premises are located, and shall offer such beneficiary, mortgagee or landlord a reasonable
opportunity to cure the default, including time to obtain possession of the Premises by power of
sale or a judicial action if such should prove necessary to effect a cure; provided that Landlord
shall furnish to Tenant in writing, upon written request by Tenant, the names and addresses of all
such persons who are to receive such notices;
provided
,
however
, in no event shall
such reasonable opportunity to cure exceed an additional sixty (60) days within which to cure or
correct such default (or if such default cannot be cured or corrected within that time, then such
additional time as may be necessary if such mortgagee has commenced within such sixty (60) day
period and is diligently pursuing the remedies or steps necessary to cure or correct such default).
24.
Assignment or Subletting
.
24.1. Except as hereinafter expressly permitted, Tenant shall not, either voluntarily or by
operation of Applicable Laws, directly or indirectly sell, hypothecate, assign, pledge, encumber or
otherwise transfer this Lease, or sublet the Premises or any part hereof (each, a
Transfer
), without Landlords prior written consent, which consent Landlord may not
unreasonably withhold, condition or delay. Tenant shall have the right to Transfer without
Landlords prior written consent the Premises or any portion thereof to any person or entity that:
(a) directly, or indirectly through one or more intermediaries, (i) controls, is controlled by, or
is under common control with Tenant, (ii) acquires all or substantially all of the assets of
Tenant, or (iii) is the resulting entity of a merger or consolidation of Tenant with another
entity; and (b) has a net worth equal to Two Hundred Million Dollars ($200,000,000) (each, a
Tenants Affiliate
), provided (1) Tenant shall notify Landlord in writing at least ten
(10) days prior to the effectiveness of such Transfer to Tenants Affiliate (an
Exempt
Transfer
); and (2) Tenant remains obligated under this Lease. For purposes of Exempt
Transfers, control requires both (y) owning (directly or indirectly) more than fifty-one percent
(51%) of the stock or other equity interests of another person and (z) possessing, directly or
indirectly, the power to direct or cause the direction of the management and policies of such
person.
24.2. In the event Tenant desires to effect a Transfer, then, at least twenty (20) business
days but not more than one hundred twenty (120) days prior to the date when Tenant desires the
assignment or sublease to be effective (the
Transfer Date
), Tenant shall provide written
notice to Landlord (the
Transfer Notice
) containing information (including references)
concerning the character of the proposed transferee, assignee or sublessee; the Transfer Date; any
ownership or commercial relationship between Tenant and the proposed transferee, assignee or
sublessee; and the consideration and all other material terms and conditions of the proposed
Transfer; and evidence respecting the relevant business experience and financial responsibility and
status of the proposed transferee, assignee or sublessee, all in such detail as Landlord shall
reasonably require (the
Transfer Information
). Tenant shall also tender to Landlord the
actual, documented and reasonable attorneys fees and other costs or overhead expenses incurred by
Landlord in reviewing Tenants request for such Transfer (not to exceed Two Thousand Five Hundred
Dollars ($2,500.00) in the aggregate per Transfer request).
24.3. Landlord, in determining whether consent should be given to a proposed Transfer, may
give consideration to (a) the financial strength of such assignee (notwithstanding Tenant
remaining liable for Tenants performance), and (b) any change in use that such transferee,
assignee or sublessee proposes to make in the use of the Premises. In no event shall Landlord be
deemed to be unreasonable for declining to consent to a Transfer to a transferee, assignee or
sublessee of lacking financial qualifications or seeking a change in the Permitted Use, or
jeopardizing directly or indirectly the status of Landlord or any of Landlords affiliates as a
Real Estate Investment Trust under the Internal Revenue Code of 1986 (the
Code
).
Notwithstanding anything contained in this Lease to the contrary, (w) no Transfer shall be
consummated on any basis such that the rental or other amounts to be paid by the occupant,
assignee, manager or other transferee thereunder would be based, in whole or in part, on the
income or profits derived by the business activities of such occupant, assignee, manager or other
transferee; (x) Tenant shall not furnish or render any services to an occupant, assignee, manager
or other transferee with respect to whom transfer consideration is required to be paid, or manage
or operate the Premises or any capital additions so transferred, with respect to which transfer
consideration is being paid; (y) Tenant shall not consummate a Transfer with any person in which
Landlord owns an interest, directly or indirectly (by applying constructive ownership rules set
forth in Section 856(d)(5) of the Code); and (z) Tenant shall not consummate a Transfer with any
person or in any manner that could cause any portion of the amounts received by Landlord
25
pursuant
to this Lease or any sublease, license or other arrangement for the right to use, occupy or possess
any portion of the Premises to fail to qualify as rents from real property within the meaning of
Section 856(d) of the Code, or any similar or successor provision thereto or which could cause any
other income of Landlord to fail to qualify as income described in Section 856(c)(2) of the Code.
Landlord shall respond to Tenants proposed Transfer within twenty (20) days after receipt of
Tenants Transfer request. If Landlord fails to respond within such twenty (20) day period, then
Tenant shall provide Landlord with a second written notice stating in bold and all caps 12 point
font that Landlords failure to respond to Tenants Transfer request within five (5) days after
Landlords receipt of this second notice shall be deemed approval by Landlord, and if Landlord
does not respond within such five (5) day period, then Landlord shall be deemed to have approved
such Transfer request.
24.4. As conditions precedent to Tenant subleasing the Premises or to Landlord considering a
request by Tenant to Tenants transfer of rights or sharing of the Premises, Landlord may require
any or all of the following:
24.4.1 Tenant shall remain fully liable under this Lease during the unexpired Term;
24.4.2 Tenant shall provide Landlord with the Transfer Information;
24.4.3 If Tenants transfer of rights or sharing of the Premises provides for the receipt by,
on behalf of or on account of Tenant of any consideration of any kind whatsoever (including,
without limitation, a premium rental for a sublease or lump sum payment for an assignment) in
excess of the rental and other charges due to Landlord under this Lease, Tenant shall pay fifty
percent (50%) of all of such excess to Landlord, after deductions for tenant improvement allowances
actually provided by Tenant, alterations (including hard and soft costs), cash and other monetary
concessions, marketing expenses, free rent, brokerage commissions and the actual documented and
reasonable attorneys fees necessarily incurred in negotiating such sublease or assignment. If said
consideration consists of cash paid to Tenant, payment to Landlord shall be made upon receipt by
Tenant of such cash payment;
24.4.4 The proposed transferee, assignee or sublessee shall agree that, in the event Landlord
gives such proposed transferee, assignee or sublessee notice that Tenant is in default under this
Lease, such proposed transferee, assignee or sublessee shall thereafter make all payments otherwise
due Tenant directly to Landlord, which payments shall be received by Landlord without any liability
being incurred by Landlord, except to credit such payment against those due by Tenant under this
Lease, and any such proposed transferee, assignee or sublessee shall agree to attorn to Landlord or
its successors and assigns should this Lease be terminated for any reason;
provided
,
however
, that in no event shall Landlord or its Lenders, successors or assigns be obligated
to accept such attornment;
24.4.5 Any such consent to Transfer shall be effected on Landlords forms, subject to changes
by Tenant that are satisfactory to Landlord in its reasonable discretion;
24.4.6 Tenant shall not then be in default hereunder (beyond the expiration of all applicable
notice and cure periods) in any respect;
24.4.7 Such proposed transferee, assignee or sublessees use of the Premises shall not be
inconsistent with the Permitted Use;
24.4.8 Landlord shall not be bound by any provision of any agreement pertaining to the
Transfer, except for Landlords written consent to the same;
24.4.9 Tenant shall pay all transfer and other taxes (including interest and penalties)
assessed or payable for any Transfer;
24.4.10 Landlords consent (or waiver of its rights) for any Transfer shall not waive
Landlords right to consent to any later Transfer;
24.4.11 Tenant shall deliver to Landlord one executed copy of any and all written instruments
evidencing the Transfer; and
26
24.4.12 A list of Hazardous Materials (as defined in
Section 36.6
below), certified by
the proposed transferee, assignee or sublessee to be true and correct, that the proposed
transferee, assignee or sublessee intends to use or store in the Premises. Additionally, Tenant
shall deliver to Landlord, on or before the date any proposed transferee, assignee or sublessee
takes occupancy of the Premises, all of the items relating to Hazardous Materials of such proposed
transferee, assignee or sublessee as described in
Section 36.2
.
24.5. Any Transfer that is not in compliance with the provisions of this
Article 24
shall be void and constitute a Default hereunder.
24.6. The consent by Landlord to a Transfer shall not relieve Tenant or proposed transferee,
assignee or sublessee from obtaining Landlords consent to any further Transfer, nor shall it
release Tenant or any proposed transferee, assignee or sublessee of Tenant from full and primary
liability under this Lease.
24.7. Notwithstanding any Transfer, Tenant shall remain fully and primarily liable for the
payment of all Rent and other sums due or to become due hereunder, and for the full performance of
all other terms, conditions and covenants to be kept and performed by Tenant. The acceptance of
Rent or any other sum due hereunder, or the acceptance of performance of any other term, covenant
or condition thereof, from any person or entity other than Tenant shall not be deemed a waiver of
any of the provisions of this Lease or a consent to any Transfer.
24.8.
Licenses to Business Affiliates
. Notwithstanding any contrary provision of this
Article 24
, the original Tenant named hereunder (but not any assignee or subtenant) shall
have the right, without the receipt of Landlords consent, but on prior written notice to Landlord,
to license (but not sublease) up to an aggregate of up to ten percent (10%) of the rentable square
feet of the Premises to individuals or entities (each, a
Business Affiliate
), which
license to a Business Affiliate shall be on and subject to all of the following conditions: (i)
Tenant shall have a direct contractual business relationship (relating to a primary business of
Tenant conducted in the Premises and other than Business Affiliates use of the Premises) with each
such Business Affiliate; (ii) each such Business Affiliate shall be of a character and reputation
consistent with the quality of the Buildings; (iii) each such license shall clearly specify that it
is only a contract right and that the Business Affiliate is not a subtenant and has no interest in
real property; (iv) each such Business Affiliates use of the Premises is in a manner consistent
with the Permitted Use; (v) no demising walls or separate entrances shall be constructed in the
Premises to accommodate any such license; (vi) the term of such license shall not exceed six (6)
months; and (vii) the licensee shall pay no rent or other compensation to Tenant in respect of such
license. No such license shall relieve Tenant from any liability under this Lease.
24.9. If Tenant sublets the Premises or any portion thereof, Tenant hereby immediately and
irrevocably assigns to Landlord, as security for Tenants obligations under this Lease, all rent
from any such subletting, and appoints Landlord as assignee and attorney-in-fact for Tenant, and
Landlord (or a receiver for Tenant appointed on Landlords application) may collect such rent and
apply it toward Tenants obligations under this Lease;
provided
that, until the occurrence
of a Default (beyond the expiration at all applicable notice and cure periods) by Tenant, Tenant
shall have the right to collect such rent.
25.
Attorneys Fees
. If either party commences an action against the other party
arising out of or in connection with this Lease, then the substantially prevailing party shall be
entitled to have and
recover from the other party reasonable attorneys fees, charges and disbursements and costs
of suit.
26.
Definition of Landlord
. With regard to obligations imposed upon Landlord pursuant
to this Lease, the term
Landlord
, as used in this Lease, shall refer only to Landlord or
Landlords then-current successor-in-interest. In the event of any transfer, assignment or
conveyance of Landlords interest in this Lease or in Landlords fee title to or leasehold interest
in the Property, as applicable, Landlord herein named (and in case of any subsequent transfers or
conveyances, the subsequent Landlord) shall be automatically freed and relieved, from and after the
date of such transfer, assignment or conveyance, from all liability for the performance of any
covenants or obligations contained in this Lease thereafter to be performed by Landlord and,
without further agreement, the transferee, assignee or conveyee of Landlords in this Lease or in
Landlords fee title to or leasehold interest in the Property, as applicable, shall be deemed to
have assumed and agreed to observe and perform any and all covenants and obligations of Landlord
27
hereunder during the tenure of its interest in this Lease or the Property. Landlord or any
subsequent Landlord may transfer its interest in the Premises or this Lease without Tenants
consent.
27.
Estoppel Certificate
. Tenant shall, within fifteen (15) days of receipt of
written notice from Landlord, execute, acknowledge and deliver a statement in writing substantially
in the form attached to this Lease as
Exhibit C
, or on any other commercially reasonable form
reasonably requested by a proposed Lender or purchaser, (a) certifying that this Lease is
unmodified and in full force and effect (or, if modified, stating the nature of such modification
and certifying that this Lease as so modified is in full force and effect) and the dates to which
rental and other charges are paid in advance, if any, (b) acknowledging that there are not, to
Tenants knowledge, any uncured defaults on the part of Landlord hereunder, or specifying such
defaults if any are claimed, and (c) setting forth such further information with respect to this
Lease or the Premises as may be reasonably requested thereon. Any such statement may be relied
upon by any prospective purchaser or encumbrancer of all or any portion of the real property of
which the Premises are a part. Tenants failure to deliver such statement within such the
prescribed time shall, at Landlords option, constitute a Default under this Lease, and, in any
event, shall be binding upon Tenant that this Lease is in full force and effect and without
modification except as may be represented by Landlord in any certificate prepared by Landlord and
delivered to Tenant for execution and that all other statements set forth in such certificate are
true and correct. Landlord shall, within fifteen (15) days of receipt of written notice from
Tenant but in no event more than once every twelve (12) months, provide to Tenant an estoppel
certificate signed by Landlord, (a) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying that this Lease as
so modified is in full force and effect) and the dates to which rental and other charges are paid
in advance, if any, and (b) acknowledging that there are not, to Landlords knowledge, any uncured
defaults on the part of Tenant hereunder, or specifying such defaults if any are claimed.
28.
Joint and Several Obligations
. If more than one person or entity executes this
Lease as Tenant, then:
28.1. Each of them is jointly and severally liable for the keeping, observing and performing
of all of the terms, covenants, conditions, provisions and agreements of this Lease to be kept,
observed or performed by Tenant; and
28.2. The term
Tenant
as used in this Lease shall mean and include each of them,
jointly and severally. The act of, notice from, notice to, refund to, or signature of any one or
more of them with respect to the tenancy under this Lease, including, without limitation, any
renewal, extension, expiration, termination or modification of this Lease, shall be binding upon
each and all of the persons executing this Lease as Tenant with the same force and effect as if
each and all of them had so acted, so given or received such notice or refund, or so signed.
29.
Limitation of Landlords Liability
.
29.1. If Landlord is in default under this Lease and, as a consequence, Tenant recovers a
monetary judgment against Landlord, the judgment shall be satisfied only out of (a) the proceeds of
sale received on execution of the judgment and levy against the right, title and interest of
Landlord in the Premises, (b) rent or other income from such real property receivable by Landlord,
(c) the consideration received by Landlord from the sale, financing, refinancing or other
disposition of all or any part of Landlords right, title or interest in the Premises and (d) any
casualty insurance proceeds which Landlord receives for damage to the Premises.
29.2. Landlord shall not be personally liable for any deficiency under this Lease. If
Landlord is a partnership or joint venture, then the partners of such partnership shall not be
personally liable for Landlords obligations under this Lease, and no partner of Landlord shall be
sued or named as a party in any suit or action, and service of process shall not be made against
any partner of Landlord except as may be necessary to secure jurisdiction of the partnership or
joint venture. If Landlord is a corporation, then the shareholders, directors, officers, employees
and agents of such corporation shall not be personally liable for
28
Landlords obligations under this
Lease, and no shareholder, director, officer, employee or agent of Landlord shall be sued or named
as a party in any suit or action, and service of process shall not be made against any shareholder,
director, officer, employee or agent of Landlord. If Landlord is a limited liability company, then
the members of such limited liability company shall not be personally liable for Landlords
obligations under this Lease, and no member of Landlord shall be sued or named as a party in any
suit or action, and service of process shall not be made against any member of Landlord except as
may be necessary to secure jurisdiction of the limited liability company. No partner, shareholder,
director, employee, member or agent of Landlord shall be required to answer or otherwise plead to
any service of process, and no judgment shall be taken or writ of execution levied against any
partner, shareholder, director, employee or agent of Landlord.
29.3. If Tenant is a partnership or joint venture, then the partners of such partnership
shall not be personally liable for Tenants obligations under this Lease, and no partner of Tenant
shall be sued or named as a party in any suit or action, and service of process shall not be made
against any partner of Tenant except as may be necessary to secure jurisdiction of the partnership
or joint venture. If Tenant is a corporation, then the shareholders, directors, officers,
employees and agents of such corporation shall not be personally liable for Tenants obligations
under this Lease, and no shareholder, director, officer, employee or agent of Tenant shall be sued
or named as a party in any suit or action, and service of process shall not be made against any
shareholder, director, officer, employee or agent of Tenant. If Tenant is a limited liability
company, then the members of such limited liability company shall not be personally liable for
Tenants obligations under this Lease, and no member of Tenant shall be sued or named as a party
in any suit or action, and service of process shall not be made against any member of Tenant
except as may be necessary to secure jurisdiction of the limited liability company. No partner,
shareholder, director, employee, member or agent of Tenant shall be required to answer or
otherwise plead to any service of process, and no judgment shall be taken or writ of execution
levied against any partner, shareholder, director, employee or agent of Tenant. Notwithstanding
the foregoing, in no event shall the provisions of this
Section 29.3
relieve Tenants
partners, shareholders, directors, employees, members or agents of any personal liability arising
out of, or in connection with, such partners, shareholders, directors, employees, members or
agents gross negligence or willful misconduct.
29.4. Each of the covenants and agreements of this
Article 29
shall be applicable to
any covenant or agreement either expressly contained in this Lease or imposed by Applicable Laws
and shall survive the expiration or earlier termination of this Lease.
30.
Premises Control by Landlord
. Landlord and Landlords Agents may, at any and all
reasonable times during non-business hours (or during business hours if Tenant so requests), and
upon twenty-four (24) hours prior notice (
provided
that no time restrictions shall apply
or advance notice be required if an emergency necessitates immediate entry), enter the Premises to
(a) inspect the same and to determine whether Tenant is in compliance with its obligations
hereunder, (b) supply any service Landlord is required to provide hereunder, (c) show the Premises
to prospective purchasers or tenants during the final year of the Term, (d) post notices of
nonresponsibility, (e) access the telephone equipment, electrical substation and fire risers, or
(f) alter, improve or repair any portion of the Buildings. In connection with any such alteration,
improvement or repair as described in
Subsection 30(f)
above, Landlord and Landlords
Agents may erect in the Premises
scaffolding and other structures reasonably required for the alteration, improvement or repair
work to be performed. Subject to
Section 15.4
above, in no event shall Tenants Rent abate
as a result of Landlords activities pursuant to this
Section 30
;
provided
,
however
, that all such activities shall be conducted in such a manner so as to cause as
little interference to Tenant as is reasonably possible. Landlord shall at all times retain a key
with which to unlock all of the doors in the Premises. If an emergency (where there is an imminent
threat to persons or property) necessitates immediate access to the Premises, Landlord may use
whatever force is necessary to enter the Premises, and any such entry to the Premises shall not
constitute a forcible or unlawful entry to the Premises, a detainer of the Premises, or an eviction
of Tenant from the Premises or any portion thereof.
31.
Construction; Quiet Enjoyment
.
31.1.
Temporary Construction Easement
. Tenant hereby grants Landlord and the Landlord
Parties from the Execution Date through the completion of the construction of the Landlords
Construction Work and the Tenant Improvements (each as defined in the New Parcel 3 Lease): (a)
access through the portion of Premises that are improved with walkways and driveways for the
purpose of access, and (b) over and across the portion of the Premises that is shown on
Exhibit G
for storage of building supplies, materials and equipment, and staging of construction, for any and
all purposes reasonably related to the construction of the New Parcel 3 Building.
29
31.2. So long as Tenant is not in default under this Lease or as otherwise permitted by this
Lease, Landlord or anyone acting through or under Landlord shall not disturb Tenants occupancy of
the Premises. Notwithstanding the foregoing, to the extent that Landlord uses commercially
reasonable efforts to minimize any interference the construction of the New Parcel 3 Building may
have on Tenants use and quiet enjoyment of the Premises for Tenants normal business operations,
Tenant hereby (a) accepts any and all inconveniences associated with the construction of the New
Parcel 3 Building, including, any noise, paint, fumes, dust, debris, obstruction of access
(including any obstruction caused by the erection of scaffolding, barricades or other necessary
structures on the Property), or any other inconvenience caused by the construction of the New
Parcel 3 Building, (b) agrees that the performance of the construction of the New Parcel 3 Building
shall not constitute a constructive eviction nor shall Tenant be entitled to an abatement of Rent,
and (c) acknowledges and agrees that Landlord shall not, for any reason, be responsible or liable
to Tenant for any direct or indirect injury to Tenant or Tenants Agents, or interference with
Tenants business, arising from the construction of the New Parcel 3 Building;
provided
,
however
, that if Landlord fails to use its commercially reasonable efforts to minimize any
interference that the construction of the New Parcel 3 Building may have on Tenants use of the
Premises for Tenants normal business operations, such failure results in an Adverse Condition, and
as a direct result of such Adverse Condition, Tenant is unable to conduct its business in a
reasonable manner in a material portion of the Premises, Tenant shall be entitled to an abatement
of rent with respect to such Adverse Condition to the extent Tenant is entitled to an abatement of
rent pursuant to the terms and conditions of
Section 15.4
above.
32.
Subordination and Attornment
.
32.1. Subject to the delivery of the non-disturbance agreements described in this
Article
32
as a condition precedent to any such subordination, this Lease shall be subject and
subordinate to the lien of any mortgage, deed of trust, or lease in which Landlord is tenant now or
hereafter in force against the Premises or any portion thereof and to all advances made or
hereafter to be made upon the security thereof without the necessity of the execution and delivery
of any further instruments on the part of Tenant to effectuate such subordination. In
consideration of, and as a condition precedent to, Tenants agreement to permit its interest
pursuant to this Lease to be subordinated to any particular future ground or underlying lease of
the Buildings or the Premises or to the lien of any mortgage or trust deed, hereafter enforced
against the Buildings or the Premises and to any renewals, extensions, modifications,
consolidations and replacements thereof, Landlord shall deliver to Tenant a non-disturbance
agreement on (a) the form of
Exhibit E
attached hereto, (b) a commercially reasonable form of
non-disturbance agreements of the lessor under such ground lease or underlying lease or the holder
of such mortgage or trust deed, or (c) another commercially reasonable form. Landlords delivery
to Tenant of non-disturbance agreement(s) in favor of Tenant from any ground lessors,
mortgage holders or lien holders of Landlord who later came into existence at any time prior
to the expiration of the Term shall be in consideration of, and a condition precedent to, Tenants
agreement to be bound by the terms of this
Article 32
. Tenant shall be entitled, at
Tenants sole cost and expense, to record any such non-disturbance agreement promptly after full
execution and delivery of such agreement.
32.2. Notwithstanding the foregoing, Tenant shall execute and deliver upon demand such further
commercially reasonable instrument or instruments evidencing such subordination of this Lease to
the lien of any such mortgage or mortgages or deeds of trust or lease in which Landlord is tenant
as may be required by Landlord. However, if any such mortgagee, beneficiary or Landlord under
lease wherein Landlord is tenant so elects, this Lease shall be deemed prior in lien to any such
lease, mortgage, or deed of trust upon or including the Premises regardless of date and Tenant
shall execute a statement in writing to such effect at Landlords request.
32.3. Upon written request of Landlord and opportunity for Tenant to review, Tenant agrees to
execute any Lease amendments not materially altering the terms of this Lease, if required by a
mortgagee or beneficiary of a deed of trust encumbering real property of which the Premises
constitute a part incident to the financing of the real property of which the Premises constitute a
part. Any change affecting the amount or timing of the consideration to be paid by Tenant or
modifying the term of this Lease shall be deemed as materially altering the terms hereof.
30
32.4. Subject to
Section 32.1
, in the event any proceedings are brought for
foreclosure, or in the event of the exercise of the power of sale under any mortgage or deed of
trust made by Landlord covering the Premises, Tenant shall at the election of the purchaser at such
foreclosure or sale attorn to the purchaser upon any such foreclosure or sale and recognize such
purchaser as Landlord under this Lease.
33.
Surrender
.
33.1. No surrender of possession of any part of the Premises shall release Tenant from any of
its obligations hereunder, unless such surrender is accepted in writing by Landlord.
33.2. The voluntary or other surrender of this Lease by Tenant shall not effect a merger with
Landlords fee title or leasehold interest in the Premises or any portion thereof, unless Landlord
consents in writing, and shall, at Landlords option, operate as an assignment to Landlord of any
or all subleases.
33.3. The voluntary or other surrender of any ground or other underlying lease that now exists
or may hereafter be executed affecting the Premises or any portion thereof, or a mutual
cancellation thereof or of Landlords interest therein by Landlord and its lessor shall not effect
a merger with Landlords fee title or leasehold interest in the Premises and shall, at the option
of the successor to Landlords interest in the Premises or any portion thereof operate as an
assignment of this Lease.
33.4. In the event Tenant has performed any Alterations in accordance with this Lease, upon
surrender of the Premises, Tenant shall reimburse Landlord for any extra costs and expenses
incurred by Landlord by reason of any delays in re-leasing the Premises caused by Tenants removal
of such Alterations.
34.
Waiver and Modification
No provision of this Lease may be modified, amended or
supplemented except by an agreement in writing signed by Landlord and Tenant. The waiver by
Landlord of any breach by Tenant of any term, covenant or condition herein contained shall not be
deemed to be a waiver of any subsequent breach of the same or any other term, covenant or condition
herein contained. The waiver by Tenant of any breach by Landlord of any term, covenant or
condition herein contained shall not be deemed to be a waiver of any subsequent breach of the same
or any other term, covenant or condition herein contained.
35.
Waiver of Jury Trial and Counterclaims
. To the extent allowed under Applicable Laws, the parties waive trial by jury in any action,
proceeding or counterclaim brought by the other party hereto related to matters arising out of or
in any way connected with this Lease; the relationship between Landlord and Tenant; Tenants use or
occupancy of the Premises; or any claim of injury or damage related to this Lease or the Premises.
36.
Hazardous Materials
.
36.1. After the Execution Date, Tenant shall not cause or permit any Hazardous Materials (as
hereinafter defined) to be brought upon, kept or used in or about the Premises in violation of
Applicable Laws by Tenant or Tenants Agents. If Tenant breaches such obligation, or if the
presence of Hazardous Materials brought upon, kept or used in or about the Premises by Tenant or
Tenants Agents results in contamination of the Premises or any adjacent property, or if
contamination of the Premises or any adjacent property by Hazardous Materials otherwise occurs
before or during the term of this Lease or any extension or renewal hereof or holding over
hereunder (other than in connection with substances that migrated to the Premises from any
adjoining property, except in the event Tenant is aware of such contamination and neither remedies
such contamination nor promptly notifies Landlord of the existence of such contamination), then
Tenant shall indemnify, save, defend and hold Landlord, its agents and contractors harmless from
and against any and all claims, judgments, damages, penalties, fines, costs, liabilities and losses
(including, without limitation, diminution in value of the Premises or any portion thereof; damages
for the loss or restriction on use of rentable or usable space or of any amenity of the Premises;
damages arising from any adverse impact on marketing of space in the Premises; and sums paid in
settlement of claims, attorneys fees, consultants fees and experts fees) that arise before,
during or after the Term as a result of such breach or contamination, except to the extent arising
solely out of Landlords construction of the Landlords Construction Work or the Tenant
Improvements (each as defined in the Parcel 3
31
Lease);
provided
,
however
, in no
event shall Tenants indemnity extend to consequential damages; provided that this sentence shall
not limit Landlords damages if, as a result of Tenants breach of this Lease: (a) Landlord does
not or is unable to lease the Premises to another party, or (b) a third party is unable to occupy
the Premises on the date specified in such third partys lease. This indemnification of Landlord
by Tenant includes, without limitation, costs incurred in connection with any investigation of site
conditions or any cleanup, remedial, removal or restoration work required by any Governmental
Authority because of Hazardous Materials present in the air, soil or groundwater above, on or under
the Premises. Without limiting the foregoing, if the presence of any Hazardous Materials in, on,
under or about the Premises or any adjacent property caused or permitted by Tenant or Tenants
Agents results in any contamination of the Premises or any adjacent property, then Tenant shall
promptly take all actions at its sole cost and expense as are necessary to return the Premises and
any adjacent property to their respective condition existing prior to the time of such
contamination; provided that Landlords written approval of such action shall first be obtained,
which approval Landlord shall not unreasonably withhold; and provided, further, that it shall be
reasonable for Landlord to withhold its consent if such actions could have a material adverse
long-term or short-term effect on the Premises.
36.2. Landlord acknowledges that it is not the intent of this
Article 36
to prohibit
Tenant from operating its business as described in
Section 2.7
above. Tenant may operate
its business according to the custom of Tenants industry so long as the use or presence of
Hazardous Materials is strictly and properly monitored according to Applicable Laws. As a material
inducement to Landlord to allow Tenant to use Hazardous Materials in connection with its business,
Tenant agrees to deliver to Landlord prior to the Execution Date a list identifying each type of
Hazardous Material to be present on the Premises and setting forth any and all governmental
approvals or permits required in connection with the presence of such Hazardous Material on the
Premises (the
Hazardous Materials List
). Tenant shall deliver to Landlord an updated
Hazardous Materials List on or prior to each annual anniversary of the Execution Date and shall
also deliver an updated Hazardous Materials List before any new Hazardous Materials are brought
onto the Premises. Tenant shall deliver to Landlord true and correct copies of the following
documents (hereinafter referred to as the
Documents
) relating to the handling, storage,
disposal and emission of Hazardous Materials prior to Execution Date or, if unavailable at that
time, concurrent with the receipt from or submission to any Governmental Authority: permits;
approvals; reports and correspondence; storage and management plans; notices of violations of
Applicable Laws; plans relating to the installation of any storage tanks to be installed in or
under the Premises (
provided
that installation of storage tanks shall only be
permitted after Landlord has given Tenant its written consent to do so, which consent Landlord
may withhold in its sole and absolute discretion); and all closure plans or any other documents
required by any and all Governmental Authorities for any storage tanks installed in, on or under
the Premises for the closure of any such storage tanks. Tenant shall not be required, however, to
provide Landlord with any portion of the Documents containing information of a proprietary nature
that, in and of themselves, do not contain a reference to any Hazardous Materials or activities
related to Hazardous Materials.
36.3. At any time, and from time to time, prior to the expiration of the Term, Landlord shall
have the right to conduct appropriate tests of the Premises to demonstrate that Hazardous Materials
are present or that contamination has occurred due to Tenant or Tenants agents, employees or
invitees. Tenant shall pay all reasonable costs of such tests of the Premises if such tests
demonstrate that Tenant has breached any provision of this Lease regarding Hazardous Materials or
has any clean-up obligations under this
Article 36
.
36.4. If underground or other storage tanks storing Hazardous Materials are: (a) located on
the Premises; (b) hereafter placed on the Premises by Tenant or Tenants Agents, (c) hereafter used
by Tenant or Tenants Agents, or (d) placed on the Premises by any other party and Tenant is aware
that such party placed such underground or other storage tank on the Premises, Tenant shall monitor
the storage tanks, maintain appropriate records, implement reporting procedures, properly close any
underground storage tanks, and take or cause to be taken all other steps necessary or required
under the Applicable Laws. Tenant shall pay all reasonable costs of such tests of the Premises
36.5. Tenants and Landlords obligations under this
Article 36
shall survive the
expiration or earlier termination of this Lease. During any period of time needed by Tenant or
Landlord after the termination of this Lease to complete the removal from the Premises of any
32
such
Hazardous Materials that Tenant is liable for pursuant to the terms and conditions of this Lease,
Tenant shall continue to pay Rent in accordance with this Lease, which Rent shall be prorated
daily.
36.6. As used herein, the term Hazardous Material means any hazardous or toxic substance,
material or waste that is or becomes regulated by any Governmental Authority.
37.
Miscellaneous
.
37.1. This Lease shall not be effective until, and shall be contingent upon, the satisfaction
of each of the following conditions: (a) the Parcel 3 Lease shall have been fully executed and is
in full force and effect, (b) Landlord shall have received Northwestern Mutual Life Insurance
Companys consent to this Lease and release of its security interest in the Parcel 3 Land, (c)
Landlord shall have received either: (i) a subordination, non-disturbance and attornment agreement
in the form of
Exhibit E
attached hereto executed by the holder of any existing mortgage or deed of
trust against the Property (the
Existing Lender
), or in another form reasonably
acceptable to Tenant, or (ii) a written acknowledgement in a form reasonably acceptable to Tenant
and from any Existing Lender that the Original Lease subordination, non-disturbance and attornment
agreement, if any, applies to this Lease to the same extent that it now applies to the Original
Lease, and (d) Landlord has received formal approval of substantial conformance review and plan
check comments from the City of San Diego in connection with the New Parcel 3 Building, which
approval and comments shall not contain any changes that cause Landlord to materially alter the
Landlords Construction Work or Tenant Improvements. If the conditions set forth in this
Section 37.1
are not satisfied or waived on or before April 10, 2007, this Lease shall
become null and void
37.2. Within five (5) business days after the end of each calendar month, Tenant shall submit
to Landlord an invoice, or, in the event an invoice is not available, an itemized list of expenses,
of all costs and expenses that: (a) Tenant has incurred during the prior month; and (b) Tenant has
reasonably determined that Landlord is obligated to reimburse such costs and expenses pursuant to
the terms of this Lease.
37.3. This Lease shall be deemed and construed to be an absolute net lease and, except as
herein expressly provided, Landlord shall receive all payments required to be made by Tenant free
from all charges, assessments, impositions, expenses and deductions of any and every kind or nature
whatsoever. Landlord shall not be required to furnish any services or
facilities or to make any repairs, replacements or alterations of any kind in or on the
Premises except as specifically provided herein. Tenant shall receive all invoices and bills
relative to the Premises and, except as otherwise provided herein, shall pay for all expenses
directly to the person or company submitting a bill without first having to forward payment for the
expenses to Landlord. Tenant shall at Tenants sole cost and expense be responsible for the
management of the Premises, shall maintain the landscaping and parking lot, and shall make those
additional repairs and alterations required of Tenant hereunder to maintain the Premises in first
class condition.
37.4. Where applicable in this Lease, the singular includes the plural and the masculine or
neuter includes the masculine, feminine and neuter. The Section headings of this Lease are not a
part of this Lease and shall have no effect upon the construction or interpretation of any part
hereof.
37.5. Submission of this instrument for examination or signature by Tenant does not constitute
a reservation of or option for a lease, and shall not be effective as a lease or otherwise until
execution by and delivery to both Landlord and Tenant.
37.6. Time is of the essence with respect to the performance of every provision of this Lease
in which time of performance is a factor.
37.7. Each provision of this Lease performable by Tenant shall be deemed both a covenant and a
condition.
37.8. Whenever consent or approval of either party is required, that party shall not
unreasonably withhold such consent or approval, except as may be expressly set forth to the
contrary.
33
37.9. The terms of this Lease are intended by the parties as a final expression of their
agreement with respect to the terms as are included herein, and may not be contradicted by evidence
of any prior or contemporaneous agreement.
37.10. Any provision of this Lease that shall prove to be invalid, void or illegal shall in no
way affect, impair or invalidate any other provision hereof, and all other provisions of this Lease
shall remain in full force and effect and shall be interpreted as if the invalid, void or illegal
provision did not exist.
37.11. Landlord may, but shall not be obligated to, record a short form memorandum hereof
without Tenants consent. Tenant shall reasonably cooperate with Landlord in such recording.
Neither party shall record this Lease. Tenant shall have the right to record a memorandum of this
Lease (which Landlord shall execute); provided, however, that Tenant shall be responsible for the
cost of recording any memorandum of this Lease, including any transfer or other taxes incurred in
connection with said recordation. Landlord shall reasonably cooperate with Tenant in such
recording at Tenants sole cost and expense.
37.12. The language in all parts of this Lease shall be in all cases construed as a whole
according to its fair meaning and not strictly for or against either Landlord or Tenant.
37.13. Each of the covenants, conditions and agreements herein contained shall inure to the
benefit of and shall apply to and be binding upon the parties hereto and their respective heirs;
legatees; devisees; executors; administrators; and permitted successors, assigns, sublessees.
Nothing in this
Section 37.13
shall in any way alter the provisions of this Lease
restricting assignment or subletting.
37.14. Any notice, consent, demand, bill, statement or other communication required or
permitted to be given hereunder shall be in writing and shall be given by personal delivery,
overnight delivery with a reputable nationwide overnight delivery service, or certified mail
(return receipt requested), and if given by personal delivery, shall be deemed delivered upon
receipt; if given by overnight delivery, shall be deemed delivered one (1) day after deposit with a
reputable nationwide overnight delivery service; and, if given by certified mail (return receipt
requested), shall be deemed delivered three (3) business days after the time the notifying party
deposits the notice with the United States Postal Service. Any notices given pursuant to this
Lease shall be addressed to Tenant at the Premises, or to Landlord or Tenant at the addresses
shown in
Sections 2.9
and
2.10
, respectively. Either party may, by notice to
the other given pursuant to this Section, specify additional or different addresses for notice
purposes.
37.15. This Lease shall be governed by, construed and enforced in accordance with the laws of
the State in which the Premises are located, without regard to such States conflict of law
principles.
37.16. That individual or those individuals signing this Lease guarantee, warrant and
represent that said individual or individuals have the power, authority and legal capacity to sign
this Lease on behalf of and to bind all entities, corporations, partnerships, limited liability
companies, joint venturers or other organizations and entities on whose behalf said individual or
individuals have signed.
37.17. To induce Landlord to enter into this Lease, Tenant agrees that it shall promptly
furnish to Landlord, from time to time, upon Landlords written request, the most recent audited
year-end financial statements reflecting Tenants current financial condition. Tenant shall,
within ninety (90) days after the end of Tenants financial year, furnish Landlord with a certified
copy of Tenants audited year-end financial statements for the previous year. Tenant represents
and warrants that all financial statements, records and information furnished by Tenant to Landlord
in connection with this Lease are true, correct and complete in all respects. Notwithstanding the
foregoing, the provisions of this
Section 37.17
shall not apply to Tenant so long as Tenant
is a publicly traded company that is listed on a United States stock exchange.
37.18. This Lease is subject to any recorded covenants, conditions or restrictions now or
hereinafter affecting the Premises or Property (the
CC&R
s). Tenant shall comply with all
CC&Rs except to the extent any future CC&Rs (a) materially adversely affects Tenants use of the
Premises for its Permitted Use; or (b) materially increase Tenants costs under this Lease.
34
38.
Option to Extend Term
. Tenant shall have the option (
Option
) to extend
the Term of this Lease as to the entire Premises (and no less than the entire Premises) upon the
following terms and conditions. Any extension of the Term pursuant to any Option shall be on all
the same terms and conditions as this Lease, except as follows:
38.1. Tenant shall have three (3) options to extend the Term of this Lease by five (5) years
each (each, an
Extended Term
), upon the same terms and conditions as this Lease (except
as provided below). Basic Annual Rent shall be adjusted on the first (1st) day of each Extended
Term and every twenty-four (24) months thereafter in accordance with
Article 6
. The Basic
Annual Rent during each Extended Term shall equal the greater of: (a) the Fair Market Value for the
Extended Term; and (b) 102.5% of the then-current Basic Annual Rent at the end of the then-current
Term or Extended Term, as applicable.
Fair Market Value
means the then-prevailing
average annual rate that comparable landlords have accepted in current transactions from new,
non-equity (i.e., not being offered equity in the Buildings), nonrenewal, nonexpansion and
nonaffiliated tenants of similar financial strength for comparable space in comparable class A
office buildings comparably located, with comparable size, quality and floor height in a first
class office building, or as appropriate, a laboratory building, taking into consideration all
relevant factors, including, without limitation, the proposed lease term, the tenant inducements,
allowances or concessions, if any, and excluding specialized tenant improvements or tenant paid
improvements for a comparable term, with the determination of Fair Market Value to take into
account all relevant factors, including tenant inducements, allowances or concessions, if any, the
extent of the services provided or to be provided to the Premises, and contraction and expansion
options. In the event the tenant inducements, allowances or concessions granted differ from the
terms contained in this Lease, an adjustment to the Fair Market Value shall be made on a basis
consistent with the adjustments commonly made in the market for comparable differences and
concession packages. If Landlord and Tenant cannot agree on the Fair Market Value for purposes of
any Extended Term then they shall engage a mutually agreeable independent third party appraiser,
which appraiser shall be a real estate broker with at least ten (10) years experience in
appraising the rental value of leased commercial premises (for research and development and
laboratory uses) in the San Diego, California area (the
Appraiser
). If the parties
cannot agree on the Appraiser, each shall within ten (10) days after such impasse appoint an
Appraiser (meeting the qualifications set forth above) and, within ten (10) days after the
appointment of both such Appraisers, those two Appraisers shall select a third Appraiser meeting
the qualifications set forth above. If either party fails to timely appoint an Appraiser,
then the Appraiser the other party appoints shall be the sole Appraiser. Within ten (10) days
after appointment of all Appraiser(s), Landlord and Tenant shall each simultaneously give the
Appraisers (with a copy to the other party) its determination of Fair Market Value, with such
supporting data or information as each submitting party determines appropriate. Within ten (10)
days after such submissions, the Appraisers shall by majority vote select either Landlords or
Tenants Fair Market Value. The Appraisers may not select or designate any other Fair Market
Value. The determination of the Appraiser(s) shall bind the parties
38.2. The Option is not assignable separate and apart from this Lease.
38.3. The Option is conditional upon Tenant giving Landlord written notice of its election to
exercise an Option at least twelve (12) months prior to the end of the expiration of the initial
term of this Lease and, if exercised, the applicable Extended Term. Time shall be of the essence
as to Tenants exercise of each Option. Tenant assumes full responsibility for maintaining a
record of the deadlines to exercise any Option(s). Tenant acknowledges that it would be
inequitable to require Landlord to accept any exercise of any Option(s) after the date provided for
in this Section.
38.4. Notwithstanding anything contained in this
Article 38
, Tenant shall not have the
right to exercise an Option:
38.4.1 During the time commencing from the date Landlord delivers to Tenant a written notice
that Tenant is in monetary or material non-monetary default under any provision of this Lease or
the Parcel 3 Lease and continuing until Tenant has cured the specified default; or
38.4.2 At any time after any Default as described in
Article 23
of this Lease
(
provided
,
however
, that, for purposes of this
Subsection 38.4.2
, Landlord
shall not be required to provide Tenant with notice of such Default) and continuing until Tenant
cures any such Default, if such Default is susceptible to being cured; or
35
38.4.3 In the event that Tenant has defaulted in the performance of its obligations under this
Lease three (3) or more times and a service or late charge has become payable under
Section
23.1
for each of such defaults during the twelve (12)-month period immediately prior to the
date that Tenant intends to exercise an Option, whether or not Tenant has cured such defaults.
38.5. The period of time within which Tenant may exercise an Option shall not be extended or
enlarged by reason of Tenants inability to exercise such Option because of the provisions of
Section 38.4
.
39.
Tenants Authority
. Tenant hereby covenants and warrants that (a) Tenant is duly
incorporated or otherwise established or formed and validly existing under the laws of its state of
incorporation, establishment or formation, (b) Tenant has and is duly qualified to do business in
the state in which the Property is located, (c) Tenant has full corporate, partnership, trust,
association or other appropriate power and authority to enter into this Lease and to perform all
Tenants obligations hereunder and (d) each person (and all of the persons if more than one signs)
signing this Lease on behalf of Tenant is duly and validly authorized to do so.
40.
Landlords Authority
. Landlord hereby covenants and warrants that (a) Landlord is
duly incorporated or otherwise established or formed and validly existing under the laws of its
state of incorporation, establishment or formation, (b) Landlord has and is duly qualified to do
business in the state in which the Property is located, (c) Landlord has full corporate,
partnership, trust, association or other appropriate power and authority to enter into this Lease
and to perform all Landlords obligations hereunder and (d) each person (and all of the persons if
more than one signs) signing this Lease on behalf of Landlord is duly and validly authorized to do
so.
41.
Confidentiality
. Neither party shall disclose any terms or conditions of this
Lease (including Rent) or give a copy of this Lease to any third party, and Landlord shall not
release to any third
party any nonpublic financial information or nonpublic information about Tenants ownership
structure that Tenant gives Landlord, except (a) if required by Applicable Laws or in any judicial
proceeding,
provided
that the releasing party has given the other party reasonable notice
of such requirement, if feasible, (b) to a partys attorneys, accountants, brokers and other bona
fide consultants or advisers,
provided
such third parties agree to be bound by this Section
or (c) to bona fide prospective assignees or subtenants of this Lease, provided they agree in
writing to be bound by this Section.
42.
Excavation
. If any excavation shall be made upon land adjacent to or under the
Buildings, or shall be authorized to be made, Tenant shall afford to the person causing or
authorized to cause such excavation, license to enter the Premises for the purpose of performing
such work as said person shall deem necessary or desirable to preserve and protect the Buildings
from injury or damage and to support the same by proper foundations, without any claim for damages
or liability against Landlord and without, subject to the terms and conditions of this Lease,
reducing or otherwise affecting Tenants obligations under this Lease.
43.
Telecommunications Equipment
. At any time during the Term, subject to the terms
of this
Article 43
and subject to Landlords prior written approval, which approval shall
not be unreasonably withheld or delayed, Tenant shall have the exclusive right to install, at
Tenants sole cost and expense, satellite or microwave dishes or other communication equipment (the
Telecommunications Equipment
) upon the roof of the Buildings. The physical appearance
and the size of the Telecommunications Equipment shall be subject to Landlords written approval
prior to installation, which approval will not unreasonably be withheld, any covenants, conditions,
or restrictions encumbering the Premises and, any Applicable Laws. Tenant shall maintain such
Telecommunications Equipment in good condition and repair, at Tenants sole cost and expense. The
cost of the Telecommunications Equipment, including but not limited to the permitting,
installation, maintenance and removal thereof shall be at Tenants sole cost and expense. If Tenant
fails to maintain its Telecommunications Equipment, or if Tenant fails to remove such
Telecommunications Equipment upon termination of this Lease, or fails to repair any damage caused
by such removal, Landlord may do so at Tenants expense. Tenant shall on demand reimburse Landlord
for all costs incurred by Landlord to effect such removal, which amounts shall be deemed Additional
Rent and shall include without limitation, all sums disbursed, incurred or deposited by Landlord,
including Landlords costs, expenses and actual attorneys fees with interest thereon. Tenant
shall indemnify, defend and hold harmless Landlord from and against any loss, cost, claim, lawsuit,
liability or expense (including
36
reasonable attorneys fees and disbursements) arising directly or
indirectly out of Tenants failure to perform any of its obligations under this
Article 43
.
44.
Access to Premises
. Subject to
Section 30
, Tenant shall be granted access
to the Premises (including the parking facilities) twenty-four (24) hours per day, seven (7) days
per week, every day of the year.
45.
Secured Areas
. Notwithstanding anything to the contrary set forth in this Lease,
Tenant may designate certain areas of the Premises as Secured Areas should Tenant require such
areas for the purpose of securing certain valuable property or confidential information. Landlord
may not enter such Secured Areas except in the case of emergency or in the event of a Landlord
inspection, in which case Landlord shall provide Tenant with one (1) business day prior written
notice of the specific date and time of such Landlord inspection.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
37
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the date first above
written.
LANDLORD
:
BMR-9885 TOWNE CENTRE DRIVE LLC
,
a Delaware limited liability company
TENANT
:
ILLUMINA, INC.
,
a Delaware corporation
[Signature
Page Parcels 1&2 Illumina Lease]
EXHIBIT A
TENANTS PERSONAL PROPERTY
1)
|
|
All Data Servers/Racks that are not mounted to the floor
|
|
2)
|
|
2 large UPSs
|
|
a)
|
|
1 in the A/2 Data Room
|
|
|
b)
|
|
1 in the A/1 Shipping area
|
3)
|
|
RO/DI Water System
|
|
4)
|
|
Backup Generator
|
|
5)
|
|
Boardroom Electronics and Podium
|
|
6)
|
|
All Modular Furniture
|
|
7)
|
|
All Shelving/Racking
|
|
8)
|
|
Reagent Delivery System
|
|
9)
|
|
Caging Material
|
|
10)
|
|
All Equipment Specific to the Production Process of Illumina other than Fume Hoods and
Bio-Safety Cabinets
|
EXHIBIT A-1
EXHIBIT B
RULES AND REGULATIONS
NOTHING IN THESE RULES AND REGULATIONS (
RULES AND REGULATIONS
) SHALL SUPPLANT ANY
PROVISION OF THE LEASE. IN THE EVENT OF A CONFLICT OR INCONSISTENCY BETWEEN THESE RULES AND
REGULATIONS AND THE LEASE, THE LEASE SHALL PREVAIL.
1.
|
|
Except as specifically provided in the Lease to which these Rules and Regulations are
attached, no sign, placard, picture, advertisement, name or notice shall be installed or
displayed on any part of the outside of the Premises without Landlords prior written consent.
Landlord shall have the right to remove, at Tenants sole cost and expense and without
notice, any sign installed or displayed in violation of this rule.
|
2.
|
|
If Landlord objects in writing to any curtains, blinds, shades, screens or hanging plants or
other similar objects attached to or used in connection with any window or door of the
Premises or placed on any windowsill, which window, door or windowsill is (a) visible from the
exterior of the Premises and (b) not included in plans approved by Landlord, then Tenant shall
promptly remove said curtains, blinds, shades, screens or hanging plants or other similar
objects at its sole cost and expense.
|
3.
|
|
Tenant shall not obstruct any sidewalks or entrances to the Buildings, or any halls,
passages, exits, entrances or stairways within the Premises, in any case that are required to
be kept clear for health and safety reasons.
|
4.
|
|
Tenant shall not place a load upon any floor of the Premises that exceeds the load per square
foot that (a) such floor was designed to carry or (b) that is allowed by Applicable Laws.
|
5.
|
|
Tenant shall not use any method of heating or air conditioning other than as approved in
writing by Landlord.
|
6.
|
|
Tenant shall not install any radio, television or other antenna, cell or other communications
equipment, or any other devices on the roof or exterior walls of the Premises except as
otherwise provided in the Lease. Tenant shall not interfere with radio, television or other
communications from or in the Premises or elsewhere.
|
7.
|
|
Canvassing, peddling, soliciting and distributing handbills or any other written material
within, on or around the Premises are prohibited, and Tenant shall cooperate to prevent such
activities.
|
8.
|
|
Tenant shall store all of its trash, garbage and Hazardous Materials within its Premises or
in designated receptacles outside of the Premises. Tenant shall not place in any such
receptacle any material that cannot be disposed of in the ordinary and customary manner of
trash, garbage and Hazardous Materials disposal.
|
9.
|
|
The Premises shall not be used for any unlawful or reasonably objectionable purposes. No
cooking shall be done or permitted on the Premises; provided, however, that Tenant may use (a)
equipment approved in accordance with the requirements of insurance policies that Landlord or
Tenant is required to purchase and maintain pursuant to the Lease for brewing coffee, tea, hot
chocolate and similar beverages, and (b) microwave ovens for employees use; provided,
further, that any such equipment and microwave ovens are used in accordance with Applicable
Laws.
|
10.
|
|
Tenant shall not, without Landlords prior written consent, use the name of the Premises, if
any, in connection with or in promoting or advertising Tenants business except as Tenants
address.
|
11.
|
|
Tenant shall comply with all safety, fire protection and evacuation procedures and
regulations established by Landlord or any Governmental Authority.
|
EXHIBIT B-1
12.
|
|
Tenant assumes any and all responsibility for protecting the Premises from theft, robbery and
pilferage, which responsibility includes keeping doors locked and other means of entry to the
Premises closed.
|
13.
|
|
Landlord may waive any one or more of these Rules and Regulations for the benefit of Tenant,
but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in
favor of Tenant, nor prevent Landlord from thereafter enforcing any such Rules and Regulations
against Tenant.
|
14.
|
|
These Rules and Regulations are in addition to, and shall not be construed to in any way
modify or amend, in whole or in part, the terms covenants, agreements and conditions of the
Lease.
|
15.
|
|
Landlord reserves the right to make such other reasonable rules and regulations as, in its
judgment, may from time to time be needed for safety and security, the care and cleanliness of
the Premises, or the preservation of good order therein; provided, however, that Landlord
shall provide written notice to Tenant of such rules and regulations prior to them taking
effect. Tenant agrees to abide by these Rules and Regulations and any additional reasonable
rules and regulations issued or adopted by Landlord.
|
16.
|
|
Tenant shall not permit or allow any vehicles that belong to or are controlled by Tenant or
Tenants Agents to be loaded, unloaded or parked in areas other than those designated by
Landlord for such activities. No vehicles are to be left in the parking areas overnight and
no vehicles are to be parked in the parking areas other than normally sized passenger
automobiles, motorcycles and pick-up trucks. No extended term storage of vehicles is
permitted. Landlord reserves the right, without cost or liability to Landlord, to tow any
vehicle if such vehicles audio theft alarm system remains engaged for an unreasonable period
of time. Washing, waxing, cleaning or servicing of any vehicle in any portion of the Premises
is prohibited.
|
17.
|
|
Tenant shall be responsible for the observance of these Rules and Regulations by Tenants
employees, agents, clients, customers, invitees and guests.
|
EXHIBIT B-2
EXHIBIT C
FORM OF ESTOPPEL CERTIFICATE
|
|
|
To:
|
|
BMR-9885 Towne Centre Drive LLC
|
|
|
17140 Bernardo Center Drive, Suite 222
|
|
|
San Diego, CA 92128
|
|
|
Attention: General Counsel/Real Estate
|
|
|
|
|
|
BioMed Realty, L.P.
|
|
|
c/o BioMed Realty Trust, Inc.
|
|
|
17140 Bernardo Center Drive, Suite 222
|
|
|
San Diego, CA 92128
|
Re: 9885 Towne Centre Drive (the
Premises
) at 9885 Towne Centre Drive, San Diego,
California (the
Property
)
The undersigned tenant (
Tenant
) hereby certifies to you as follows:
1. Tenant is a tenant at the Property under a lease (the
Lease
) for the Premises dated as
of [___], 20[___]. The Lease has not been cancelled, modified, assigned, extended or amended
[except as follows: [___]], and there are no other agreements, written or oral, affecting or
relating to Tenants lease of the Premises or any other space at the Property. The lease term
expires on [___], 20[___].
2. Tenant took possession of the Premises, currently consisting of [___] square feet, on
[___], 20[___], and commenced to pay rent on [___], 20[___]. Tenant has full possession of
the Premises, has not assigned the Lease or sublet any part of the Premises, and does not hold the
Premises under an assignment or sublease[, except as follows: [___]].
3. All base rent, rent escalations and additional rent under the Lease have been paid through
[___], 20[___]. There is no prepaid rent[, except $[___]][, and the amount of security
deposit is $[___] [in cash][in the form of a letter of credit]]. Tenant currently has no right
to any future rent abatement under the Lease.
4. Base rent is currently payable in the amount of $[___] per month.
5. Tenant is currently paying estimated payments of additional rent of $[___] per month on
account of real estate taxes, insurance, management fees and common area maintenance expenses.
6. All work to be performed for Tenant under the Lease has been performed as required under the
Lease and has been accepted by Tenant[, except [___]], and all allowances to be paid to Tenant,
including allowances for tenant improvements, moving expenses or other items, have been paid.
7. The Lease is in full force and effect, free from default and free from any event that could
become a default under the Lease, and Tenant has no claims against the landlord or offsets or
defenses against rent, and there are no disputes with the landlord. Tenant has received no notice
of prior sale, transfer, assignment, hypothecation or pledge of the Lease or of the rents payable
thereunder[, except [___]].
8. [Tenant has the following expansion rights or options for the Property: [___].][Tenant has
no rights or options to purchase the Property.]
9. To Tenants knowledge, no hazardous wastes have been generated, treated, stored or disposed of
by or on behalf of Tenant in, on or around the Premises in violation of any environmental laws.
10. The undersigned has executed this Estoppel Certificate with the knowledge and understanding
that [INSERT NAME OF LANDLORD, PURCHASER OR LENDER, AS APPROPRIATE] or its assignee is acquiring
the Property in reliance on this certificate and that the undersigned shall be bound by this
certificate. The statements contained herein may be relied upon by [INSERT NAME OF PURCHASER OR
LENDER, AS APPROPRIATE],
EXHIBIT C-1
[LANDLORD], BioMed Realty, L.P., BioMed Realty Trust, Inc., and any mortgagee of the Property and
their respective successors and assigns.
Any capitalized terms not defined herein shall have the respective meanings given in the
Lease.
Dated this [____] day of [_______], 20[__].
[___],
a [___]
EXHIBIT C-2
EXHIBIT D
FORM OF LETTER OF CREDIT
[On letterhead or L/C letterhead of Issuer.]
LETTER OF CREDIT
Date: _______, 200__
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(the Beneficiary)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attention:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
L/C. No.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan No.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ladies and Gentlemen:
We establish in favor of Beneficiary our irrevocable and unconditional Letter of Credit
numbered as identified above (the
L/C
) for an aggregate amount of $___, expiring at
___:00 p.m. on ___ or, if such day is not a Banking Day, then the next succeeding Banking Day
(such date, as extended from time to time, the
Expiry Date
).
Banking Day
means
a weekday except a weekday when commercial banks in ___ are authorized or required to
close.
We authorize Beneficiary to draw on us (the
Issuer
) for the account of ___(the
Account Party
), under the terms and conditions of this L/C.
Funds under this L/C are available by presenting the following documentation (the
Drawing
Documentation
): (a) the original L/C and (b) a sight draft substantially in the form of
Exhibit A
, with blanks filled in and bracketed items provided as appropriate. No other evidence of
authority, certificate, or documentation is required.
Drawing
Documentation must be presented at Issuers office at ___ on or before the
Expiry Date by personal presentation, courier or messenger service, or fax. Presentation by fax
shall be effective upon electronic confirmation of transmission as evidenced by a printed report
from the senders fax machine. After any fax presentation, but not as a condition to its
effectiveness, Beneficiary shall with reasonable promptness deliver the original Drawing
Documentation by any other means. Issuer will on request issue a receipt for Drawing
Documentation.
We agree, irrevocably, and irrespective of any claim by any other person, to honor drafts
drawn under and in conformity with this L/C, within the maximum amount of this L/C, presented to us
on or before the Expiry Date, provided we also receive (on or before the Expiry Date) any other
Drawing Documentation this L/C requires.
We shall pay this L/C only from our own funds by check or wire transfer, in compliance with
the Drawing Documentation.
If Beneficiary presents proper Drawing Documentation to us on or before the Expiry Date, then
we shall pay under this L/C at or before the following time (the
Payment Deadline
): (a)
if presentment is made at or before noon of any Banking Day, then the close of such Banking Day;
and (b) otherwise, the close of the next Banking Day. We waive any right to delay payment beyond
the Payment Deadline. If we determine that Drawing Documentation is not proper, then we shall so
advise Beneficiary in writing, specifying all grounds for our determination, within one Banking Day
after the Payment Deadline.
Partial drawings are permitted. This L/C shall, except to the extent reduced thereby, survive
any partial drawings.
We shall have no duty or right to inquire into the validity of or basis for any draw under
this L/C or any Drawing Documentation. We waive any defense based on fraud or any claim of fraud.
EXHIBIT D-1
The
Expiry Date shall automatically be extended by one year (but never beyond ___ the
Outside Date
) unless, on or before the date thirty (30) days before any Expiry Date, we
have given Beneficiary notice that the Expiry Date shall not be so extended (a
Nonrenewal
Notice
). We shall promptly upon request confirm any extension of the Expiry Date under the
preceding sentence by issuing an amendment to this L/C, but such an amendment is not required for
the extension to be effective. We need not give any notice of the Outside Date.
Beneficiary may from time to time without charge transfer this L/C, in whole but not in part,
to any transferee (the
Transferee
). Issuer shall look solely to Beneficiary for payment
of any fee for any transfer of this L/C. Beneficiary or Transferee shall consummate such transfer
by delivering to Issuer the original of this L/C and a Transfer Notice substantially in the form of
Exhibit B
, purportedly signed by Beneficiary, and designating Transferee. Issuer shall promptly
reissue or amend this L/C in favor of Transferee as Beneficiary. Upon any transfer, all references
to Beneficiary shall automatically refer to Transferee, who may then exercise all rights of
Beneficiary. Issuer expressly consents to any transfers made from time to time in compliance with
this paragraph.
Any notice to Beneficiary shall be in writing and delivered by hand with receipt acknowledged
or by overnight delivery service such as FedEx (with proof of delivery) at the above address, or
such other address as Beneficiary may specify by written notice to Issuer. A copy of any such
notice shall also be delivered, as a condition to the effectiveness of such notice, to:
___ (or such replacement as Beneficiary designates from time to time by written notice).
No amendment that adversely affects Beneficiary shall be effective without Beneficiarys
written consent.
This L/C is subject to and incorporates by reference: (a) the Uniform Customs and Practice for
Documentary Credits, International Chamber of Commerce Publication No. 500 (the UCP); and (b) to
the extent not inconsistent with the UCP,
Article 5
of the Uniform Commercial Code of the
State of New York.
Very truly yours,
[Issuer Signature]
EXHIBIT D-2
EXHIBIT A
FORM OF SIGHT DRAFT
[BENEFICIARY LETTERHEAD]
TO:
[Name and Address of Issuer]
SIGHT DRAFT
AT SIGHT, pay to the Order of
, the sum of
United States Dollars
($___). Drawn under [Issuer] Letter of Credit No.
dated
.
[Issuer is hereby directed to pay the proceeds of this Sight Draft solely to the following account:
.]
[Name and signature block, with signature or purported signature of Beneficiary]
Date:
EXHIBIT D-3
EXHIBIT B
FORM OF TRANSFER NOTICE
[BENEFICIARY LETTERHEAD]
TO:
[Name and Address of Issuer] (the
Issuer
)
TRANSFER NOTICE
By signing below, the undersigned, Beneficiary (the Beneficiary) under Issuers Letter of Credit
No.
dated
(the L/C), transfers the L/C to the following transferee
(the Transferee):
[Transferee Name and Address]
The original L/C is enclosed. Beneficiary directs Issuer to reissue or amend the L/C in favor of
Transferee as Beneficiary. Beneficiary represents and warrants that Beneficiary has not
transferred, assigned, or encumbered the L/C or any interest in the L/C, which transfer,
assignment, or encumbrance remains in effect.
[Name and signature block, with signature or purported signature of Beneficiary]
Date:
EXHIBIT D-4
EXHIBIT E
FORM OF SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
RECORDED AT REQUEST OF
AND WHEN RECORDED RETURN TO:
SUBORDINATION, NONDISTURBANCE, AND ATTORNMENT AGREEMENT
This Subordination, Nondisturbance, and Attornment Agreement (
Agreement
) is made as
of ___, ___ between
(
Lender
), a
, having its
principal place of business at
,
,
and Illumina, Inc.
(
Tenant
), a Delaware corporation, having its principal place of business at 9855 through
9885 Towne Centre Drive, San Diego, California.
Recitals:
A. Lender has agreed to make a loan to BMR-9865 Towne Center Drive LLC, a Delaware limited
liability company (
Landlord
), to be secured by a deed of trust, dated
,
___, and recorded on
, ___, as Instrument No.
, in the Official
Records of San Diego County, California (together with all amendments, increases, renewals,
modifications, consolidations, spreaders, combinations, supplements, replacements, substitutions,
and extensions, either current or future, referred to hereafter as the
Mortgage
)
encumbering Landlords ownership interest in real property located in San Diego County, State of
California. The legal description of the encumbered real property (the
Mortgage
Premises
) is set forth in Exhibit A, attached to this Agreement. The Mortgage, together with
the promissory note or notes, the loan agreement(s), and other documents executed in connection
with it are hereafter collectively referred to as the Loan Documents.
B. On
, ___, Tenant and Landlord entered into that certain Lease for a portion
of the Mortgage Premises (the
Lease
). The Lease creates a leasehold estate in favor of
Tenant for space (the
Leased Premises
) located on the Mortgage Premises.
C. In connection with execution of the Mortgage, Landlord also executed and delivered to
Lender an
[Assignment of Leases, Rents and Profits]
dated
, ___, and recorded on
, ___, as Instrument No.
, in the Official Records of the County Recorder
of San Diego, California concerning all rents, issues and profits from the Mortgage Premises. This
document, together with all amendments, renewals, modifications consolidations, replacements,
substitutions and extensions, is hereafter referred to as the
Assignment of Rents
.
TO CONFIRM their understanding concerning the legal effect of the Mortgage and the Lease, in
consideration of the mutual covenants and agreements contained in this Agreement and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, Lender and Tenant,
intending to be legally bound, agree and covenant as follows:
1.
Representations and Warranties
. Tenant warrants and represents that the Lease is
in full force and effect and that, as of the date of this Agreement and to Tenants actual
knowledge, there is no default under the Lease by Landlord or Tenant.
2.
Tenant Subordination
.
2.1 Subject to the provisions of
Section 3
, the Loan Documents shall constitute a lien
or charge on the Mortgage Premises that is prior and superior to the Lease, to the leasehold estate
created by it, and to all rights and privileges of Tenant under it; by this
EXHIBIT E-1
Agreement, the Lease, the leasehold estate created by it, together with all rights and
privileges of Tenant under it, is, subject to
Section 3
, subordinated, at all times, to the
lien or charge of the Loan Documents in favor of Lender.
2.2 By executing this Agreement, Tenant, subject to
Section 3
, subordinates the Lease
and Tenants interest under it to the lien right and security title, and terms of the Loan
Documents, and to all advances or payments made, or to be made, under any Loan Document.
3.
Nondisturbance
.
3.1 Lender consents to the Lease.
3.2 Despite Tenants subordination under
Section 2
, Tenants peaceful and quiet
possession of the Leased Premises shall not be disturbed and Tenants rights and privileges under
the Lease, shall not be diminished by Lenders exercise of its rights or remedies under the Loan
Documents (subject to the provisions of
Section 5
), provided that:
(a) no Default (as defined in the Lease) exists; and
(b) the Lease has not been canceled or terminated (without regard to whether Landlord
or Tenant is then in default under the Lease).
3.3 Tenant shall not be named or joined in any foreclosure, trustees sale, or other
proceeding to enforce the Loan Documents unless such joinder shall be legally required to perfect
the foreclosure, trustees sale, or other proceeding.
4.
Attornment
.
4.1 If Lender shall succeed to Landlords interest in the Mortgage Premises by foreclosure of
the Mortgage, by deed in lieu of foreclosure, or in any other manner, Tenant shall be bound to
Lender (and Lender shall be bound to Tenant) under all the terms, covenants and conditions of the
Lease for the balance of its term with the same force and effect as if Lender were the Landlord
under the Lease. Tenant shall be deemed to have full and complete attornment to, and to have
established direct privity between Tenant and:
(a) Lender when in possession of the Mortgage Premises;
(b) a receiver appointed in any action or proceeding to foreclose the Mortgage;
(c) any party acquiring title to the Mortgage Premises; or
(d) any successor to Landlord.
4.2 Tenants attornment is self-operating, and it shall continue to be effective without
execution of any further instrument by any of the parties to this Agreement or the Lease. Lender
agrees to give Tenant written notice if Lender has succeeded to the interest of the Landlord under
the Lease. Subject to
Section 5
, the terms of the Lease are incorporated into this
Agreement by reference.
4.3 If the interests of Landlord under the Lease are transferred by foreclosure of the
Mortgage, deed in lieu of foreclosure, or otherwise, to a party other than Lender
(
Transferee
), in consideration of, and as condition precedent to, Tenants agreement to
attorn to any such Transferee, Transferee shall be deemed to have assumed all terms, covenants, and
conditions of the Lease to be observed or performed by Landlord from the date on which the
Transferee succeeds to Landlords interests under the Lease; provided that the liability of any
Transferee to Tenant under the terms of the Lease shall be limited in the same manner as Lenders
liability is limited under
Section 5
.
5.
Lender as Landlord
. If Lender shall succeed to the interest of Landlord under the
Lease, Lender shall be bound to Tenant under all the terms, covenants and conditions of the Lease,
and Tenant shall, from the date of Lenders succession to the Landlords interest under the Lease,
have the same remedies against Lender for breach of the Lease that Tenant would have had under the
Lease against Landlord; provided, however, that despite anything to
the contrary in this Agreement or the Lease, Lender, as successor to the Landlords interest,
shall not be:
EXHIBIT E-2
(a) liable for any act or omission of any previous landlord (including Landlord),
provided that the foregoing shall not be construed to limit Tenants right to possession of
the Leased Premises for the entire term of the Lease, as extended, on the terms and
conditions of the Lease;
(b) subject to any offsets or defenses which Tenant might have had against any previous
landlord (including Landlord) relating to any event or occurrence before the date of
attornment. The foregoing shall not limit either (a) Tenants right to exercise against
successor landlord any offset right otherwise available to Tenant because of events
occurring after the date of attornment, or (b) successor landlords obligation to correct
any conditions that existed as of the date of attornment and that violate successor
landlords obligations as landlord under the Lease;
(c) unless actually received by Lender, bound by any rent or additional rent that
Tenant might have paid for more than one month in advance to any prior landlord (including
Landlord), other than, and only to the extent of, prepayments (if any) expressly required
under the Lease; or
(d) bound by an amendment or modification of the Lease which would materially adversely
affect any right of Landlord under the Lease made without Lenders written consent, which
consent shall not be unreasonably withheld, conditioned or delayed, except for any amendment
or modification evidencing Tenants exercise of any rights expressly granted to Tenant in
the Lease so long as such amendment or modification reflects the terms and conditions
provided with regards to such rights as reflected in the Lease. Notwithstanding the
foregoing, any modification, amendment or waiver made or entered into between Landlord and
Tenant shall be binding as between Landlord and Tenant.
6.
Notice of Default; Right To Cure
. Tenant agrees to give Lender prompt written
notice of any known default by Landlord under the Lease. Tenant agrees that, before Tenant
exercises any of its rights or remedies under the Lease, Lender shall have the right, but not the
obligation, to cure the default within the same time given Landlord in the lease to cure the
default, plus an additional thirty (30) days. Tenant agrees that the cure period shall be extended
by the time reasonably necessary for Lender to commence foreclosure proceedings and to obtain
possession of the Mortgage Premises, provided that this sentence shall not apply if the breach or
default by Landlord poses an immediate threat to the health, safety or welfare of Tenants
employees, customers or invitees at the Leased Premises, provided further that:
(a) Lender shall notify Tenant of Lenders intent to effect its remedy within thirty
(30) days after receipt of Tenants notice;
(b) Lender initiates immediate steps to foreclose on or to recover possession of the
Mortgage Premises;
(c) Lender initiates legal proceedings to appoint a receiver for the Mortgage Premises
or to foreclose on or recover possession of the Mortgage Premises within the thirty (30) day
period; and
(d) Lender prosecutes such proceedings and remedies with due diligence and continuity
to completion.
Tenant also agrees to its use its commercially reasonable efforts to give Lender notice of any
casualty damage to the Mortgage Premises, but Tenants failure to provide such notice shall not be
a default under this Agreement.
7.
Assignment of Rents
. If Landlord defaults in its performance of the terms of the
Loan Documents, Tenant agrees to recognize the Assignment of Rents made by Landlord to Lender and
shall pay to Lender, as assignee, from the time Lender gives Tenant written notice that Landlord is
in default under the terms of the Loan Documents, the rents under the Lease, but only those rents
that are due or that become due under the terms of the Lease after notice by
EXHIBIT E-3
Lender. Payments of rents to Lender by Tenant under the assignment of rents and Landlords
default shall continue until the first of the following occurs:
(a) No further rent is due or payable under the Lease;
(b) Lender gives Tenant written notice that the Landlords default under the Loan
Documents has been cured and instructs Tenant that the rents shall thereafter be payable to
Landlord; or
(c) The lien of the Mortgage has been foreclosed and the purchaser at the foreclosure
sale (whether Lender or a Transferee) gives Tenant written notice of the foreclosure sale.
On giving written notice, the purchaser shall succeed to Landlords interests under the
Lease, after which time the rents and other benefits due Landlord under the Lease shall be
payable to the purchaser as the owner of the Mortgage Premises.
8.
Tenants Reliance
. When complying with the provisions of
Section 7
, Tenant
shall be entitled to rely on the notices given by Lender under
Section 7
, and Landlord
agrees to release, relieve, protect and indemnify Tenant from and against any and all loss, claim,
damage, or liability (including reasonable attorneys fees) arising out of Tenants compliance with
such notice.
Tenant shall be entitled to full credit under the Lease for any rents paid to Lender in
accordance with
Section 7
to the same extent as if such rents were paid directly to
Landlord. Any dispute between Lender (or Lenders Transferee) and Landlord as to the existence of a
default by Landlord under the terms of the Mortgage, the extent or nature of such default, or
Lenders right to foreclosure of the Mortgage, shall be dealt with and adjusted solely between
Lender (or Transferee) and Landlord, and Tenant shall not be made a party to any such dispute
(unless required by law).
9.
Lenders Status
. Nothing in this Agreement shall be construed to be an agreement
by Lender to perform any covenant of the Landlord under the Lease unless and until it obtains title
to the Mortgage Premises by power of sale, judicial foreclosure, or deed in lieu of foreclosure, or
obtains possession of the Mortgage Premises under the terms of the Loan Documents.
10.
Cancellation of Lease
. Tenant agrees that it will not cancel, terminate, or
surrender the Lease, except at the normal expiration of the Lease term or as provided in the Lease,
or except as otherwise provided in
Section 5
above, enter into any agreement, amendment, or
modification of the Lease except any agreement, amendment, or modification contemplated by or
provided by the terms of the Lease unless Lender gives its prior written consent, which shall not
be unreasonably withheld, conditioned or delayed; provided, however, that no Lender consent shall
be required pursuant to a termination permitted under the Lease.
11.
Special Covenants
. Despite anything in this Agreement or the Lease to the
contrary, if Lender acquires title to the Mortgage Premises, Tenant agrees that: Lender shall have
the right at any time in connection with the sale or other transfer of the Mortgage Premises to
assign the Lease or Lenders rights under it to any person or entity, and that Lender, its
officers, directors, shareholders, agents, and employees shall be released from any further
liability under the Lease arising after the date of such transfer, provided that the assignee of
Lenders interest assumes Lenders obligations under the Lease (including liability for all
obligations accruing prior to the date of the assignment), in writing, from the date of such
transfer.
12.
Transferees Liability
. If a Transferee acquires title to the Mortgage Premises:
(a) Tenants recourse against Transferee for default under the Lease shall be limited
to the Mortgage Premises or any sale, insurance, or condemnation proceeds from the Mortgage
Premises;
(b) Tenant shall look exclusively to Transferees interests described in (a) above for
the payment and discharge of any obligations imposed on Transferee under this Agreement or
the Lease ; and
(c) Transferee, its officers, directors, shareholders, agents, and employees are
released and relieved of any personal liability under the Lease; and
EXHIBIT E-4
(d) Tenant shall not collect or attempt to collect any judgment out of any other
assets, or from any general or limited partners or shareholders of Transferee.
Notwithstanding the foregoing, Tenant reserves all rights and remedies available to it in law
or in equity against the prior landlord.
13.
Transferees Performance Obligations
. Subject to the limitations provided in
Sections 11
and
12
, if a Transferee acquires title to the Mortgage Premises, the
Transferee shall perform and recognize: all tenant improvement allowance provisions, all rent-free
and rent rebate provisions, and all options and rights of offer, in addition to Landlords other
obligations under the Lease.
14.
Notice
. All notices required by this Agreement shall be given in writing and
shall be deemed to have been duly given for all purposes when:
(a) deposited in the United States mail (by registered or certified mail, return
receipt requested, postage prepaid); or
(b) deposited with a nationally recognized overnight delivery service such as Federal
Express or Airborne.
Each notice must be directed to the party to receive it at its address stated below or at such
other address as may be substituted by notice given as provided in this Section.
The addresses are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lender:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attention:
|
|
|
|
|
|
|
|
|
|
|
|
Copy to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attention:
|
|
|
|
|
|
|
|
|
|
|
|
Tenant:
|
|
Illumina, Inc.
|
|
|
|
|
|
|
9885 Towne Centre Drive
|
|
|
|
|
|
|
San Diego, CA 92121
|
|
|
|
|
|
|
Attention: Christian Henry
|
|
|
|
|
|
|
|
|
|
|
|
Copy to:
|
|
Allen Matkins Leck Gamble Mallory & Natsis LLP
|
|
|
|
|
501 West Broadway, 15
th
Floor
|
|
|
|
|
|
|
San Diego, CA 92121
|
|
|
|
|
|
|
Attention: Martin L. Togni, Esq.
|
|
|
Copies of notices sent to the parties attorneys or other parties are courtesy copies, and failure
to provide such copies shall not affect the effectiveness of a notice given hereunder.
15.
Miscellaneous Provisions
.
15.1 This Agreement may not be modified orally; it may be modified only by an agreement in
writing signed by the parties or their successors-in-interest. This Agreement shall inure to the
benefit of and bind the parties and their successors and assignees.
15.2 The captions contained in this Agreement are for convenience only and in no way limit or
alter the terms and conditions of the Agreement.
15.3 This Agreement has been executed under and shall be construed, governed, and enforced, in
accordance with the laws of the State of California except to the extent that California law is
preempted by the U.S. federal law. The invalidity or unenforceability of one or more provisions of
this Agreement does not affect the validity or enforceability of any other provisions.
EXHIBIT E-5
15.4 This Agreement has been executed in duplicate. Lender and Tenant agree that one (1) copy
of the Agreement will be recorded.
15.5 This Agreement shall be the entire and only agreement concerning subordination of the
Lease and the leasehold estate created by it, together with all rights and privileges of Tenant
under it, to the lien or charge of the Loan Documents and shall supersede and cancel, to the extent
that it would affect priority between the Lease and the Loan Documents, any previous subordination
agreements, including provisions, if any, contained in the Lease that provide for the subordination
of the Lease and the leasehold estate created by it to a deed of trust or mortgage.
15.6 This Agreement may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which copies, taken together,
shall constitute but one and the same instrument. Signature and acknowledgment pages may be
detached from the copies and attached to a single copy of this Agreement to physically form one
original document, which may be recorded without an attached copy of the Lease.
15.7 If any legal action or proceeding is commenced to interpret or enforce the terms of this
Agreement or obligations arising out of it, or to recover damages for the breach of the Agreement,
the party prevailing in such action or proceeding shall be entitled to recover from the
non-prevailing party or parties all reasonable attorneys fees, costs, and expenses it has
incurred.
15.8 Unless the context clearly requires otherwise, (a) the plural and singular numbers will
each be deemed to include the other; (b) the masculine, feminine, and neuter genders will each be
deemed to include the others; (c) shall, will, must, agrees, and covenants are each
mandatory; (d) may is permissive; (e) or is not exclusive; and (f) includes and including
are not limiting.
(Signature Page Follows)
EXHIBIT E-6
Executed on the date first above written.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LENDER
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[
],
|
|
|
|
|
|
a [
]
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TENANT
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ILLUMINA, INC.
,
|
|
|
|
|
|
|
a Delaware corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accepted and Agreed To:
|
|
|
|
|
|
|
|
|
|
|
|
|
BMR-9865 TOWNE CENTRE DRIVE LLC
,
|
|
|
|
|
a Delaware limited liability company
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
BIOMED REALTY, L.P.,
|
|
|
|
|
|
|
a Maryland limited partnership its Member
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXHIBIT E-7
ACKNOWLEDGMENTS
STATE OF CALIFORNIA
COUNTY OF SAN DIEGO
On
before me,
, a Notary Public,
personally appeared
, personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person(s) whose name is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacit(ies), and that by his/her/their signature(s) on the instrument the person(s), or
the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature of Notary Public
|
|
|
(This area for official notarial seal)
STATE OF CALIFORNIA
COUNTY OF SAN DIEGO
On
before me,
, a Notary Public,
personally appeared
, personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person(s) whose name is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacit(ies), and that by his/her/their signature(s) on the instrument the person(s), or
the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature of Notary Public
|
|
|
(This area for official notarial seal)
EXHIBIT E-8
STATE OF CALIFORNIA
COUNTY OF SAN DIEGO
On
before me,
, a Notary Public,
personally appeared
, personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person(s) whose name is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacit(ies), and that by his/her/their signature(s) on the instrument the person(s), or
the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature of Notary Public
|
|
|
(This area for official notarial seal)
EXHIBIT E-9
EXHIBIT A
LEGAL DESCRIPTION
(See Attached)
EXHIBIT E-10
EXHIBIT F
RECIPROCAL EASEMENT AGREEMENT
RECORDING REQUESTED BY:
BMR-9865 Towne Centre Drive LLC
General Counsel / Finance Department
17140 Bernardo Center Drive, Suite 222
San Diego, CA 92128
SPACE ABOVE LINE FOR RECORDERS USE ONLY
RECIPROCAL EASEMENT AND COVENANT AGREEMENT
This RECIPROCAL EASEMENT AND COVENANT AGREEMENT (together with all exhibits attached hereto
and by this reference incorporated herein, this
Agreement
) is made and entered into as of
, 2007 (the
Effective Date
), by and between BMR-9885 TOWNE
CENTRE DRIVE LLC, a Delaware limited liability company (together with its successors and assigns,
the
Parcels 1&2 Owner
), whose address is 17140 Bernardo Center Drive, Suite 222, San
Diego, California 92128 and BMR-9865 TOWNE CENTRE DRIVE LLC, a Delaware limited liability company
(together with its successors and assigns, the
Parcel 3 Owner
and, together with the
Parcels 1&2 Owner, the
Owners
)), whose address is 17140 Bernardo Center Drive, Suite 222,
San Diego, California 92128.
RECITALS
A. WHEREAS, the Parcels 1&2 Owner owns three (3) parcels of real property located in the City
of San Diego, County of San Diego, State of California, legally described as: (1) Parcel 1 of
Parcel Map 18286 filed with the San Diego County Recorder on June 21, 1999 (together with any
easements and appurtenances thereto, the
Parcel 1 Land
); (2) Parcel 2 of Parcel Map 18286
filed with the San Diego County Recorder on June 21, 1999 (together with any easements and
appurtenances thereto, the
Parcel 2 Land
and, together with the Parcel 1 Land, the
Parcels 1&2 Land
); and (3) Parcel 3 of Parcel Map 18286 filed with the San Diego County
Recorder on June 21, 1999 (together with any easements and appurtenances thereto, the
Parcel 3
Land
and, collectively with the Parcel 1 Land and the Parcel 2 Land, the
Parcels
).
The Parcels 1&2 Land is improved by two (2) buildings consisting of approximately 104,870 square
feet of space (the
Parcels 1&2 Building
), and the Parcel 3 Land is improved by one (1)
building consisting of approximately 11,000 square feet of space (the
Parcel 3 Building
).
B. WHEREAS, concurrently herewith, the Parcels 1&2 Owner is conveying to the Parcel 3 Owner
all of its right, title and interest in the Parcel 3 Land, together with the Parcel 3 Building.
C. WHEREAS, the Parcel 3 Owner intends to construct an additional building on the Parcel 3
Land (the
Additional Parcel 3 Building
and, collectively with the Parcels 1&2 Building
and the Parcel 3 Building, the
Buildings
), totaling approximately 83,866 rentable square
feet.
D. WHEREAS, the Parcel 3 Land is improved by, among other things, a fitness center, a full
court basketball/sports courts, outdoor seating areas, dressing, locker and working rooms,
restrooms, and showers (the
Recreation Facilities
).
E. WHEREAS, pursuant to that certain: (a) Amended and Restated Lease dated as of January 26,
2007 (the
Parcels 1&2 Lease
), the Parcels 1&2 Owner is leasing the Parcels 1&2 Building
to Illumina, Inc., a Delaware corporation (the
Parcels 1&2 Tenant
); (b) Lease dated as of
January 26, 2007 (the
Parcel 3 Lease
), the Parcel 3 Owner is leasing a portion of the
Parcel 3 Building and, upon completion, the Additional Parcel 3 Building, to Illumina, Inc., a
Delaware corporation (the
Parcel 3 Tenant
); and (c) Eastgate Pointe Building D Lease
dated as of July 6, 2000 (the
Diversified Lease
), Diversified Eastgate Pointe, LLC, a
California limited liability company (as successor in interest to Matsix Investments, Inc.,
Diversified
and, together with the Parcels 1&2 Tenant and the Parcel 3 Tenant, the
Tenants
), is leasing a portion of the Parcel 3 Building.
EXHIBIT F-1
F. WHEREAS, the Parcels 1&2 Owner and the Parcel 3 Owner desire to grant each other and their
respective Tenants certain rights to use their respective Parcels, including access rights, parking
rights, and certain rights to use the Recreation Facilities, all in accordance with the following.
NOW, THEREFORE
, in consideration of the foregoing and for other good and valuable
consideration, the receipt and accuracy of which is hereby acknowledged, the parties hereto hereby
agree as follows:
AGREEMENT
1.
Grant of Easement Rights, Etc.
1.1
Grant by Parcels 1&2 Owner
. Subject to the terms and conditions hereof: the
Parcels 1&2 Owner hereby grants, bargains, sells and conveys perpetually to the Parcel 3 Owner and
its successors in title, for the benefit of, and appurtenant to, the Parcel 3 Land, a
non-exclusive easement and right of way (the
Parcels 1&2 Driveway Easement
) for the
Parcel 3 Benefited Parties (as defined below) over, upon, through and across the portions of the
easement area described on
Exhibit A
attached hereto and incorporated hereby (the
Parcels 1&2 Driveway Servient Tenement
), to be used in common with the Parcels 1&2
Benefited Parties (as defined below), for vehicular or pedestrian ingress, egress and access
(
Access
) to and from the public streets adjacent to the Parcel 3 Land.
1.2
Grant by Parcel 3 Owner
. Subject to the terms and conditions hereof: the Parcel 3
Owner hereby grants, bargains, sells and conveys perpetually to the Parcels 1&2 Owner and its
successors in title, for the benefit of, and appurtenant to, the Parcels 1&2 Land, the following
easements and licenses:
(a)
Parcel 3 Driveway Easement
: a non-exclusive easement and right of way (the
Parcel 3 Driveway Easement
) for the Parcels 1&2 Benefited Parties over, upon,
through and across the portions of the easement area described on
Exhibit A
attached
hereto and incorporated hereby (the
Parcel 3 Driveway Servient Tenement
and
together with the Parcels 1&2 Driveway Servient Tenement, the
Driveway Servient
Tenements
), to be used in common with the Parcel 3 Benefited Parties, for Access to and
from the public streets adjacent to Parcels 1&2 Land.
(b)
Parking Easement
: from and after substantial completion of the Additional
Parcel 3 Building, a non-exclusive easement and right of way (the
Parking
Easement
) for the Parcels 1&2 Benefited Parties over, upon, through and across the
portions of the easement area and to use the parking spaces described on
Exhibit B
attached hereto and incorporated hereby (the
Parking Servient Tenement
), to be
used in common with the Parcel 3 Benefited Parties, for vehicular parking and Access to the
Parcels 1&2 Land. The Parcel 3 Owner has the right to reasonably establish the location of
the pedestrian pathways in the Parking Servient Tenement so as to minimize (i) the impact on
the number of parking spaces within the Parcel 3 Land and (ii) the likely disruption to the
Parcel 3 Benefited Parties.
(c)
Recreation Facilities
: a non-exclusive license (the
Recreation
Facilities License
and, collectively with the Parcel 3 Driveway Easement, the Parking
Easement and the Access Easement, the
Parcel 3 Easements
and, together with the
Parcels 1&2 Driveway Easement, the
Easements
)) for the Parcels 1&2 Benefited
Parties, to be used in common with the Parcel 3 Benefited Parties, to Access, use and enjoy
the Recreation Facilities located on the Parcel 3 Land. The Recreation Facilities License
shall include the right of ingress, egress and regress for pedestrian traffic over and
across any and all sidewalks, elevators, stairways, paths, valleys and lanes within Parcel 3
Land which provides reasonably direct access from the Parcels 1&2 Land to the Recreation
Facilities, as further described on
Exhibit C
attached hereto and incorporated
hereby (the
Recreation Facilities Servient Tenement
and, collectively with the
Parcel 3 Driveway Servient Tenement, and the Parking Servient Tenement, the
Parcel 3
Servient Tenements
and, together with the Parcels 1&2 Driveway Servient Tenement, the
Servient Tenements
).
EXHIBIT F-2
1.3
Temporary Parking Easement
. In addition to the Parcel 3 Easements granted in
Section 1.2
, the Parcel 3 Owner hereby grants, bargains, sells and conveys to the Parcels
1&2 Owner and its successors in title, for the benefit of, and appurtenant to, the Parcels 1&2
Land, a non-exclusive temporary easement and right of way (the
Temporary Parking
Easement
) for the Parcels 1&2 Benefited Parties over, upon, through and across the portions of
the easement area and to use the parking spaces and the pedestrian pathways described on
Exhibit D
attached hereto and incorporated hereby (the
Temporary Parking Servient
Tenement
), to be used in common with the Parcel 3 Benefited Parties, for vehicular parking and
Access to the Parcels 1&2 Land. The Parcel 3 Owner has the right to reasonably establish the
location of the pedestrian pathways in the Temporary Parking Servient Tenement so as to minimize
(a) the impact on the number of parking spaces within the Parcel 3 Land and (b) the likely
disruption to the Parcel 3 Benefited Parties. The Temporary Parking Easement shall be irrevocable
until substantial completion of the Additional Parcel 3 Building (the
Additional Parcel 3
Building Substantial Completion Date
). During the term of the Temporary Parking Easement, the
Temporary Parking Easement shall be considered for all purposes under this Agreement as a Parking
Easement. Immediately upon the Additional Parcel 3 Building Substantial Completion Date, the
Temporary Parking Easement shall immediately terminate.
1.4
In General
. For purposes of this Agreement the following shall apply:
(a) The term
Parcels 1&2 Benefited Parties
shall mean the Parcels 1&2 Owner,
the Parcels 1&2 Tenant, and any person from time to time entitled to the use and occupancy
of any portion of the improvements on the Parcel 3 Land as an owner or under any lease,
sublease, license, concession or other similar agreement, and any of their officers,
directors, members, employees, agents, contractors, customers, vendors, suppliers, visitors,
guests, invitees, licensees, tenants, subtenants and concessionaires.
(b) The term
Parcel 3 Benefited Parties
shall mean the Parcel 3 Owner, the
Parcel 3 Tenant, Diversified, and any person from time to time entitled to the use and
occupancy of any portion of the improvements on the Parcels 1&2 Land as an owner or under
any lease, sublease, license, concession or other similar agreement, and any of their
officers, directors, members, employees, agents, contractors, customers, vendors, suppliers,
visitors, guests, invitees, licensees, tenants, subtenants and concessionaires.
(c) The term
Benefited Parties
shall mean the Parcels 1&2 Benefited Parties
and the Parcel 3 Benefited Parties.
(d) The Easements are not exclusive. Without limiting the generality of the foregoing,
each Owner may also use their property for any purposes which does not unreasonably
interfere with such uses by the other Owner, and/or convey easements appurtenant or in gross
upon, under, over and across their property to other persons, public and private, for the
same purposes as the other Owners use thereof, and for other purposes which do not
unreasonably interfere with such uses by the other Owner, without necessity for further
consent or documentation of any kind by such Owner.
(e) This Agreement, and the protective covenants, conditions, restrictions, grants of
easements, licenses, rights, rights-of-way, liens, charges and equitable servitudes set
forth therein or herein, shall, except as otherwise expressly provided therein or herein,
(a) be irrevocable and perpetual in nature (other than the Temporary Parking Easement), (b)
be binding upon all persons having or acquiring any right, title or interest in any property
encumbered thereby, or any part thereof, and upon any successors or assigns to any such
right, title or interest, (c) inure to the benefit of all persons having or acquiring any
right, title or interest in any properties benefited thereby, or any part thereof, and upon
any successors or assigns to any such right, title or interest, and (d) constitute covenants
running with the land pursuant to applicable law, including without limitation Section 1468
of the Civil Code of the State of California.
(f) The Parcel 3 Easements shall be appurtenant to and shall run with fee title to the
Parcels 1&2 Land. The Parcels 1&2 Driveway Easement shall be appurtenant to and shall run
with fee title to the Parcel 3 Land.
EXHIBIT F-3
(g) Nothing herein contained shall be deemed to be a gift or dedication of any rights
in any Parcels to or for the benefit of the general public or for any public purposes
whatsoever, it being the intention of the parties hereto that this Agreement shall be
strictly limited to and for the purposes herein expressed.
2.
Covenants of the Parcels 1&2 Owner
. The Parcels 1&2 Owner covenants and agrees as
follows:
2.1
Injury, Damage, and Indemnification
.
The Parcels 1&2 Owner shall exercise its
rights and perform its obligations under this Agreement so as to reasonably minimize interference
with the use of the Parcel 3 Land or unreasonably disturb any of the Parcel 3 Benefited Parties,
including any construction or alteration work undertaken by the Parcel 3 Owner on the Parcel 3
Land. Subject to
Section 6.4
, if, in entering any of the Parcel 3 Servient Tenements, any
of the Parcels 1&2 Benefited Parties causes any damage other than ordinary wear and tear, to
landscaping, pavement, site improvements, or other real or personal property located on the Parcel
3 Land, or causes any injury to any person, whether such damage, release, or injury is intentional
or unintentional, then the Parcels 1&2 Owner shall:
(a) promptly reimburse the Parcel 3 Owner the cost to repair any and all physical damage as
necessary to substantially restore the affected area to the condition that existed immediately
before such physical damage; and
(b) indemnify, defend, and hold harmless the Parcel 3 Owner from and against any and all
demands, claims, liabilities, losses, costs, expenses, actions, causes of action, damages or
judgments, and all expenses (including, without limitation, attorneys fees, mechanics liens,
charges and disbursements) incurred in investigating or resisting the same (collectively,
Claims
) resulting from such damage or injury in accordance with
Section 8
.
2.2
No Change of Use
. The Parcels 1&2 Owner shall not permit or create a substantial,
permanent or indefinite change in its use of the Parcels 1&2 Driveway Easement.
3.
Covenants of the Parcel 3 Owner
. The Parcel 3 Owner covenants and agrees as
follows:
3.1
Injury, Damage, and Indemnification
.
Subject to
Section 6.4
, if, in
entering the Parcels 1&2 Driveway Servient Tenement, any of the Parcel 3 Benefited Parties cause
any damage other than ordinary wear and tear, to landscaping, pavement, site improvements, or other
real or personal property located on the Parcels 1&2 Driveway Servient Tenement, or causes any
injury to any person, whether such damage, release, or injury is intentional or unintentional, then
the Parcel 3 Owner shall:
(a) promptly reimburse the Parcels 1&2 Owner the cost to repair any and all physical damage as
necessary to substantially restore the affected area to the condition that existed immediately
before such physical damage; and
(b) indemnify, defend, and hold harmless the Parcels 1&2 Owner from and against any and Claims
resulting from such damage or injury in accordance with
Section 8
.
3.2
No Change of Use
. The Parcel 3 Owner shall not permit or create a substantial,
permanent or indefinite change in its use of the Parcel 3 Easements other than in connection with
the construction of the Additional Parcel 3 Building.
4.
Maintenance and Repair of Servient Tenements
.
4.1
Maintenance of Servient Tenements
.
(a)
General Provisions
.
(i) As used in this Agreement, the term
Maintenance
(or as a verb, to
Maintain
) means maintain, repair, sweep, and otherwise operate the Servient
Tenements, as applicable, so that at all times the Servient Tenements, as applicable, are in
a reasonable condition and state of reasonable repair sufficient for use in accordance with
this Agreement.
EXHIBIT F-4
(ii) As used in this Agreement, the term good condition and repair means in a
condition which is not less than the condition of such Servient Tenement on the date on
which this Agreement was initially recorded, normal wear and tear excepted.
(b)
Driveway Servient Tenements
. The Parcels 1&2 Owner and the Parcel 3 Owner
shall each, at their respective cost and expense, Maintain all paved surfaces within the
portion of the Driveway Servient Tenement on its respective parcel of land with a paved
surface and in a smooth, clean, orderly, safe and good state of repair and condition.
(c)
Parking Servient Tenement
. The Parcel 3 Owner shall on a timely basis
perform all Maintenance for the Parking Servient Tenement at the Parcel 3 Owners sole cost
and expense. The Parking Servient Tenement shall be maintained in good condition and
repair, including all paved surfaces within the portion of the Parking Servient Tenement
with a paved surface and in a smooth, clean, orderly, safe and good state of repair and
condition. The Parcel 3 Owner shall make all repairs or replacements of, in, on, under,
within, upon or about such, property, whether said repairs involve ordinary or extraordinary
repairs or replacements, necessary to keep the same in safe and good operating and
condition, howsoever the necessity or desirability thereof may arise, and whether or not
necessitated by wear, tear, obsolescence, defects or otherwise.
(d)
Recreation Facilities
.
(i) The Parcel 3 Owner shall on a timely basis perform all Maintenance for the
Recreation Facilities Servient Tenement at the Parcel 3 Owners sole cost and expense. The
Recreation Facilities Servient Tenement shall be maintained in good condition and repair,
including all paved surfaces within the portion of the Recreation Facilities Servient
Tenement with a paved surface and in a smooth, clean, orderly, safe and good state of repair
and condition
(ii) The Parcel 3 Owner shall on a timely basis Maintain in good condition and repair
and make all repairs or replacements of, in, on, under, within, upon or about such,
Recreation Facilities, whether said repairs or replacements are to the interior or exterior
thereof, or structural or non-structural components thereof, or involve ordinary or
extraordinary repairs or replacements, necessary to keep the same in safe and good operating
and condition, howsoever the necessity or desirability thereof may arise, and whether or not
necessitated by wear, tear, obsolescence, defects or otherwise. In the event the Parcel 3
Owner decides to replace any of the Recreation Facilities, the Parcel 3 Owner shall replace
such Recreation Facilities with Recreation Facilities substantially equivalent or better and
providing substantially the same quality of service or better.
(iii) No material changes in the improvements or use of the Recreation Facilities shall
be permitted without the prior written approval of Parcels 1&2 Owner, which consent shall
not be unreasonably withheld, conditioned or delayed.
4.2
Waste
. Neither the Parcels 1&2 Owner nor the Parcel 3 Owner shall suffer or
commit, and shall use all reasonable precaution to prevent, waste to any of their respective
Servient Tenements.
4.3
Failure to Maintain the Servient Tenements
. If an Owner shall fail to perform the
Maintenance of its respective Servient Tenements as set forth in
Section 4.1
, the other
Owner shall have the right, but not the obligation, (a) following thirty (30) days written notice
and opportunity to cure (or such longer period as may be necessary to cure such failure if such
default cannot be completed within such period provided such Owner commences to cure within said
thirty (30) day period and thereafter diligently prosecutes such cure to completion), or (b) in the
case of any facts or circumstances that create an imminent risk of damage to such Servient
Tenements or injury to, or death of, persons, without written notice, to perform such Maintenance
as it deems reasonable and necessary. Upon written demand, the Owner in default shall reimburse
the other Owner for the reasonable costs incurred by it in performing such Maintenance. Such
written demand for payment shall include a statement of costs and reasonable detail of expenses.
EXHIBIT F-5
4.4
Damage or Destruction
. Subject to
Section 4.5
, if any portion of the
Servient Tenements are damaged by fire or other perils, then the Owner of such Servient Tenements
shall, at such Owners sole cost and expense, commence and proceed diligently with the work of
repair, reconstruction and restoration of such Servient Tenements, in as timely a manner as
practicable under the circumstances.
4.5
Condemnation
. Notwithstanding anything to the contrary set forth herein, neither
Owner shall have any obligation to restore, reconstruct or replace any of the Servient Tenements
located on its property in the event that such Servient Tenements is taken pursuant to a
condemnation (or similar) action by a governmental or quasi-governmental entity. In any of such
events, this Agreement shall automatically terminate without the need for any further action by any
Owner as to such Servient Tenements that has been affected by such casualty or condemnation.
4.6
Compliance with Law
. Each Owner and each Benefited Party shall, at its sole cost
and expense, promptly comply with all federal, state and local laws, ordinances, regulations,
codes, rules, orders and safety guidelines pertaining to this Agreement, the Parcels 1&2 Land, the
Parcel 3 Land, or any other matter within the scope of this Agreement (collectively,
Laws
) and all recorded documents or recorded amendments thereto affecting the Parcels or
any portion thereof, and with the requirements of any board of fire underwriters or other similar
body now or hereafter constituted relating to or affecting the condition, use or occupancy of the
Parcels.
4.7
Rules and Regulations
. The Parcel 3 Owner may establish and modify, from time to
time, reasonable rules and regulations (the
Rules and Regulations
) governing the use of
the Recreation Facilities. The Parcels 1&2 Owner covenants and agrees to use commercially
reasonable efforts to cause the Parcels 1&2 Benefited Parties to comply with all applicable Rules
and Regulations. The Parcel 3 Owner shall have the right to refuse to allow any of the Parcels 1&2
Benefited Parties access to the Recreation Facilities if such Parcels 1&2 Benefited Party has not
complied with the applicable Rules and Regulations after receiving written notice of such failure
to comply.
4.8
Use of Easements
.
(a) The use of the Easements by the parties hereto shall be expressly conditioned upon
the compliance by such parties with each of the terms and conditions specified in this
Agreement (including, but not limited to, the applicable Rules and Regulations), which Rules
and Regulations shall be uniformly applied by the parties hereto to all Benefited Parties
without discrimination.
(b) No fence or other barrier shall be erected or permitted within or across any
portion of the Driveway Servient Tenements or the Parking Servient Tenement which would
prevent or obstruct the passage of pedestrian or vehicular travel; provided, however, that
the foregoing shall not prohibit the temporary erection of barricades which are reasonably
necessary for security and/or safety purposes in connection with the construction of the
Additional Parcel 3 Building, provided that all such work shall be conducted to reasonably
minimize the interference with the use of such Servient Tenement, and such work shall be
diligently prosecuted to completion.
(c)
Access Cards
. Notwithstanding any other provision of this Agreement, the
Parcel 3 Owner shall have the right to restrict access to the Recreation Facilities located
in the Parcel 3 Building, subject to the provisions of this
Section 4.8
:
(i) The access to the Recreation Facilities if locked, shall incorporate into their
design a system of being opened by an access card, entry key, remote control mechanism or
other similar controlled access device (an
Access Card
). The Parcel 3 Owner shall
provide to the Parcels 1&2 Owner a reasonable initial supply of Access Cards (the
reasonableness of such supply to be measured in terms of the number of Parcels 1&2 Benefited
Parties that will be accessing the Recreation Facilities). The Parcel 3 Owner further shall
provide any additional Access Cards reasonably required by the Parcels 1&2 Owner from time
to time, and the Parcels 1&2 Owner shall reimburse the Parcel 3 Owner for the actual cost
thereof.
EXHIBIT F-6
(ii) The Parcels 1&2 Owner shall maintain a list of those Parcels 1&2 Benefited Parties
to whom Access Cards have been provided, and the Parcels 1&2 Owner shall provide copies of
such lists from time to time upon request to the Parcel 3 Owner.
(iii) The intent of the foregoing is that the scope of the access, ingress and egress rights
enjoyed by the Parcels 1&2 Owner of the Recreation Facilities shall not be diminished by the
provisions of this
Section 4.8
except that exercise of such rights of the Recreation
Facilities may be controlled by the Access Cards so long as the Parcel 3 Owner provides the Parcels
1&2 Owner with Access Cards that operate in the manner described in this
Section 4.8
.
5.
Construction of Additional Parcel 3 Building
: Before the Parcel 3 Owner commences
any construction of the Additional Parcel 3 Building, the Parcel 3 Owner agrees to coordinate and
discuss any necessary security precautions or restrictions to the Easements necessary to protect
the Parcels 1&2 Benefited Parties in connection with the Parcels 1&2 Benefited Parties use of the
Parcel 3 Easements. The Parcel 3 Owner shall have the ability to relocate the Parcel 3 Easements
at its own expense to any other location on the Parcel 3 Land so long as relocation shall continue
to reasonably provide Access to the Recreation Facilities or the Parcels 1&2 Land, as applicable.
6.
Insurance
: The Owners shall procure and maintain the following insurance:
6.1
Insurance
. Each Owner shall, at its own cost and expense, procure and maintain in
effect, a comprehensive public liability insurance with limits of not less than Five Million
Dollars ($5,000,000) per occurrence for death or bodily injury and property damage with respect to
the their respective Parcel. Such insurance policies shall name the other Owner, BioMed Realty,
L.P., BioMed Realty Trust, Inc., and Mortgagees as additional insureds.
6.2
Insurance Provisions
. Each policy described in this
Section 6
shall
provide that the knowledge or acts or omissions of any insured party shall not invalidate the
policy as against any other insured party or otherwise adversely affect the rights of any other
insured party under any such policy; (ii) shall provide (except for liability insurance described
in
Section 6.1
, for which it is inapplicable) by endorsement or otherwise, that the
insurance shall not be invalidated should any of the insureds under the policy waive in writing
prior to a loss any or all rights of recovery against any party for loss occurring to the property
insured under the policy, if such provisions or endorsements are available and provided that such
waiver by the insureds does not invalidate the policy or diminish or impair the insureds ability
to collect under the policy, or unreasonably increase the premiums for such policy unless the party
to be benefited by such endorsement or provision pays such increase; (iii) shall provide for a
minimum of thirty (30) days advance written notice of the cancellation, non-renewal or material
modification thereof to all insureds thereunder; (iv) shall include a standard mortgagee
endorsement and loss payable clause in favor of the Mortgagees reasonably satisfactory to them; and
(v) shall not include a co-insurance clause.
6.3
Limits of Liability
. Insurance specified in this
Section 6
shall be
jointly reviewed by the Owners periodically at the request of any Owner, but no review will be
required more often than annually, to determine if such limits, deductible amounts and types of
insurance are reasonable and prudent in view of the type, place and amount of risk to be
transferred and the financial responsibility of the insureds, and to determine whether such limits,
deductible amounts and types of insurance comply with the requirements of all applicable Laws and
whether on a risk management basis, additional types of insurance or endorsements against special
risks should be carried or whether required coverages or endorsements should be deleted. In
connection with such periodic review, each Owner shall make reasonably available to the other any
Mortgagee (as defined below) insurance requirements that apply to such Owner. Limits of liability
may not be less than limits required by Mortgagees. Such limits shall be increased or decreased,
deductible amounts increased or decreased or types of insurance shall be modified, if justified,
based upon said review, and upon any such increase, decrease or modification, the Owners shall, at
any Owners election, execute an instrument in recordable form confirming such increase, decrease or
modification, which any Owner may record with the San Diego County Recorders Office as a
supplement to this Agreement.
EXHIBIT F-7
6.4
Waiver
. Provided that such a waiver does not invalidate the respective policy or
policies or diminish or impair the insureds ability to collect under such policy or policies, each
Owner hereby waives all claims for recovery from the other Owner for any loss or damage to any of
its property insured (or required hereunder to be insured) under valid and collectible insurance
policies to the extent of any recovery collectible (or which would have been collectible had such
insurance required hereunder been obtained) under such insurance policies plus any deductible
amounts.
6.5
Delegate
. Each Owner shall have the right to delegate its obligations under this
Section 6
to its respective Tenants.
7.
Reimbursements
: Any reimbursements due to a Owner from the other Owner which are
not paid within fifteen (15) days of receipt of any invoice therefore shall bear interest at a rate
equal to the prime rate, as published in
The Wall Street Journal
from time to time, plus three
percent (3%) per annum, not to exceed the highest rate allowed by law. If
The Wall Street Journal
no longer publishes such prime rate, then the Parcel 3 Owner shall reasonably designate a
substitute publication that is nationally recognized as an authoritative source for interest rate
information.
8.
Indemnification
: Subject to
Section 6.4
, each Owner (hereinafter as used
in this
Section 8
, the
Indemnifying Owner
) covenants and agrees, at its sole cost
and expense, to indemnify, defend and hold harmless the other Owner (hereinafter as used in this
Section 8.1
, the
Indemnitee
) from and against any and all Claims, against
Indemnitee, for losses, liabilities, damages, judgments, costs and expenses by or on behalf of any
Person other than the Indemnitee, arising from: (a) the Indemnifying Owners negligent use,
possession or management of the Indemnifying Owners property or activities therein; and (b) the
Indemnifying Owners or any of such Indemnifying Owners Benefited Parties use, exercise or
enjoyment of the applicable Easements, except to the extent caused by the Indemnitees gross
negligence or willful misconduct. Notwithstanding anything to the contrary in this
Section
8.1
, the Parcel 3 Owner shall have no responsibility to the Parcels 1&2 Owner for any Claims
arising out of, caused by, or resulting from any of the Parcels 1&2 Benefited Parties use of the
Recreation Facilities or the negligence of any of the Parcel 3 Benefited Parties in connection with
the operation and maintenance of such Recreation Facilities.
9.
Remedies
. In the event of any breach, violation, or failure to perform or satisfy
any of the duties or obligations contained in this Agreement (including without limitation using
any Servient Tenement in any manner not permitted by this Agreement), the Owner to which such duty
or obligation is owed shall have the right to provide written notice to the affecting Owner
describing in reasonable detail the nature of the breach, violation or failure. If such breach,
violation or failure is not cured within thirty (30) days after delivery of such notice, the Owner
delivering the notice shall have the right to enforce all easements, rights, rights-of-way, charges
and equitable servitudes now or hereafter imposed pursuant to this Agreement. Any court hearing a
dispute with respect to such alleged breach shall have the power to award all rights and remedies
available at law or in equity; provided, however, that no breach of this Agreement by a Owner shall
entitle any other Owner to cancel, rescind or terminate the rights granted to the breaching Owner
hereunder; and provided further that such complaining Owner shall have the right (a) to require the
breaching Owner to remedy the breach, and (b) in the event of a default in the payment of any
amount due and payable under this Agreement, either Owner, in addition to any other remedy provided
herein or by law, shall have the right to recover a money judgment for the amount due and payable,
including costs and reasonable attorneys fees.
10.
Limitation of Liability
.
10.1
Limitation of Liability
. The liability under this Agreement of
an Owner shall be limited to and enforceable solely against the assets of such Owner constituting
an interest in the Parcels (including insurance and condemnation proceeds attributable to the
Parcels) and no other assets of such Owner.
10.2
Transfer of Ownership
. If an Owner shall sell, assign, transfer, convey or
otherwise dispose of its portion of the Parcel (other than as security for a loan to such Owner),
then (a) such Owner shall be entirely freed and relieved of any and all covenants and obligations
arising under this Agreement which accrue under this Agreement from and after the date such Owner
shall so sell, assign, transfer, convey or otherwise dispose of its interest in such portion of
EXHIBIT F-8
the Parcel, and (b) the person or entity who succeeds to Owners interest in such portion of
the Parcel shall be deemed to have assumed any and all of the covenants and obligations arising
under this Agreement of such Owner both theretofore accruing or which accrue under this Agreement
from and after the date such Owner shall so sell, assign, transfer, convey or otherwise dispose of
its interest in such Parcel.
11.
Miscellaneous
11.1
Term
. The covenants, conditions and restrictions contained in
this Agreement shall be enforceable by the Owners and their respective successors and assigns for
the term of this Agreement which shall be perpetual (or if the law provides for a time limit on any
covenant, condition, or restriction, then such covenant, condition or restriction shall be
enforceable for such shorter period permitted by law), subject to amendment as set forth in
Section 11.8
. If the law provides for such shorter period, then upon expiration of such
shorter period, said covenants, conditions and restrictions shall be automatically extended without
further act or deed of the Owners, except as may be required by law, for successive periods of ten
(10) years, subject to amendment or termination as set forth in
Section 11.8
.
11.2
Further Assurances
. Each Owner shall each promptly upon request take such
further actions, and execute such further documents, as shall be reasonably necessary or
appropriate from time to time to implement and effectuate the intentions of the Owners as expressed
in this Agreement.
11.3
Estoppel Certificates
. At any time and from time to time, within fifteen (15)
days after written request by either Owner or any institutional mortgagee of an Owner, the Owner
receiving such a request shall deliver to the requesting Owner and/or institutional mortgagee a
statement in writing certifying that this Agreement is unmodified and in full force and effect (or
specifying each such modification), and stating whether or not there is any default in the
performance of any provision contained in this Agreement (and specifying each such default, if
any). If an Owner or institutional mortgagee shall fail or refuse to deliver such a statement
within such period, then as against such Owner or institutional mortgagee, this Agreement shall be
deemed to be in full force and effect with no defaults hereunder.
11.4
Notices
. Any notice, consent, demand, bill, statement or other communication
required or permitted to be given hereunder shall be in writing and shall be given by personal
delivery, overnight delivery with a reputable nationwide overnight delivery service, or certified
mail (return receipt requested), and if given by personal delivery, shall be deemed delivered upon
receipt; if given by overnight delivery, shall be deemed delivered one (1) day after deposit with a
reputable nationwide overnight delivery service; and, if given by certified mail (return receipt
requested), shall be deemed delivered three (3) business days after the time the notifying party
deposits the notice with the United States Postal Service. Any notices given pursuant to this
Agreement shall be sent to the following addresses or at such other single address within the
United States as a party may specify by notice to the other:
If to Parcels 1&2 Owner:
BMR-9885 Towne Centre Drive LLC
17140 Bernardo Center Drive, Suite 222
San Diego, California 92128
Attn: General Counsel/Real Estate
Facsimile: (858) 985-9843
If to Parcel 3 Owner:
BMR-9865 Towne Centre Drive LLC
17140 Bernardo Center Drive, Suite 222
San Diego, California 92128
Attn: General Counsel/Real Estate
Facsimile: (858) 985-9843
11.5
Governing Law; Modification
. This Agreement shall be governed by, construed and
interpreted in accordance with the internal laws of the State of California, without reference to
choice of law principles.
EXHIBIT
F-9
11.6
Third Party Beneficiaries
. This Agreement is made and entered into for the sole
protection and benefit of the parties hereto, their successors and assigns, and no other person or
entity shall under any circumstances be deemed to be a beneficiary of any of the rights, remedies,
terms and provisions of this Agreement.
11.7
Waiver of Jury Trial
. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES
HERETO HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER
OF THIS AGREEMENT AND THE RELATIONSHIP BETWEEN THE PARTIES HERETO THAT IS BEING ESTABLISHED. THE
PARTIES HERETO ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT
EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THE PARTIES HERETO
FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT
EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.
11.8
Amendment
. This Agreement may be amended or otherwise modified only in a writing
signed and acknowledged by the Parcels 1&2 Owner and the Parcel 3 Owner, or their respective
successors and assigns;
provided
,
however
, (a) for so long as the Parcels 1&2 Lease
is in full force and effect, any such amendment or modification shall be subject to: (i) the prior
written consent of the original named tenant under the Parcels 1&2 Lease, which consent pursuant to
Section 14.2.5
of the Parcels 1&2 Lease shall not be unreasonably withheld, conditioned or
delayed, and (ii) solely with respect to amendments or modifications that could reasonably be
expected to have a material adverse effect on obligations assumed by any successors and assigns of
the original named tenant under the Parcels 1&2 Lease, the prior written consent of any such
successors and assigns, which consent pursuant to
Section 14.2.5
of the Parcels 1&2 Lease
shall not be unreasonably withheld, conditioned or delayed; and (b) for so long as the Parcel 3
Lease is in full force and effect, any such amendment or modification shall be subject to: (i) the
prior written consent of the original named tenant under the Parcel 3 Lease, which consent pursuant
to
Section 17.7
of the Parcel 3 Lease shall not be unreasonably withheld, conditioned or
delayed, and (ii) solely with respect to amendments or modifications that could reasonably be
expected to have a material adverse effect on obligations assumed by any successors and assigns of
the original named tenant under the Parcel 3 Lease, the prior written consent of any such
successors and assigns, which consent pursuant to
Section 17.7
of the Parcel 3 Lease shall
not be unreasonably withheld, conditioned or delayed. All amendments or modifications which result
in an increase of the costs and expenses to be incurred by such successor and assign under
Section 14.2.2
of the Parcels 1&2 Lease or
Section 17.3
of the Parcel 3 Lease shall
be deemed material and adverse.
11.9
No Partnership
. Each of the parties to this Agreement agree that by this
Agreement no partnership, joint venture or other relationship is created other than a contractual
relationship to perform the obligations specifically and expressly stated in this Agreement.
11.10
Notice to Mortgagees Rights of Mortgagee
:
(a) The term
Mortgage
as used herein shall mean any mortgage (or any trust
deed) of an interest in the Parcel given primarily to secure the repayment of money owed by
the mortgagor. The term
Mortgagee
as used herein shall mean the Mortgagee from
time to time under any such Mortgage (or the beneficiary under any such trust deed).
(b) If a Mortgagee shall have served on the Owners, by personal delivery or by
registered or certified mail return receipt requested, a written notice specifying the name
and address of such Mortgagee, such Mortgagee shall be given a copy of each and every notice
required to be given by one party to the others at the same time as and whenever such notice
shall thereafter be given by one party to the others, at the address last furnished by such
Mortgagee. The address of any existing Mortgagee shall be as set forth in its consent to
subordination to be attached hereto in connection with such Mortgage. After receipt of such
notice from a Mortgagee, no notice thereafter
EXHIBIT F-10
given by either party shall be deemed to have been given unless and until a copy
thereof shall have been so given to the Mortgagee. If a Mortgagee so provides or otherwise
requires, and notice thereof is given by the Mortgagee as provided above:
(i) A Mortgagee shall have the absolute right, but no duty or obligation, to cure or
correct a breach of this Agreement by the Owner whose property is secured by the Mortgagees
Mortgage within any applicable cure period provided for such breach by such mortgagor Owner
plus an additional period of twenty (20) days after notice to the Mortgagee of expiration of
the cure period allowed the mortgagor Owner before the other Owner may exercise any right or
remedy to which it may be entitled as a Benefitted Party, except exercise of a self-help
right in an emergency situation.
(ii) Should any prospective Mortgagee require a modification or modifications of this
Agreement, which modification or modifications will not cause an increased cost or expense
to the Owner whose property is not subject to the Mortgage of such Mortgagee or in any other
way materially and adversely change the rights and obligations of such Owner, then and in
such event, such Owner agrees that this Agreement may be so modified and agrees to execute
whatever documents are reasonably required therefor and deliver the same to the other Owner
within ten (10) business days following written requests therefor by the other Owner or
prospective Mortgagee.
11.11
Mortgagee Protection Provisions
. No breach or violation of the terms of this
Agreement shall defeat or render invalid the lien of any Mortgage encumbering the Parcels 1&2 Land
or the Parcel 3 Land or any portions thereof; provided, however, that this Agreement and all
provisions hereof shall be binding upon and effective against any subsequent owner of the property
or portion thereof whose title is acquired by foreclosure, trustees sale, a deed in lieu, or other
remedies provided in such Mortgage, but such subsequent owners shall take title free and clear of
any of the previous owners violations of the terms of this Agreement that occurred before such
transfer of title or occupancy.
11.12
Attorneys Fees
. In the event any legal action, proceeding or arbitration is
commenced to interpret or enforce the terms of, or obligations arising out of, this Agreement, or
to recover damages for the breach hereof, the party prevailing in any such action, proceeding or
arbitration shall be entitled to recover from the non-prevailing party all reasonable attorneys
fees, costs and expenses incurred by the prevailing party.
11.13
Counterparts
. This Agreement may be executed in one or more counterparts, each
of which, when taken together, shall constitute one and the same document.
[Signature Page Follows]
EXHIBIT F-11
IN WITNESS WHEREOF,
the Owners have executed and delivered this Agreement as of the Effective
Date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PARCELS 1&2 OWNER
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BMR-9885 TOWNE CENTRE DRIVE LLC,
|
|
|
|
|
a Delaware limited liability company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
BIOMED REALTY, L.P.,
|
|
|
|
|
a Maryland limited partnership
|
|
|
|
|
its Member
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PARCEL 3 OWNER
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BMR-9865 TOWNE CENTRE DRIVE LLC,
|
|
|
|
|
a Delaware limited liability company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
BIOMED REALTY, L.P.,
|
|
|
|
|
a Maryland limited partnership
|
|
|
|
|
its Member
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
EXHIBIT F-12
ACKNOWLEDGMENTS
STATE OF CALIFORNIA
COUNTY OF SAN DIEGO
On
before me,
,
a Notary Public, personally appeared
, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name is/are subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their authorized capacit(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf
of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature of Notary Public
(This area for official notarial seal)
STATE OF CALIFORNIA
COUNTY OF SAN DIEGO
On
before me,
,
a Notary Public, personally appeared
, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name is/are subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their authorized capacit(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf
of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature of Notary Public
(This area for official notarial seal)
EXHIBIT F-13
CONSENT OF PARCELS 1&2 TENANT
THE UNDERSIGNED, as the tenant under that certain under that Lease (the
Parcels 1&2 Lease
),
as more particularly defined in Recital D of the foregoing Reciprocal Easement and Covenant
Agreement (
Agreement
) to which this Consent is attached, hereby (a) consents to the execution and
recording of the foregoing Agreement against the undersigneds leasehold interest in the real
property subject to the Parcels 1&2 Lease, and (b) agrees that the Parcels 1&2 Lease is subject and
subordinate to the Agreement.
Dated as of
, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ILLUMINA, INC.,
|
|
|
|
|
a Delaware corporation
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
EXHIBIT F-14
CONSENT OF PARCEL 3 TENANT
THE UNDERSIGNED, as the tenant under that certain under that Lease (the
Parcel 3 Lease
), as
more particularly defined in Recital D of the foregoing Reciprocal Easement and Covenant Agreement
(
Agreement
) to which this Consent is attached, hereby: (a) consents to the execution and
recording of the foregoing Agreement against the undersigneds leasehold interest in the real
property subject to the Parcel 3 Lease, and (b) agrees that the Parcel 3 Lease is subject and
subordinate to the Agreement.
Dated as of
, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ILLUMINA, INC.,
|
|
|
|
|
a Delaware corporation
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
EXHIBIT F-15
CONSENT OF DIVERSIFIED
THE UNDERSIGNED, as the tenant under that certain under that Eastgate Pointe Building D
Lease dated as of July 6, 2000 (the
Diversified Lease
), as more particularly defined in Recital D
of the foregoing Reciprocal Easement and Covenant Agreement (
Agreement
) to which this Consent is
attached, hereby consents to the execution and recording of the foregoing Agreement against the
undersigneds leasehold interest in the real property subject to the Diversified Lease, and agrees
that the Diversified Lease is subject and subordinate to the Agreement.
Dated as of
, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIVERSIFIED EASTGATE POINTE, LLC
|
|
|
|
|
a California limited liability company
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
EXHIBIT F-16
RECIPROCAL EASEMENT AND COVENANT AGREEMENT
EXHIBITS
|
|
|
Exhibit A
|
|
Driveway Servient Tenement
|
Exhibit B
|
|
Parking Servient Tenement
|
Exhibit C
|
|
Recreation Facilities Servient Tenement
|
Exhibit D
|
|
Temporary Parking Servient Tenement
|
EXHIBIT F-17
EXHIBIT A
DRIVEWAY SERVIENT TENEMENT
TOWNE
CENTRE DRIVE
EXHIBIT F-18
EXHIBIT B
PARKING SERVIENT TENEMENT
TOWNE
CENTRE DRIVE
EXHIBIT F-19
EXHIBIT C
RECREATION FACILITIES SERVIENT TENEMENT
TOWNE
CENTRE DRIVE
EXHIBIT F-20
EXHIBIT D
TEMPORARY PARKING SERVIENT TENEMENT
TOWNE
CENTRE DRIVE
EXHIBIT F-21
EXHIBIT G
TEMPORARY CONSTRUCTION EASEMENT
TOWNE
CENTRE DRIVE
EXHIBIT G-1
SCHEDULE 1
RENT SCHEDULE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expiration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Start Date
|
|
Date
|
|
SF
|
|
Annual $/SF
|
|
Annual Rent
|
|
Monthly Rent
|
|
Monthly $/SF
|
|
Execution
|
|
8/17/2007
|
|
|
104,870
|
|
|
$
|
37.12
|
|
|
$
|
3,893,226.97
|
|
|
$
|
324,435.58
|
|
|
$
|
3.09
|
|
8/18/2007
|
|
8/17/2008
|
|
|
104,870
|
|
|
$
|
38.24
|
|
|
$
|
4,010,023.72
|
|
|
$
|
334,168.64
|
|
|
$
|
3.19
|
|
8/18/2008
|
|
8/17/2009
|
|
|
104,870
|
|
|
$
|
39.39
|
|
|
$
|
4,130,324.46
|
|
|
$
|
344,193.71
|
|
|
$
|
3.28
|
|
8/18/2009
|
|
8/17/2010
|
|
|
104,870
|
|
|
$
|
40.57
|
|
|
$
|
4,254,234.22
|
|
|
$
|
354,519.52
|
|
|
$
|
3.38
|
|
8/18/2010
|
|
8/17/2011
|
|
|
104,870
|
|
|
$
|
41.78
|
|
|
$
|
4,381,861.25
|
|
|
$
|
365,155.10
|
|
|
$
|
3.48
|
|
8/18/2011
|
|
8/17/2012
|
|
|
104,870
|
|
|
$
|
43.04
|
|
|
$
|
4,513,317.03
|
|
|
$
|
376,109.75
|
|
|
$
|
3.59
|
|
8/18/2012
|
|
8/17/2013
|
|
|
104,870
|
|
|
$
|
44.33
|
|
|
$
|
4,648,716.52
|
|
|
$
|
387,393.04
|
|
|
$
|
3.69
|
|
8/18/2013
|
|
8/17/2014
|
|
|
104,870
|
|
|
$
|
45.66
|
|
|
$
|
4,788,177.97
|
|
|
$
|
399,014.83
|
|
|
$
|
3.80
|
|
8/18/2014
|
|
8/17/2015
|
|
|
104,870
|
|
|
$
|
45.60
|
|
|
$
|
4,782,072.00
|
|
|
$
|
398,506.00
|
|
|
$
|
3.80
|
|
8/18/2015
|
|
8/17/2016
|
|
|
104,870
|
|
|
$
|
45.60
|
|
|
$
|
4,782,072.00
|
|
|
$
|
398,506.00
|
|
|
$
|
3.80
|
|
8/18/2016
|
|
8/17/2017
|
|
|
104,870
|
|
|
$
|
47.88
|
|
|
$
|
5,021,175.60
|
|
|
$
|
418,431.30
|
|
|
$
|
3.99
|
|
8/18/2017
|
|
8/17/2018
|
|
|
104,870
|
|
|
$
|
47.88
|
|
|
$
|
5,021,175.60
|
|
|
$
|
418,431.30
|
|
|
$
|
3.99
|
|
8/18/2018
|
|
8/17/2019
|
|
|
104,870
|
|
|
$
|
50.27
|
|
|
$
|
5,272,234.38
|
|
|
$
|
439,352.87
|
|
|
$
|
4.19
|
|
8/18/2019
|
|
8/17/2020
|
|
|
104,870
|
|
|
$
|
50.27
|
|
|
$
|
5,272,234.38
|
|
|
$
|
439,352.87
|
|
|
$
|
4.19
|
|
8/18/2020
|
|
8/17/2021
|
|
|
104,870
|
|
|
$
|
52.79
|
|
|
$
|
5,535,846.10
|
|
|
$
|
461,320.51
|
|
|
$
|
4.40
|
|
8/18/2021
|
|
8/17/2022
|
|
|
104,870
|
|
|
$
|
52.79
|
|
|
$
|
5,535,846.10
|
|
|
$
|
461,320.51
|
|
|
$
|
4.40
|
|
8/18/2022
|
|
8/17/2023
|
|
|
104,870
|
|
|
$
|
55.43
|
|
|
$
|
5,812,638.40
|
|
|
$
|
484,386.53
|
|
|
$
|
4.62
|
|
SCHEDULE 1-1
TABLE OF CONTENTS
|
|
|
|
|
1. Lease of Premises
|
|
|
1
|
|
2. Basic Lease Provisions
|
|
|
1
|
|
3. Term
|
|
|
3
|
|
4. Possession and Commencement Date
|
|
|
3
|
|
5. Rent
|
|
|
3
|
|
6. Rent Adjustments
|
|
|
3
|
|
7. Taxes
|
|
|
3
|
|
8. Security Deposit.
|
|
|
5
|
|
9. Use
|
|
|
6
|
|
10. Brokers
|
|
|
8
|
|
11. Holding Over
|
|
|
8
|
|
12. Property Management Fee
|
|
|
9
|
|
13. Condition of Premises
|
|
|
9
|
|
14. Regulations and Parking; Recreation Facilities
|
|
|
9
|
|
15. Utilities and Services
|
|
|
10
|
|
16. Alterations
|
|
|
12
|
|
17. Repairs and Maintenance
|
|
|
14
|
|
18. Liens
|
|
|
16
|
|
19. Indemnification and Exculpation
|
|
|
17
|
|
20. Insurance; Waiver of Subrogation
|
|
|
18
|
|
21. Damage or Destruction
|
|
|
19
|
|
22. Eminent Domain
|
|
|
21
|
|
23. Defaults and Remedies
|
|
|
21
|
|
24. Assignment or Subletting
|
|
|
25
|
|
25. Attorneys Fees
|
|
|
27
|
|
26. Definition of Landlord
|
|
|
27
|
|
27. Estoppel Certificate
|
|
|
28
|
|
28. Joint and Several Obligations
|
|
|
28
|
|
29. Limitation of Landlords Liability
|
|
|
28
|
|
30. Premises Control by Landlord
|
|
|
29
|
|
31. Construction; Quiet Enjoyment
|
|
|
29
|
|
32. Subordination and Attornment
|
|
|
30
|
|
|
|
|
|
|
33. Surrender
|
|
|
31
|
|
34. Waiver and Modification
|
|
|
31
|
|
35. Waiver of Jury Trial and Counterclaims
|
|
|
31
|
|
36. Hazardous Materials
|
|
|
31
|
|
37. Miscellaneous
|
|
|
33
|
|
38. Option to Extend Term
|
|
|
35
|
|
39. Tenants Authority
|
|
|
36
|
|
40. Landlords Authority
|
|
|
36
|
|
41. Confidentiality
|
|
|
36
|
|
42. Excavation
|
|
|
36
|
|
43. Telecommunications Equipment
|
|
|
36
|
|
44. Access to Premises
|
|
|
37
|
|
45. Secured Areas
|
|
|
37
|
|
Exhibit 10.42
EXECUTION VERSION
LEASE
(Parcel 3: 9865 Towne Centre Drive, San Diego, California)
by and between
BMR-9885 TOWNE CENTRE DRIVE LLC
,
a Delaware limited liability company
and
ILLUMINA, INC.,
a Delaware corporation
LEASE
(Parcel 3: 9865 Towne Centre Drive, San Diego, California)
THIS LEASE (this
Lease
) is entered into as of this 26
th
day of January,
2007 (the
Execution Date
), by and between BMR-9885 Towne Centre Drive LLC, a Delaware
limited liability company (
Landlord
), and Illumina, Inc., a Delaware corporation
(
Tenant
).
RECITALS
A. WHEREAS, Landlord is the owner of three (3) parcels of real property located in the City of
San Diego, County of San Diego, State of California, legally described as Parcels 1, 2 and 3 of
Parcel Map 18286 filed with the San Diego County Recorder on June 21, 1999 (together with any
easements and appurtenances thereto, the
Initial Illumina Lease Land
). The Original
Illumina Lease Land consists of approximately 10.781 gross acres and is improved with two (2)
buildings and an atrium on Parcels 1 and 2 (the
Existing Parcel 1 and Parcel 2 Buildings
)
and one (1) building on Parcel 3 (the
Diversified Building
and, collectively with the
Existing Parcel 1 and Parcel 2 Buildings, the
Original Illumina Lease Buildings
)
consisting of 115,870 square feet of space and commonly known as 9855 through 9885 (and consecutive
addresses), Towne Centre Drive, San Diego, California. The Original Illumina Lease Land and the
Original Illumina Lease Buildings are shown on the site plan attached hereto as
Exhibit A
and made
a part of this Lease. The Original Illumina Lease Land and the Original Illumina Lease Buildings
are collectively referred to as the
Original Illumina Lease Premises
.
B. WHEREAS, On July 6, 2000, Landlord (as successor in interest to Tenant) and Diversified
Eastgate Pointe, LLC, a California limited liability company (as successor in interest to Matsix
Investments, Inc.,
Diversified
), entered into that certain Eastgate Pointe Building D
Lease (the
Diversified Lease
), pursuant to which Diversified leases approximately 6,600
rentable square feet of space located in the Diversified Building (the
Diversified
Space
);
C. WHEREAS, On August 18, 2004, Tenant and Landlord entered into that certain Single Tenant
Lease (the
Original Illumina Lease
), pursuant to which Landlord leases the Original
Illumina Lease Premises to Tenant;
D. WHEREAS, Concurrently herewith, Landlord and Tenant are amending and restating the Original
Illumina Lease (such amended and restated lease, the
Illumina Lease
) to, among other
things, (i) exclude the Parcel 3 Land (including the Diversified Building) from the Premises
covered by the Illumina Lease; (ii) eliminate Tenants right of first refusal to lease space in the
Building (as defined below); (iii) eliminate the development fee; and (iv) extend the term of the
Original Illumina Lease to be co-terminous with the term of this Lease;
E. WHEREAS, Landlord intends to construct an additional building totaling approximately 83,866
rentable square feet on the Property (the
Expansion Building
and, together with the
Diversified Building, the
Buildings
);
F. WHEREAS, Landlord may subdivide (the
Subdivision
) Parcel 3 so that it will
consist of two lots that may be legally conveyed in accordance with Californias Subdivision Map
Act as follows: (a) the portion of Parcel 3 on which the Expansion Building is located, and to be
more particularly defined by Landlord in connection with the Subdivision (the
Subdivided
Property
), and (b) the portion of Parcel 3 excluding the Subdivided Property. The term
Property
shall mean Parcel 3, together with all landscaping, parking facilities and other
improvements and appurtenances related thereto, including the Buildings, the Common Areas, the
Premises (as defined below) and the Diversified Space; and
G. WHEREAS, Landlord wishes to lease to Tenant, and Tenant desires to lease from Landlord, the
Premises (as defined below) pursuant to the terms and conditions of this Lease, as detailed below.
AGREEMENT
NOW, THEREFORE, Landlord and Tenant, in consideration of the mutual promises contained herein
and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, agree as follows:
1.
Lease of Premises
.
1.1. Effective on the Execution Date, Landlord hereby leases to Tenant, and Tenant hereby
leases from Landlord, (a)approximately 4,400 rentable square feet of space located in the
Diversified Building (the
Diversified Building Premises
), and (b) upon the satisfaction
of the conditions set forth in this
Section 1.1
, the interior portion of the Expansion
Building described below (the
Expansion Premises
and, together with the Diversified
Building Premises, the
Premises
): (a) from and after the Phase 1 Commencement Date (as
defined below), 40,866 rentable square feet located in the Expansion Building (the
Phase 1
Premises
), (b) from and after the Phase 2 Commencement Date (as defined below), 21,500
rentable square feet located in the Expansion Building (the
Phase 2 Premises
), and (c)
from and after the Phase 3 Commencement Date (as defined below), the remainder of the interior
space located in the Expansion Building (including all elevator shafts and stairwells) (the
Phase 3 Premises
), subject to and with the benefit of the terms, covenants, conditions
and provisions of this Lease. The term
Phase
shall mean and refer to each of the Phase 1
Premises, the Phase 2 Premises and the Phase 3 Premises. On or before Substantial Completion of
the Landlords Construction Work (as defined below), Tenant and Landlord shall mutually agree to:
(1) the location of the Phase 1 Premises, and shall attach a diagram of its location to this Lease
as
Exhibit C
; (2) the location of the Phase 2 Premises, and shall attach a diagram of its location
to this Lease as
Exhibit D
; and (3) the location of the Phase 2 Premises, and shall attach a
diagram of its location to this Lease as
Exhibit E.
In the event the parties are unable to agree
on the location of each of the Phase 1 Premises, the Phase 2 Premises and the Phase 3 Premises by
the Substantial Completion of the Landlords Construction Work, Landlord shall reasonably designate
the location of each of the Phase 1 Premises and the Phase 2 Premises, and shall attach: (x) a
diagram of the location of the Phase 1 Premises to this Lease as
Exhibit C
, (y) a diagram of the
location of the Phase 2 Premises to this Lease as
Exhibit D
, and (z) a diagram of the location of
the Phase 3 Premises to this Lease as
Exhibit E
.
1.2. Tenant shall have, as appurtenant to the Premises, the exclusive right of tenants of the
Buildings (including any assignees, sublessee and assigns) to use, and permit its invitees to use
in common with Landlord and others, the elevators, walkways, access roads, and driveways necessary
for access to the Premises and the parking areas, loading areas, pedestrian sidewalks, landscaped
areas, trash enclosures, recreation areas and other areas and facilities, if any, which are located
on the Property (the
Common Areas
). Tenants use of the Common Areas shall at all times
be in compliance with all Applicable Laws and shall be consistent with and in connection with
Tenants Permitted Use as set forth in
Section 2.8
. Tenant shall use the Common Areas only
in such a manner as will not interfere with the use of, and access to, the Diversified Space and
the parking spaces to be provided to the occupants thereof under the Diversified Lease.
1.3. This Lease and all rights and remedies of Tenant hereunder are subject and subordinate to
Section 2(e)
(Common Areas),
Section 2(j)
(Parking),
Section 2(k)
(Premises),
Section 9
(Services and Utilities),
Article 30
(Quiet Enjoyment) and
Article 32
(Signage & Sign Control) of the Diversified Lease.
2.
Basic Lease Provisions
. For convenience of the parties, certain basic provisions
of this Lease are set forth herein. The provisions set forth herein are subject to the remaining
terms and conditions of this Lease and are to be interpreted in light of such remaining terms and
conditions.
2.1.
Binding
. This Lease shall take effect upon the Execution Date and, except as
specifically otherwise provided within this Lease, each of the provisions hereof shall be binding
upon and inure to the benefit of Landlord and Tenant from the Execution Date.
2.2.
Rentable Areas of the Premises
. The term
Rentable Area
of (i) the
Diversified Building Premises shall be deemed to be 4,400 square feet; (ii) the Phase 1 Premises
shall be deemed to be 40,866 square feet, (iii) the Phase 2 Premises shall be deemed to be 21,500
square feet, (iv) the Phase 3 Premises shall be deemed to be 21,500 square feet, and (v) the
Expansion Premises shall be deemed to be 83,866 square feet, even if it is determined upon final
measurement of the Diversified Building Premises, such Phase or the Expansion Premises that the
Rentable Area of the Diversified Building Premises, such Phase or the Expansion Premises is smaller
or larger than the amount set forth in this
Section 2.2
.
2
2.3.
Basic Annual Rent
.
2.3.1
Diversified Building Premises
. Initial monthly and annual installment of Basic
Annual Rent for the Diversified Building Premises (the
Diversified Building Premises Basic
Annual Rent
) as of the Execution Date is set forth on
Schedule 1
attached hereto.
2.3.2
Expansion Premises
. Initial monthly and annual installments of Basic Annual
Rent for the Expansion Premises (the
Expansion Premises Basic Annual Rent
and, together
with the Diversified Building Premises Basic Annual Rent, the
Basic Annual Rent
) as of
the Phase 1 Commencement Date, subject to adjustment in accordance with
Section 6.1
, shall
be as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Rentable
|
|
|
|
|
|
|
|
|
|
|
|
|
S.F. of
|
|
|
|
|
|
|
|
|
Rentable S.F. of
|
|
Phase 1
|
|
|
|
|
|
Total
|
|
|
Phase 1 Premises
|
|
Premises
|
|
Total Annual
|
|
Monthly
|
Phase 1 Premises
|
|
|
40,866
|
|
|
$
|
2.80
|
|
|
$
|
1,373,097.60
|
|
|
$
|
114,424.80
|
|
2.4.
Estimated Delivery Dates
. The Estimated Delivery Dates for each Phase of the
Premises are as follows:
2.4.1
Phase 1 Estimated Delivery Date
. October 1, 2008.
2.4.2
Phase 2 Estimated Delivery Date
. Twelve (12) months after the Phase 1
Commencement Date.
2.4.3
Phase 3 Estimated Delivery Date
. Twelve (12) months after the Phase 2
Commencement Date.
2.5.
Commencement Date
: Subject to
Section 5.2
, the Commencement Date shall
be determined as follows:
2.5.1
Diversified Building Premises Commencement Date
: The Execution Date;
2.5.2
Phase 1 Commencement Date
: Thirty (30) days after the later of: (a) the Phase 1
Estimated Delivery Date, or (b) Substantial Completion of Landlords Construction Work and the
Tenant Improvements (each as defined below);
2.5.3
Phase 2 Commencement Date
: Thirty (30) days after the earlier of: (a) the Phase
2 Estimated Delivery Date, or (b) the date Tenant actually occupies any portion of the Phase 2
Premises to conduct business therein (including storage); and
2.5.4
Phase 3 Commencement Date
: Thirty (30) days after the earlier of: (a) the Phase
3 Estimated Delivery Date, or (b) the date Tenant actually occupies any portion of the Phase 3
Premises to conduct business therein (including storage).
2.6.
Expiration Date
: Fifteen (15) years from the Phase 1 Commencement Date;
provided
,
however
, Tenant shall have the option to extend this Lease as provided in
Article 42
.
2.7.
Security Deposit
: An amount equal to $40,836.75, which amount shall be increased
accordingly as occupancy of the Expansion Building by Tenant is increased as provided in
Article 10
.
2.8.
Permitted Use
: (a) Laboratory research, administration, pharmaceutical,
diagnostic, office, manufacturing and related health care and research uses in conformity with
Applicable Laws (as defined below); and (b) such other legally permitted uses as are approved by
Landlord, which approval shall not be unreasonably withheld or delayed.
2.9.
Address for Rent Payment
:
BMR-9885 Towne Centre Drive LLC
Unit E
P.O. Box 51918
Los Angeles, CA 90051-6218
3
2.10.
Address for Notices to Landlord
:
BMR-9885 Towne Centre Drive LLC
17140 Bernardo Center Drive, Suite 222
San Diego, California 92128
Attn: General Counsel/Real Estate
2.11.
Address for Notices to Tenant
:
Illumina, Inc.
9885 Towne Centre Drive
San Diego, CA 92121
Attn: Christian Henry
2.12. The following Exhibits are attached hereto and incorporated herein by reference:
|
|
|
Exhibit A
|
|
Original Illumina Lease Premises
|
Exhibit B
|
|
Intentionally Omitted
|
Exhibit C
|
|
Phase 1 Premises
|
Exhibit D
|
|
Phase 2 Premises
|
Exhibit E
|
|
Phase 3 Premises
|
Exhibit F
|
|
Acknowledgement of Commencement Date and Expiration Date
|
Exhibit G
|
|
Tenants Personal Property
|
Exhibit H
|
|
Rules and Regulations
|
Exhibit I
|
|
Form of Estoppel Certificate
|
Exhibit J
|
|
Work Letter
|
Exhibit K
|
|
Form of Letter of Credit
|
Exhibit L
|
|
Reciprocal Easement Agreement
|
Exhibit M
|
|
Form of Subordination, Non-Disturbance and Attornment Agreement
|
|
|
|
Schedule 1
|
|
Diversified Building Premises Rent Schedule
|
3.
Term
. The actual term of this Lease (the
Term
) shall be the period from
the Execution Date through the Expiration Date, subject to earlier termination of this Lease as
provided herein.
4.
Landlords Construction Work and Tenant Improvements
.
4.1.
Shell and Core Construction of Expansion Building
.
4.1.1
Commencement of Landlords Construction Work
. On or before June 1, 2007,
Landlord shall, at Landlords sole cost and expense, cause Landlords contractor, Reno Contracting
or such replacement thereof as Landlord may make from time to time with Tenants approval, which
approval shall not be unreasonably withheld or delayed (
Contractor
), to commence and
thereafter diligently prosecute the construction of the shell and core of the Expansion Building to
completion pursuant to the Approved CW Plans (as defined in the Work Letter), subject only to CW
Permitted Changes (as defined in the Work Letter), (all such construction, collectively,
Landlords Construction Work
). Landlords Construction Work shall be performed in a
workmanlike manner, and in compliance with all Applicable Laws. The commencement and completion of
Landlords Construction Work shall be subject to delays resulting from acts of Tenants, acts of
God; acts of terrorism; adverse weather conditions; war; invasion; insurrection; acts of a public
enemy; terrorism; riot; mob violence; civil commotion; sabotage; labor disputes; general shortage
of labor, materials, facilities, equipment or supplies on the open market; delay in transportation;
delays caused by new, or changes to existing, laws, rules, regulations or orders of any
Governmental Authority; moratorium or other governmental action; inability to obtain permits or
approvals, including, without limitation, city and public utility approvals beyond the time periods
that generally prevail for obtaining such permits and approvals; the acts or inaction of the
contractor and subcontractors, if any; or any other cause
beyond the reasonable control of Landlord, financial ability excepted, whether similar or
dissimilar to the foregoing (collectively,
Force Majeure
).
4
4.1.2
Completion of Construction
. Landlords Construction Work shall be deemed
Substantially Complete
or there shall be
Substantial Completion
if Landlord has
(a) completed all of Landlords Construction Work identified on the Approved CW Plans (subject only
to such incomplete or defective work as will not materially or adversely impact Tenants continuous
and uninterrupted use of the Expansion Premises for its Permitted Use (collectively, the
Punchlist Items
)) and (b) received a temporary or permanent certificate of occupancy from
the applicable municipal authority(ies) and a certificate of substantial completion from the
architect.
4.1.3
Warranties
. Landlord shall use commercially reasonable efforts (but without any
obligation to commence or pursue any litigation) to cause Contractor to complete with reasonable
promptness the Punchlist Items and repair with reasonable promptness all defects in the
construction of Landlords Construction Work in accordance with the Approved CW Plans as to which
Tenant notifies Landlord in writing (which notice Tenant shall give within thirty (30) days
following the Phase 1 Commencement Date). Notwithstanding the foregoing, Landlord shall cause all
Punchlist Items that reasonably can be completed within thirty (30) days after Substantial
Completion of the Landlords Construction Work to be completed within thirty (30) days after
Substantial Completion of the Landlords Construction Work. Except for such Punchlist Items and
except for latent defects and non-compliance of Landlords Construction Work with Applicable Laws,
Tenant shall, subject to the terms hereof, be deemed to have accepted the Expansion Premises in the
condition delivered to it As Is,
provided
,
however
, except as to those items that
Landlord is required to correct pursuant to this Section, Landlord shall partially assign to Tenant
(but without prejudice to any of Landlords rights of enforcement) all warranties that it has
received under the construction contract, any subcontract, or from any material supplier.
Notwithstanding the foregoing, if Tenant notifies Landlord within the period beginning on
Substantial Completion of the Landlords Construction Work and continuing through the date that is
twelve (12) months thereafter (the
CW Warranty Period
), of (a) latent defects in the
construction of the Landlords Construction Work; or (b) non-compliance of Landlords Construction
Work with Applicable Laws, then as Landlords sole and exclusive obligation with respect thereto,
Landlord shall cause such latent defect or non-compliance promptly to be remedied. All warranty
claims shall be barred and shall lapse unless such claim is made in writing to Landlord, with a
description of the claim made, on or before the expiration of the CW Warranty Period.
4.2.
Tenant Improvements
.
4.2.1
Tenant Improvements
. Landlord shall cause the Contractor to commence and
thereafter diligently prosecute the construction of the tenant improvements in the Expansion
Building pursuant to the Work Letter (the
Tenant Improvements
). The Tenant Improvements
shall be performed in a workmanlike manner and in compliance with all Applicable Laws and
substantially in compliance with the Approved TI Plans (as defined in the Work Letter), subject to
minor deviations that do not alter the type, scope and quality of the Tenant Improvements depicted
on the Approved TI Plans. The portion of the TI Costs for which Landlord is responsible (the
TI Allowance
) shall not exceed (subject to the terms hereof) the TI Allowance Amount (as
defined below). TI Costs means all Tenant Delay Costs (as defined below) and costs of the Tenant
Improvements (the
TI Costs
), including the costs of (i) construction, (ii) construction
management by Landlord (which costs shall be stipulated to equal one and one-half percent (1.5%) of
the cost of the Tenant Improvements, including the Excess Cost (as defined below)) (the
Construction Management Fee
), (iii) space planning, architect, engineering and other
related services, (iv) costs and expenses for labor, material, equipment and fixtures, and (v)
building permits and other taxes, fees, charges and levies by governmental and quasi-governmental
agencies for permits or for inspections of the Tenant Improvements. Notwithstanding the foregoing,
in no event shall the TI Allowance be used for: (w) the purchase of any furniture, personal
property or other non-building system equipment, (x) the cost of work that is not authorized by the
Approved TI Plans (subject to any TI Change) or otherwise approved in writing by Landlord, (y)
costs resulting from any default by Tenant of its obligations under this Lease, or (z) costs that
are recoverable or reasonably recoverable by Tenant from a third party (e.g., insurers, warrantors
or tortfeasors). The
TI Allowance Amount
shall be Forty-Seven and 15/100 Dollars
($47.15) per rentable square foot of the Expansion Building,
plus the amount of any Additional Allowance that Tenant elects to use to pay the cost of the
Tenant Improvements.
5
4.2.2 In the event the estimated total TI Costs (the
Estimated TI Costs
) exceeds the
TI Allowance Amount, Tenant shall pay such overage, as reasonably estimated by Landlord from time
to time (the
Excess Cost
), as the work progresses as follows: on or before the tenth
(10
th
) day of each month, Landlord shall deliver to Tenant an application for
reimbursement, accompanied by reasonable documentary evidence of the construction costs of such
Tenant Improvements incurred since the last application for reimbursement. On or before the tenth
(10
th
) day following delivery of such application for reimbursement, Tenant shall pay to
Landlord an amount that (when added to any prior reimbursements of Excess Costs by Tenant) will
equal (a) a fraction, the numerator of which is the amount of TI Costs incurred prior to the date
of the application for reimbursement, and the denominator of which is the Estimated TI Costs, times
(b) the Excess Cost (the
Tenant Reimbursement
). In the event the TI Allowance and the
estimated Excess Cost are not sufficient to cover the actual TI Costs, including all approved
change orders, Landlord shall adjust the Excess Cost accordingly.
4.2.3
Architects and Consultants
. The architect, engineering consultants, design
team, general contractor and subcontractors responsible for the construction of the Tenant
Improvements shall be selected pursuant to the procedures set forth in the Work Letter. Subject to
the terms of the Work Letter, Tenant hereby approves of Ferguson Pape Baldwin Architects as
Landlords architect and Reno Contracting as Landlords general contractor.
4.2.4
Completion of Tenant Improvements
. The Tenant Improvements shall be deemed
Substantially Complete
or there shall be Substantial Completion if (i) Landlord has
completed, in compliance with all Applicable Laws, all of the Tenant Improvements identified on and
substantially in accordance with the Approved TI Plans (subject only to the Punchlist Items and
minor deviations that do not alter the type, scope and quality of the Tenant Improvements depicted
on the Approved TI Plans) and Tenant is provided with continuous and uninterrupted use of the
applicable portion of the Expansion Premises and the Expansion Building for Tenants Permitted Use
(including Tenants parking), except to the extent reasonably necessary for Landlords Contractor
to complete the Punchlist Items in accordance with
Section 4.1.2
, and (ii) Landlord has
obtained a certificate of occupancy or temporary certificate of occupancy (or its equivalent)
allowing Tenant to legally occupy the Expansion Premises.
4.2.5
Warranties
. Landlord shall use commercially reasonable efforts (but without
obligation to commence or pursue any litigation) to cause Contractor to complete with reasonable
promptness the Punchlist Items and repair with reasonable promptness all defects in the
construction of the Tenant Improvements in accordance with the Work Letter as to which Tenant
notifies Landlord in writing (which notice Tenant shall give within thirty (30) days following the
Phase 1 Commencement Date). Notwithstanding the foregoing, Landlord shall cause all Punchlist Items
that reasonably can be completed within sixty (60) days after Substantial Completion of the Tenant
Improvements to be completed within sixty (60) days after Substantial Completion of the Tenant
Improvements. Except for such Punchlist Items and except for latent defects and non-compliance of
Tenant Improvements with Applicable Laws, Tenant shall, subject to the terms hereof, be deemed to
have accepted the Expansion Premises in the condition delivered to it As Is,
provided
,
however
, except as to those items that Landlord is required to correct pursuant to this
Section, Landlord shall partially assign to Tenant (but without prejudice to any of Landlords
rights of enforcement) all warranties that it has received under the construction contract, any
subcontract, or from any material supplier. Notwithstanding the foregoing, if Tenant notifies
Landlord within the period beginning on Substantial Completion of the Tenant Improvements and
continuing through the date that is twelve (12) months thereafter (the
TI Warranty
Period
), of (a) latent defects in the construction of the Tenant Improvements; or (b)
non-compliance of Tenant Improvements with Applicable Laws, then as Landlords sole and exclusive
obligation with respect thereto, Landlord shall cause such latent defects or non-compliance
promptly to be remedied. All warranty claims shall be barred and shall lapse unless such claim is
made in writing to Landlord, with a description of the claim made, on or before the expiration of
the TI Warranty Period.
4.3.
Additional Allowance
. Landlord shall, at Tenants request, provide an additional
tenant improvement allowance not to exceed Thirty-Five Dollars ($35.00) per rentable square foot of
the Expansion Premises (the
Additional Allowance
), which amount may be used by Tenant to
increase the scope of Landlords Construction Work or the Tenant Improvements
pursuant to the terms and conditions contained in the Work Letter and/or pay for any other
costs payable by Tenant pursuant to the Work Letter. In the event Tenant elects to use all or any
6
portion of the Additional Allowance, Tenant shall pay to Landlord, as Rent, an amount equal to the
Additional Allowance disbursed by Landlord, together with interest thereon at the rate of nine
percent (9%) per annum. Tenant shall make payments in respect of the Additional Allowance plus
interest thereon in equal monthly installments so that the full amount shall be paid on or before
the expiration of the initial Term. Tenant shall pay such amounts with the payment of Basic Annual
Rent for each month. If Tenant has not paid the full amount of the Additional Allowance plus
interest thereon at the expiration or earlier termination of this Lease, then upon the expiration
or termination of this Lease, Tenant shall, within thirty (30) days thereafter, pay the unpaid
portion of such amount to Landlord. The payments Tenant is requested to make in respect of the
Additional Allowance shall constitute Additional Rent.
5.
Possession and Commencement Date
.
5.1.
Tenants Access
. So long as Tenant does not (in Landlords reasonable judgment)
unreasonably or unnecessarily interfere with Landlords Construction Work or the Tenant
Improvements, upon reasonable prior written notice to Landlord, Tenant may enter upon any Phase
prior to the respective Commencement Date for the purpose of, among other things, installing
improvements (including cabling) or the placement of personal property;
provided
,
however
, that Tenant shall furnish to Landlord evidence satisfactory to Landlord that
insurance coverages required of Tenant under the provisions of
Article 23
are in effect,
and such entry shall be subject to all the terms and conditions of this Lease other than the
payment of Rent. Tenant shall reimburse Landlord for all actual documented incremental costs that
result from such entry and indemnify, defend and hold harmless Landlord from and against any loss,
cost, claim, lawsuit, liability or expense (including reasonable attorneys fees and disbursements)
arising out of any entry and/or activities upon the Expansion Premises by Tenant or Tenants
Agents.
5.2.
Possession and Commencement Date
.
5.2.1
Diversified Building Premises
. Tenant hereby acknowledges that immediately
prior to the Diversified Building Premises Commencement Date, Tenant occupied the Diversified
Building Premises and that Tenant is in possession of the Diversified Building Premises, and is
familiar with the condition thereof and accepts the Diversified Building Premises in its as is
condition with all faults, and Landlord makes no representation or warranty of any kind with
respect the Diversified Building Premises, and Landlord will have no obligation to improve, alter
or repair the Diversified Building Premises, except as specifically set forth herein. Tenant
acknowledges that Tenant was the prior owner of the Diversified Building and as such is fully aware
of the current conditions of the Diversified Building.
5.2.2
Phase 1 Premises
.
(a) Landlord shall endeavor to tender possession of the Phase 1 Premises to Tenant on or
before the Phase 1 Estimated Delivery Date. If Landlords Construction Work or the Tenant
Improvements as required pursuant to the terms of the Work Letter are not Substantially Complete on
or before the Phase 1 Estimated Delivery Date for any reason whatsoever, then, except as provided
below, this Lease shall not be void or voidable, Landlord shall not be liable to Tenant for any
loss or damage resulting therefrom and the Phase 1 Commencement Date shall not occur until
Substantial Completion of Landlords Construction Work and the Tenant Improvements occurs;
provided
,
however
, if the satisfaction of the requirements for Substantial
Completion of Landlords Construction Work or the Tenant Improvements have been actually delayed by
any Tenant Delay, then, subject to the terms hereof, Substantial Completion of Landlords
Construction Work and the Tenant Improvements shall be deemed to occur when (as reasonably
determined by Landlord) Substantial Completion of Landlords Construction Work and the Tenant
Improvements would have occurred if such Tenant Delay had not occurred. Within thirty (30) days
after Substantial Completion of Landlords Construction Work and the Tenant Improvements,
Landlords architect shall calculate and certify in writing to Landlord and Tenant the Rentable
Area of the Phase 1 Premises in accordance with
Article 9
.
Tenant Delay
shall
mean: (1) delays or failure of Tenant or Tenants architect to deliver items in accordance with the
Work Letter attached hereto as
Exhibit J
; (2) Tenants failure to timely fulfill its obligations as
set forth in the Work Letter within the time periods set forth therein; (3) delays caused by CW
Tenant Change Order Requests (as defined in the Work Letter) or TI Tenant Change Order Requests (as
defined in the Work Letter);
4) unavailability of materials, components or finishes for the Tenant Improvements that have
an unusually long lead-time for delivery; (5) a willful or negligent act or
7
omission of Tenant,
Tenants Agents that interferes with the progress of the work, (6) any delay that results from
Tenants use of an architect other than Ferguson Pape Baldwin Architects for purposes of the TI
Program and the Schematic TI Plans, or (7) any other event or circumstance described as a Tenant
Delay in the Work Letter. Landlord shall not assess any day towards a Tenant Delay for delays
caused solely by Landlords contractors, Landlord or any third parties or due to Force Majeure.
Notwithstanding anything above to the contrary, (i) the first ten (10) days of Tenant Delays (if
any) associated with any CW Tenant Change Order Request or TI Tenant Change Order Request shall not
be deemed a Tenant Delay, (ii) no delay shall be considered a Tenant Delay unless Landlord provides
Tenant written notice of such Tenant Delay, to the extent Landlord and/or management personnel of
Landlords contractor(s) are aware of such Tenant Delay, and Tenant fails to cure such delay within
one (1) business day; provided that no such notice and cure period shall be required if such delay
is with respect to interference with the Landlords construction activities and Landlord has
previously notified Tenant of similar Tenant Delays, (iii) no delay shall be considered a Tenant
Delay in the event Substantial Completion of Landlords Construction Work and the Tenant
Improvements occurs on or before the Phase 1 Estimated Delivery Date. Landlord and Contractor
shall take commercially reasonable actions, remedial or otherwise, to complete the Landlords
Construction Work and the Tenant Improvements by the Phase 1 Estimated Delivery Date
notwithstanding any Tenant Delay. All additional cost and expense payable by Landlord, if any, to
complete the Landlords Construction Work or the Tenant Improvements due to Tenant Delay
(
Tenant Delay Costs
), shall constitute TI Costs, and to the extent the TI Costs exceed
the TI Allowance Amount, Tenant shall pay such actual and documented additional costs and expenses
as Excess Costs in accordance with
Section 4.2.2
of this Lease.
(b) Landlord and Tenant shall each execute and deliver to the other a factually correct
written acknowledgment of the actual Phase 1 Commencement Date and the Expiration Date when such is
established in the form of
Exhibit F
, and shall attach it to this Lease as
Exhibit F-1
. Failure to
execute and deliver such acknowledgement, however, shall not affect the Phase 1 Commencement Date
or Landlords or Tenants liability hereunder. Failure by Tenant to obtain validation by any
medical review board or other similar governmental licensing of the Expansion Premises required for
the Permitted Use by Tenant shall not serve to extend the Phase 1 Commencement Date.
5.2.3
Phase 2 Premises
.
(a) In the event Tenant elects to occupy the Phase 2 Premises before the Phase 2 Estimated
Delivery Date, then Tenant shall deliver to Landlord at least five (5) business days before the
date Tenant elects to occupy the Phase 2 Premises a written notice setting forth the date Tenant
intends to occupy the Phase 2 Premises (collectively, the
Phase 2 Commencement Date
Notice
).
(b) Landlord shall tender possession of the Phase 2 Premises to Tenant upon the Phase 2
Commencement Date. On the Phase 2 Commencement Date, Landlord and Tenant shall each execute and
deliver to the other a factually correct written acknowledgement of the actual Phase 2 Commencement
Date and the Expiration Date when established, in the form
Exhibit F
, and shall attach it to this
Lease as
Exhibit F-2
. Failure to execute and deliver such acknowledgement, however, shall not
affect the Phase 2 Commencement Date or Tenants liability hereunder.
5.2.4
Phase 3 Premises
.
(a) In the event Tenant elects to occupy the Phase 3 Premises (which shall include all, and
not less than all, of the remainder unoccupied portion of the Expansion Building) before the Phase
3 Estimated Delivery Date, Tenant shall deliver to Landlord at least five (5) business days a
written notice setting forth the date that Tenant intends to occupy the Phase 3 Premises
(collectively, the
Phase 3 Commencement Date Notice
).
(b) Landlord shall tender possession of the Phase 3 Premises to Tenant upon the Phase 3
Commencement Date. On the Phase 3 Commencement Date, Landlord and Tenant shall each execute and
deliver to the other factually correct written acknowledgement of the actual Phase 3 Commencement
Date and the Expiration Date when established, in the form
Exhibit F
, and shall attach it to this Lease as
Exhibit F-3
. Failure to execute and deliver
such
8
acknowledgement, however, shall not affect the Phase 3 Commencement Date or Tenants liability
hereunder.
5.2.5
Tenants Termination and Abatement Rights.
(a)
First Milestone Termination Right
. Notwithstanding the foregoing, in the event
Landlord has not commenced the grading of the land where the Expansion Building will be located
(
Grading Work
) by September 1, 2007, as such date may be equitably extended to reflect
any Tenant Delay and any Force Majeure delays (
Outside Date Termination Date
), then
Tenant shall have the right to terminate this Lease by notice to Landlord given no later than
thirty (30) days following such date, at which time neither party shall have any further right or
obligation hereunder (except for those terms and provisions which expressly survive the expiration
or sooner termination of this Lease).
(b)
Second Milestone Abatement and Termination Right
. Notwithstanding the foregoing,
in the event that Substantial Completion of the Tenant Improvements has not occurred by October 1,
2008
,
as such date may be equitably extended to reflect any Tenant Delay and any Force Majeure
delays (the
TI Completion Outside Date
), then Tenant shall be entitled to one (1) day of
abatement of Expansion Premises Basic Annual Rent for the Phase 1 Premises for every day past the
applicable TI Completion Outside Date that Substantial Completion of the Tenant Improvements has
not occurred. In the event that Substantial Completion of the Tenant Improvements has not occurred
by October 1, 2009, as such date may be equitably extended to reflect any Tenant Delay and any
Force Majeure delays (the
TI Completion Termination Date
), then Tenant shall have the
right to terminate this Lease by notice to Landlord given no later than thirty (30) days following
such date, at which time neither party shall have any further right or obligation hereunder (except
for those terms and provisions which expressly survive the expiration or sooner termination of this
Lease);
provided
,
however
, for purposes of this
Section 5.2.5(b)
, in no
event shall the period of excused delay for Force Majeure exceed ninety (90) days in the aggregate.
6.
Rent
.
6.1.
Diversified Building Premises
. Starting on the Execution Date, Tenant shall pay
to Landlord as Basic Annual Rent for the Diversified Building Premises, the rent set forth on the
rent schedule attached hereto as
Schedule 1
, subject to adjustments in accordance with
Article 7
. The Diversified Building Premises Basic Annual Rent shall be paid in equal
monthly installments on or before the first day of the applicable month.
6.2.
Expansion Premises
. Starting on the Phase 1 Commencement Date, Tenant shall pay
to Landlord as Basic Annual Rent for the Expansion Premises, the product of (a) the rate per
rentable square feet set forth in
Section 2.3
(as adjusted in accordance with
Article
7
), and (b) the rentable square feet of the Phases that are included in the Expansion Premises
from time to time, subject to adjustment pursuant to the terms of this Lease, including, without
limitation: (i) the Expansion Premises Basic Annual Rent shall increase on the Phase 2 Commencement
Date by the product of (1) the number of rentable square feet of the Phase 2 Premises and (2) the
same Expansion Premises Basic Annual Rent rate per rentable square foot that applies to the
Expansion Premises from time to time; (ii) the Expansion Premises Basic Annual Rent shall increase
on the Phase 3 Commencement Date by the product of (1) the number of rentable square feet of the
Phase 3 Premises and (2) the same Expansion Premises Basic Annual Rent rate per rentable square
foot that applies to the Expansion Premises from time to time; and (iii) the biennial rent
adjustments in accordance the provisions of
Article 7
hereof. Expansion Premises Basic
Annual Rent and the TI Allowance Amount shall be paid in equal monthly installments on or before
the first day of the applicable month.
6.3. In addition to Basic Annual Rent, from and after the Commencement Date, Tenant shall pay
to Landlord as additional rent (
Additional Rent
) at times hereinafter specified in this
Lease (a) amounts related to Insurance Costs, Utility Costs and Taxes (each as defined below) and
(b) any other amounts that Tenant agrees to pay under the provisions of this Lease that are owed to
Landlord, including, without limitation, any and all other sums that may become due by reason of
any default of Tenant or failure on Tenants part to comply with the agreements,
terms, covenants and conditions of this Lease to be performed by Tenant, after notice and the
lapse of any applicable cure periods.
9
6.4. Basic Annual Rent (including the Diversified Building Premises Basic Annual Rent and the
Expansion Premises Basic Annual Rent) and Additional Rent shall together be denominated
Rent
. Rent shall be paid to Landlord, without, except as otherwise provided herein,
abatement, deduction or offset, in lawful money of the United States of America at the office of
Landlord as set forth in
Section 2.10
or to such other person or at such other place as
Landlord may from time designate in writing. In the event the Commencement Date for any Phase
commences or ends on a day other than the first day of a calendar month, then the Rent for such
fraction of a month shall be prorated for such period on the basis of a thirty (30) day month and
shall be paid at the then-current rate for such fractional month.
7.
Rent Adjustments
.
7.1.
Initial Term
.
7.1.1
Diversified Building Premises
. The Diversified Building Premises Basic Annual
Rent per rentable square foot of the Diversified Building Premises shall be increased in accordance
with
Schedule 1
attached hereto.
7.1.2
Expansion Premises
. The Expansion Premises Basic Annual Rent per rentable
square foot of the Expansion Premises shall be increased on every other anniversary (i.e., the
second anniversary, the fourth anniversary, the sixth anniversary, etc.) of the Phase 1
Commencement Date by five percent (5%) of the Expansion Premises Basic Annual Rent per rentable
square foot of the Expansion Premises immediately preceding such increase. The monthly installment
of Expansion Premises Basic Annual Rent that is due for the month in which each such adjustment
occurs (the installment due immediately before such month) shall be the first installment that will
be increased to reflect such increase in Expansion Premises Basic Annual Rent.
7.2.
Extended Term
.
7.2.1
Diversified Building Premises
. The Diversified Building Premises Basic Annual
Rent for the Diversified Building Premises shall be adjusted on the first (1
st
) day of
each Extended Term to the amount calculated in accordance with
Section 42.1
, and shall be
adjusted every twenty-four (24) months thereafter by five percent (5%) of the Diversified Building
Premises Basic Annual Rent per rentable square foot of the Diversified Building Premises
immediately preceding such increase. The monthly installment of the Diversified Building Premises
Basic Annual Rent that is due for the month in which each such adjustment occurs (the installment
due immediately before such month) shall be the first installment that will be increased to reflect
such increase in the Diversified Building Premises Basic Annual Rent.
7.2.2
Expansion Premises
. The Expansion Premises Basic Annual Rent for the Expansion
Premises shall be adjusted on the first (1
st
) day of each Extended Term to the amount
calculated in accordance with
Section 42.1
, and shall be adjusted every twenty-four (24)
months thereafter by five percent (5%) of the Expansion Premises Basic Annual Rent per rentable
square foot of the Expansion Premises immediately preceding such increase. The monthly installment
of the Expansion Premises Basic Annual Rent that is due for the month in which each such adjustment
occurs (the installment due immediately before such month) shall be the first installment that will
be increased to reflect such increase in the Expansion Premises Basic Annual Rent.
8.
Taxes
.
8.1. Commencing with the Commencement Date and continuing for each calendar year or, at
Landlords option, tax year (each such tax year being a period of twelve (12) consecutive
calendar months for which the applicable taxing authority levies or assesses Taxes), for the
balance of the Term, Tenant shall pay to Landlord the amount of all Taxes levied and assessed for
any such year upon the Property (including the Diversified Space).
Taxes
shall mean all
government impositions including, without limitation, property tax costs consisting of real and
personal property taxes and assessments (including amounts due under any
improvement bond upon the Property or any portion thereof, including the Parcel or parcels of
real property upon which the Buildings are located or assessments levied in lieu thereof) imposed
by any federal, state, regional, local or municipal governmental authority, agency or subdivision
(each, a
Governmental Authority
) on the Property or improvements thereon, any tax on or
10
measured by gross rentals received from the rental of space in the Buildings, or tax based on the
square footage of the Premises or the Buildings as well as any parking charges, utilities
surcharges, or any other costs levied, assessed or imposed by, or at the direction of, or resulting
from statutes or regulations, or interpretations thereof, promulgated by any Governmental Authority
in connection with the use or occupancy of the Premises or the parking facilities exclusively
serving the Premises; any tax on this transaction or this Lease;
provided
,
however
,
that
Taxes
shall in no event include any franchise or federal or state income tax, excess
profit taxes, gift taxes, capital stock taxes, inheritance and succession taxes, estate taxes or
any tax based on net rentals received from the rental of space in the Buildings. Any amount paid
by Tenant for any partial year of the Term shall be prorated on the basis of the number of days of
such partial year. Payment shall be made in the following manner: Tenant shall pay to Landlord
the amounts owed under this
Article 8
within thirty (30) days after Landlord gives notice
to Tenant of the amount of such Taxes payable by Tenant (or not less than fifteen (15) days prior
to delinquency, whichever is later). Landlord also shall provide Tenant with a copy of the
applicable tax bill or tax statement from the relevant taxing authority. Notwithstanding the
foregoing, if Applicable Laws allow any such Taxes to be paid in installments, then Tenant may make
such payments to Landlord in installments, provided that each such installment shall be payable to
Landlord not less than ten (10) days prior to the date upon which payment of the applicable
installment to the taxing authority becomes delinquent. In addition to any other amounts due from
Tenant to Landlord, if Tenant fails to pay Taxes to Landlord as herein required, Tenant shall pay
to Landlord the amount of any interest, penalties or late charges imposed by any governmental
authority for late payment.
Applicable Laws
means all federal, state, municipal and
local laws, codes, ordinances, rules and regulations of Governmental Authorities, committees,
associations, or other regulatory committees, agencies or governing bodies having jurisdiction over
the Property, Landlord or Tenant, including both statutory and common law and hazard waste rules
and regulations.
8.1.1 Tenant shall have the right, by appropriate proceedings, to protest or contest in good
faith any assessment or reassessment of Taxes, any special assessment, or the validity of any Taxes
or of any change in assessment or tax rate;
provided
,
however
, that prior to any
such challenge Tenant must either (a) pay the Taxes alleged to be due in their entirety and seek a
refund from the appropriate authority or (b) post a bond in an amount sufficient to ensure full
payment of the Taxes, including any potential interest, late charge and penalties. Upon a final
determination with respect to any such contest or protest, Tenant shall promptly pay to the
appropriate Governmental Authority all sums found to be due with respect thereto. In any such
protest or contest, Tenant may act in its own name, and at the request of Tenant, Landlord shall
cooperate with Tenant in any way Tenant may reasonably require in connection with such contest or
protest, including signing such documents as Tenant reasonably shall request,
provided
that
such cooperation shall be at no expense to Landlord and shall not require Landlord to attend any
appeal or other hearing. Any such contest or protest shall be at Tenants sole expense, and if any
penalties, interest or late charges become payable with respect to the Taxes as a result of such
contest or protest, Tenant shall pay the same.
8.1.2 If Tenant obtains a refund as the result of Tenants protest or contest, and subject to
Tenants obligation to pay Landlords costs (if any) associated therewith, Tenant shall be entitled
to such refund to the extent it relates to the Property during the Term.
8.2. If, at any time during the Term under the laws of any Governmental Authority, a tax or
excise on rent or any other tax howsoever described is levied or assessed by any such political
body against Landlord on account of rentals payable to Landlord hereunder, such tax or excise shall
be considered
Taxes
for the purposes of this
Article 8
, although any amount
assessed against Landlord as state or federal income tax shall not be deemed
Taxes
.
8.3. To the extent Landlord is required by a lender, Tenant shall timely pay all tax and
insurance impound payments due on the Property.
8.4.
Taxes on Tenants Property
.
8.4.1 Tenant shall pay at least twenty (20) days prior to delinquency any and all taxes levied
against any personal property or trade fixtures placed by Tenant in or about the Property.
11
8.4.2 If any such taxes on Tenants personal property or trade fixtures are levied against
Landlord or Landlords property or, if the assessed valuation of the Buildings is increased by
inclusion therein of a value attributable to Tenants personal property or trade fixtures, and if
Landlord, after written notice to Tenant, pays the taxes based upon any such increase in the
assessed valued of the Buildings, then Tenant shall, upon demand, repay to Landlord the taxes so
paid by Landlord.
8.5.
Cut-Off Date
. Notwithstanding anything herein to the contrary, Tenant shall not
be responsible for Taxes attributable to any calendar year which are first billed to Tenant more
than eighteen (18) months after the expiration of the applicable calendar year, except with respect
to supplemental Taxes.
9.
[Intentionally Omitted]
.
10.
Security Deposit
.
10.1. Pursuant to the Original Illumina Lease, Tenant has deposited with Landlord an amount
equal to $1,911,855 as the security deposit under the Original Illumina Lease (the
Original
Illumina Lease Security Deposit
), and (a) from and after the Execution Date, Landlord shall
continue to hold a portion of the Original Illumina Lease Security Deposit in an amount equal to
$40,836.75 (the
Security Deposit
), in accordance with the terms and conditions of this
Section 10
, (b) from and after the Execution Date, Landlord shall hold a portion of
Original Illumina Lease Security Deposit equal to $865,177.50 in accordance with the terms and
conditions of Section 8 of the Illumina Lease, and (c) Landlord shall return the remaining portion
of the Original Illumina Lease Security Deposit in an amount equal to $1,005,840.75 to Tenant.
10.2. The Security Deposit shall be held by Landlord as security for the faithful performance
by Tenant of all of the terms, covenants and conditions of this Lease to be kept and performed by
Tenant during the period commencing on the Execution Date and ending upon the expiration or
termination of this Lease. In addition, Tenant shall deposit the following amounts with Landlord
and the Security Deposit shall be increased by such amounts: (a) a sum equal to $343,274.40 upon
commencement of construction of the Landlords Construction Work, (b) a sum equal to $180,600.00 on
the Phase 2 Commencement Date, and (c) a sum equal to $189,630.00 on the Phase 3 Commencement Date.
If Tenant defaults with respect to any provision of this Lease, including, but not limited to, any
provision relating to the payment of Rent, then Landlord may (but shall not be required to) use,
apply or retain all or any part of the Security Deposit for the payment of any Rent or any other
sum in default, or to compensate Landlord for any other loss or damage that Landlord may suffer by
reason of Tenants default. If any portion of the Security Deposit is so used or applied, then
Tenant shall, within twenty (20) days following demand therefor, deposit cash with Landlord in an
amount sufficient to restore the Security Deposit to its original amount, and Tenants failure to
do so shall be a material breach of this Lease. Landlord shall not be required to keep this
Security Deposit separate from its general fund, and Tenant shall not be entitled to interest on
the Security Deposit. The provisions of this
Article 10
shall survive the expiration or
earlier termination of this Lease.
10.3. In the event Landlord receives documentation from Tenant that demonstrates to Landlords
reasonable satisfaction that Tenant has achieved a rating of BBB or better from Standard & Poors
Corporation (
S&P
), or Baa or better from Moodys Investors Service, Inc.
(
Moodys
)(or in each case any successor thereof), and Tenant is not then in Default,
Landlord shall return a portion of the Security Deposit so that the remaining Security Deposit
equals one (1) month of Basic Annual Rent for the entire Premises to Tenant;
provided
,
however
, in the event (a) Tenant subsequently has neither a S&P rating of BBB or better
nor a Moodys rating of Baa or better, or (b) Tenant assigns its interest in this Lease to
another person or entity in accordance with
Section 27
hereof, unless such assignee
satisfies the requirements set forth in this
Section 10.3
, Tenant shall, within fifteen
(15) days after written notice thereof, deposit an amount with Landlord sufficient to restore said
Security Deposit to the amount set forth in
Section 2.7
and Tenants failure to do so shall
constitute a Default of this Lease.
10.4. In the event of bankruptcy or other debtor-creditor proceedings against Tenant, the
Security Deposit shall be deemed to be applied first to the payment of Rent and other charges due
Landlord for all periods prior to the filing of such proceedings.
12
10.5. Landlord may deliver to any purchaser of Landlords interest in the Property the funds
deposited hereunder by Tenant, and thereupon Landlord shall be discharged from any further
liability with respect to such deposit. This provision shall also apply to any subsequent
transfers.
10.6. If Tenant is not then in Default under this Lease nor is any event then occurring which
with the giving of notice or the passage of time, or both, would constitute a Default hereunder,
then the Security Deposit, or any balance thereof, shall be returned to Tenant (or, at Landlords
option, to the last assignee of Tenants interest hereunder) within thirty (30) days after the
expiration or earlier termination of this Lease.
10.7. The Security Deposit may be in the form of cash, a letter of credit or any other
security instrument acceptable to Landlord in its sole discretion. Tenant may at any time, except
during Default, deliver a letter of credit (
L/C Security
) as the entire Security Deposit,
as follows.
10.7.1 If Tenant elects to deliver L/C Security, then Tenant shall provide Landlord, and
maintain in full force and effect throughout the Term, a letter of credit in substantially the form
of
Exhibit K
issued by an issuer reasonably satisfactory to Landlord, in the amount of the Security
Deposit, with an initial term of at least one year. If, at the Expiration Date, any Rent remains
uncalculated or unpaid, then: (a) Landlord shall with reasonable diligence complete any necessary
calculations; (b) Tenant shall extend the expiry date of such L/C Security from time to time as
Landlord reasonably requires; and (c) in such extended period, Landlord shall not unreasonably
refuse to consent to an appropriate reduction of the L/C Security. Tenant shall reimburse
Landlords legal costs (as estimated by Landlords counsel) in handling Landlords acceptance of
L/C Security or its replacement or extension
10.7.2 If Tenant delivers to Landlord satisfactory L/C Security in place of the entire
Security Deposit, Landlord shall promptly remit to Tenant any cash Security Deposit Landlord
previously held.
10.7.3 Landlord may draw upon the L/C Security, and hold and apply the proceeds in the same
manner and for the same purposes as the Security Deposit, if: (a) an uncured Default exists; (b)
as of the date thirty (30) days before any L/C Security expires (even if such scheduled expiry date
is after the Expiration Date) Tenant has not delivered to Landlord an amendment or replacement for
such L/C Security, reasonably satisfactory to Landlord, extending the expiry date to the earlier of
(i) six (6) months after the then-current Expiration Date or (ii) the date one year after the
then-current expiry date of the L/C Security; (c) the L/C Security provides for automatic renewals,
Landlord asks the issuer to confirm the current L/C Security expiry date, and the issuer fails to
do so within ten (10) business days; (d) Tenant fails to pay (when and as Landlord reasonably
requires) any bank charges for Landlords transfer of the L/C Security; or (e) the issuer of the
L/C Security ceases, or announces that it will cease, to maintain an office in the city where
Landlord may present drafts under the L/C Security. This Section does not limit any other
provisions of this Lease allowing Landlord to draw the L/C Security under specified circumstances.
10.7.4 Tenant shall not seek to enjoin, prevent, or otherwise interfere with Landlords draw
under L/C Security, even if it violates this Lease. Tenant acknowledges that the only effect of a
wrongful draw would be to substitute a cash Security Deposit for L/C Security, causing Tenant no
legally recognizable damage. Landlord shall hold the proceeds of any draw in the same manner and
for the same purposes as a cash Security Deposit. In the event of a wrongful draw, the parties
shall cooperate to allow Tenant to post replacement L/C Security simultaneously with the return to
Tenant of the wrongfully drawn sums, and Landlord shall upon request confirm in writing to the
issuer of the L/C Security that Landlords draw was erroneous.
10.7.5 If Landlord transfers its interest in the Property, then Tenant shall at Tenants
expense, within ten (10) business days after receiving a request from Landlord, deliver (and, if
the issuer requires, Landlord shall consent to) an amendment to the L/C Security naming Landlords
grantee as substitute beneficiary;
provided
,
however
, in the event Landlord
transfers
its interest in the Property more than once in a twelve (12) month period, Landlord shall pay
any fee owed to the issuing bank in connection with any such additional transfer. If the required
Security changes while L/C Security is in force, then Tenant shall deliver (and, if the issuer
requires, Landlord shall consent to) a corresponding amendment to the L/C Security.
13
11.
Use
.
11.1. Tenant shall use the Premises for the purpose set forth in
Section 2.8
, and
shall not use the Premises, or permit or suffer the Premises to be used, for any other purpose
without Landlords prior written consent, which consent Landlord may withhold in its reasonable
discretion.
11.2. Tenant shall not use or occupy the Property in violation of Applicable Laws; zoning
ordinances; or the certificate of occupancy issued for the Buildings, and shall, upon five (5)
days written notice from Landlord, discontinue any use of the Property that is declared or claimed
by any Governmental Authority having jurisdiction to be a violation of any of the above, or that
Landlord has a reasonable basis to believe that such use violates any of the above and Landlord
identifies such basis in its notice to Tenant. Tenant shall comply with any direction of any
Governmental Authority having jurisdiction that shall, by reason of the nature of Tenants use or
occupancy of the Property, impose any duty upon Tenant with respect to the Property or with respect
to the use or occupation thereof.
11.3. Tenant shall not do or permit to be done anything that will invalidate or increase the
cost of any fire, environmental, extended coverage or any other insurance policy covering the
Property, and shall comply with all rules, orders, regulations and requirements of the insurers of
the Property, and Tenant shall promptly, upon demand, reimburse Landlord for any additional premium
charged for such policy by reason of Tenants failure to comply with the provisions of this
Article 11
.
11.4. Tenant shall, at its sole cost and expense, promptly and properly observe and comply
with all present and future orders, regulations, directions, rules, laws, ordinances, and
requirements of all Governmental Authorities (including, without limitation, state, municipal,
county and federal governments and their departments, bureaus, boards and officials) arising from
the use or occupancy of the Property, including, without limitation, the requirements of Americans
with Disabilities Act of 1990 (together with regulations promulgated pursuant thereto, the
ADA
). Tenants obligations under this
Section 11.4
shall include any Alterations
to the Property (including (a) the Diversified Building and, (b) from and after the Phase 1
Commencement Date, the Expansion Building) that Tenant is required or elects to make pursuant to
the terms of this Lease;
provided
,
however
, Landlord shall be responsible for ADA
compliance of the Landlords Construction Work and the Tenant Improvements.
11.5. Tenant shall keep all doors opening onto public corridors closed, except when in use for
ingress and egress.
11.6. No additional locks or bolts of any kind shall be placed upon any of the doors or
windows by Tenant, nor shall any changes be made to existing locks or the mechanisms thereof
without Landlords prior written consent. Tenant shall, upon termination of this Lease, return to
Landlord all keys to offices and restrooms either furnished to or otherwise procured by Tenant. In
the event any key so furnished to Tenant is lost, Tenant shall pay to Landlord the cost of
replacing the same or of changing the lock or locks opened by such lost key if Landlord shall deem
it necessary to make such change
11.7. No awnings or other projections shall be attached to any outside wall of the Buildings.
No curtains, blinds, shades or screens shall be attached to or hung in, or used in connection with,
any window or door of the Buildings other than Landlords standard window coverings. Neither the
interior nor exterior of any windows shall be coated or otherwise sunscreened without Landlords
prior written consent, nor shall any bottles, parcels or other articles be placed on the
windowsills. No equipment, furniture or other items of personal property shall be placed on any
exterior balcony without Landlords prior written consent.
11.8. Subject to Diversifieds right to place signs on the Property in accordance with Section
32 of the Diversified Lease, Tenant shall, at Tenants sole cost and expense, have the exclusive
right to install the maximum amount of any legally permitted signage on the Property
(including any building thereon) (
Signage
), which Signage shall be subject to
Landlords prior written consent, which consent shall not be unreasonably withheld, conditioned or
delayed. Tenant shall keep the Signage in good condition and repair. The size, design, and other
physical aspects of any sign shall be subject to Landlords written approval prior to installation,
which approval will not unreasonably be withheld, any covenants, conditions, or restrictions
14
encumbering the Property and, any Applicable Laws. The cost of the sign(s), including but not
limited to the permitting, installation, maintenance and removal thereof shall be at Tenants sole
cost and expense. If Tenant fails to maintain its sign(s), or if Tenant fails to remove such
sign(s) upon termination of this Lease, or fails to repair any damage caused by such removal
(including without limitation, painting the damaged portions of the Buildings and any other
portions of the Buildings that Landlord reasonably determines in good faith shall be painted so
that repainting the damaged portion of the Buildings does not adversely affect the visual
appearance of the Buildings, if required by Landlord;
provided
,
however
, in no
event shall Landlord require Tenant to repaint an entire Building), Landlord may do so at Tenants
expense. Tenant shall on demand reimburse Landlord for all costs incurred by Landlord to effect
such removal, which amounts shall be deemed Additional Rent and shall include without limitation,
all sums disbursed, incurred or deposited by Landlord, including Landlords costs, expenses and
actual attorneys fees with interest thereon. Tenant shall indemnify, defend and hold harmless
Landlord from and against any loss, cost, claim, lawsuit, liability or expense (including
reasonable attorneys fees and disbursements) arising directly or indirectly out of Tenants
failure to perform any of its obligations under this
Section 11.8
.
11.9. Tenant shall only place equipment within the Premises with floor loading consistent with
the structural design of the Buildings without Landlords prior written approval, and such
equipment shall be placed in a location designed to carry the weight of such equipment.
11.10. Tenant shall not (a) use or allow the Property to be used for any unlawful or
reasonably objectionable purposes or (b) cause, maintain or permit any nuisance or waste in, on or
about the Property (other than the Diversified Space).
11.11. Except for Landlords Construction Work and Tenant Improvement work, Tenant shall be
responsible for all liabilities, costs and expenses arising out of or in connection with the
compliance of the Property (other than the Diversified Space) with the ADA, and Tenant shall
indemnify, defend and hold harmless Landlord from and against any loss, cost, claim, lawsuit,
liability or expense (including reasonable attorneys fees and disbursements) arising out of any
failure of the Property (other than the Diversified Space) to comply with the ADA. Notwithstanding
the foregoing, Landlord represents and warrants that upon Substantial Completion of Landlords
Construction Work and the Tenant Improvement work, the Expansion Building shall comply with all
Applicable Laws, including the ADA and any compliance costs as a result of a breach of this
representation and warranty shall be at Landlords sole cost and expense and Landlord shall
indemnify, defend and hold harmless Tenant from and against any loss, cost, claim, lawsuit,
liability or expense (including reasonable attorneys fees and disbursements) arising out of any
failure of the Landlords Construction Work or the Tenant Improvements to comply with the ADA. The
provisions of this
Section 11.11
shall survive the expiration or earlier termination of
this Lease.
12.
Diversified Lease and Subdivision
.
12.1.
Diversified Lease
. From and after the Commencement Date, (a) Tenant shall be
responsible for paying all amounts with respect to Taxes, Insurance Costs, Utility Costs and any
other costs and expenses Landlord is required to pay in connection with the Diversified Space in
accordance with Article 9 of the Diversified Lease, and (b) Landlord assumes, and is responsible
for performing, all of the obligations of the landlord under and related to the Diversified Lease
(other than the payment of expenses in accordance with
Section 12.1(a)
above).
Notwithstanding the foregoing, (x) Tenant is solely responsible for maintaining the Property (other
than the Diversified Space) in accordance with the terms and conditions of this Lease, and (y)
Diversified is solely responsible for maintaining the Diversified Space pursuant to Section 11(b)
of the Diversified Lease.
12.2.
Estoppel
. Tenant certifies that (a) the Diversified Lease is unmodified and in
full force and effect and (b) to Tenants knowledge, there are not any uncured defaults on the part
of landlord or the tenant under the Diversified Lease.
12.3.
Recreation Facilities
. Tenant acknowledges that Diversified has certain rights
to the Property (excluding the Expansion Building) pursuant to the Diversified Lease, including,
without limitation, the right to use: (a) the Diversified Building lobby, utility room, common
corridors and hallways, 5 covered reserved parking spaces, uncovered parking areas, stairways &
elevators and access to other generally understood public or common areas (
Diversified
15
Building Common Areas
), and (b) the full court basketball/sports courts, outdoor seating
areas, dressing, locker and working rooms, restrooms, and showers located on the Property
(collectively, the
Recreation Facilities
and, together with the Diversified Building
Common Areas, the
Diversified Areas
). Diversified shall have the non-exclusive right to
use the Diversified Areas 24 hours a day, 7 days a week other than Diversifieds exclusive right to
use the 5 covered reserved parking spaces pursuant to the Diversified Lease. Tenant hereby agrees
that it shall not regulate, restrict or charge any fees in connection with Diversifieds use of the
Diversified Areas.
12.4.
Subdivision
. Landlord may subdivide Parcel 3 so that it will consist of two
lots that may be legally conveyed in accordance with Californias Subdivision Map Act. At
Landlords request, Tenant shall execute, acknowledge and deliver such further instruments and do
such further acts as may be necessary to modify the subdivision of such property. Tenant shall not
oppose or object to any changes or modifications to the subdivision for such property.
13.
Brokers
.
13.1. Tenant represents and warrants that it has had no dealings with any real estate broker
or agent in connection with the negotiation of this Lease other than Steve Rosetta and Ted Simpson,
Cushman & Wakefield (
Tenants Broker
), and that it knows of no other real estate broker
or agent that is or might be entitled to a commission in connection with this Lease. Landlord
shall compensate Tenants Broker in relation to this Lease pursuant to a separate agreement between
Landlord and Landlords Broker (the
Commission Agreement
).
13.2. Landlord represents and warrants that it has had no dealings with any real estate broker
or agent in connection with the negotiation of this Lease other than Doug Lozier at CB Richard
Ellis, Inc. (
Landlords Broker
), and that it knows of no other real estate broker or
agent that is or might be entitled to a commission in connection with this Lease. Landlord shall
compensate Landlords Broker in relation to this Lease pursuant to the Commission Agreement.
13.3. Tenant acknowledges and agrees that the employment of brokers by Landlord is for the
purpose of solicitation of offers of leases from prospective tenants and that no authority is
granted to any broker to furnish any representation (written or oral) or warranty from Landlord
unless expressly contained within this Lease. Landlord is executing this Lease in reliance upon
Tenants representations, warranties and agreements contained within
Section 13.1
.
13.4. Tenant agrees to indemnify, defend and hold Landlord harmless from any and all cost or
liability for compensation claimed by any other broker or agent, other than Tenants Broker,
employed or engaged by it or claiming to have been employed or engaged by Tenant. Landlord agrees
to indemnify, defend and hold Tenant harmless from any and all cost or liability for compensation
claimed by any other broker or agent, other than Landlords Broker, employed or engaged by it or
claiming to have been employed or engaged by Landlord.
14.
Holding Over
.
14.1. If, with Landlords prior written consent, Tenant holds possession of all or any part of
the Property after the Term, Tenant shall become a tenant from month to month after the expiration
or earlier termination of the Term, and in such case Tenant shall continue to pay (a) the Basic
Annual Rent in accordance with
Article 6
, as adjusted in accordance with
Article 7
,
and (b) any amounts for which Tenant would otherwise be liable under this Lease if this Lease were
still in effect, including, without limitation, payments for Taxes and insurance. Any such
month-to-month tenancy shall be subject to every other term, covenant and agreement contained
herein.
14.2. Notwithstanding the foregoing, if Tenant remains in possession of the Property after the
expiration or earlier termination of the Term without Landlords prior written consent, Tenant
shall become a tenant at sufferance subject to the terms and conditions of this Lease, except that
the per diem Basic Annual Rent shall be equal to: (a) for the first three (3) months
that Tenant remains in possession of the Property after the expiration or earlier termination
of this Lease, one hundred twenty-five percent (125%) of the Basic Annual Rent in effect during
the last thirty (30) days of the Term; and (b) for any time thereafter that Tenant remains in
possession of the Property after the expiration or earlier termination of this Lease, one hundred
16
fifty percent (150%) of the Basic Annual Rent in effect during the last thirty (30) days of the
Term.
14.3. Acceptance by Landlord of Rent after the expiration or earlier termination of the Term
shall not result in an extension, renewal or reinstatement of this Lease.
14.4. The foregoing provisions of this
Article 14
are in addition to and do not affect
Landlords right of reentry or any other rights of Landlord hereunder or as otherwise provided by
Applicable Laws.
15.
Property Management Fee
. Tenant shall pay to Landlord on the first day of each
calendar month of the Term, as Additional Rent, the
Property Management Fee
, which shall
equal one percent (1%) of the Basic Annual Rent due from Tenant.
16.
Condition of Premises and the Property
. Except as otherwise provided herein,
Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation or
warranty with respect to the condition of the Premises, the Property or with respect to the
suitability of the Premises for the conduct of Tenants business.
17.
Regulations and Parking and Recreation Facilities
.
17.1. Tenant shall faithfully observe and comply with the rules and regulations adopted by
Landlord and attached hereto as
Exhibit H
, together with such other reasonable and
nondiscriminatory rules and regulations as are hereafter promulgated by Landlord in its reasonable
discretion (the
Rules and Regulations
).
17.2. Subject to Diversifieds rights under
Section 12.3
, Tenant shall have the right
to use, at no additional cost, the parking facilities serving the Premises. As part of Landlords
Construction Work, the Property shall contain sufficient parking to comply with applicable zoning
requirements.
17.3. Tenant shall, at Tenants sole cost and expense, comply with the terms and conditions
set forth in, and perform each of the obligations of the Parcel 3 Owner (as defined in the REA)
described in,
Sections 3
,
4.1
,
4.2
,
4.3
,
4.
4,
4.8
,
7
,
8
,
9
,
11.3
,
11.10
,
11.11
and
11.12
of
the Reciprocal Easement Agreement attached hereto as
Exhibit L
(the
REA
), in accordance
with the terms of conditions of the REA as if Tenant were the Parcel 3 Owner.
17.4. Subject to
Section 18.5
and provided there is no material adverse impact on
Tenants Permitted Use and access to the Premises (including the parking facilities), Landlord
reserves the right to subdivide the real property;
provided
,
however
, that such
right shall be exercised in a way that does not materially adversely affect Tenants beneficial use
and occupancy of the Premises, including Tenants Permitted Use and Tenants access to the Premises
(including the parking facilities).
17.5. Tenant shall, and shall cause Tenants Agents to, faithfully observe and comply with any
rules and regulations adopted pursuant to
Section 4.7
of the REA (the
Recreation
Facilities Rules and Regulations
). Landlord has the right to refuse to allow Tenants Agents
to access the Recreation Facilities if such Tenants Agent has not complied with the applicable
Recreation Facilities Rules and Regulations after receiving written notice of such failure to
comply.
17.6. Tenant shall have the right to use the Recreation Facilities during the hours reasonably
established by Landlord as the operating hours of the Recreation Facilities. Notwithstanding
anything to the contrary in this Lease, Landlord shall have no responsibility to Tenant or Tenants
Agents (as defined below), for any accidents, claims, demands, liabilities, causes of action,
judgments, costs, liens, damages, injuries, suits, losses or expenses, including
attorneys fees, of any nature, kind or description, arising out of, caused by, or resulting
from Tenant or Tenants Agents use of the Recreational Facilities or the negligence of Landlord
Parties (as defined in
Section 22.3
) or Tenants Agents in connection with the operation
and maintenance of such Recreational Facilities.
17.7. So long as this Lease is in full force and effect, Landlord shall not amend or modify
the REA without first obtaining: (a) the prior written consent of the original Tenant hereunder
(but not any assignee or subtenant), which consent shall not be unreasonably withheld,
17
conditioned
or delayed, and (b) solely with respect to amendments or modifications that could reasonably be
expected to have a material adverse effect on obligations assumed by any successors and assigns of
Tenant under the REA, the prior written consent of any such successors and assigns, which consent
shall not be unreasonably withheld, conditioned or delayed. All amendments or modifications which
result in an increase of the costs and expenses to be incurred by Tenant under
Section 17.3
shall be deemed material and adverse.
18.
Utilities and Services
.
18.1. Tenant shall, at Tenants sole cost and expense, procure and maintain contracts, with
copies furnished promptly to Landlord after execution thereof, in customary form and substance for,
and with contractors specializing and experienced in, the maintenance of the following equipment
and improvements, if any, if and when installed on the Property: (a) HVAC equipment, (b) boilers
and pressure vessels, (c) fire extinguishing systems, including fire alarm and smoke detection
devices, (d) landscaping and irrigation systems, (e) roof coverings and drains, (f) clarifiers, (g)
basic utility feeds to the perimeter of the Buildings, and (h) any other equipment reasonably
required by Landlord. Notwithstanding the foregoing, in the event Tenant fails to maintain the
contracts required under this
Section 18.1
within one (1) business day after Landlord
provides Tenant written notice of such failure, Landlord reserves the right, upon notice to Tenant,
to procure and maintain any or all of such contracts, and if Landlord so elects, Tenant shall
reimburse Landlord, upon demand, for the actual documented costs thereof
.
18.2. Within sixty (60) days after the Commencement Date, and within sixty (60) days after the
beginning of each calendar year during the Term, Landlord shall give Tenant a written estimate for
such calendar year of the cost of utilities for the Property (including the Diversified Space), if
not separately metered (
Utility Costs
), and insurance provided by Landlord for the
Property (including the Diversified Space) (
Insurance Costs
). Tenant shall pay such
estimated amount to Landlord in advance in equal monthly installments. Within ninety (90) days
after the end of each calendar year, Landlord shall furnish to Tenant a statement showing in
reasonable detail the costs incurred by Landlord for Utility Costs and Insurance Costs for the
Property (including the Diversified Space) during such year (the
Annual Statement
), and
Tenant shall pay to Landlord the costs incurred in excess of the payments previously made by Tenant
within thirty (30) days of receipt of the Annual Statement. In the event that the payments
previously made by Tenant for Utility Costs and Insurance Costs for the Property (including the
Diversified Space) exceed Tenants obligation, such excess amount shall be credited by Landlord to
the Rent or other charges next due and owing,
provided
that, if the Term has expired,
Landlord shall remit such excess amount to Tenant. In the event Tenant disputes the amounts of any
Annual Statement for the particular calendar year delivered by Landlord to Tenant and Tenant is not
in Default hereunder, Tenant shall have the right, at Tenants cost, after reasonable notice to
Landlord, to have Tenants authorized employees inspect, at Landlords office in San Diego County
during normal business hours, Landlords books, records and supporting documents concerning the
expenses set forth in such Annual Statement;
provided
,
however
, Tenant shall have
no right to conduct such inspection, have an audit performed by the Accountant as described below,
or object to or otherwise dispute the amount of the expenses set forth in any such Annual Statement
unless Tenant notifies Landlord of such objection and dispute, completes such inspection, and has
the Accountant commence and complete such audit within one hundred and eighty (180) days
immediately following Landlords delivery of the particular Annual Statement in question (the
Review Period
); provided, further, that notwithstanding any such timely objection,
dispute, inspection, and/or audit, and as a condition precedent to Tenants exercise of its right
of objection, dispute, inspection and/or audit as set forth in this
Section 18.2
, Tenant
shall not be permitted to withhold payment of, and Tenant shall timely pay to Landlord, the full
amounts as required by the provisions of this Lease in accordance with such Annual Statement.
However, such payment may be made under protest pending the outcome of any audit which may be
performed by the Accountant as described below. In connection with any such inspection by Tenant,
Landlord and Tenant shall reasonably cooperate with each other so
that such inspection can be performed pursuant to a mutually acceptable schedule. If after
such inspection and/or request for documentation, Tenant still disputes the amount of the expenses
set forth in the Annual Statement, Tenant shall have the right, within the Review Period, to cause
an independent certified public accountant selected by Tenant and compensated on a non-contingency
fee basis (the
Accountant
) to complete an audit of Landlords books and records to
determine the proper amount of the expenses incurred and amounts payable by Tenant for the calendar
year which is the subject of such Annual Statement. Such audit by the Accountant shall be final
and binding upon Landlord and Tenant. If such audit reveals that Landlord has
18
over-charged Tenant,
then within thirty (30) days after the results of such audit are made available to Landlord,
Landlord shall reimburse to Tenant the amount of such over-charge. If the audit reveals that the
Tenant was under-charged, then within thirty (30) days after the results of such audit are made
available to Tenant, Tenant shall reimburse to Landlord the amount of such under-charge. Tenant
agrees to pay the cost of such audit unless it is subsequently determined that Landlords original
Annual Statement which was the subject of such audit overstated expenses by five percent (5%) or
more of the actual expenses which were the subject of such audit. The payment by Tenant of any
amounts pursuant to this
Section 18.2
shall not preclude Tenant from questioning, during
the Review Period, the correctness of the particular Annual Statement in question provided by
Landlord, but the failure of Tenant to object thereto, conduct and complete its inspection and have
the Accountant conduct the audit as described above prior to the expiration of the Review Period
for such Annual Statement shall be conclusively deemed Tenants approval of the Annual Statement in
question and the amount of expenses shown thereon. If following Tenants delivery to Landlord of a
written request to make Landlords books and records regarding the expenses reasonably available to
Tenant and/or the Accountant to conduct any such inspection and/or audit described above in this
Section 18.2
, Landlord fails to make Landlords books reasonably available for such
purposes during Landlords normal business hours, and such failure continues for five (5) business
days after Tenant notifies Landlord thereof, then the Review Period shall be extended one (1) day
for each such additional day that Tenant and/or the Accountant, as the case may be, is so prevented
from accessing such books and records. In connection with any inspection and/or audit conducted by
Tenant pursuant to this
Section 18.2
, Tenant agrees to keep, and to cause all of Tenants
employees and consultants and the Accountant to keep, all of Landlords books and records and the
audit, and all information pertaining thereto and the results thereof, strictly confidential
(except if required by any court to disclose such information or if such information is available
from an inspection of public records).
18.3. Tenant shall make all arrangements for and pay for all water, sewer, gas, heat, light,
power, telephone service and any other service or utility Tenant required at the Property
(including the Diversified Space). Landlord shall not be liable for, nor shall any eviction of
Tenant result from, the failure to furnish any utility or service, whether or not such failure is
caused by Force Majeure or Landlords inability, despite the exercise of reasonable diligence, to
furnish any such utility or service. Except as provided in
Section 18.5
, in the event of
such failure, Tenant shall not be entitled to termination of this Lease, any abatement or reduction
of Rent, or relief from the operation of any covenant or agreement of this Lease. Tenant shall pay
for, prior to delinquency of payment therefor, any utilities and services that may be furnished to
the Property (including the Diversified Space) during or, if Tenant occupies any portion of the
Premises after the expiration or earlier termination of the Term, after the Term.
18.4. From and after the Commencement Date, Tenant shall be responsible for paying all amounts
with respect to Insurance Costs, Utility Costs, Taxes and other amounts for which Tenant is
responsible under this Lease (other than Expansion Premises Basic Annual Rent) for the Expansion
Premises as if it was part of the Expansion Premises on the Commencement Date.
18.5. Notwithstanding the foregoing and subject to
Sections 17
and
35
, if
because of (i) any repair, maintenance, alteration, development or construction performed by
Landlord after the Commencement Date, which substantially interferes with Tenants use of the
Premises and which was not caused by Tenant, (ii) any material interference by Landlord with
Tenants access to the Premises (including the parking facilities) that is not caused by Tenant, or
(iii) the presence of Hazardous Materials in, on or around the Premises in connection with the
Landlords Construction Work or the Tenant Improvements which (a) is not caused by Tenant, and (b)
poses a health risk to occupants of the Premises (each, an
Adverse Condition
), Tenant is
unable to conduct its business in a reasonable manner in a material portion of the Premises as a
direct result of the Adverse Condition and Tenant therefore actually does not occupy or use such
portion of the Premises, as the case may be, and such condition
persists for more than the Interruption Period (as defined below), then following the
Interruption Period, Tenant shall be entitled to an abatement of Rent for the portion of the
Premises rendered untenantable. However, in the event that the remaining portion of the Premises
is not sufficient to allow Tenant to conduct its business therein, and if Tenant does not conduct
its business from such remaining portion, then for such time after expiration of the Interruption
Period during which Tenant is so prevented from effectively conducting its business therein, the
Rent for the entire Premises shall be abated;
provided
,
however
, if Tenant
continues to occupy any portion of the Premises, or reoccupies and conducts its business from any
portion of the Premises, during such period, the
19
Rent allocable to such reoccupied portion, based
on the proportion that the rentable area of such reoccupied portion of the Premises bears to the
total rentable area of the Premises, shall be payable by Tenant from the date such business
operations commence. Such abatement shall commence as of the first day after the expiration of the
Interruption Period and terminate upon the cessation of such Adverse Condition. As used herein,
the term
Interruption Period
shall mean seven (7) consecutive business days after written
notice thereof to Landlord, or such shorter period as applicable under the coverage which is or
would be covered by rental abatement insurance required to be carried by Landlord.
19.
Alterations
.
19.1. Tenant shall make no alterations, additions or improvements in or to the Property or
engage in any construction, demolition, reconstruction, renovation, or other work of any kind in,
at, or serving the Premises (
Alterations
) without Landlords prior written approval,
which approval Landlord may withhold in its sole and absolute discretion;
provided
,
however
, that Landlords approval shall not be unreasonably withheld, conditioned or
delayed in connection with any Alteration that does none of the following (i) adversely affects the
exterior appearance of a Building or the Premises, (ii) adversely affects the structural aspects of
a Building, including, without limitation, the roof, foundation, load bearing walls and structural
elements of a Building or the Premises, (iii) adversely affects any base-building system or
equipment, including, without limitation, the base building HVAC, mechanical, electrical, plumbing
or life safety systems; (iv) creates a foreseeable risk of violating any Applicable Law or
increasing insurance premiums; (v) violates any recorded document affecting the Property; (vi)
causes a Building to be inconsistent with the quality and scope of a class A office buildings in
the vicinity of the Buildings; (vii) involves a use of the Premises that is inconsistent with the
current use of the Premises; nor (viii) in Landlords reasonable judgment, reduces the quality or
value of a Building or the Property (each, a
Design Problem
). In seeking Landlords
approval, Tenant shall provide Landlord, at least ten (10) business days in advance of any proposed
construction, with plans, specifications, bid proposals, work contracts, requests for laydown areas
and such other information concerning the nature and cost of the Alterations as Landlord may
reasonably request.
19.2. Notwithstanding the provisions of
Section 19.1
, Tenant may make non-structural
Alterations to the Premises (
Acceptable Changes
) upon at least ten (10) business days
prior written notice to Landlord but without Landlords prior consent provided (a) the Acceptable
Changes do not involve Design Problems; and (b) the cost of such Acceptable Changes do not exceed
Fifty Thousand Dollars ($50,000) per occurrence or an aggregate amount of One Hundred Thousand
Dollars ($100,000) in any twelve (12) month period.
19.3. All Alterations made by Tenant shall be: (a) performed in a good and workmanlike manner
and in conformance with any and all Applicable Laws and CC&Rs; and (b) shall be made only by a
licensed, bonded contractor and such architects, suppliers and mechanics approved in advance by
Landlord (which shall not be unreasonably withheld, conditioned or delayed);
provided
,
however
, that such contractor need not be bonded or approved and such architects, suppliers
and mechanics need not be approved by Landlord in connection with Acceptable Changes.
19.4. Tenant shall not construct or permit to be constructed partitions or other obstructions
that will interfere with free access to mechanical installation or service facilities of the
Buildings, or interfere with the moving of Landlords equipment to or from the enclosures
containing such installations or facilities.
19.5. Tenant shall accomplish any work performed on the Property in such a manner as to permit
any fire sprinkler system and fire water supply lines to remain fully operable at all times.
19.6. Tenant covenants and agrees that all work done by Tenant or Tenants contractors shall
be performed in full compliance with Applicable Laws. Within thirty (30) days after completion of
any Alterations, Tenant shall provide Landlord with complete as-built drawing print sets and
electronic CADD files on disc (or files in such other current format in common use as Landlord
reasonably approves or requires) showing any changes in the Property (but only if drawings and
plans were required by this Lease or were prepared in connection with any such Alterations).
20
19.7. Before commencing any work, Tenant shall give Landlord at least ten (10) business days
prior written notice of the proposed commencement of such work.
19.8. Except for those items listed on
Exhibit G
, all Alterations, attached equipment,
decorations, fixtures, trade fixtures, additions and improvements, subject to
Section 19.8
,
attached to or built into the Property, made by either of the Parties, including, without
limitation, all floor and wall coverings, built-in cabinet work and paneling, sinks and related
plumbing fixtures, laboratory benches, exterior venting fume hoods and walk-in freezers and
refrigerators, ductwork, conduits, electrical panels and circuits shall (unless, prior to such
construction or installation, Landlord elects otherwise) become the property of Landlord upon the
expiration or earlier termination of the Term, and shall remain upon and be surrendered with the
Property as a part thereof. The Property shall at all times remain the property of Landlord and
shall be surrendered to Landlord upon the expiration or earlier termination of this Lease. Except
for those items on
Exhibit G
, all trade fixtures, Tenant Improvements, Alterations and Signage
installed by or under Tenant shall be the property of Landlord. Notwithstanding the foregoing, at
any time during the Term, subject to Landlords prior written approval, which approval shall not be
unreasonably withheld, conditioned or delayed, Tenant shall have the right to update
Exhibit G
.
19.9. Tenant shall repair any damage to the Property caused by Tenants removal of any
property from the Property. During any such restoration period, Tenant shall pay Rent to Landlord
as provided herein as if the affected portion of the Premises were otherwise occupied by Tenant.
The provisions of this Section shall survive the expiration or earlier termination of this Lease.
19.10. Except as to those items listed on
Exhibit G
attached hereto, all business and trade
fixtures, machinery and equipment, built-in furniture and cabinets, together with all additions and
accessories thereto, attached to or built into the Property shall be and remain the property of
Landlord and shall not be moved by Tenant at any time during the Term. If Tenant shall fail to
remove any of its effects from the Property within ten (10) days after the termination of this
Lease, then Landlord may, at its option, remove the same in any manner that Landlord shall choose
and store said effects without liability to Tenant for loss thereof or damage thereto, and Tenant
shall pay Landlord, upon demand, any actual, documented and reasonable costs and expenses incurred
due to such removal and storage or Landlord may, at its sole option and upon notice to Tenant, sell
such property or any portion thereof at private sale and without legal process for such price as
Landlord may obtain and apply the proceeds of such sale against any (a) amounts due by Tenant to
Landlord under this Lease and (b) any actual and documented expenses incident to the removal,
storage and sale of said personal property.
19.11. Notwithstanding any other provision of this
Article 19
to the contrary, in no
event shall Tenant remove any improvement from the Property as to which Landlord contributed
payment, including, without limitation, the Tenant Improvements made pursuant to the Work Letter
without Landlords prior written consent, which consent Landlord may withhold in its sole and
absolute discretion.
19.12. Tenant shall pay to Landlord the Construction Management Fee on the Tenant
Improvements. In addition, Tenant shall pay to Landlord an amount equal to one and one-half
percent (1.5%) of the cost to Tenant of all Alterations (other than Tenant Improvements) installed
by Tenant or its contractors or agents to cover Landlords overhead and expenses for plan review,
coordination, scheduling and supervision thereof but only for those Alterations requiring
Landlords consent. For purposes of payment of such sum, Tenant shall submit to Landlord copies of
all bills, invoices and statements covering the costs of such charges, accompanied by payment to
Landlord of the fee set forth in this Section. Tenant shall reimburse Landlord for any extra
expenses incurred by Landlord by reason of faulty work done by Tenant or its contractors.
19.13. Upon Landlords written request, within sixty (60) days after final completion of any
Alterations performed by Tenant with respect to the Property, Tenant shall submit to Landlord
documentation showing the amounts expended by Tenant with respect to such Alterations, together
with supporting documentation reasonably acceptable to Landlord.
21
19.14. Tenant shall require its contractors and subcontractors performing work on the Property
to name Landlord and its affiliates and lenders as additional insureds on their respective
insurance policies.
20.
Repairs and Maintenance
.
20.1. Subject to Landlords obligations hereunder, Tenant, at its sole cost and expense, shall
maintain and keep the Property (other than the Diversified Space), all improvements thereon, and
all appurtenances thereto, including but not limited to sidewalks, parking areas, curbs, roads,
driveways, lighting standards, landscaping, sewers, water, gas and electrical distribution systems
and facilities, drainage facilities, and all signs, both illuminated and non-illuminated that are
now or hereafter on the Property, in good condition and in a manner consistent with the Permitted
Use. Tenant shall make all repairs, replacements and improvements, including, without limitation,
all HVAC, plumbing and electrical repairs, replacements and improvements required, and shall keep
the same free and clear from all rubbish and debris, excluding, however, the foundation, slab,
structural portions of the walls and roof (not including the membrane), and structural steel
aspects of the Buildings. All repairs made by Tenant shall be at least equal in quality to the
original work, and shall be made only by a licensed, bonded contractor approved in advance by
Landlord (which shall not be unreasonably withheld, conditioned or delayed);
provided
,
however
, that such contractor need not be bonded or approved by Landlord if the
non-structural alterations, repairs, additions or improvements to be performed do not exceed Fifty
Thousand Dollars ($50,000) per occurrence or an aggregate amount of One Hundred Thousand Dollars
($100,000) in any twelve (12) month period. Tenant shall not take or omit to take any action, the
taking or omission of which shall cause waste, damage or injury to the Property. Tenant shall
indemnify, defend (by legal counsel acceptable to Landlord) and hold harmless Landlord from and
against any and all Claims (as defined below) arising out of the failure of Tenant or Tenants
Agents to perform the covenants contained in this Section.
Tenants Agents
shall be
defined to include Tenants officers, employees, agents, contractors, invitees, customers and
subcontractors. For the avoidance of doubt, as used in this
Article 20
and in
Section
11.1
, the Diversified Space shall exclude all building systems within the Diversified Space and
any demising, exterior or load bearing walls (other than the interior surface of such walls within
the Diversified Space).
20.2. Tenant shall maintain the lines designating the parking spaces in good condition and
paint the same as often as may be necessary, so that they are easily discernable at all times;
resurface the parking areas as necessary to maintain them in good condition; paint any exterior
portions of the Buildings as necessary to maintain them in good condition; maintain the roof and
landscaping in good condition; maintain sightly screens, barricades or enclosures around any waste
or storage areas; and take all reasonable precautions to insure that the drainage facilities of the
roof are not clogged and are in good and operable condition at all times
20.3. There shall be no abatement of Rent and no liability of Landlord by reason of any injury
to or interference with Tenants business arising from the Tenants making of any repairs,
alterations or improvements in or to any portion of the Property, or in or to improvements,
fixtures, equipment and personal property therein (unless the necessity for any of the same is due
to Landlords gross negligence or willful misconduct).
20.4. During the Term, Landlord shall, at Landlords sole cost and expense, be responsible for
any and all repairs and replacements to the foundation, slab, structural portions of the walls and
roof (not including the membrane), and structural steel aspects of the Buildings only.
Notwithstanding the foregoing, Tenant shall be responsible for, and shall pay, all costs and
expenses of such repair and replacement if such repair or replacement results from anything done by
Tenant or Tenants Agents or any breach by Tenant under this Lease. For purposes of clarity,
except as provided in the preceding sentence, Landlord shall not be responsible for any repairs or
replacements to the roof, the exterior walls or any other portions of the Property. Except for the
foregoing and except as otherwise provided in this Lease, Landlord shall not be required to
maintain or make any repairs or replacements of any nature or description whatsoever to the
Property unless the necessity for such repairs or replacements is due to Landlords gross
negligence or willful misconduct. Except as otherwise provided in this Lease, Tenant hereby
expressly waives the right to make repairs at the expense of Landlord as provided for in any
Applicable Laws in effect at the time of execution of this Lease, or in any other Applicable Laws
that may hereafter be enacted, and waives its rights under Applicable Laws relating to a landlords
duty to maintain its premises in a tenantable condition. Notwithstanding the
22
foregoing, if Tenant
shall fail, where such failure shall continue for a period of ten (10) days after written notice
thereof from Landlord to Tenant, to maintain or to commence and thereafter to proceed with
diligence to make any repair required of it pursuant to the terms of this Lease, Landlord, without
being under any obligation to do so and without thereby waiving such default by Tenant, may so
maintain or make such repair and may charge Tenant for the actual and documented costs thereof.
Any expense reasonably incurred by Landlord in connection with the making of such repairs may be
billed by Landlord to Tenant monthly or, at Landlords option, immediately, and shall be due and
payable within thirty (30) days after such billing.
20.5. Landlord and Landlords agents shall have the right to enter upon the Property or any
portion thereof in accordance with the terms and conditions of
Section 34.2
, for the
purposes of performing any repairs or maintenance Landlord is permitted or required to make
pursuant to this Lease, and of ascertaining the condition of the Property or whether Tenant is
observing and performing Tenants obligations hereunder, all without unreasonable interference from
Tenant or Tenants Agents.
20.6. Tenant shall, upon the expiration or sooner termination of the Term, surrender the
Property (other than the Diversified Space) to Landlord in as good of a condition as when received,
ordinary wear and tear and damage by casualty excepted. Landlord shall have no obligation to
alter, remodel, improve, repair, decorate or paint the Property (other than the Diversified Space)
or any part thereof, other than pursuant to the terms and provisions of this Lease.
20.7. Tenant shall, at its sole cost and expense, perform the maintenance and repair
obligations of the Parcel 3 Owner (as defined in the REA) pursuant to, and in accordance with,
Section 4.1
of the REA.
20.8. Landlord shall not be liable for any failure to make any repairs or to perform any
maintenance that is an obligation of Landlord unless such failure shall persist for an unreasonable
time after Tenant provides Landlord with written notice of the need of such repairs or maintenance.
Notwithstanding any provision in this Lease to the contrary, if Tenant provides notice to Landlord
of an event or circumstance which requires the action of Landlord with respect to the provision of
repairs as set forth in
Section 20.4
of this Lease, and Landlord fails to provide such
action as required by the terms of this Lease within thirty (30) days after the date of such notice
from Tenant (or if such repair is reasonably expected to require longer than thirty (30) days to
complete, if Landlord shall fail to commence in a meaningful way such repair within said thirty
(30) day period and diligently prosecutes such repair to completion), then Tenant may provide
Landlord with a second written notice stating in bold and all caps 12 point font that Landlords
failure to commence repair of the damage described below within ten (10) business days after
Landlords receipt of this second notice shall entitle Tenant to repair such damage. If Landlord
does not commence in a meaningful way such repair within such ten (10) business day period, then
Tenant shall have the right to take such action, and if such action was required under the terms of
this Lease to be taken by Landlord, then Tenant shall be entitled to reimbursement by Landlord of
Tenants reasonable actual and documented costs and expenses in taking such action.
Notwithstanding the foregoing, in case of an emergency (where there is an imminent threat of injury
to persons or damage to property), Tenant shall only be required to provide Landlord five (5)
business days notice of the need to make such repairs stating in bold and all caps 12 point font
that EMERGENCY: Landlords failure to commence its repairs of such damage within five (5) business
days after Landlords receipt of this notice shall entitle Tenant to repair such damage, and if
Landlord does not commence in a meaningful way such repair within such five (5) business day
period, then Tenant shall have the right to take such action. In the event Tenant takes such
action, and such work will affect the building systems and equipment, structural integrity of the
Buildings or exterior appearance of the Buildings, Tenant shall use only those contractors used by
Landlord in connection with the Landlords Construction Work for such work unless such contractors
are unwilling or unable to perform such work or their pricing is unreasonable, in which event
Tenant may utilize the services of any other qualified contractor which normally and regularly
performs similar work in comparable first-class, institutional quality, office buildings in the San
Diego, California area whose pricing is
reasonable. If Tenant is entitled to reimbursement by Landlord of Tenants reasonable actual
and documented costs and expenses in taking any action pursuant to this
Section 20.8
,
Tenant shall so notify Landlord in writing (the
Reimbursement Notice
), which
Reimbursement Notice shall specify in detail such costs and expenses. Within thirty (30) days
after Landlords receipt of a Reimbursement Notice, Landlord shall pay to Tenant any undisputed
portion of such costs and
23
expenses and shall notify Tenant in writing of those costs and expenses
specified by Tenant in the Reimbursement Notice which Landlord disputes (the
Disputed
Amounts
) and the reasons for such dispute. Any amounts which are not so identified by
Landlord as Disputed Amounts within said thirty (30) day period shall be considered to be
undisputed. To the extent Landlord fails to reimburse Tenant for the actual and documented costs
and expenses specified in the Reimbursement Notice within thirty (30) days after demand therefor,
Tenant shall be entitled to offset the sum of the amount of any undisputed portion of such costs
and expenses against Basic Annual Rent payable by Tenant under this Lease together with interest at
the interest rate of eight percent (8%) per annum from the date of expiration of said thirty (30)
day period until the earlier of (a) the date that Landlord reimburses Tenant such amount and (b)
the date of offset (up to a maximum offset each month of fifteen percent (15%) of the Basic Annual
Rent payable for the Premises) until the full pre-judgment offset amount (plus such interest) has
been so offset. If Tenant obtains a final judgment against Landlord for the Disputed Amount and if
Landlord fails to pay such judgment within thirty (30) days after the date such judgment is
rendered, Tenant shall be entitled to offset such judgment against Basic Annual Rent payable by
Tenant under this Lease together with interest at the interest rate of eight percent (8%) per annum
from the date Landlord failed to timely reimburse Tenant for such costs and expenses until the
earlier of (x) the date that Landlord has reimburses Tenant such amount and (y) the date of offset
(up to a maximum offset each month of fifteen percent (15%) of the Basic Annual Rent payable for
the Premises) until the full amount of such judgment (plus such interest) has been so offset. If
Landlord obtains a final judgment against Tenant for the Disputed Amount, Tenant shall pay to
Landlord such judgment within thirty (30) days after the date such judgment is rendered.
20.9. This
Article 20
relates to repairs and maintenance arising in the ordinary
course of operation of the Property (other than the Diversified Space) and any related facilities.
In the event of fire, earthquake, flood, vandalism, war, terrorism, natural disaster or similar
cause of damage or destruction,
Article 24
shall apply in lieu of this
Article 20
.
20.10. Notwithstanding anything above to the contrary, if during the Term, any portion of the
Property which is Tenants responsibility hereunder to repair cannot be repaired other than at a
cost which is in excess of fifty percent (50%) of the cost of replacing such item(s), then such
item(s) shall be replaced by Tenant (subject to Landlords prior approval of the plans and
specifications and the cost of any such replacement), and Landlord shall reimburse Tenant a prorata
share of the cost thereof based upon a fraction, the numerator of which is the number of months of
the useful life of such replacement item beyond the expiration of the Term (including any Extended
Term, if applicable), and the denominator of which is the total number of months of the useful life
of such replacement (as such useful life is specified pursuant to Federal income tax regulations or
guidelines for depreciation thereof);
provided
,
however
, for purposes of
calculating the useful life of such replacement, the useful life of such replacement shall not
exceed seven (7) years from the date that such replacement is made.
21.
Liens
.
21.1. Subject to the immediately succeeding sentence, Tenant shall keep the Property free from
any liens arising out of work performed, materials furnished or obligations incurred by Tenant.
Tenant further covenants and agrees that any mechanics lien filed against the Property for work
claimed to have been done for, or materials claimed to have been furnished to, shall be discharged
or bonded by Tenant within ten (10) days after the filing thereof, at Tenants sole cost and
expense.
21.2. Should Tenant fail to discharge or bond against any lien of the nature described in
Section 21.1
, Landlord may, at Landlords election, pay such claim or post a bond or
otherwise provide security to eliminate the lien as a claim against title, and Tenant shall
immediately reimburse Landlord for the actual, documented and reasonable costs thereof as
Additional Rent.
21.3. In the event that Tenant leases or finances the acquisition of office equipment,
furnishings or other personal property of a removable nature utilized by Tenant in the operation of
Tenants business (which Tenant shall have the right to do), Tenant warrants that any Uniform
Commercial Code financing statement executed by Tenant shall, upon its face or by Exhibit
thereto, indicate that such financing statement is applicable only to removable personal property
of Tenant located within the Premises. In no event shall the address of the Property be furnished
on a financing statement without qualifying language as to applicability of the lien only to
removable personal property located in an identified suite leased by Tenant. Should any
24
holder of
a financing statement executed by Tenant record or place of record a financing statement that
appears to constitute a lien against any interest of Landlord, Tenant shall, within ten (10) days
after filing such financing statement, cause (a) a copy of the lender security agreement or other
documents to which the financing statement pertains to be furnished to Landlord to facilitate
Landlords ability to demonstrate that the lien of such financing statement is not applicable to
Landlords interest and (b) Tenants lender to amend such financing statement and any other
documents of record to clarify that any liens imposed thereby are not applicable to any interest of
Landlord in the Property.
22.
Indemnification and Exculpation
.
22.1. Subject to
Section 22.6
below, Tenant agrees to indemnify, defend and save
Landlord harmless from and against any and all demands, claims, liabilities, losses, costs,
expenses, actions, causes of action, damages or judgments, and all reasonable expenses (including,
without limitation, reasonable attorneys fees, charges and disbursements) incurred in
investigating or resisting the same (collectively,
Claims
) arising from injury to or
death of any person or damage to any property occurring within or about the Property arising
directly or indirectly out of Tenants or Tenants employees, agents or guests use or occupancy
of the Property or a breach or default by Tenant in the performance of any of its obligations
hereunder, unless caused solely by Landlords willful misconduct or gross negligence.
22.2. Landlord agrees to indemnify, defend and save Tenant harmless from and against any and
all Claims arising from injury to or death of any person or damage to any property occurring within
or about the Diversified Space that arise directly out of Landlords obligations under the
Diversified Lease after the Effective Date, unless (a) caused by Tenants acts or omissions, or (b)
arising from Tenants performance, or Tenants failure to perform, any of Tenants obligations
under this Lease.
22.3. Notwithstanding any provision of
Section 22.1
to the contrary, but subject to
Section 22.5
below, Landlord shall not be liable to Tenant for, and Tenant assumes all risk
of, damage to personal property or scientific research, including, without limitation, loss of
records kept by Tenant within the Property and damage or losses caused by fire, electrical
malfunction, gas explosion or water damage of any type (including, without limitation, broken water
lines, malfunctioning fire sprinkler systems, roof leaks or stoppages of lines), unless any such
loss is due to Landlords gross negligence, willful misconduct and/or willful disregard of written
notice by Tenant of need for a repair that Landlord is responsible to make for an unreasonable
period of time. Tenant further waives any claim for injury to Tenants business or loss of income
relating to any such damage or destruction of personal property as described in this
Section
22.2
.
22.4. Landlord shall not be liable for any damages arising from any act, omission or neglect
of any third party other than the gross negligence or willful misconduct of any of Landlords
officers, employees, agents, general partners, members, and Lenders (
Landlord Parties
).
22.5. Tenant acknowledges that security devices and services, if any, while intended to deter
crime, may not in given instances prevent theft or other criminal acts. Landlord shall not be
liable for injuries or losses caused by criminal acts of third parties, and Tenant assumes the risk
that any security device or service may malfunction or otherwise be circumvented by a criminal. If
Tenant desires protection against such criminal acts, then Tenant shall, at Tenants sole cost and
expense, obtain appropriate insurance coverage. Notwithstanding any contrary provision of this
Lease, neither Landlord nor Tenant shall be liable to the other party for any consequential
damages, loss of business or profit for a breach or default under this Lease; provided that this
sentence shall not limit Landlords damages if, as a result of Tenants breach of this Lease: (a)
Landlord does not or is unable to lease the Premises to another party, or (b) a third party is
unable to occupy the Premises on the date specified in such third partys lease.
22.6. Tenant shall not be required to indemnify and hold Landlord harmless from any Claim to
any person, property or entity resulting from the grossly negligent acts or omissions or
willful misconduct of the Landlord Parties in connection with the Landlord Parties activities
in, on or about the Property, and Landlord hereby agrees to so indemnify and holds Tenant harmless
from any such Claims.
25
22.7. The provisions of this
Article 22
shall survive the expiration or earlier
termination of this Lease.
23.
Insurance; Waiver of Subrogation
.
23.1. Landlord shall maintain insurance for the Property (including the Diversified Space) in
amounts equal to full replacement cost (exclusive of the costs of excavation, foundations and
footings, and without reference to depreciation taken by Landlord upon its books or tax returns) or
such lesser coverage as Landlord may elect,
provided
that such coverage shall not be less
than ninety percent (90%) of such full replacement cost or the amount of such insurance Landlords
lender, mortgagee or beneficiary (each, a
Lender
), if any, requires Landlord to maintain,
providing protection against any peril generally included within the classification Fire and
Extended Coverage, together with insurance against sprinkler damage (if applicable), vandalism and
malicious mischief. Landlord, subject to availability thereof, shall further insure, if Landlord
deems it appropriate, coverage against flood, environmental hazard, earthquake, loss or failure of
building equipment, rental loss during the period of repairs or rebuilding, workmens compensation
insurance and fidelity bonds for employees employed to perform services. Notwithstanding the
foregoing, Landlord may, but shall not be deemed required to, provide insurance for any
improvements installed by Tenant or that are in addition to the standard improvements customarily
furnished by Landlord, without regard to whether or not such are made a part of or are affixed to
the Buildings. Any costs incurred by Landlord pursuant to this
Section 23.1
shall
constitute a portion of Insurance Costs.
23.2. In addition, Landlord shall carry public liability insurance with a single limit of not
less than Ten Million Dollars ($10,000,000) for death or bodily injury, or property damage with
respect to the Property (including the Diversified Space). Any costs incurred by Landlord pursuant
to this
Section 23.2
shall constitute a portion of Insurance Costs.
23.3. Tenant shall, at its own cost and expense, procure and maintain in effect, beginning on
the Commencement Date or the date of occupancy, whichever occurs first, and continuing throughout
the Term (and occupancy by Tenant, if any, after termination of this Lease) comprehensive public
liability insurance with limits of not less than Five Million Dollars ($5,000,000) per occurrence
for death or bodily injury and not less than Two Million Dollars ($2,000,000) for property damage
with respect to the Property (including the Diversified Space).
23.4. Tenant shall, at its sole cost and expense, procure and maintain in effect, beginning on
the Commencement Date or the date of occupancy, whichever occurs first, and continuing throughout
the Term all insurance required to be maintained by the Parcel 3 Owner (as defined in the REA) in
connection with the Parcel 3 Land (as defined in the REA) pursuant to Section 6 of the REA.
23.5. The insurance required to be purchased and maintained by Tenant pursuant to this Lease
shall show, as an additional insured in respect of the Property, Landlord, BioMed Realty, L.P.,
BioMed Realty Trust, Inc., Tenant, any management company retained by Landlord to manage the
Property, any ground lessor and any mortgagee of Landlord required to be named pursuant to its
mortgage documents. All public liability and property damage policies shall contain a provision
that Landlord, although named as an insured, nevertheless shall be entitled to recovery under said
policies for any loss occasioned to it, its servants, agents and employees by reason of the
negligence of Tenant. Said insurance shall be with companies having a rating of not less than
policyholder rating of A and financial category rating of at least Class XII in Bests Insurance
Guide. Tenant shall obtain for Landlord from the insurance companies or cause the insurance
companies to furnish certificates of coverage to Landlord. No such policy shall be cancelable or
subject to reduction of coverage or other modification or cancellation except after thirty (30)
days prior written notice to Landlord from the insurer. All such policies shall be written as
primary policies, not contributing with and not in excess of the coverage that Landlord may carry.
Tenants policy may be a blanket policy that specifically provides that the amount of insurance
shall not be prejudiced by other losses covered by the policy. Tenant shall, at least twenty (20)
days prior to the expiration of such policies, furnish Landlord with renewals or binders. Tenant
agrees that if Tenant does not take out and maintain such insurance, Landlord
may (but shall not be required to) procure said insurance on Tenants behalf and at its cost
to be paid by Tenant as Additional Rent.
26
23.6. Tenant assumes the risk of damage to any fixtures, goods, inventory, merchandise,
equipment and leasehold improvements, and Landlord shall not be liable for injury to Tenants
business or any loss of income therefrom, relative to such damage, all as more particularly set
forth within this Lease unless caused by Landlords gross negligence or willful misconduct. Tenant
shall, at Tenants sole cost and expense, carry such insurance as Tenant desires for Tenants
protection with respect to personal property of Tenant or business interruption.
23.7. In each instance where Tenants insurance is to name additional insureds, Tenant shall,
upon Landlords written request, also designate and furnish certificates evidencing the same to (a)
any Lender of Landlord holding a security interest in the Property or any portion thereof, (b) the
landlord under any lease whereunder Landlord is a tenant of the real property upon which the
Buildings are located if the interest of Landlord is or shall become that of a tenant under a
ground lease rather than that of a fee owner, and (c) any management company retained by Landlord
to manage the Property.
23.8. Landlord and Tenant each hereby waive any and all rights of recovery against the other
or against the officers, directors, employees, agents and representatives of the other on account
of loss or damage occasioned by such waiving party or its property or the property of others under
such waiving partys control, in each case to the extent that such loss or damage is insured
against under any fire and extended coverage insurance policy that either Landlord or Tenant may
have in force at the time of such loss or damage. Such waivers shall continue so long as their
respective insurers so permit. Any termination of such a waiver shall be by written notice to the
other party, containing a description of the circumstances hereinafter set forth in this
Section 23.8
. Landlord and Tenant, upon obtaining the policies of insurance required or
permitted under this Lease, shall give notice to the insurance carrier or carriers that the
foregoing mutual waiver of subrogation is contained in this Lease. If such policies shall not be
obtainable with such waiver or shall be so obtainable only at a premium over that chargeable
without such waiver, then the party seeking such policy shall notify the other of such conditions,
and the party so notified shall have ten (10) days thereafter to either (a) procure such insurance
with companies reasonably satisfactory to the other party or (b) agree to pay such additional
premium. If the parties do not accomplish either (a) or (b), then this
Section 23.8
shall
have no effect during such time as such policies shall not be obtainable or the party in whose
favor a waiver of subrogation is desired refuses to pay the additional premium. If such policies
shall at any time be unobtainable, but shall be subsequently obtainable, then neither party shall
be subsequently liable for a failure to obtain such insurance until a reasonable time after
notification thereof by the other party. If the release of either Landlord or Tenant, as set forth
in the first sentence of this
Section 23.8
, shall contravene Applicable Laws, then the
liability of the party in question shall be deemed not released but shall be secondary to the other
partys insurer.
24.
Damage or Destruction
.
24.1. Subject to
Section 24.2
, In the event of a partial or complete destruction of
the Premises or a Building by fire or other perils, Landlord shall commence and proceed diligently
with the work of repair, reconstruction and restoration of the Premises and such Building, as
applicable, and this Lease shall continue in full force and effect.
24.2. Notwithstanding the terms of this
Article 24
, Landlord may elect not to rebuild
and/or restore the Premises and the Buildings and instead terminate this Lease by notifying Tenant
in writing of such termination within sixty (60) days after the date of damage, such notice to
include a termination date giving Tenant ninety (90) days to vacate the Premises, but Landlord may
so elect only if the Premises or any Building shall be damaged by fire or other casualty or cause
or be subject to a condition existing as a result of such a fire or other casualty or cause, and
one or more of the following conditions is present: (i) in the reasonable judgment of a contractor
selected by Landlord and reasonably approved by Tenant, repairs cannot reasonably be completed
within one hundred eighty (180) days of the date of damage (when such repairs are made without the
payment of overtime or other premiums); (ii) the holder of any mortgage on the Premises or the
Buildings, or ground or underlying lessor with respect to the Premises or the Buildings (a) shall
require that the insurance proceeds or any portion thereof be used to retire the mortgage debt due
to an impairment of such holders collateral, and the remaining proceeds are
insufficient to repair the damage and as a result thereof the deficiency of insurance proceeds
exceeds the Maximum Amount, as that term is defined below, and Landlord elects not to commence
repair to the Premises or the Buildings within one (1) year of such damage or
27
destruction, or (b)
shall terminate the ground or underlying lease, as the case may be; (iii) the dollar amount of the
damage or condition arising as a result of such damage which is not fully covered by Landlords
insurance policies (and that would not be fully covered by Landlords insurance policies if
Landlord had carried the coverage required under this Lease) including any deductible amount, is
equal to or greater than Two Hundred and Fifty Thousand Dollars ($250,000) (the
Maximum
Amount
), which Maximum Amount shall, as of the date of termination of this Lease, be equal to
the product of (a) the Maximum Amount and (b) a fraction, the numerator of which is the number of
full months remaining in the Term, or when appropriate the Extended Term then applicable, as of the
date of the termination of this Lease, and the denominator of which is 180 (or, if applicable, 60
during an Extended Term) and Landlord elects not to commence repair to the Premises or the
Buildings within one (1) year of such damage or destruction; or (iv) the damage occurs during the
last twenty-four (24) months of the Term, as such Term may have been extended by Tenant pursuant to
this Lease;
provided
,
however
, that if Landlord does not elect to terminate this
Lease pursuant to Landlords termination right as provided above, and the repairs of such damage
cannot, in the reasonable opinion of a contractor selected by Landlord and reasonably approved by
Tenant, be completed within twelve (12) months after being commenced, Tenant may elect, not later
than ten (10) business days after the date of such damage, to terminate this Lease by written
notice to Landlord effective as of the date specified in the notice. At any time, from time to
time, after the date occurring thirty (30) days after the date of the damage, but in no event more
than once every forty-five (45) days, Tenant may request that Landlord provide Tenant with a
certificate from the architect or contractor described above setting forth such architects or
contractors reasonable opinion of the date of completion of the repairs and Landlord shall respond
to such request within fifteen (15) business days.
24.3. Landlord shall give written notice to Tenant of its election not to repair, reconstruct
or restore the Premises or the Buildings within sixty (60) days following the date of damage or
destruction.
24.4. Upon any termination of this Lease under any of the provisions of this
Article
24
, the parties shall be released thereby without further obligation to the other from the date
possession of the Premises is surrendered to Landlord, except with regard to (a) items occurring
prior to the damage or destruction and (b) provisions of this Lease that, by their express terms,
survive the expiration or earlier termination hereof.
24.5. In the event of repair, reconstruction and restoration as provided in this
Article
24
, all Rent to be paid by Tenant under this Lease shall be abated proportionately based on the
extent to which Tenants use of the Premises is impaired during the period of such repair,
reconstruction or restoration, unless Landlord provides Tenant with other space during the period
of repair that, in Tenants reasonable discretion, is suitable for the temporary conduct of
Tenants business;
provided
,
however
, that the amount of such abatement shall be
reduced by the proceeds of lost rental income insurance actually received by Tenant with respect to
the Premises.
24.6. Notwithstanding anything to the contrary contained in this
Article 24
, should
Landlord be delayed or prevented from completing the repair, reconstruction or restoration of the
damage or destruction to the Premises or the Buildings after the occurrence of such damage or
destruction by Force Majeure, then the time for Landlord to commence or complete repairs shall be
extended on a day-for-day basis.
24.7. If Landlord is obligated to or elects to repair, reconstruct or restore as herein
provided, then Landlord shall be obligated to make such repair, reconstruction or restoration only
with regard to those portions of the Premises and the Buildings that were originally provided at
Landlords expense. The repair, reconstruction or restoration of improvements not originally
provided by Landlord or at Landlords expense shall be the obligation of Tenant. In the event
Tenant has elected to upgrade certain improvements, Landlord shall, upon the need for replacement
due to an insured loss, construct the improvements to the standard that existed prior to such
damage, unless Tenant again elects to upgrade such improvements and pay any incremental costs
related thereto, except to the extent that excess insurance proceeds, if received, are adequate to
provide such upgrades, in addition to providing for basic repair, reconstruction and restoration of
the Premises and the Buildings.
24.8. In addition to its termination right in
Section 24.2
above, Tenant shall have
the right to terminate this Lease if any damage to the Buildings or the Premises: (a) occurs during
28
the last twelve (12) months of the Term of this Lease (including the last twelve (12) months of any
Extended Term, if applicable); (b) Tenant is unable to occupy more than twenty-five percent (25%)
of the Premises; and (c) in the reasonable judgment of a contractor selected by Landlord and
reasonably approved by Tenant, such repairs cannot reasonably be completed within twenty-five
percent (25%) of the remaining term of this Lease (including any Extended Term, if applicable).
25.
Eminent Domain
.
25.1.
Total Taking Termination
. In the event the whole of the Premises, or such
part thereof so that reconstruction of the Premises will not result in the Premises being
reasonably suitable (as reasonably determined by Landlord and Tenant) for Tenants continued
occupancy for the uses and purposes permitted by this Lease, shall be taken for any public or
quasi-public purpose by any lawful power or authority by exercise of the right of appropriation,
condemnation or eminent domain, or sold to prevent such taking, Tenant or Landlord may terminate
this Lease effective as of the date possession is required to be surrendered to said authority.
25.2.
Partial Taking
. In the event of a partial taking of the Premises, or of drives,
walkways or parking areas serving the Premises for any public or quasi-public purpose by any lawful
power or authority by exercise of right of appropriation, condemnation, or eminent domain, or sold
to prevent such taking, then, without regard to whether any portion of the Premises occupied by
Tenant was so taken, Landlord may elect to terminate this Lease as of such taking if such taking
is, in Landlords sole opinion, of a material nature such as to make it uneconomical to continue
use of the unappropriated portion for purposes of renting office or laboratory space.
25.3. Tenant shall be entitled to any award that is specifically awarded as compensation for
(a) the taking of Tenants personal property that was installed at Tenants expense and (b) the
costs of Tenant moving to a new location. Except as set forth in this
Article 25
, any
award for such taking shall be the property of Landlord.
25.4. If, upon any taking of the nature described in
Sections 25.1
and
25.2
,
this Lease continues in effect, then (a) Landlord shall promptly proceed to restore the Premises to
substantially their same condition prior to such partial taking and this Lease shall, as to the
part so taken terminate as of the date that possession of such part of the Premises is taken and
the Basic Annual Rent shall be reduced in the same proportion that the floor area of the portion of
the Buildings so taken (less any addition thereto by reason of any reconstruction) bears to the
original floor area of the Buildings, and (b) in the event of a partial taking of the Diversified
Space, (i) Tenant agrees to sublease to Diversified, at no cost to Diversified, up to 6,600
rentable square feet in the Expansion Premises or in the Existing Parcel 1 and Parcel 2 Buildings
in accordance with Diversifieds rights under
Article 20
of the Diversified Lease, (ii)
Tenant shall be entitled to (1) an abatement of fifty percent (50%) of the Expansion Premises Basic
Annual Rent for the portion of the Expansion Premises (if any) occupied by Diversified, and (2) an
abatement of fifty percent (50%) of the Basic Annual Rent under the Illumina Lease for the portion
of the Premises (as defined in the Illumina Lease) (if any) occupied by Diversified, (iii) Landlord
shall pay all costs associated with the relocation of Diversified, including, but not limited to,
costs of tenant improvements and moving costs, and (iv) Tenant shall not be entitled to an
abatement of any of the operating expenses, including Taxes, Insurance Costs, Utility Costs and all
other insurance and utility costs and expenses in connection with the portion of the Expansion
Premises or the Premises (as defined in the Illumina Lease) occupied by Diversified
26.
Defaults and Remedies
.
26.1. Late payment by Tenant to Landlord of Rent and other sums due shall cause Landlord to
incur costs not contemplated by this Lease, the exact amount of which shall be extremely difficult
and impracticable to ascertain. Such costs include, but are not limited to, processing and
accounting charges and late charges that may be imposed on Landlord by the terms of any mortgage or
trust deed covering the Property. Therefore, if any installment of Rent due from Tenant is not
received by Landlord within five (5) days after written notice that such payment is due, Tenant
shall pay to Landlord an additional sum of three percent (3%) of the overdue Rent as a late charge.
The parties agree that this late charge represents a fair and
reasonable estimate of the costs that Landlord shall incur by reason of late payment by
Tenant. Notwithstanding the foregoing, Landlord shall waive the imposition of such late charge for
the
29
first late payment of Rent due hereunder in any calendar year of the Term. In addition to the
late charge, Rent not paid when due shall bear interest from the fifth (5th) day after the date due
until paid at the lesser of (a) twelve percent (12%) per annum or (b) the maximum rate permitted by
Applicable Laws.
26.2. No payment by Tenant or receipt by Landlord of a lesser amount than the Rent payment
herein stipulated shall be deemed to be other than on account of the Rent, nor shall any
endorsement or statement on any check or any letter accompanying any check or payment as Rent be
deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice
to Landlords right to recover the balance of such Rent or pursue any other remedy provided in this
Lease or in equity or at law. If a dispute shall arise as to any amount or sum of money to be paid
by Tenant to Landlord hereunder, Tenant shall have the right to make payment under protest, such
payment shall not be regarded as a voluntary payment, and there shall survive the right on the part
of Tenant to institute suit for recovery of the payment paid under protest.
26.3. If Tenant fails to pay any sum of money (other than Basic Annual Rent) required to be
paid by it hereunder, or shall fail to perform any other act on its part to be performed hereunder,
Landlord may, without waiving or releasing Tenant from any obligations of Tenant, but shall not be
obligated to, make such payment or perform such act;
provided
that (a) such failure by
Tenant continues beyond all applicable notice and cure periods after Landlord delivers notice to
Tenant demanding performance by Tenant; or (b) such failure by Tenant reasonably could be expected
to result in a violation of Applicable Laws, damage to property or injury to any person, or the
cancellation of an insurance policy maintained by Landlord. Notwithstanding the foregoing, in the
event of an emergency, Landlord shall have the right to enter the Property and act in accordance
with its rights as provided elsewhere in this Lease. Tenant shall pay to Landlord as Additional
Rent all sums so paid or incurred by Landlord, together with interest thereon, from the date such
sums were paid or incurred, at the annual rate equal to twelve percent (12%) per annum or highest
rate permitted by Applicable Laws, whichever is less.
26.4. The occurrence of any one or more of the following events shall constitute a
Default
hereunder by Tenant:
26.4.1 The failure by Tenant to make any payment of Rent, as and when due, where such failure
shall continue for a period of five (5) days after written notice thereof from Landlord to Tenant;
26.4.2 The failure by Tenant to observe or perform any obligation or covenant contained herein
to be performed by Tenant (other than described in
Subsections 26.4.1
and
26.4.2
),
where such failure shall continue for a period of ten (10) business days after written notice
thereof from Landlord to Tenant;
provided
that, if the nature of Tenants default is such
that it reasonably requires more than ten (10) business days to cure, Tenant shall not be deemed to
be in default if Tenant shall commence such cure within said ten (10) business day period and
thereafter diligently prosecute the same to completion;
26.4.3 Tenant makes an assignment for the benefit of creditors;
26.4.4 A receiver, trustee or custodian is appointed to or does take title, possession or
control of all or substantially all of Tenants assets;
26.4.5 Tenant files a voluntary petition under the United States Bankruptcy Code or any
successor statute (the
Bankruptcy Code
) or an order for relief is entered against Tenant
pursuant to a voluntary or involuntary proceeding commenced under any chapter of the Bankruptcy
Code;
26.4.6 Any involuntary petition if filed against Tenant under any chapter of the Bankruptcy
Code and is not dismissed within sixty (60) days;
26.4.7 Failure to deliver an estoppel certificate in accordance with
Article 31
;
26.4.8 The occurrence of a monetary or material non-monetary default under the Illumina Lease;
30
26.4.9 The occurrence of any Transfer that is not in compliance with the provisions of
Article 27
, where such failure shall continue for a period of ten (10) days after written
notice thereof from Landlord to Tenant; or
26.4.10 Tenants interest in this Lease is attached, executed upon or otherwise judicially
seized and such action is not released within one hundred twenty (120) days of the action.
No notice given above shall be deemed a forfeiture or a termination of this Lease unless
Landlord elects otherwise in such notice.
26.5. In the event of a Default by Tenant, and at any time thereafter, with or without notice
or demand and without limiting Landlord in the exercise of any right or remedy that Landlord may
have, Landlord shall be entitled to terminate Tenants right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Tenant shall immediately thereafter,
surrender possession of the Premises to Landlord. In such event, Landlord shall have the right to
re-enter and remove all persons and property, and such property may be removed and stored in a
public warehouse or elsewhere at the cost and for the account of Tenant, all without service of
notice or resort to legal process and without being deemed guilty of trespass or becoming liable
for any loss or damage that may be occasioned thereby. In the event that Landlord shall elect to
so terminate this Lease, then Landlord shall be entitled to recover from Tenant all damages
incurred by Landlord by reason of Tenants default, including, without limitation:
26.5.1 The worth at the time of award of the unpaid Rent that had been earned at the time of
termination; plus
26.5.2 The worth at the time of award of the amount by which the unpaid Rent that would have
been earned during the period commencing with termination of this Lease and ending at the time of
award exceeds that portion of the loss of Landlords rental income from the Premises that Tenant
proves could have been reasonably avoided; plus
26.5.3 The worth at the time of award of the amount by which the unpaid Rent for the balance
of the Term after the time of award exceeds the amount of the loss of Landlords rental income from
the Premises that Tenant proves could be reasonably avoided; plus
26.5.4 Any other amount necessary to compensate Landlord for all the detriment caused by
Tenants failure to perform its obligations under this Lease or that in the ordinary course of
things would be likely to result therefrom, including, without limitation, the cost of restoring
the Premises to the condition required under the terms of this Lease.
As used in
Subsections 26.5.1
and
26.5.2
, worth at the time of award shall be
computed by allowing interest at the rate specified in
Section 26.1
. As used in
Subsection 26.5.3
above, the worth at the time of the award shall be computed by taking
the present value of such amount, using the discount rate of the Federal Reserve Bank of San
Francisco at the time of the award plus one (1) percentage point.
26.6. In addition to any other remedies available to Landlord at law or in equity and under
this Lease, Landlord shall have the remedy described in California Civil Code Section 1951.4
(Landlord may continue this Lease in effect after Tenants Default and abandonment and recover Rent
as it becomes due, provided Tenant has the right to sublet or assign, subject only to reasonable
limitations). In addition, Landlord shall not be liable in any way whatsoever for its failure or
refusal to relet the Premises. For purposes of this
Section 26.6
, the following acts by
Landlord will not constitute the termination of Tenants right to possession of the Premises:
Acts of maintenance or preservation or efforts to relet the Premises, including, but not
limited to, alterations, remodeling, redecorating, repairs, replacements and/or painting as
Landlord shall consider advisable for the purpose of reletting the Premises or any part thereof, or
The appointment of a receiver upon the initiative of Landlord to protect Landlords interest
under this Lease or in the Property.
31
Notwithstanding the foregoing, in the event of a Default by Tenant, Landlord may elect at any time
to terminate this Lease and to recover damages to which Landlord is entitled.
26.7. In the event Landlord elects to terminate this Lease and relet the Premises, Landlord
may execute any new lease in its own name. Tenant hereunder shall have no right or authority
whatsoever to collect any Rent from such tenant. The proceeds of any such reletting shall be
applied as follows:
26.7.1 First, to the payment of any indebtedness other than Rent due hereunder from Tenant to
Landlord, including, without limitation, storage charges or brokerage commissions owing from Tenant
to Landlord as the result of such reletting;
26.7.2 Second, to the payment of the costs and expenses of reletting the Premises, including
(a) alterations and repairs that Landlord deems reasonably necessary and advisable and (b)
reasonable attorneys fees, charges and disbursements incurred by Landlord in connection with the
retaking of the Premises and such reletting;
26.7.3 Third, to the payment of Rent and other charges due and unpaid hereunder; and
26.7.4 Fourth, to the payment of future Rent and other damages payable by Tenant under this
Lease.
26.8. All of Landlords rights, options and remedies hereunder shall be construed and held to
be nonexclusive and cumulative. Landlord shall have the right to pursue any one or all of such
remedies, or any other remedy or relief that may be provided by Applicable Laws, whether or not
stated in this Lease. No waiver of any default of Tenant hereunder shall be implied from any
acceptance by Landlord of any Rent or other payments due hereunder or any omission by Landlord to
take any action on account of such default if such default persists or is repeated, and no express
waiver shall affect defaults other than as specified in said waiver.
26.9. Landlords termination of (a) this Lease or (b) Tenants right to possession of the
Premises shall not relieve Tenant of any liability to Landlord that has previously accrued or that
shall arise based upon events that occurred prior to the later to occur of (i) the date of Lease
termination or (ii) the date Tenant surrenders possession of the Premises.
26.10. In the event of a Default by Tenant hereunder, to the fullest extent required by
Applicable Laws (to the extent such Applicable Laws cannot be modified by contract), Landlord shall
use commercially reasonable efforts to mitigate its damages.
26.11. To the extent permitted by Applicable Laws, Tenant waives any and all rights of
redemption granted by or under any present or future Applicable Laws if Tenant is evicted or
dispossessed for any cause, or if Landlord obtains possession of the Premises due to Tenants
default hereunder or otherwise.
26.12. Landlord shall not be in default under this Lease unless Landlord fails to perform
obligations required of Landlord within a reasonable time, but in no event shall such failure
continue for more than thirty (30) days after written notice from Tenant specifying the nature of
Landlords failure;
provided
,
however
, that if the nature of Landlords obligation
is such that more than thirty (30) days are required for its performance, then Landlord shall not
be in default if Landlord commences performance within such thirty (30) day period and thereafter
diligently prosecutes the same to completion. In the event of any default by Landlord (beyond the
expiration of all applicable notice and cure periods), Tenant may exercise any rights and remedies
available at law or in equity.
26.13. In the event of any default by Landlord, Tenant shall give notice by registered or
certified mail to any (a) beneficiary of a deed of trust or (b) mortgagee under a mortgage covering
the Property or any portion thereof and to any landlord of any lease of land upon or within which
the Premises are located, and shall offer such beneficiary, mortgagee or landlord a reasonable
opportunity to cure the default, including time to obtain possession of the Premises by power of
sale or a judicial action if such should prove necessary to effect a cure; provided that Landlord
shall furnish to Tenant in writing, upon written request by Tenant, the names and addresses of all
such persons who are to receive such notices;
provided
,
however
, in no event shall
such reasonable opportunity to cure exceed an additional sixty (60) days within which to
32
cure or
correct such default (or if such default cannot be cured or corrected within that time, then such
additional time as may be necessary if such mortgagee has commenced within such sixty
(60) day period and is diligently pursuing the remedies or steps necessary to cure or correct
such default).
27.
Assignment or Subletting
.
27.1. Except as hereinafter expressly permitted, Tenant shall not, either voluntarily or by
operation of Applicable Laws, directly or indirectly sell, hypothecate, assign, pledge, encumber or
otherwise transfer this Lease, or sublet the Premises or any part hereof (each, a
Transfer
), without Landlords prior written consent, which consent Landlord may not
unreasonably withhold, condition or delay. Tenant shall have the right to Transfer without
Landlords prior written consent the Premises or any portion thereof to any person or entity that:
(a) directly, or indirectly through one or more intermediaries, (i) controls, is controlled by, or
is under common control with Tenant, (ii) acquires all or substantially all of the assets of
Tenant, or (iii) is the resulting entity of a merger or consolidation of Tenant with another
entity; and (b) has a net worth equal to Two Hundred Million Dollars ($200,000,000) (each, a
Tenants Affiliate
), provided (1) Tenant shall notify Landlord in writing at least ten
(10) days prior to the effectiveness of such Transfer to Tenants Affiliate (an
Exempt
Transfer
); and (2) Tenant remains obligated under this Lease. For purposes of Exempt
Transfers, control requires both (x) owning (directly or indirectly) more than fifty-one percent
(51%) of the stock or other equity interests of another person and (y) possessing, directly or
indirectly, the power to direct or cause the direction of the management and policies of such
person.
27.2. In the event Tenant desires to effect a Transfer, then, at least twenty (20) business
days but not more than one hundred twenty (120) days prior to the date when Tenant desires the
assignment or sublease to be effective (the
Transfer Date
), Tenant shall provide written
notice to Landlord (the
Transfer Notice
) containing information (including references)
concerning the character of the proposed transferee, assignee or sublessee; the Transfer Date; any
ownership or commercial relationship between Tenant and the proposed transferee, assignee or
sublessee; and the consideration and all other material terms and conditions of the proposed
Transfer; and evidence respecting the relevant business experience and financial responsibility and
status of the proposed transferee, assignee or sublessee, all in such detail as Landlord shall
reasonably require (the
Transfer Information
). Tenant shall also tender to Landlord the
actual, documented and reasonable attorneys fees and other costs or overhead expenses incurred by
Landlord in reviewing Tenants request for such Transfer (not to exceed Two Thousand Five Hundred
Dollars ($2,500.00) in the aggregate per Transfer request).
27.3. Landlord, in determining whether consent should be given to a proposed Transfer, may
give consideration to (a) the financial strength of such assignee (notwithstanding Tenant
remaining liable for Tenants performance), and (b) any change in use that such transferee,
assignee or sublessee proposes to make in the use of the Premises. In no event shall Landlord be
deemed to be unreasonable for declining to consent to a Transfer to a transferee, assignee or
sublessee of lacking financial qualifications or seeking a change in the Permitted Use, or
jeopardizing directly or indirectly the status of Landlord or any of Landlords affiliates as a
Real Estate Investment Trust under the Internal Revenue Code of 1986 (the
Code
).
Notwithstanding anything contained in this Lease to the contrary, (w) no Transfer shall be
consummated on any basis such that the rental or other amounts to be paid by the occupant,
assignee, manager or other transferee thereunder would be based, in whole or in part, on the income
or profits derived by the business activities of such occupant, assignee, manager or other
transferee; (x) Tenant shall not furnish or render any services to an occupant, assignee, manager
or other transferee with respect to whom transfer consideration is required to be paid, or manage
or operate the Premises or any capital additions so transferred, with respect to which transfer
consideration is being paid; (y) Tenant shall not consummate a Transfer with any person in which
Landlord owns an interest, directly or indirectly (by applying constructive ownership rules set
forth in Section 856(d)(5) of the Code); and (z) Tenant shall not consummate a Transfer with any
person or in any manner that could cause any portion of the amounts received by Landlord pursuant
to this Lease or any sublease, license or other arrangement for the right to use, occupy or possess
any portion of the Premises to fail to qualify as rents from real property within the meaning of
Section 856(d) of the Code, or any similar or successor provision thereto or which could cause any
other income of Landlord to fail to qualify as income described in Section 856(c)(2) of the Code.
Landlord shall respond to Tenants proposed Transfer within twenty (20) days after receipt of
Tenants Transfer request. If Landlord fails to respond within such twenty
33
(20) day period, then
Tenant shall provide Landlord with a second written notice stating in bold and all caps 12 point
font that Landlords failure to respond to Tenants Transfer request within
five (5) days after Landlords receipt of this second notice shall be deemed approval by
Landlord, and if Landlord does not respond within such five (5) day period, then Landlord shall be
deemed to have approved such Transfer request.
27.4. As conditions precedent to Tenant subleasing the Premises or to Landlord considering a
request by Tenant to Tenants transfer of rights or sharing of the Premises, Landlord may require
any or all of the following:
27.4.1 Tenant shall remain fully liable under this Lease during the unexpired Term;
27.4.2 Tenant shall provide Landlord with the Transfer Information;
27.4.3 If Tenants transfer of rights or sharing of the Premises provides for the receipt by,
on behalf of or on account of Tenant of any consideration of any kind whatsoever (including,
without limitation, a premium rental for a sublease or lump sum payment for an assignment) in
excess of the rental and other charges due to Landlord under this Lease, Tenant shall pay fifty
percent (50%) of all of such excess to Landlord, after deductions for tenant improvement allowances
actually provided by Tenant, alterations (including hard and soft costs), cash and other monetary
concessions, marketing expenses, free rent, brokerage commissions and the actual documented and
reasonable attorneys fees necessarily incurred in negotiating such sublease or assignment. If said
consideration consists of cash paid to Tenant, payment to Landlord shall be made upon receipt by
Tenant of such cash payment;
27.4.4 The proposed transferee, assignee or sublessee shall agree that, in the event Landlord
gives such proposed transferee, assignee or sublessee notice that Tenant is in default under this
Lease, such proposed transferee, assignee or sublessee shall thereafter make all payments otherwise
due Tenant directly to Landlord, which payments shall be received by Landlord without any liability
being incurred by Landlord, except to credit such payment against those due by Tenant under this
Lease, and any such proposed transferee, assignee or sublessee shall agree to attorn to Landlord or
its successors and assigns should this Lease be terminated for any reason;
provided
,
however
, that in no event shall Landlord or its Lenders, successors or assigns be obligated
to accept such attornment;
27.4.5 Any such consent to Transfer shall be effected on Landlords forms, subject to changes
by Tenant that are satisfactory to Landlord in its reasonable discretion;
27.4.6 Tenant shall not then be in default hereunder (beyond the expiration of all applicable
notice and cure periods) in any respect;
27.4.7 Such proposed transferee, assignee or sublessees use of the Premises shall not be
inconsistent with the Permitted Use;
27.4.8 Landlord shall not be bound by any provision of any agreement pertaining to the
Transfer, except for Landlords written consent to the same;
27.4.9 Tenant shall pay all transfer and other taxes (including interest and penalties)
assessed or payable for any Transfer;
27.4.10 Landlords consent (or waiver of its rights) for any Transfer shall not waive
Landlords right to consent to any later Transfer;
27.4.11 Tenant shall deliver to Landlord one executed copy of any and all written instruments
evidencing the Transfer; and
27.4.12 A list of Hazardous Materials (as defined in
Section 40.6
below), certified by
the proposed transferee, assignee or sublessee to be true and correct, that the proposed
transferee, assignee or sublessee intends to use or store in the Property. Additionally, Tenant
shall deliver to Landlord, on or before the date any proposed transferee, assignee or sublessee
takes occupancy of the Premises, all of the items relating to Hazardous Materials of such proposed
transferee, assignee or sublessee as described in
Section 40.2
.
34
27.5. Any Transfer that is not in compliance with the provisions of this
Article 27
shall be void and constitute a Default hereunder.
27.6. The consent by Landlord to a Transfer shall not relieve Tenant or proposed transferee,
assignee or sublessee from obtaining Landlords consent to any further Transfer, nor shall it
release Tenant or any proposed transferee, assignee or sublessee of Tenant from full and primary
liability under this Lease.
27.7. Notwithstanding any Transfer, Tenant shall remain fully and primarily liable for the
payment of all Rent and other sums due or to become due hereunder, and for the full performance of
all other terms, conditions and covenants to be kept and performed by Tenant. The acceptance of
Rent or any other sum due hereunder, or the acceptance of performance of any other term, covenant
or condition thereof, from any person or entity other than Tenant shall not be deemed a waiver of
any of the provisions of this Lease or a consent to any Transfer.
27.8.
Licenses to Business Affiliates
. Notwithstanding any contrary provision of this
Article 27
, the original Tenant named hereunder (but not any assignee or subtenant) shall
have the right, without the receipt of Landlords consent, but on prior written notice to Landlord,
to license (but not sublease) up to an aggregate of up to ten percent (10%) of the rentable square
feet of the Expansion Premises to individuals or entities (each, a
Business Affiliate
),
which license to a Business Affiliate shall be on and subject to all of the following conditions:
(i) Tenant shall have a direct contractual business relationship (relating to a primary business of
Tenant conducted in the Expansion Premises and other than Business Affiliates use of the Expansion
Premises) with each such Business Affiliate; (ii) each such Business Affiliate shall be of a
character and reputation consistent with the quality of the Buildings; (iii) each such license
shall clearly specify that it is only a contract right and that the Business Affiliate is not a
subtenant and has no interest in real property; (iv) each such Business Affiliates use of the
Expansion Premises is in a manner consistent with the Permitted Use; (v) no demising walls or
separate entrances shall be constructed in the Expansion Premises to accommodate any such license;
(vi) the term of such license shall not exceed six (6) months; and (vii) the licensee shall pay no
rent or other compensation to Tenant in respect of such license. No such license shall relieve
Tenant from any liability under this Lease.
27.9. If Tenant sublets the Premises or any portion thereof, Tenant hereby immediately and
irrevocably assigns to Landlord, as security for Tenants obligations under this Lease, all rent
from any such subletting, and appoints Landlord as assignee and attorney-in-fact for Tenant, and
Landlord (or a receiver for Tenant appointed on Landlords application) may collect such rent and
apply it toward Tenants obligations under this Lease;
provided
that, until the occurrence
of a Default (beyond the expiration at all applicable notice and cure periods) by Tenant, Tenant
shall have the right to collect such rent.
28.
Attorneys Fees
. If either party commences an action against the other party
arising out of or in connection with this Lease, then the substantially prevailing party shall be
entitled to have and recover from the other party reasonable attorneys fees, charges and
disbursements and costs of suit.
29.
[Intentionally Omitted
].
30.
Definition of Landlord
. With regard to obligations imposed upon Landlord pursuant
to this Lease, the term
Landlord
, as used in this Lease, shall refer only to Landlord or
Landlords then-current successor-in-interest. In the event of any transfer, assignment or
conveyance of Landlords interest in this Lease or in Landlords fee title to or leasehold interest
in the Property, as applicable, Landlord herein named (and in case of any subsequent transfers or
conveyances, the subsequent Landlord) shall be automatically freed and relieved, from and after the
date of such transfer, assignment or conveyance, from all liability for the performance of any
covenants or obligations contained in this Lease thereafter to be performed by Landlord and,
without further agreement, the transferee, assignee or conveyee of Landlords in this Lease or in
Landlords fee title to or leasehold interest in the Property, as applicable, shall be deemed to
have assumed and agreed to observe and perform any and all covenants and obligations of Landlord
hereunder
during the tenure of its interest in this Lease or the Property. Landlord or any subsequent
Landlord may transfer its interest in the Property or this Lease without Tenants consent.
35
31.
Estoppel Certificate
. Tenant shall, within fifteen (15) days of receipt of
written notice from Landlord, execute, acknowledge and deliver a statement in writing substantially
in the form attached to this Lease as
Exhibit I
, or on any other commercially reasonable form
reasonably requested by a proposed Lender or purchaser, (a) certifying that this Lease is
unmodified and in full force and effect (or, if modified, stating the nature of such modification
and certifying that this Lease as so modified is in full force and effect) and the dates to which
rental and other charges are paid in advance, if any, (b) acknowledging that there are not, to
Tenants knowledge, any uncured defaults on the part of Landlord hereunder, or specifying such
defaults if any are claimed, and (c) setting forth such further information with respect to this
Lease or the Property as may be reasonably requested thereon. Any such statement may be relied
upon by any prospective purchaser or encumbrancer of all or any portion of the real property of
which the Premises are a part. Tenants failure to deliver such statement within such the
prescribed time shall, at Landlords option, constitute a Default under this Lease, and, in any
event, shall be binding upon Tenant that this Lease is in full force and effect and without
modification except as may be represented by Landlord in any certificate prepared by Landlord and
delivered to Tenant for execution and that all other statements set forth in such certificate are
true and correct. Landlord shall, within fifteen (15) days of receipt of written notice from
Tenant but in no event more than once every twelve (12) months, provide to Tenant an estoppel
certificate signed by Landlord, (a) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying that this Lease as
so modified is in full force and effect) and the dates to which rental and other charges are paid
in advance, if any, and (b) acknowledging that there are not, to Landlords knowledge, any uncured
defaults on the part of Tenant hereunder, or specifying such defaults if any are claimed.
32.
Joint and Several Obligations
. If more than one person or entity executes this
Lease as Tenant, then:
32.1. Each of them is jointly and severally liable for the keeping, observing and performing
of all of the terms, covenants, conditions, provisions and agreements of this Lease to be kept,
observed or performed by Tenant; and
32.2. The term
Tenant
as used in this Lease shall mean and include each of them,
jointly and severally. The act of, notice from, notice to, refund to, or signature of any one or
more of them with respect to the tenancy under this Lease, including, without limitation, any
renewal, extension, expiration, termination or modification of this Lease, shall be binding upon
each and all of the persons executing this Lease as Tenant with the same force and effect as if
each and all of them had so acted, so given or received such notice or refund, or so signed.
33.
Limitation of Landlords Liability
.
33.1. If Landlord is in default under this Lease and, as a consequence, Tenant recovers a
monetary judgment against Landlord, the judgment shall be satisfied only out of (a) the proceeds of
sale received on execution of the judgment and levy against the right, title and interest of
Landlord in the Property, (b) rent or other income from such real property receivable by Landlord,
(c) the consideration received by Landlord from the sale, financing, refinancing or other
disposition of all or any part of Landlords right, title or interest in the Property and (d) any
casualty insurance proceeds which Landlord receives for damage to the Property.
33.2. Landlord shall not be personally liable for any deficiency under this Lease. If
Landlord is a partnership or joint venture, then the partners of such partnership shall not be
personally liable for Landlords obligations under this Lease, and no partner of Landlord shall be
sued or named as a party in any suit or action, and service of process shall not be made against
any partner of Landlord except as may be necessary to secure jurisdiction of the partnership or
joint venture. If Landlord is a corporation, then the shareholders, directors, officers, employees
and agents of such corporation shall not be personally liable for Landlords obligations under this
Lease, and no shareholder, director, officer, employee or agent of Landlord shall be sued or named
as a party in any suit or action, and service of process shall not be made against any
shareholder, director, officer, employee or agent of Landlord. If Landlord is a limited
liability company, then the members of such limited liability company shall not be personally
liable for Landlords obligations under this Lease, and no member of Landlord shall be sued or
named as a party in any suit or action, and service of process shall not be made against any member
of Landlord except as may be necessary to secure jurisdiction of the limited liability company. No
partner, shareholder, director, employee, member or agent of Landlord shall be required to
36
answer
or otherwise plead to any service of process, and no judgment shall be taken or writ of execution
levied against any partner, shareholder, director, employee or agent of Landlord.
33.3. If Tenant is a partnership or joint venture, then the partners of such partnership
shall not be personally liable for Tenants obligations under this Lease, and no partner of Tenant
shall be sued or named as a party in any suit or action, and service of process shall not be made
against any partner of Tenant except as may be necessary to secure jurisdiction of the partnership
or joint venture. If Tenant is a corporation, then the shareholders, directors, officers,
employees and agents of such corporation shall not be personally liable for Tenants obligations
under this Lease, and no shareholder, director, officer, employee or agent of Tenant shall be sued
or named as a party in any suit or action, and service of process shall not be made against any
shareholder, director, officer, employee or agent of Tenant. If Tenant is a limited liability
company, then the members of such limited liability company shall not be personally liable for
Tenants obligations under this Lease, and no member of Tenant shall be sued or named as a party
in any suit or action, and service of process shall not be made against any member of Tenant
except as may be necessary to secure jurisdiction of the limited liability company. No partner,
shareholder, director, employee, member or agent of Tenant shall be required to answer or
otherwise plead to any service of process, and no judgment shall be taken or writ of execution
levied against any partner, shareholder, director, employee or agent of Tenant. Notwithstanding
the foregoing, in no event shall the provisions of this
Section 33.3
relieve Tenants
partners, shareholders, directors, employees, members or agents of any personal liability arising
out of, or in connection with, such partners, shareholders, directors, employees, members or
agents gross negligence or willful misconduct.
33.4. Each of the covenants and agreements of this
Article 33
shall be applicable to
any covenant or agreement either expressly contained in this Lease or imposed by Applicable Laws
and shall survive the expiration or earlier termination of this Lease.
34.
Control by Landlord
.
34.1. Subject to
Section 34.2
, Landlord and Landlords offices, employees, lenders,
agents, architects, engineering consultants, design team, general contractor, and subcontractors
(collectively
Landlords Agents
) shall have the right, at any time, to enter the Property
and the Buildings to commence and prosecute the construction of Landlords Construction Work, the
Tenant Improvements and to attend to all other activities related thereto.
34.2. Landlord and Landlords Agents may, at any and all reasonable times during non-business
hours (or during business hours if Tenant so requests), and upon twenty-four (24) hours prior
notice (
provided
that no time restrictions shall apply or advance notice be required if an
emergency necessitates immediate entry), enter the Property to (a) inspect the same and to
determine whether Tenant is in compliance with its obligations hereunder, (b) supply any service
Landlord is required to provide hereunder, (c) show the Property to prospective purchasers or
tenants during the final year of the Term, (d) post notices of nonresponsibility, (e) access the
telephone equipment, electrical substation and fire risers, or (f) alter, improve or repair any
portion of the Buildings. In connection with any such alteration, improvement or repair as
described in
Subsection 34.2(f)
above, Landlord and Landlords Agents may erect in the
Property scaffolding and other structures reasonably required for the alteration, improvement or
repair work to be performed. Subject to
Section 18.5
above, in no event shall Tenants
Rent abate as a result of Landlords activities pursuant to this
Section 34.1
;
provided
,
however
, that all such activities shall be conducted in such a manner so
as to cause as little interference to Tenant as is reasonably possible. Landlord shall at all
times retain a key with which to unlock all of the doors in the Premises. If an emergency (where
there is an imminent threat to persons or property) necessitates immediate access to the Premises,
Landlord may use whatever force is necessary to enter the Premises, and any such entry to the
Premises shall not constitute a forcible or unlawful entry to the Premises, a detainer of the
Premises, or an eviction of Tenant from the Premises or any portion thereof.
35.
Quiet Enjoyment
. So long as Tenant is not in default under this Lease or as
otherwise permitted by this Lease, Landlord or anyone acting through or under Landlord shall not
disturb Tenants occupancy of the Premises. Notwithstanding the foregoing, to the extent that
Landlord uses commercially reasonable efforts to minimize any interference with the construction of
the Expansion Building may have on Tenants use and quiet enjoyment of the Diversified Building
Premises for Tenants normal business operations, Tenant hereby (i) accepts any and all
37
inconveniences associated with the construction of the Expansion Building, including, any noise,
paint, fumes, dust, debris, obstruction of access (including any obstruction caused by the erection
of scaffolding, barricades or other necessary structures on the Property), or any other
inconvenience caused by the construction of the Expansion Building, (ii) agrees that the
performance of the construction of the Expansion Building shall not constitute a constructive
eviction nor shall Tenant be entitled to an abatement of Rent, and (iii) acknowledges and agrees
that Landlord shall not, for any reason, be responsible or liable to Tenant for any direct or
indirect injury to Tenant or Tenants Agents, or interference with Tenants business, arising from
the construction of the Expansion Building;
provided
,
however
, that if Landlord
fails to use its commercially reasonable efforts to minimize any interference that the construction
of the Expansion Building may have on Tenants use of the Diversified Building Premises for
Tenants normal business operations, such failure results in an Adverse Condition, and as a direct
result of such Adverse Condition, Tenant is unable to conduct its business in a reasonable manner
in a material portion of the Premises, Tenant shall be entitled to an abatement of rent with
respect to such Adverse Condition to the extent Tenant is entitled to an abatement of rent pursuant
to the terms and conditions of
Section 18.5
above.
36.
Subordination and Attornment
.
36.1. Subject to the delivery of the non-disturbance agreements described in this
Article
36
as a condition precedent to any such subordination, this Lease shall be subject and
subordinate to the lien of any mortgage, deed of trust, or lease in which Landlord is tenant now or
hereafter in force against the Property or any portion thereof and to all advances made or
hereafter to be made upon the security thereof without the necessity of the execution and delivery
of any further instruments on the part of Tenant to effectuate such subordination. In
consideration of, and as a condition precedent to, Tenants agreement to permit its interest
pursuant to this Lease to be subordinated to any particular future ground or underlying lease of
the Buildings or the Property or to the lien of any mortgage or trust deed, hereafter enforced
against the Buildings or the Property and to any renewals, extensions, modifications,
consolidations and replacements thereof, Landlord shall deliver to Tenant a non-disturbance
agreement on (a) the form of
Exhibit M
attached hereto, (b) a commercially reasonable form of
non-disturbance agreements of the lessor under such ground lease or underlying lease or the holder
of such mortgage or trust deed, or (c) another commercially reasonable form. Landlords delivery
to Tenant of non-disturbance agreement(s) in favor of Tenant from any ground lessors, mortgage
holders or lien holders of Landlord who later came into existence at any time prior to the
expiration of the Term shall be in consideration of, and a condition precedent to, Tenants
agreement to be bound by the terms of this
Article 36
. Tenant shall be entitled, at
Tenants sole cost and expense, to record any such non-disturbance agreement promptly after full
execution and delivery of such agreement.
36.2. Notwithstanding the foregoing, Tenant shall execute and deliver upon demand such further
commercially reasonable instrument or instruments evidencing such subordination of this Lease to
the lien of any such mortgage or mortgages or deeds of trust or lease in which Landlord is tenant
as may be required by Landlord. However, if any such mortgagee, beneficiary or Landlord under
lease wherein Landlord is tenant so elects, this Lease shall be deemed prior in lien to any such
lease, mortgage, or deed of trust upon or including the Property regardless of date and Tenant
shall execute a statement in writing to such effect at Landlords request.
36.3. Upon written request of Landlord and opportunity for Tenant to review, Tenant agrees to
execute any Lease amendments not materially altering the terms of this Lease, if required by a
mortgagee or beneficiary of a deed of trust encumbering real property of which the Premises
constitute a part incident to the financing of the real property of which the Premises constitute a
part. Any change affecting the amount or timing of the consideration to be paid by
Tenant or modifying the term of this Lease shall be deemed as materially altering the terms
hereof.
36.4. Subject to
Section 36.1
, in the event any proceedings are brought for
foreclosure, or in the event of the exercise of the power of sale under any mortgage or deed of
trust made by Landlord covering the Property, Tenant shall at the election of the purchaser at such
foreclosure or sale attorn to the purchaser upon any such foreclosure or sale and recognize such
purchaser as Landlord under this Lease.
38
37.
Surrender
.
37.1. No surrender of possession of any part of the Property shall release Tenant from any of
its obligations hereunder, unless such surrender is accepted in writing by Landlord.
37.2. The voluntary or other surrender of this Lease by Tenant shall not effect a merger with
Landlords fee title or leasehold interest in the Property or any portion thereof, unless Landlord
consents in writing, and shall, at Landlords option, operate as an assignment to Landlord of any
or all subleases.
37.3. The voluntary or other surrender of any ground or other underlying lease that now exists
or may hereafter be executed affecting the Property or any portion thereof, or a mutual
cancellation thereof or of Landlords interest therein by Landlord and its lessor shall not effect
a merger with Landlords fee title or leasehold interest in the Property and shall, at the option
of the successor to Landlords interest in the Property or any portion thereof operate as an
assignment of this Lease.
37.4. In the event Tenant has performed any Alterations in accordance with this Lease, upon
surrender of the Premises, Tenant shall reimburse Landlord for any extra costs and expenses
incurred by Landlord by reason of any delays in re-leasing the Premises caused by Tenants removal
of such Alterations.
38.
Waiver and Modification
No provision of this Lease may be modified, amended or
supplemented except by an agreement in writing signed by Landlord and Tenant. The waiver by
Landlord of any breach by Tenant of any term, covenant or condition herein contained shall not be
deemed to be a waiver of any subsequent breach of the same or any other term, covenant or condition
herein contained. The waiver by Tenant of any breach by Landlord of any term, covenant or
condition herein contained shall not be deemed to be a waiver of any subsequent breach of the same
or any other term, covenant or condition herein contained.
39.
Waiver of Jury Trial and Counterclaims
. To the extent allowed under Applicable
Laws, the parties waive trial by jury in any action, proceeding or counterclaim brought by the
other party hereto related to matters arising out of or in any way connected with this Lease; the
relationship between Landlord and Tenant; Tenants use or occupancy of the Property; or any claim
of injury or damage related to this Lease or the Property.
40.
Hazardous Materials
.
40.1. After the Execution Date, Tenant shall not cause or permit any Hazardous Materials (as
hereinafter defined) to be brought upon, kept or used in or about the Property in violation of
Applicable Laws by Tenant or Tenants Agents. If Tenant breaches such obligation, or if the
presence of Hazardous Materials brought upon, kept or used in or about the Property by Tenant or
Tenants Agents results in contamination of the Property or any adjacent property, or if
contamination of the Property or any adjacent property by Hazardous Materials otherwise occurs
during the term of this Lease or any extension or renewal hereof or holding over hereunder (other
than in connection with substances that migrated to the Property from any adjoining property,
except in the event Tenant is aware of such contamination and neither remedies such contamination
nor promptly notifies Landlord of the existence of such contamination), then Tenant shall
indemnify, save, defend and hold Landlord, its agents and contractors harmless from and against any
and all claims, judgments, damages, penalties, fines, costs, liabilities and losses (including,
without limitation, diminution in value of the Property or any portion thereof;
damages for the loss or restriction on use of rentable or usable space or of any amenity of
the Property; damages arising from any adverse impact on marketing of space in the Property; and
sums paid in settlement of claims, attorneys fees, consultants fees and experts fees) that arise
during or after the Term as a result of such breach or contamination, except to the extent arising
solely out of Landlords construction of the Landlords Construction Work or the Tenant
Improvements;
provided
,
however
, in no event shall Tenants indemnity extend to
consequential damages; provided that this sentence shall not limit Landlords damages if, as a
result of Tenants breach of this Lease: (a) Landlord does not or is unable to lease the Premises
to another party, or (b) a third party is unable to occupy the Premises on the date specified in
such third partys lease. This indemnification of Landlord by Tenant includes, without limitation,
costs incurred in connection with any investigation of site conditions or any cleanup, remedial,
removal or restoration work required by any Governmental Authority because of Hazardous
39
Materials
present in the air, soil or groundwater above, on or under the Property. Without limiting the
foregoing, if the presence of any Hazardous Materials in, on, under or about the Property or any
adjacent property caused or permitted by Tenant or Tenants Agents results in any contamination of
the Property or any adjacent property, then Tenant shall promptly take all actions at its sole cost
and expense as are necessary to return the Property and any adjacent property to their respective
condition existing prior to the time of such contamination; provided that Landlords written
approval of such action shall first be obtained, which approval Landlord shall not unreasonably
withhold; and provided, further, that it shall be reasonable for Landlord to withhold its consent
if such actions could have a material adverse long-term or short-term effect on the Property.
40.2. Landlord acknowledges that it is not the intent of this
Article 40
to prohibit
Tenant from operating its business as described in
Section 2.8
above. Tenant may operate
its business according to the custom of Tenants industry so long as the use or presence of
Hazardous Materials is strictly and properly monitored according to Applicable Laws. As a material
inducement to Landlord to allow Tenant to use Hazardous Materials in connection with its business,
Tenant agrees to deliver to Landlord prior to the Term Commencement Date a list identifying each
type of Hazardous Material to be present on the Property and setting forth any and all governmental
approvals or permits required in connection with the presence of such Hazardous Material on the
Property (the
Hazardous Materials List
). Tenant shall deliver to Landlord an updated
Hazardous Materials List on or prior to each annual anniversary of the Term Commencement Date and
shall also deliver an updated Hazardous Materials List before any new Hazardous Materials are
brought onto the Property. Tenant shall deliver to Landlord true and correct copies of the
following documents (hereinafter referred to as the
Documents
) relating to the handling,
storage, disposal and emission of Hazardous Materials prior to the Term Commencement Date or, if
unavailable at that time, concurrent with the receipt from or submission to any Governmental
Authority: permits; approvals; reports and correspondence; storage and management plans; notices
of violations of Applicable Laws; plans relating to the installation of any storage tanks to be
installed in or under the Property (
provided
that installation of storage tanks shall only
be permitted after Landlord has given Tenant its written consent to do so, which consent Landlord
may withhold in its sole and absolute discretion); and all closure plans or any other documents
required by any and all Governmental Authorities for any storage tanks installed in, on or under
the Property for the closure of any such storage tanks. Tenant shall not be required, however, to
provide Landlord with any portion of the Documents containing information of a proprietary nature
that, in and of themselves, do not contain a reference to any Hazardous Materials or activities
related to Hazardous Materials.
40.3. At any time, and from time to time, prior to the expiration of the Term, Landlord shall
have the right to conduct appropriate tests of the Property to demonstrate that Hazardous Materials
are present or that contamination has occurred due to Tenant or Tenants agents, employees or
invitees. Tenant shall pay all reasonable costs of such tests of the Property if such tests
demonstrate that Tenant has breached any provision of this Lease regarding Hazardous Materials or
has any clean-up obligations under this
Article 40
.
40.4. If underground or other storage tanks storing Hazardous Materials are: (a) located on
the Property; (b) hereafter placed on the Property by Tenant or Tenants Agents, (c) hereafter used
by Tenant or Tenants Agents, or (d) placed on the Property by any other party and Tenant is aware
that such party placed such underground or other storage tank on the Property, Tenant shall monitor
the storage tanks, maintain appropriate records, implement reporting procedures, properly close any
underground storage tanks, and take or cause to be taken all other steps
necessary or required under the Applicable Laws. Tenant shall pay all reasonable costs of
such tests of the Property
40.5. Tenants and Landlords obligations under this
Article 40
shall survive the
expiration or earlier termination of this Lease. During any period of time needed by Tenant or
Landlord after the termination of this Lease to complete the removal from the Property of any such
Hazardous Materials that Tenant is liable for pursuant to the terms and conditions of this Lease,
Tenant shall continue to pay Rent in accordance with this Lease, which Rent shall be prorated
daily.
40.6. As used herein, the term Hazardous Material means any hazardous or toxic substance,
material or waste that is or becomes regulated by any Governmental Authority.
40
41.
Miscellaneous
.
41.1. This Lease shall not be effective until, and shall be contingent upon, the satisfaction
of each of the following conditions: (a) the Illumina Lease shall have been fully executed and be
in full force and effect, (b) Landlord shall have received Northwestern Mutual Life Insurance
Companys consent to the Illumina Lease and release of its security interest in Parcel 3, (c)
Landlord shall have conveyed the Parcel 3 Land (including the Diversified Building) to, and
assigned all of its interests in this Lease to, BMR-9865 Towne Centre Drive, LLC, a Delaware
limited liability company, and (d) Landlord has received formal approval of substantial conformance
review and plan checks comments from the City of San Diego in connection with the Expansion
Building, which approval and comments shall not contain any required changes that cause Landlord to
materially alter the Landlords Construction Work or Tenant Improvements. If the conditions set
forth in this
Section 41.1
are not satisfied or waived on or before April 10, 2007, this
Lease shall become null and void.
41.2. Within five (5) business days after the end of each calendar month, Tenant shall submit
to Landlord an invoice, or, in the event an invoice is not available, an itemized list of expenses,
of all costs and expenses that: (a) Tenant has incurred during the prior month; and (b) Tenant has
reasonably determined that Landlord is obligated to reimburse such costs and expenses pursuant to
the terms of this Lease.
41.3. This Lease shall be deemed and construed to be an absolute net lease and, except as
herein expressly provided, Landlord shall receive all payments required to be made by Tenant free
from all charges, assessments, impositions, expenses and deductions of any and every kind or nature
whatsoever. Landlord shall not be required to furnish any services or facilities or to make any
repairs, replacements or alterations of any kind in or on the Property except as specifically
provided herein. Tenant shall receive all invoices and bills relative to the Property (including
the Diversified Space) and, except as otherwise provided herein, shall pay for all expenses
directly to the person or company submitting a bill without first having to forward payment for the
expenses to Landlord. Tenant shall at Tenants sole cost and expense be responsible for the
management of the Property (other than the Diversified Space), shall maintain the landscaping and
parking lot, and shall make those additional repairs and alterations required of Tenant hereunder
to maintain the Property (other than the Diversified Space) in first class condition.
41.4. Where applicable in this Lease, the singular includes the plural and the masculine or
neuter includes the masculine, feminine and neuter. The Section headings of this Lease are not a
part of this Lease and shall have no effect upon the construction or interpretation of any part
hereof.
41.5. Submission of this instrument for examination or signature by Tenant does not constitute
a reservation of or option for a lease, and shall not be effective as a lease or otherwise until
execution by and delivery to both Landlord and Tenant.
41.6. Time is of the essence with respect to the performance of every provision of this Lease
in which time of performance is a factor.
41.7. Each provision of this Lease performable by Tenant shall be deemed both a covenant and a
condition.
41.8. Whenever consent or approval of either party is required, that party shall not
unreasonably withhold such consent or approval, except as may be expressly set forth to the
contrary.
41.9. The terms of this Lease are intended by the parties as a final expression of their
agreement with respect to the terms as are included herein, and may not be contradicted by evidence
of any prior or contemporaneous agreement.
41.10. Any provision of this Lease that shall prove to be invalid, void or illegal shall in no
way affect, impair or invalidate any other provision hereof, and all other provisions of this Lease
shall remain in full force and effect and shall be interpreted as if the invalid, void or illegal
provision did not exist.
41
41.11. Landlord may, but shall not be obligated to, record a short form memorandum hereof
without Tenants consent. Tenant shall reasonably cooperate with Landlord in such recording.
Neither party shall record this Lease. Tenant shall have the right to record a memorandum of this
Lease (which Landlord shall execute);
provided
,
however
, that Tenant shall be
responsible for the cost of recording any memorandum of this Lease, including any transfer or other
taxes incurred in connection with said recordation. Landlord shall reasonably cooperate with
Tenant in such recording at Tenants sole cost and expense.
41.12. The language in all parts of this Lease shall be in all cases construed as a whole
according to its fair meaning and not strictly for or against either Landlord or Tenant.
41.13. Each of the covenants, conditions and agreements herein contained shall inure to the
benefit of and shall apply to and be binding upon the parties hereto and their respective heirs;
legatees; devisees; executors; administrators; and permitted successors, assigns, sublessees.
Nothing in this
Section 41.13
shall in any way alter the provisions of this Lease
restricting assignment or subletting.
41.14. Any notice, consent, demand, bill, statement or other communication required or
permitted to be given hereunder shall be in writing and shall be given by personal delivery,
overnight delivery with a reputable nationwide overnight delivery service, or certified mail
(return receipt requested), and if given by personal delivery, shall be deemed delivered upon
receipt; if given by overnight delivery, shall be deemed delivered one (1) day after deposit with a
reputable nationwide overnight delivery service; and, if given by certified mail (return receipt
requested), shall be deemed delivered three (3) business days after the time the notifying party
deposits the notice with the United States Postal Service. Any notices given pursuant to this
Lease shall be addressed to Tenant at the Premises, or to Landlord or Tenant at the addresses shown
in
Sections 2.10
and
2.11
, respectively. Either party may, by notice to the other
given pursuant to this Section, specify additional or different addresses for notice purposes.
41.15. This Lease shall be governed by, construed and enforced in accordance with the laws of
the State in which the Property is located, without regard to such States conflict of law
principles.
41.16. That individual or those individuals signing this Lease guarantee, warrant and
represent that said individual or individuals have the power, authority and legal capacity to sign
this Lease on behalf of and to bind all entities, corporations, partnerships, limited liability
companies, joint venturers or other organizations and entities on whose behalf said individual or
individuals have signed.
41.17. To induce Landlord to enter into this Lease, Tenant agrees that it shall promptly
furnish to Landlord, from time to time, upon Landlords written request, the most recent audited
year-end financial statements reflecting Tenants current financial condition. Tenant shall,
within ninety (90) days after the end of Tenants financial year, furnish Landlord with a certified
copy of Tenants audited year-end financial statements for the previous year. Tenant represents
and warrants that all financial statements, records and information furnished by Tenant to Landlord
in connection with this Lease are true, correct and complete in all respects. Notwithstanding the
foregoing, the provisions of this
Section 41.17
shall not apply to Tenant so long as Tenant
is a publicly traded company that is listed on a United States stock exchange.
41.18. This Lease is subject to any recorded covenants, conditions or restrictions now or
hereinafter affecting the Premises or the Property (the
CC&R
s). Tenant shall comply with
all CC&Rs except to the extent any future CC&Rs (a) materially adversely affects Tenants use of
the Premises for its Permitted Use; or (b) materially increase Tenants costs under this Lease.
42.
Option to Extend Term
. Tenant shall have the option (
Option
) to extend
the Term of this Lease as to the entire Premises (and no less than the entire Premises) upon the
following terms and conditions. Any extension of the Term pursuant to any Option shall be on all
the same terms and conditions as this Lease, except as follows:
42.1. Tenant shall have three (3) options to extend the Term of this Lease by five (5) years
each (each, an
Extended Term
), upon the same terms and conditions as this Lease (except
as provided below). Basic Annual Rent for the Diversified Building Premises and the Expansion
Premises shall be adjusted on the first (1st) day of each Extended Term and every
42
twenty-four (24)
months thereafter in accordance with
Article 7
. The Basic Annual Rent during each Extended
Term shall equal the greater of: (a) the Fair Market Value for the Extended Term; and (b) 102.5% of
the then-current Basic Annual Rent at the end of the then-current Term or Extended Term, as
applicable.
Fair Market Value
means the then-prevailing average annual rate that
comparable landlords have accepted in current transactions from new, non-equity (i.e., not being
offered equity in the Buildings), nonrenewal, nonexpansion and nonaffiliated tenants of similar
financial strength for comparable space in comparable class A office buildings comparably
located, with comparable size, quality and floor height in a first class office building, or as
appropriate, a laboratory building, taking into consideration all relevant factors, including,
without limitation, the proposed lease term, the tenant inducements, allowances or concessions, if
any, and excluding specialized tenant improvements or tenant paid improvements for a comparable
term, with the determination of Fair Market Value to take into account all relevant factors,
including tenant inducements, allowances or concessions, if any, the extent of the services
provided or to be provided to the Premises, and contraction and expansion options. In the event
the tenant inducements, allowances or concessions granted differ from the terms contained in this
Lease, an adjustment to the Fair Market Value shall be made on a basis consistent with the
adjustments commonly made in the market for comparable differences and concession packages. If
Landlord and Tenant cannot agree on the Fair Market Value for purposes of any Extended Term then
they shall engage a mutually agreeable independent third party appraiser, which appraiser shall be
a real estate broker with at least ten (10) years experience in appraising the rental value of
leased commercial premises (for research and development and laboratory uses) in the San Diego,
California area (the
Appraiser
). If the parties cannot agree on the Appraiser, each
shall within ten (10) days after such impasse appoint an Appraiser (meeting the qualifications set
forth above) and, within ten (10) days after the appointment of both such Appraisers, those two
Appraisers shall select a third Appraiser meeting the qualifications set forth above. If either
party fails to timely appoint an Appraiser, then the Appraiser the other party appoints shall be
the sole Appraiser. Within ten (10) days after appointment of all Appraiser(s), Landlord and
Tenant shall each simultaneously give the Appraisers (with a copy to the other party) its
determination of Fair Market Value, with such supporting data or information as each submitting
party determines appropriate. Within ten (10) days after such submissions, the Appraisers shall by
majority vote select either Landlords or Tenants Fair Market Value. The Appraisers may not
select or designate any other Fair Market Value. The determination of the Appraiser(s) shall bind
the parties
42.2. The Option is not assignable separate and apart from this Lease.
42.3. The Option is conditional upon Tenant giving Landlord written notice of its election to
exercise an Option at least twelve (12) months prior to the end of the expiration of the initial
term of this Lease and, if exercised, the applicable Extended Term. Time shall be of the essence
as to Tenants exercise of each Option. Tenant assumes full responsibility for maintaining a
record of the deadlines to exercise any Option(s). Tenant acknowledges that it would be
inequitable to require Landlord to accept any exercise of any Option(s) after the date provided for
in this Section.
42.4. Notwithstanding anything contained in this
Article 42
, Tenant shall not have the
right to exercise an Option:
42.4.1 During the time commencing from the date Landlord delivers to Tenant a written notice
that Tenant is in monetary or material non-monetary default under any provision of this Lease or
the Illumina Lease and continuing until Tenant has cured the specified default; or
42.4.2 At any time after any Default as described in
Article 26
of this Lease
(
provided
,
however
, that, for purposes of this
Subsection 42.4(b)
, Landlord
shall not be required to provide Tenant with notice of such Default) and continuing until Tenant
cures any such Default, if such Default is susceptible to being cured; or
42.4.3 In the event that Tenant has defaulted in the performance of its obligations under this
Lease three (3) or more times and a service or late charge has become payable under
Section
26.1
for each of such defaults during the twelve (12)-month period immediately prior to the
date that Tenant intends to exercise an Option, whether or not Tenant has cured such defaults.
43
42.5. The period of time within which Tenant may exercise an Option shall not be extended or
enlarged by reason of Tenants inability to exercise such Option because of the provisions of
Section 42.4
.
43.
Tenants Authority
. Tenant hereby covenants and warrants that (a) Tenant is duly
incorporated or otherwise established or formed and validly existing under the laws of its state of
incorporation, establishment or formation, (b) Tenant has and is duly qualified to do business in
the state in which the Property is located, (c) Tenant has full corporate, partnership, trust,
association or other appropriate power and authority to enter into this Lease and to perform all
Tenants obligations hereunder and (d) each person (and all of the persons if more than one signs)
signing this Lease on behalf of Tenant is duly and validly authorized to do so.
44.
Landlords Authority
. Landlord hereby covenants and warrants that (a) Landlord is
duly incorporated or otherwise established or formed and validly existing under the laws of its
state of incorporation, establishment or formation, (b) Landlord has and is duly qualified to do
business in the state in which the Property is located, (c) Landlord has full corporate,
partnership, trust, association or other appropriate power and authority to enter into this Lease
and to perform all Landlords obligations hereunder and (d) each person (and all of the persons if
more than one signs) signing this Lease on behalf of Landlord is duly and validly authorized to do
so.
45.
Confidentiality
. Neither party shall disclose any terms or conditions of this
Lease (including Rent) or give a copy of this Lease to any third party, and Landlord shall not
release to any third party any nonpublic financial information or nonpublic information about
Tenants ownership structure that Tenant gives Landlord, except (a) if required by Applicable Laws
or in any judicial proceeding,
provided
that the releasing party has given the other party
reasonable notice of such requirement, if feasible, (b) to a partys attorneys, accountants,
brokers and other bona fide consultants or advisers,
provided
such third parties agree to
be bound by this Section or (c) to bona fide prospective assignees or subtenants of this Lease,
provided they agree in writing to be bound by this Section.
46.
Excavation
. If any excavation shall be made upon land adjacent to or under the
Buildings, or shall be authorized to be made, Tenant shall afford to the person causing or
authorized to cause such excavation, license to enter the Property for the purpose of performing
such work as said person shall deem necessary or desirable to preserve and protect the Buildings
from injury or damage and to support the same by proper foundations, without any claim for damages
or liability against Landlord and without, subject to the terms and conditions of this Lease,
reducing or otherwise affecting Tenants obligations under this Lease.
47.
Telecommunications Equipment
. At any time during the Term, subject to the terms
of this
Article 47
and subject to Landlords prior written approval, which approval shall
not be unreasonably withheld or
delayed, Tenant shall have the exclusive right to install, at Tenants sole cost and expense,
satellite or microwave dishes or other communication equipment (the
Telecommunications
Equipment
) upon the roof of the Expansion Building. The physical appearance and the size of
the Telecommunications Equipment shall be subject to Landlords written approval prior to
installation, which approval will not unreasonably be withheld, any covenants, conditions, or
restrictions encumbering the Property and, any Applicable Laws. Tenant shall maintain such
Telecommunications Equipment in good condition and repair, at Tenants sole cost and expense. The
cost of the Telecommunications Equipment, including but not limited to the permitting,
installation, maintenance and removal thereof shall be at Tenants sole cost and expense. If Tenant
fails to maintain its Telecommunications Equipment, or if Tenant fails to remove such
Telecommunications Equipment upon termination of this Lease, or fails to repair any damage caused
by such removal, Landlord may do so at Tenants expense. Tenant shall on demand reimburse Landlord
for all costs incurred by Landlord to effect such removal, which amounts shall be deemed Additional
Rent and shall include without limitation, all sums disbursed, incurred or deposited by Landlord,
including Landlords costs, expenses and actual attorneys fees with interest thereon. Tenant
shall indemnify, defend and hold harmless Landlord from and against any loss, cost, claim, lawsuit,
liability or expense (including reasonable attorneys fees and disbursements) arising directly or
indirectly out of Tenants failure to perform any of its obligations under this
Article 47
.
48.
Access to Premises
. Subject to
Section 34.2
, Tenant shall be granted
access to the Premises (including the parking facilities) twenty-four (24) hours per day, seven (7)
days per week, every day of the year.
44
49.
Secured Areas
. Notwithstanding anything to the contrary set forth in this Lease,
Tenant may designate certain areas of the Premises as Secured Areas should Tenant require such
areas for the purpose of securing certain valuable property or confidential information. Landlord
may not enter such Secured Areas except in the case of emergency or in the event of a Landlord
inspection, in which case Landlord shall provide Tenant with one (1) business day prior written
notice of the specific date and time of such Landlord inspection.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
45
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the date first above
written.
|
|
|
|
|
LANDLORD
:
|
|
|
|
|
|
|
|
BMR-9885 TOWNE CENTRE DRIVE LLC
,
a Delaware limited liability company
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TENANT
:
|
|
|
|
|
|
|
|
ILLUMINA, INC.
,
a Delaware corporation
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
[Signature Page Parcel 3: Illumina Lease]
EXHIBIT A
ORIGINAL ILLUMINA LEASE PREMISES
TOWNE
CENTRE DRIVE
EXHIBIT A-1
EXHIBIT B
INTENTIONALLY OMITTED
EXHIBIT B-1
EXHIBIT C
PHASE 1 PREMISES
(to be attached by the parties on or before
Substantial Completion of the Landlords Construction Work}
EXHIBIT C-1
EXHIBIT D
PHASE 2 PREMISES
(to be attached by the parties on or before
Substantial Completion of the Landlords Construction Work}
EXHIBIT D-1
EXHIBIT E
PHASE 3 PREMISES
(to be attached by the parties on or before
Substantial Completion of the Landlords Construction Work}
EXHIBIT E-1
EXHIBIT F
ACKNOWLEDGEMENT OF [PHASE 1][PHASE 2][PHASE 3]
COMMENCEMENT DATE AND EXPIRATION DATE
THIS ACKNOWLEDGEMENT OF [PHASE 1][PHASE 2][PHASE 3] COMMENCEMENT DATE AND EXPIRATION DATE is
entered into as of [___], 20[___], with reference to that certain Lease (the
Lease
)
dated as of January 26, 2007, by Illumina, Inc., a Delaware corporation (
Tenant
), in
favor of BMR-9885 Towne Centre Drive LLC, a Delaware limited liability company
(
Landlord
). All capitalized terms used herein without definition shall have the meanings
ascribed to them in the Lease.
Tenant hereby confirms the following:
1.
|
|
Tenant accepted possession of the [Phase 1][Phase 2][Phase 3] Premises on [___], 20[___].
|
|
2.
|
|
The [Phase 1][Phase 2][Phase 3] Premises are in good order, condition and repair.
|
|
3.
|
|
Landlords Construction Work and the Tenant Improvements required to be constructed by
Landlord under the Lease have been substantially completed.
|
|
4.
|
|
All conditions of the Lease to be performed by Landlord as a condition to the full
effectiveness of the Lease have been satisfied, and Landlord has fulfilled all of its duties
in the nature of inducements offered to Tenant to lease the [Phase 1][Phase 2][Phase 3]
Premises.
|
|
5.
|
|
In accordance with the provisions of
Section [5.2.2][5.2.3][5.2.4]
of the Lease, the
[Phase 1][Phase 2][Phase 3] Commencement Date is [___], 20[___], and, unless the Lease is
terminated prior to the Expiration Date pursuant to its terms, the Expiration Date shall be
[___], 20[___].
|
|
6.
|
|
Tenant commenced occupancy of the [Phase 1][Phase 2][Phase 3] Premises for the Permitted Use
on [___], 20[___].
|
|
7.
|
|
The Lease is in full force and effect, and the same represents the entire agreement between
Landlord and Tenant concerning the [Phase 1][Phase 2][Phase 3] Premises [, except [___]].
|
|
8.
|
|
Tenant has no existing defenses against the enforcement of the Lease by Landlord, and there
exist no offsets or credits against Rent owed or to be owed by Tenant.
|
|
9.
|
|
The obligation to pay Rent is presently in effect and all Rent obligations on the part of
Tenant under the Lease commenced to accrue on [___], 20[___].
|
|
10.
|
|
The undersigned Tenant has not made any prior assignment, transfer, hypothecation or pledge
of the Lease or of the rents thereunder or sublease of the Premises or any portion thereof.
|
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
EXHIBIT F-1
IN WITNESS WHEREOF, Tenant has executed this Acknowledgment of [Phase 1][Phase 2][Phase 3]
Commencement Date and Expiration Date as of [___], 20[___].
|
|
|
|
|
ILLUMINA, INC.
,
a Delaware corporation
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACKNOWLEDGED AND AGREED
:
|
|
|
|
|
|
|
|
BMR-9885 TOWNE CENTRE DRIVE LLC
,
a Delaware limited liability company
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
EXHIBIT F-2
EXHIBIT G
TENANTS PERSONAL PROPERTY
1)
|
|
All Data Servers/Racks that are not mounted to the floor
|
|
2)
|
|
2 large UPSs
|
|
a)
|
|
1 in the A/2 Data Room
|
|
|
b)
|
|
1 in the A/1 Shipping area
|
3)
|
|
RO/DI Water System
|
|
4)
|
|
Backup Generator
|
|
5)
|
|
Boardroom Electronics and Podium
|
|
6)
|
|
All Modular Furniture
|
|
7)
|
|
All Shelving/Racking
|
|
8)
|
|
Reagent Delivery System
|
|
9)
|
|
Caging Material
|
|
10)
|
|
All Equipment Specific to the Production Process of Illumina other than Fume Hoods and
Bio-Safety Cabinets
|
EXHIBIT G-1
EXHIBIT H
RULES AND REGULATIONS
NOTHING IN THESE RULES AND REGULATIONS (
RULES AND REGULATIONS
) SHALL SUPPLANT ANY
PROVISION OF THE LEASE. IN THE EVENT OF A CONFLICT OR INCONSISTENCY BETWEEN THESE RULES AND
REGULATIONS AND THE LEASE, THE LEASE SHALL PREVAIL.
1.
|
|
Except as specifically provided in the Lease to which these Rules and Regulations are
attached, no sign, placard, picture, advertisement, name or notice shall be installed or
displayed on any part of the outside of the Buildings or in the Common Areas without
Landlords prior written consent. Landlord shall have the right to remove, at Tenants sole
cost and expense and without notice, any sign installed or displayed in violation of this
rule.
|
2.
|
|
If Landlord objects in writing to any curtains, blinds, shades, screens or hanging plants or
other similar objects attached to or used in connection with any window or door of the
Buildings or placed on any windowsill, which window, door or windowsill is (a) visible from
the exterior of the Buildings and (b) not included in plans approved by Landlord, then Tenant
shall promptly remove said curtains, blinds, shades, screens or hanging plants or other
similar objects at its sole cost and expense.
|
3.
|
|
Tenant shall not obstruct any sidewalks or entrances to the Buildings, or any halls,
passages, exits, entrances or stairways within the Premises, in any case that are required to
be kept clear for health and safety reasons.
|
4.
|
|
Tenant shall not place a load upon any floor of the Premises that exceeds the load per square
foot that (a) such floor was designed to carry or (b) that is allowed by Applicable Laws.
|
5.
|
|
Tenant shall not use any method of heating or air conditioning other than that shown in the
Tenant Improvement plans.
|
6.
|
|
Tenant shall not install any radio, television or other antenna, cell or other communications
equipment, or any other devices on the roof or exterior walls of the Buildings except to the
extent shown on approved Tenant Improvements plans or as otherwise provided in the Lease.
Tenant shall not interfere with radio, television or other communications from or in the
Buildings or elsewhere.
|
7.
|
|
Canvassing, peddling, soliciting and distributing handbills or any other written material
within, on or around the Property is prohibited, and Tenant shall cooperate to prevent such
activities.
|
8.
|
|
Tenant shall store all of its trash, garbage and Hazardous Materials within its Premises or
in designated receptacles outside of the Premises. Tenant shall not place in any such
receptacle any material that cannot be disposed of in the ordinary and customary manner of
trash, garbage and Hazardous Materials disposal.
|
9.
|
|
The Property shall not be used for any unlawful or reasonably objectionable purposes. No
cooking shall be done or permitted on the Property;
provided
,
however
, that
Tenant may use (a) equipment approved in accordance with the requirements of insurance
policies that Landlord or Tenant is required to purchase and maintain pursuant to the Lease
for brewing coffee, tea, hot chocolate and similar beverages, (b) microwave ovens for
employees use and (c) equipment shown on Tenant Improvement plans approved by Landlord;
provided, further, that any such equipment and microwave ovens are used in accordance with
Applicable Laws.
|
10.
|
|
Tenant shall not, without Landlords prior written consent, use the name of the Premises, if
any, in connection with or in promoting or advertising Tenants business except as Tenants
address.
|
11.
|
|
Tenant shall comply with all safety, fire protection and evacuation procedures and
regulations established by Landlord or any Governmental Authority.
|
EXHIBIT H-1
12.
|
|
Tenant assumes any and all responsibility for protecting the Property from theft, robbery and
pilferage, which responsibility includes keeping doors locked and other means of entry to the
Premises closed.
|
13.
|
|
Landlord may waive any one or more of these Rules and Regulations for the benefit of Tenant,
but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in
favor of Tenant, nor prevent Landlord from thereafter enforcing any such Rules and Regulations
against Tenant.
|
14.
|
|
These Rules and Regulations are in addition to, and shall not be construed to in any way
modify or amend, in whole or in part, the terms covenants, agreements and conditions of the
Lease.
|
15.
|
|
Landlord reserves the right to make such other reasonable rules and regulations as, in its
judgment, may from time to time be needed for safety and security, the care and cleanliness of
the Property, or the preservation of good order therein;
provided
,
however
,
that Landlord shall provide written notice to Tenant of such rules and regulations prior to
them taking effect. Tenant agrees to abide by these Rules and Regulations and any additional
reasonable rules and regulations issued or adopted by Landlord.
|
16.
|
|
Tenant shall not permit or allow any vehicles that belong to or are controlled by Tenant or
Tenants Agents to be loaded, unloaded or parked in areas other than those designated by
Landlord for such activities. No vehicles are to be left in the parking areas overnight and
no vehicles are to be parked in the parking areas other than normally sized passenger
automobiles, motorcycles and pick-up trucks. No extended term storage of vehicles is
permitted. Landlord reserves the right, without cost or liability to Landlord, to tow any
vehicle if such vehicles audio theft alarm system remains engaged for an unreasonable period
of time. Washing, waxing, cleaning or servicing of any vehicle in any portion of the Property
is prohibited.
|
17.
|
|
Tenant shall be responsible for the observance of these Rules and Regulations by Tenants
employees, agents, clients, customers, invitees and guests.
|
EXHIBIT H-2
EXHIBIT I
FORM OF ESTOPPEL CERTIFICATE
|
|
|
To:
|
|
BMR-9885 Towne Centre Drive LLC
17140 Bernardo Center Drive, Suite 222
San Diego, CA 92128
Attention: General Counsel/Real Estate
BioMed Realty, L.P.
c/o BioMed Realty Trust, Inc.
17140 Bernardo Center Drive, Suite 222
San Diego, CA 92128
|
Re: 9885 Towne Centre Drive (the
Premises
) at 9885 Towne Centre Drive, San Diego,
California (the
Property
)
The undersigned tenant (
Tenant
) hereby certifies to you as follows:
1. Tenant is a tenant at the Property under a lease (the
Lease
) for the Premises dated as
of [
], 20[___]. The Lease has not been cancelled, modified, assigned, extended or amended
[except as follows: [
]], and there are no other agreements, written or oral, affecting or
relating to Tenants lease of the Premises or any other space at the Property. The lease term
expires on [
], 20[___].
2. Tenant took possession of the Premises, currently consisting of [
] square feet, on
[
], 20[___], and commenced to pay rent on [
], 20[___]. Tenant has full possession of
the Premises, has not assigned the Lease or sublet any part of the Premises, and does not hold the
Premises under an assignment or sublease[, except as follows: [
]].
3. All base rent, rent escalations and additional rent under the Lease have been paid through
[
], 20[___]. There is no prepaid rent[, except $[
]][, and the amount of security
deposit is $[
] [in cash][in the form of a letter of credit]]. Tenant currently has no right
to any future rent abatement under the Lease.
4. Base rent is currently payable in the amount of $[
] per month.
5. Tenant is currently paying estimated payments of additional rent of $[
] per month on
account of real estate taxes, insurance, management fees and common area maintenance expenses.
6. All work to be performed for Tenant under the Lease has been performed as required under the
Lease and has been accepted by Tenant[, except [
]], and all allowances to be paid to Tenant,
including allowances for tenant improvements, moving expenses or other items, have been paid.
7. The Lease is in full force and effect, free from default and free from any event that could
become a default under the Lease, and Tenant has no claims against the landlord or offsets or
defenses against rent, and there are no disputes with the landlord. Tenant has received no notice
of prior sale, transfer, assignment, hypothecation or pledge of the Lease or of the rents payable
thereunder[, except [
]].
8. [Tenant has the following expansion rights or options for the Property: [
].][Tenant has
no rights or options to purchase the Property.]
9. To Tenants knowledge, no hazardous wastes have been generated, treated, stored or disposed of
by or on behalf of Tenant in, on or around the Property in violation of any environmental laws.
10. The undersigned has executed this Estoppel Certificate with the knowledge and understanding
that [INSERT NAME OF LANDLORD, PURCHASER OR LENDER, AS APPROPRIATE] or its assignee is acquiring
the Property in reliance on this certificate and that the undersigned shall be bound by this
certificate. The statements contained herein may be relied upon by [INSERT NAME OF PURCHASER OR
LENDER, AS APPROPRIATE],
EXHIBIT I-1
[LANDLORD], BioMed Realty, L.P., BioMed Realty Trust, Inc., and any mortgagee of the Property and
their respective successors and assigns.
Any capitalized terms not defined herein shall have the respective meanings given in the
Lease.
Dated this [___] day of [
], 20[___].
[
],
a [
]
EXHIBIT I-2
EXHIBIT J
WORK LETTER
This Work Letter (the
Work Letter
) is made and entered into as of the
26
th
day of January, 2007, by and between BMR-9885 Towne Centre Drive LLC, a Delaware
limited liability company (
Landlord
), and Illumina, Inc., a Delaware corporation
(
Tenant
), and is attached to and made a part of that certain Lease dated as of January
26, 2007 (the
Lease
), by and between Landlord and Tenant for the Premises located at 9885
Towne Centre Drive in San Diego, California. All capitalized terms used but not otherwise defined
herein shall have the meanings given them in the Lease.
1.
General Requirements
.
1.1
Tenants Authorized Representative
. Tenant designates Jeff Hughson (
Tenants
Authorized Representative
) as the person authorized to initial all plans, drawings, changes
orders and approvals pursuant to this Work Letter. Landlord shall not be obligated to respond to
or act upon any such item until such item has been initialed by Tenants Authorized Representative.
Tenant may change Tenants Authorized Representative upon five (5) days prior written notice to
Landlord.
1.2
Responsibility Matrix
. Landlord and Tenant have approved that certain
Responsibility Matrix attached hereto as
Exhibit A-1
(the
Responsibility Matrix
). The
Responsibility Matrix shall be determinative in allocating work between the Tenant Improvements and
the Landlords Construction Work.
1.3
Landlords Construction Work
. The schedule for the design and development of
Landlords Construction Work (as defined in the Lease), including, without limitation, the time
periods for preparation and review of construction documents, approvals and performance, shall be
in accordance with that certain schedule prepared by Landlord and Tenant attached as
Exhibit A-2
to
this Work Letter (the
Landlords Construction Work Schedule
). The Landlords
Construction Work Schedule shall be subject to adjustment as mutually agreed upon in writing by the
parties, or as provided in this Work Letter.
1.4
Landlords Construction Work: Architects and Consultants
. The architect,
engineering consultants, design team, general contractor and subcontractors responsible for the
construction of Landlords Work (as defined below) shall be selected by Landlord and approved by
Tenant, which approval Tenant shall not unreasonably withhold, condition or delay. Tenant hereby
approves of Ferguson Pape Baldwin Architects as Landlords architect and Reno Contracting as
Landlords general contractor.
1.5
Tenant Improvements: Architect
. The architect responsible for the preparation of
the TI Program and the Schematic TI Plans shall be selected by Tenant and approved by Landlord,
which approval Landlord shall not unreasonably withhold, condition or delay. Landlord hereby
approves Ferguson Pape Baldwin Architects as Tenants architect.
2.
Landlords Construction Work
.
2.1
Landlords Construction Work
. Landlords Construction Work shall be performed by
Landlord at Landlords sole cost and expense in accordance with the Approved CW Plans (as defined
below), the outline specifications attached hereto as
Exhibit B
, and the Landlords Construction
Work Schedule, subject only to changes approved in accordance with
Section 2.3
.
2.2
Approved CW Plans
. Landlord shall prepare final plans and specifications for
Landlords Construction Work that are: (a) consistent with and are logical evolutions of the Design
Development Drawings dated December 5, 2006 and prepared by Ferguson Pape Baldwin, which have been
reasonably approved by Tenant, (b) incorporate CW Permitted Changes, and (c) incorporate any other
Landlord-requested (and Tenant approved) CW Changes. As soon as such final plans and
specifications (
Final CW Plans
) are completed, Landlord shall deliver the same to Tenant
for Tenants approval, which approval may be reasonably withheld only if: (i) the Final CW Plans
are not consistent with or logical evolutions of the approved Design Development Drawings, (ii)
Tenant requests changes to the Final CW Plans in
EXHIBIT J-1
accordance with
Section 2.3(a)(i)
, or
(iii) Tenant objects to any Landlord requested CW Change
(other than CW Permitted Changes). Such Final CW Plans shall be approved or disapproved by
Tenant within seven (7) days after delivery to Tenant. If Tenant fails to respond within such
seven (7) days period, then Landlord shall provide Tenant with a second written notice stating that
Tenants failure to respond within three (3) days after Landlords second notice shall be deemed
Tenants approval of the Final CW Plans, and if Tenant does not respond within such three (3) day
period, then Tenant shall be deemed to have approved the Final CW Plans. If the Final CW Plans are
disapproved by Tenant, Tenant shall notify Landlord in writing of its objections to such Final CW
Plans and shall submit any requested CW Changes through a CW Tenant Change Order Request (as
defined below), then the parties shall confer and negotiate in good faith to reach agreement on the
Final CW Plans. Promptly after the Final CW Plans are approved by Landlord and Tenant, two (2)
copies of such Final CW Plans shall be initialed and dated by Landlord and Tenant as soon as
approved by Landlord and Tenant, Landlord shall promptly submit such Final CW Plans to all
appropriate governmental agencies for approval. The Final CW Plans so approved, and all change
orders specifically permitted by the Lease, are referred to herein as the
Approved CW
Plans
and shall become part of the Lease as though set forth in full.
2.3
Changes to Landlords Construction Work
. Any changes to the Final CW Plans or the
Approved CW Plans (each, a
CW Change
) requested by Landlord or Tenant (other than CW
Permitted Changes by Landlord) shall be requested and instituted in accordance with the provisions
of this
Article 2
and shall be subject to the written approval of the other party in
accordance with this Work Letter.
(a)
CW Changes Requested by Tenant
.
(i)
CW Tenant Change Order Request
. Tenant may request CW Changes to the Final CW
Plans or the Approved CW Plans by notifying Landlord thereof in writing in substantially the same
form as the AIA standard change order form (a
CW Tenant Change Order Request
), which CW
Tenant Change Order Request shall detail the nature and extent of any requested CW Changes,
including, without limitation, (a) the CW Change, (b) the party required to perform the CW Change,
and (c) any modification of the Final CW Plans or the Approved CW Plans, as applicable, and the
Landlords Construction Work Schedule necessitated by the CW Change. If the nature of a CW Change
requires revisions to the Final CW Plans or the Approved CW Plans, as applicable, or the Landlords
Construction Work Schedule, then Tenant shall be solely responsible for the cost and expense of
such revisions. In the event Landlord approves such CW Change, Landlord shall: (1) notify Tenant
if it reasonably believes such CW Change could cause a delay in the Landlords Construction Work
Schedule; and (2) provide Landlords reasonable estimate of any additional costs and expenses
associated with such CW Change. Tenant shall deposit with Landlord the additional cost and expense
payable by Landlord, as reasonably estimated by Landlord, to complete the Construction Work due to
a Tenant-requested CW Change within ten (10) days of receiving Landlords approval of such CW
Change (the
CW Deposit
). In the event such deposit is not sufficient to cover the actual
cost of such approved CW Change, Tenant shall reimburse Landlord the difference between the actual
cost of such CW Change and the CW Deposit. Tenant shall have the right to apply the Additional
Allowance (as defined in the Lease) towards the CW Deposit. CW Tenant Change Order Requests shall
be signed by Tenants Authorized Representative.
(ii)
Landlords Approval of CW Changes
. If Landlord does not notify Tenant in writing
of Landlords decision either to proceed with or abandon Tenant requested CW Change within ten (10)
days after receipt of a CW Tenant Change Order Request, then such CW Tenant Change Order Request
shall be deemed rejected by Landlord, and Tenant shall not be permitted to alter Landlords
Construction Work as contemplated by such CW Tenant Change Order Request. Landlord may withhold in
it sole and absolute discretion its approval of any CW Tenant Change Order Request;
provided
,
however
, Landlord shall not unreasonably withhold its approval to any CW
Change requested by Tenant that is a CW Permitted Change or that could not reasonably be expected,
as reasonably determined by Landlord, to cause a Design Problem.
(b)
Changes Requested by Landlord
.
(i)
CW Landlord Change Order Request
. Landlord may request CW Changes to Landlords
Construction Work by notifying Tenant thereof in writing in substantially the same form as the AIA
standard change order form (a
CW Landlord Change Order
EXHIBIT J-2
Request
), which CW Landlord Change
Order Request shall detail the nature and extent of any
requested CW Changes, including, without limitation, (a) the CW Change, (b) the party required
to perform the CW Change, and (c) any modification of the Approved CW Plans and the Landlords
Construction Work Schedule necessitated by the CW Change.
(ii)
Tenants Approval of CW Change
. Tenant shall have seven (7) days after receipt
of a CW Landlord Change Order Request to notify Landlord in writing of Tenants approval or
rejection of the Landlord-requested CW Change, which approval shall not be unreasonably withheld,
conditioned or delayed. If Tenant fails to respond within such seven (7) days period, then Landlord
shall provide Tenant with a second written notice stating that Tenants failure to respond within
three (3) days after Landlords second notice shall be deemed Tenants approval to such CW Landlord
Change Order Request, and if Tenant does not respond within such three (3) day period, then Tenant
shall be deemed to have approved such CW Landlord Change Order Request.
(c)
CW Permitted Changes
. For purposes of this Work Letter, a
CW Permitted
Change
shall mean: (a)
minor
field changes; (b) changes required by Governmental
Authority; (c) any other changes that: (1) do not materially and adversely affect the building
structure, roof, or building service equipment to be constructed as part of Landlords Construction
Work, (2) do not materially change the size, cost, configuration, or overall appearance of the
Expansion Building or Landlords ability to construct Landlords Construction Work or Tenants
ability to operate its business in the Expansion Building, and (3) will not extend the Scheduled
Completion Date of Landlords Construction Work (as set forth in the Landlords Construction Work
Schedule) beyond October 1, 2008; and (d) ordinary development of the Approved CW Plans in a manner
not inconsistent with the Approved CW Plans.
3.
Tenant Improvements
.
3.1
TI Program
. The Tenant Improvements shall be performed by Landlord at Tenants
sole cost and expense and without cost to Landlord (except for the TI Allowance) and in accordance
with the Approved TI Plans (as defined below). On or before April 1, 2007, Tenant shall prepare
and submit to Landlord for Landlords approval a TI Program for the Tenant Improvements (the
TI Program
). Landlord shall notify Tenant in writing within ten (10) business days after
receipt of the TI Program whether Landlord approves or rejects to the TI Program and of the manner,
if any, in which the TI Program is objectionable. If Landlord objects to the TI Program, then
Tenant shall revise the TI Program and cause Landlords permitted objections to be remedied in the
revised TI Program. Tenant shall then resubmit the revised Tenant Program to Landlord for approval
within ten (10) business days after Tenant receives Landlords comments on the TI Program.
Landlord shall not unreasonably withhold its approval of any iteration of the TI Program so long as
the TI Program does not include any Design Problem and the date when Landlord expects the Tenant
Improvements to be Substantially Completed (the
Expected TI Substantial Completion Date
)
based thereon is no later than October 1, 2008 (the
Target TI Substantial Completion
Date
). Landlords approval of or objection to the revised TI Program and Tenants correction
of the same shall be in accordance with this
Section 3.1
until Landlord has approved the TI
Program in writing. Any delay in the final approval of the TI Program beyond June 1, 2007 shall be
a Tenant Delay except to the extent that Tenant demonstrates that such delay in the approval of the
TI Program resulted from Landlords failure to comply with the requirements of this
Section
3.1
. The iteration of the TI Program that is approved by Landlord without objection shall be
referred to herein as the Approved TI Program.
3.2
Schematic TI Plans
. Within thirty (30) business days after Landlords approval of
the Approved TI Program, Tenant shall prepare and submit to Landlord for approval schematics
covering the Tenant Improvements prepared in conformity with the Approved TI Program (the
Schematic TI Plans
). The Schematic TI Plans shall contain sufficient information and
detail to accurately describe the proposed design to Landlord and such other information as
Landlord may reasonably request. Tenant shall be solely responsible for ensuring that the Approved
TI Program and the Schematic TI Plans satisfy Tenants business requirements. Subject to
Section 3.4(a)(ii)
, Landlord shall notify Tenant in writing within ten (10) business days
after receipt of the Schematic TI Plans whether Landlord approves or objects to the Schematic TI
Plans and of the manner, if any, in which the Schematic TI Plans are objectionable. If Landlord
objects to the Schematic TI Plans, then Tenant shall revise the Schematic TI Plans and cause
Landlords reasonable objections to be remedied in the revised Schematic TI Plans. Tenant shall
then
EXHIBIT J-3
resubmit the revised Schematic TI Plans to Landlord for approval within ten (10) business days
after Tenant received Landlords comments to the Schematic TI Plans. Landlords approval of
or objection to revised Schematic TI Plans and Tenants correction of the same shall be in
accordance with this
Section 3.2
, until Landlord has approved the Schematic TI Plans in
writing. Landlord shall not unreasonably withhold its approval of any iteration of the Schematic
TI Plans so long as such iteration of such Schematic TI Plans do not include any Design Problem,
are consistent with the Approved TI Program and the Expected TI Substantial Completion Date is not
later than the Target TI Substantial Completion Date. Any delay in the final approval of the
Schematic TI Plans beyond the day that is thirty (30) days after Landlord approves the TI Program
shall be a Tenant Delay except to the extent that Tenant demonstrates that such delay in the
approval of the Schematic TI Plans resulted from Landlords failure to comply with the requirements
of this
Section 3.2
. The iteration of the Schematic TI Plans that is approved by Landlord
without objection shall be referred to herein as the
Approved Schematic TI Plans
.
3.3
Construction TI Plans
. Landlord shall prepare final plans and specifications for
the Tenant Improvements that: (a) are consistent with and are logical evolutions of the Approved
Schematic TI Plans, (b) incorporate TI Permitted Changes, and (c) incorporate any other
Landlord-requested (and Tenant approved) TI Changes. As soon as such final plans and
specifications (
Construction TI Plans
) are completed, Landlord shall deliver the same to
Tenant for Tenants approval, which approval may be reasonably withheld only if: (i) the
Construction TI Plans are not consistent with or logical evolutions of the Approved Schematic TI
Plans, (ii) Tenant intends to request changes to the Construction TI Plans in accordance with
Section 3.4(a)(i)
, or (iii) Tenant objects to any Landlord requested TI Change (other than
TI Permitted Changes). Such Construction TI Plans shall be approved or disapproved by Tenant
within seven (7) business days after delivery to Tenant. If Tenant fails to notify Landlord of
disapproval within such seven (7) days period, then Landlord shall provide Tenant with a second
written notice stating that Tenants failure to respond within three (3) days after Landlords
second notice shall be deemed Tenants approval to such Construction TI Plans, and if Tenant does
not respond within such three (3) day period, then Tenant shall be deemed to have approved such
Construction TI Plans. If the Construction TI Plans are disapproved by Tenant, Tenant shall notify
Landlord in writing of its objections to such Construction TI Plans and shall submit any requested
TI Changes through a TI Tenant Change Order Request (as defined below), then the parties shall
confer and negotiate in good faith to reach agreement on the Construction TI Plans. Promptly after
the Construction TI Plans are approved by Landlord and Tenant, two (2) copies of such Construction
TI Plans shall be initialed and dated by Landlord and Tenant as soon as approved by Landlord and
Tenant, Landlord shall promptly submit such Construction TI Plans to all appropriate governmental
agencies for approval. The Construction TI Plans so approved, and all change orders specifically
permitted by the Lease, are referred to herein as the
Approved TI Plans
and shall become
part of the Lease as though set forth in full.
3.4
Changes to Tenant Improvements
. Any changes to the Construction TI Plans or the
Approved TI Plans (each, a
TI Change
) requested by Landlord or Tenant (other than TI
Permitted Changes by Landlord) shall be requested and instituted in accordance with the provisions
of this
Article 3
and shall be subject to the written approval of the other party in
accordance with this Work Letter.
(a)
TI Changes Requested by Tenant
.
(i)
TI Tenant Change Order Request
. Tenant may request TI Changes after Tenant
approves the Construction TI Plans or the Approved TI Plans, as applicable, by notifying Landlord
thereof in writing in substantially the same form as the AIA standard change order form (a
TI
Tenant Change Order Request
), which TI Tenant Change Order Request shall detail the nature and
extent of any requested TI Changes, including, without limitation, (a) the TI Change, (b) the party
required to perform the TI Change, and (c) any modification of the Construction TI Plans or the
Approved TI Plans, as applicable. If the nature of a TI Change requires revisions to the
Construction TI Plans or the Approved TI Plans, as applicable, then Tenant shall be solely
responsible for the cost and expense of such revisions. In the event Landlord approves such TI
Change, Landlord shall: (1) notify Tenant if it reasonably believes such TI Change could cause a
delay in Substantial Completion of the Tenant Improvements; and (2) provide Landlords reasonable
estimate of any additional costs and expenses associated with such TI Change. Tenant shall
reimburse Landlord the additional cost and expense payable by Landlord, as reasonably estimated by
Landlord, to complete the Tenant Improvements due to a Tenant-requested TI Change as Excess Costs
in accordance with
Section 4.2.2
of the Lease.
EXHIBIT J-4
(ii)
Landlords Approval of TI Changes
. All Tenant-requested TI Changes shall be
subject to Landlords prior written approval, which shall not be unreasonably withheld, conditioned
or delayed so long as such TI Change would not create a Design Problem and would not delay
Substantial Completion of the Tenant Improvements beyond the Target TI Substantial Completion Date.
Landlord shall have ten (10) days after receipt of a TI Tenant Change Order Request to notify
Tenant in writing of Landlords decision either to proceed with or abandon Tenant-requested TI
Change. If Landlord does not approve in writing a TI Tenant Change Order Request, then such TI
Tenant Change Order Request shall be deemed rejected by Landlord, and Tenant shall not be permitted
to alter Tenant Improvements as contemplated by such TI Tenant Change Order Request.
(b)
TI Changes Requested by Landlord
.
(i)
TI Landlord Change Order Request
. Other than TI Permitted Changes, Landlord may
request TI Changes after Tenant approves the Approved TI Plans by notifying Tenant thereof in
writing in substantially the same form as the AIA standard change order form (a
TI Landlord
Change Order Request
), which TI Landlord Change Order Request shall detail the nature and
extent of any requested TI Changes, including, without limitation, (a) the TI Change, (b) the party
required to perform the TI Change, and (c) any modification of the Approved TI Plans, or any delay
in the Expected TI Substantial Completion Date, necessitated by the TI Change. If the nature of a
Landlord requested TI Change requires revisions to the Construction TI Plans or the Approved TI
Plans, then Landlord shall be solely responsible for the cost and expense of such revisions (and
such cost shall not be deducted from the TI Allowance).
(ii)
Tenants Approval of TI Change
. Tenant shall have seven (7) days after receipt
of a TI Landlord Change Order Request to notify Landlord in writing of Tenants approval or
rejection of the Landlord-requested TI Change, which approval shall not be unreasonably withheld,
conditioned or delayed. If Tenant fails to respond within such seven (7) days period, then
Landlord shall provide Tenant with a second written notice stating that Tenants failure to
respond within three (3) days after Landlords second notice shall be deemed Tenants approval to
such Landlord-requested TI Change, and if Tenant does not respond within such three (3) day
period, then Tenant shall be deemed to have approved such Landlord-requested TI Change.
(c)
TI Permitted Changes
. For purposes of this Work Letter, a
TI Permitted
Change
shall mean: (a) minor field changes; (b) changes required by Governmental Authority;
(c) any other changes that: (1) do not materially and adversely affect the building structure,
roof, or building service equipment to be constructed as part of the Tenant Improvements, (2) do
not materially change the size, cost, configuration, or overall appearance of the Tenant
Improvements or Tenants ability to operate its business in the Expansion Building, and (3) will
not extend the Expected TI Substantial Completion Date beyond October 1, 2008; and (d) ordinary
development of the Approved TI Plans in a manner not inconsistent with the Approved TI Plans.
3.5 TI Allowance.
(a)
Application of TI Allowance
. Landlord shall contribute the TI Allowance toward
the costs and expenses incurred in connection with the performance of the Tenant Improvements, in
accordance with
Section 4.2
of the Lease. If the entire TI Allowance is not applied toward
or reserved for the costs of the Tenant Improvements, Tenant shall
not
be entitled to a
credit of such unused portion of the TI Allowance.
(b)
Approval of Budget for Landlords Work
. Notwithstanding anything to the contrary
set forth elsewhere in this Work Letter or the Lease, Landlord shall not have any obligation to
expend any portion of the TI Allowance until Landlord and Tenant shall have approved in writing the
budget for the Tenant Improvements (the
Approved Budget
). Prior to Landlords and
Tenants approval of the Approved Budget, Tenant shall pay all of the costs and expenses incurred
in connection with Tenant Improvements as they become due. Landlord shall not be obligated to
reimburse Tenant for costs or expenses relating to Tenant Improvements that exceed either (a) the
amount of the TI Allowance (other than pursuant to
Section 4.3
of the Lease pertaining to
the Additional Allowance) or (b) the Approved Budget, either on a line item or on
EXHIBIT J-5
an overall basis.
Tenants payment to Landlord of any such excess costs shall be paid as Excess Costs in
accordance with
Section 4.2.2
of the Lease
(c)
Application of the TI Allowance
. Tenant may apply the TI Allowance for the
payment of construction and other costs (including, without limitation, standard laboratory
improvements; finishes; building fixtures; building permits; and architectural, engineering, design
and consulting fees), in each case as reflected in the Approved Budget and the Approved TI Plans.
In no event shall the TI Allowance be applied to: (i) the purchase of any furniture, personal
property or other non-building system equipment; (ii) the cost of work that is not authorized by
the Approved TI Plans or approved in writing by Landlord, (iii) costs resulting from any default by
Tenant of its obligations under the Lease, or (iv) costs that are recoverable or reasonably
recoverable by Tenant from a third party (e.g., insurers, warrantors, or tortfeasors).
4.
Requests for Consent
. Except as otherwise provided in this Work Letter, Tenant shall
respond to all requests for consents, approvals or directions made by Landlord pursuant to this
Work Letter within seven (7) days following Tenants receipt of such request. If Tenant fails to
respond within such seven (7) days period, then Landlord shall provide Tenant with a second written
notice stating that Tenants failure to respond within three (3) days after Landlords second
notice shall be deemed approval by Tenant, and if Tenant does not respond within such three (3)
day period, then Tenant shall be deemed to have approved such item.
5.
Cost Proposal
. After the Approved TI Plans are approved by Landlord and Tenant, and the
Contractor and subcontractors have been selected, Landlord shall provide Tenant with a cost
proposal setting forth the reconciled bids and copies of all sub-bids, which cost proposal shall
include, as nearly as possible, the cost of all items to be incurred in connection with the
construction of the Tenant Improvements (the
Cost Proposal
). The Cost Proposal shall
reflect bids that will be priced by Contractor on an individual item-by-item or trade-by-trade
basis. Tenant shall accept or reject the Cost Proposal within ten (10) business days after receipt
thereof. If Tenant rejects the Cost Proposal, then Landlord and Tenant shall work together in good
faith in an attempt to agree upon a mutually acceptable Cost Proposal as soon as reasonably
practicable, and a Tenant Delay shall be deemed to exist for a number of days equal to the number
of days elapsed from Tenants rejection of the Cost Proposal until Tenants and Landlords
agreement to a mutually acceptable Cost Proposal.
6.
Completion of Landlords Work
. Landlord shall complete Landlords Construction Work and
the Tenant Improvements (collectively the
Landlords Work
) described in this Work Letter
in all respects in accordance with the provisions of the Lease and this Work Letter. Landlords
Work shall be deemed completed at such time as Landlord shall furnish to Tenant (a) evidence that
all Landlords Work has been completed and paid for in full (which shall be evidenced by the
architects certificate of completion), (b) all certifications and approvals with respect to
Landlords Work that may be required from any Governmental Authority and any board of fire
underwriters or similar body for the use and occupancy of the Expansion Premises and (c) an
affidavit from Landlords architect certifying that all work performed in, on or about the
Expansion Premises is in accordance with the Approved TI Plans.
7.
Miscellaneous
.
7.1
Headings, Etc
. Where applicable in this Work Letter, the singular includes the
plural and the masculine or neuter includes the masculine, feminine and neuter. The Section
headings of this Work Letter are not a part of this Work Letter and shall have no effect upon the
construction or interpretation of any part hereof.
7.2
Time of the Essence
. Time is of the essence with respect to the performance of
every provision of this Work Letter in which time of performance is a factor.
7.3
Covenants
. Each provision of this Work Letter performable by Landlord or Tenant
shall be deemed both a covenant and a condition.
7.4
Consent
. Whenever consent or approval of either party is required, that party
shall not unreasonably withhold, condition or delay such consent or approval, except as may be
expressly set forth to the contrary.
EXHIBIT J-6
7.5
Entire Agreement
. The terms of this Work Letter are intended by the parties as a
final expression of their agreement with respect to the terms as are included herein, and may not
be contradicted by evidence of any prior or contemporaneous agreement, other than the Lease.
7.6
Invalid Provisions
. Any provision of this Work Letter that shall prove to be
invalid, void or illegal shall in no way affect, impair or invalidate any other provision hereof,
and all other provisions of this Work Letter shall remain in full force and effect and shall be
interpreted as if the invalid, void or illegal provision did not exist.
7.7
Construction
. The language in all parts of this Work Letter shall be in all cases
construed as a whole according to its fair meaning and not strictly for or against either Landlord
or Tenant.
7.8
Assigns
. Each of the covenants, conditions and agreements herein contained shall
inure to the benefit of and shall apply to and be binding upon the parties hereto and their
respective heirs; legatees; devisees; executors; administrators; and permitted successors, assigns,
sublessees. Nothing in this
Section 6.8
shall in any way alter the provisions of the Lease
restricting assignment or subletting.
7.9
Authority
. That individual or those individuals signing this Work Letter
guarantee, warrant and represent that said individual or individuals have the power, authority and
legal capacity to sign this Work Letter on behalf of and to bind all entities, corporations,
partnerships, limited liability companies, joint venturers or other organizations and entities on
whose behalf said individual or individuals have signed.
7.10
Counterparts
. This Work Letter may be executed in one or more counterparts, each
of which, when taken together, shall constitute one and the same document.
7.11
Notice of Completion
. Within ten (10) days after completion of construction of
the Tenant Improvements, Landlord shall cause a Notice of Completion to be recorded in the office
of the Recorder of the County in which the Expansion Building is located and shall furnish a copy
thereof to Tenant upon such recordation.
7.12
No Fee to Landlord
. Except as otherwise provided in the Lease, Landlord shall
receive no fee for supervision, profit, over overhead in connection with the Landlords
Construction Work or Tenant Improvement work. In no event shall this
Section 7.12
limit
the fees that are payable to the architect, engineering consultants, design team, general
contractor and subcontractors.
7.13
Staging Area
. During the period prior to the Commencement Date, Tenant shall
have the right, without the obligation to pay Rent, to use empty space in the Expansion Building
(if any), as designated by Landlord, in its sole and absolute discretion, for the purposes of
storing and staging its furniture and equipment only. With respect to this free storage space, if
any, Tenant shall be responsible for providing all insurance and for providing any necessary
fencing or other protective facilities. Tenant shall hold Landlord harmless and shall indemnify
and defend Landlord from and against any and all Claims arising out of or in connection with the
use of such storage space by Tenant. Tenant shall be obligated to remove all of the stored
materials and its fencing and other facilities within five (5) business days after Tenants receipt
of written notice from Landlord stating that such staging area is needed by Landlord in which event
comparable vacant space, to the extent such space is available (as determined by Landlord in its
sole and absolute discretion), shall be made available to Tenant as a substitute staging area.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
EXHIBIT J-7
IN WITNESS WHEREOF, Landlord and Tenant have executed this Work Letter to be effective on the
date first above written.
|
|
|
|
|
LANDLORD
:
|
|
|
|
|
|
|
|
BMR-9885 TOWNE CENTRE DRIVE LLC,
a Delaware limited liability company
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TENANT
:
|
|
|
|
|
|
|
|
ILLUMINA, INC.,
a Delaware corporation
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
EXHIBIT J-8
EXHIBIT A-1
RESPONSIBILITY MATRIX
|
|
|
|
|
|
BMR Towne Centre Drive, LLC
|
|
|
Scope Allocation Matrix- Base building vs. Tenant Work
|
|
|
Illumina
|
|
1/22/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constructed by
|
|
|
|
|
|
|
|
|
|
|
Owner during
|
|
|
|
|
|
|
Constructed
|
|
Base Building
|
|
|
Included in
|
|
by Tenant,
|
|
construction,
|
|
|
Shell / Base
|
|
funded by TI
|
|
funded by TI
|
|
|
Building by
|
|
Allowance(s)
|
|
Allowance(s)
|
Description
|
|
Owner
|
|
as needed
|
|
as needed
|
Site work
|
|
|
|
|
|
|
|
|
|
|
|
|
Sidewalks and Curbs
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Pedestrian paved areas (San Diego Buff at main entry plaza and link to buildings A&B)
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Landscaping
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Parking and Roads
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Ground floor parking garage
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Subterranean parking garage
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Parking garage, security gates and security systems
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Code Compliance
|
|
|
|
|
|
|
|
|
|
|
|
|
Base building construction in accordance w/ req of the City of San Diego building codes
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Building Led Components
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Tenant build out compliance w/ applicable codes @ the time of fit-up
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Structure
|
|
|
|
|
|
|
|
|
|
|
|
|
Concrete floor stabs over metal deck, typical live load capacity pf 100 psf,
|
|
|
X
|
|
|
|
|
|
|
|
|
|
a predetermined of 2 structural bays upgradeable to a capacity of 125 psf,
|
|
|
|
|
|
|
X
|
|
|
|
|
|
including a 20 psf partition allowance
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Live load increases for tenant loads
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Floor to floor heights: 16-0 (excluding garage levels)
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steel framing w/ diagonal bracing & composite steel & concrete floors & roofs,
|
|
|
X
|
|
|
|
|
|
|
|
|
|
fireproofed as required by code
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Mechanical screen at roof level
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Stub-up columns for structural supports for tenant supplied equipment (not included in base
building)
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Structural support above roof for Tenant equipment
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Grate walkways on structural support (not included in base building)
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Misc metal items (lintels, elevator angles, etc.) related to base building construction
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Misc metal items & concrete pads & structural modifications related to tenant fit-out
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exterior
|
|
|
|
|
|
|
|
|
|
|
|
|
Exterior wall assembly (Cement plaster over metal frame construction, storefront type window
wall systems and stone accents)
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Insulation & Vapor barrier @ spandrel areas of exterior walls
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Service door consisting of metal coiling doors, electricity operated
|
|
|
|
|
|
|
|
|
|
|
X
|
|
On grade service drive
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Loading Dock below grade with electric dock leveler
|
|
|
|
|
|
|
|
|
|
|
X
|
|
Entry Canopy in general compliance and appearance as shown on the approved architectural
renderings
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roofing
|
|
|
|
|
|
|
|
|
|
|
|
|
Weather tight membrane roofing system (3 ply plus a cap sheet built-up roofing system)
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Walkway pads to base building mechanical equipment
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Walkway pads to tenant mechanical equipment
|
|
|
|
|
|
|
X
|
|
|
|
|
|
EXHIBIT J-9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constructed by
|
|
|
|
|
|
|
|
|
|
|
Owner during
|
|
|
|
|
|
|
Constructed
|
|
Base Building
|
|
|
Included in
|
|
by Tenant,
|
|
construction,
|
|
|
Shell / Base
|
|
funded by TI
|
|
funded by TI
|
|
|
Building by
|
|
Allowance(s)
|
|
Allowance(s)
|
Description
|
|
Owner
|
|
as needed
|
|
as needed
|
Common Areas
|
|
|
|
|
|
|
|
|
|
|
|
|
Accessible main entrance
|
|
|
X
|
|
|
|
|
|
|
|
|
|
First floor lobby framing and fire taped sheetrock
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Typical floor lobbies and elevator entrances for single tenant floors
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Finished toilet rooms core areas only
|
|
|
|
|
|
|
|
|
|
|
X
|
|
Base building electrical room
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Finished exit stairways w/ painted walls & sealed concrete floors
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Main telephone room @ Level 1
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Ships ladder roof access with 3'x5'
|
|
|
|
|
|
|
|
|
|
|
X
|
|
Doors and frames @ common areas:
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Hollow metal frames
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Hollow metal doors @ service areas
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Solid core wood doors @ other areas
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Lever hardware @ common areas
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Doors and frames w/in tenant areas & @ entry off elevator lobby
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Enclosed area for standby generators
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Tenant toilet rooms & kitchen in tenant areas
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Finished loading area w/ truck and trash bays
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Area for storage @ ground floor level
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elevators
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions for 3 building elevators (2 passenger, 1 service elevator)
|
|
|
X
|
|
|
|
|
|
|
|
|
|
4 Stop passenger elevator at main entry with allowance for cab finish
|
|
|
X
|
|
|
|
|
|
|
|
|
|
4 stop passenger elevator at west entry
|
|
|
|
|
|
|
X
|
|
|
|
|
|
3 stop service elevator at East entrance
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Window Treatment
|
|
|
|
|
|
|
|
|
|
|
|
|
Building standard blinds @ at windows
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tenant Areas
|
|
|
|
|
|
|
|
|
|
|
|
|
Drywall, insulation and stud back up @ inside face of exterior walls
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Drywall on tenant side of base building rooms and shafts fire taped and finished
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Shaft enclosures for tenant use
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Column enclosures w/in tenant spaces
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Partitions, ceilings, floorings, painting, finishes, doors, millwork and all office,
laboratory, and animal space build-out w/in tenant area
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
Tenant Equipment
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fire Protection
|
|
|
|
|
|
|
|
|
|
|
|
|
Combination sprinkler/standpipe system w/ fire department valves
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Fire service and double check valve assembly
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Alarm check valve and fire dept connection
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Floor control valve assemblies and test drains
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Sprinkler coverage to all core areas
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Branch distribution to all open shell space
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Modifications to branch distribution in tenant area
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Secondary fire suppression systems
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Flow switches, tamper switches, pressure switches
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Modification of sprinkler piping and head layout to suit tenant build-out and hazard index
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plumbing
|
|
|
|
|
|
|
|
|
|
|
|
|
below grade sanitary waste system and risers to cap 4 above ground floor FF
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Sanitary waste system distribution to tenant areas
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Potable water from meter to core area. Cap 4 above ground finish floor.
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Backflow preventors at entrance
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Water provided at city pressure
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Domestic water heaters and hot water supply piping
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Non Potable cold water system, back flow devices and risers
|
|
|
X
|
|
|
|
|
|
|
|
|
|
EXHIBIT J-10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constructed by
|
|
|
|
|
|
|
|
|
|
|
Owner during
|
|
|
|
|
|
|
Constructed
|
|
Base Building
|
|
|
Included in
|
|
by Tenant,
|
|
construction,
|
|
|
Shell / Base
|
|
funded by TI
|
|
funded by TI
|
|
|
Building by
|
|
Allowance(s)
|
|
Allowance(s)
|
Description
|
|
Owner
|
|
as needed
|
|
as needed
|
Gas
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas service to the building
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Gas main to the roof for base building requirements
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Gas distribution for base building systems
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Low-pressure gas riser for tenant use
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Low-pressure gas distribution to tenant requirements
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H.V.A.C
|
|
|
|
|
|
|
|
|
|
|
|
|
Air handling units with capacity for 60% lab and 40% office at 288SF/ton at Labs and 400SF/ton
at Office. Average building coverage of 325SF/ton of occupied space.
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Exhaust for common areas per code
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Exhaust for subterranean parking garage
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Exhaust capacity for office and lab
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Supply and exhaust duct risers for additional tenant systems
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Vertical distribution of supply and return air systems
|
|
|
|
|
|
|
|
|
|
|
X
|
|
Supply and exhaust system, including ductwork, control boxes, grilles, registers, and diffusers
in tenant areas
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Boilers (in support of HVAC system described above)
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Automatic temperature control system for base building systems
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Automatic temperature control system for tenant areas and systems
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electrical
|
|
|
|
|
|
|
|
|
|
|
|
|
Main electrical service @ 4000 amps
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Distribution to tenant spaces and equip
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Optional standby generators and feeders to distribution panels for tenant use
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Electric closest at first floor for base building systems
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Additional electric closets for tenant areas
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Power distribution for tenant areas
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Fire alarm systems and risers
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Fire alarm devises in tenant spaces
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Lighting in common and base building areas
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Lighting in tenant areas
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Lighting protection system for base building systems
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Empty telephone/data conduits into building main room
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Telephone/data system, including service, risers, wiring, closets, and distribution
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Lighting protection system for tenant systems
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security
|
|
|
|
|
|
|
|
|
|
|
|
|
Card access at bldg entries and w/in elevators
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Card access and/or alarm systems into or w/in Tenant areas
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Security system for base bldg area
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Security system for tenant areas. Tenant systems need to be coordinated w/ the base bldg system
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acoustical
|
|
|
|
|
|
|
|
|
|
|
|
|
Acoustical sound attenuation and isolation of base bldg systems
|
|
|
X
|
|
|
|
|
|
|
|
|
|
Acoustical sound attenuation and isolation of tenant systems
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Cable TV conduit into Building Main Service Room
|
|
|
|
|
|
|
X
|
|
|
|
|
|
Cable TV service
|
|
|
|
|
|
|
X
|
|
|
|
|
|
EXHIBIT J-11
EXHIBIT A-2
LANDLORDS CONSTRUCTION WORK SCHEDULE
EXHIBIT J-12
EXHIBIT B
OUTLINE SPECIFICATIONS
(See Attached)
EXHIBIT J-15
EXHIBIT K
FORM OF LETTER OF CREDIT
[On letterhead or L/C letterhead of Issuer.]
LETTER OF CREDIT
Date:
, 200___
|
|
|
|
|
|
|
|
|
(the Beneficiary)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attention:
|
|
|
|
|
|
|
|
|
|
L/C. No.:
|
|
|
|
|
|
|
|
|
|
Loan No.:
|
|
|
|
|
|
|
|
|
|
Ladies and Gentlemen:
We establish in favor of Beneficiary our irrevocable and unconditional Letter of Credit
numbered as identified above (the
L/C
) for an aggregate amount of $
, expiring at
___:00 p.m. on
or, if such day is not a Banking Day, then the next succeeding Banking Day
(such date, as extended from time to time, the
Expiry Date
).
Banking Day
means
a weekday except a weekday when commercial banks in
are authorized or required to
close.
We authorize Beneficiary to draw on us (the
Issuer
) for the account of
(the
Account Party
), under the terms and conditions of this L/C.
Funds under this L/C are available by presenting the following documentation (the
Drawing
Documentation
): (a) the original L/C and (b) a sight draft substantially in the form of
Exhibit A
, with blanks filled in and bracketed items provided as appropriate. No other evidence of
authority, certificate, or documentation is required.
Drawing Documentation must be presented at Issuers office at
on or before the
Expiry Date by personal presentation, courier or messenger service, or fax. Presentation by fax
shall be effective upon electronic confirmation of transmission as evidenced by a printed report
from the senders fax machine. After any fax presentation, but not as a condition to its
effectiveness, Beneficiary shall with reasonable promptness deliver the original Drawing
Documentation by any other means. Issuer will on request issue a receipt for Drawing
Documentation.
We agree, irrevocably, and irrespective of any claim by any other person, to honor drafts
drawn under and in conformity with this L/C, within the maximum amount of this L/C, presented to us
on or before the Expiry Date, provided we also receive (on or before the Expiry Date) any other
Drawing Documentation this L/C requires.
We shall pay this L/C only from our own funds by check or wire transfer, in compliance with
the Drawing Documentation.
If Beneficiary presents proper Drawing Documentation to us on or before the Expiry Date, then
we shall pay under this L/C at or before the following time (the
Payment Deadline
): (a)
if presentment is made at or before noon of any Banking Day, then the close of such Banking Day;
and (b) otherwise, the close of the next Banking Day. We waive any right to delay payment beyond
the Payment Deadline. If we determine that Drawing Documentation is not proper, then we shall so
advise Beneficiary in writing, specifying all grounds for our determination, within one Banking Day
after the Payment Deadline.
Partial drawings are permitted. This L/C shall, except to the extent reduced thereby, survive
any partial drawings.
We shall have no duty or right to inquire into the validity of or basis for any draw under
this L/C or any Drawing Documentation. We waive any defense based on fraud or any claim of fraud.
EXHIBIT K-1
The
Expiry Date shall automatically be extended by one year (but never beyond ___ the
Outside Date
) unless, on or before the date thirty (30) days before any Expiry Date, we
have given Beneficiary notice that the Expiry Date shall not be so extended (a
Nonrenewal
Notice
). We shall promptly upon request confirm any extension of the Expiry Date under the
preceding sentence by issuing an amendment to this L/C, but such an amendment is not required for
the extension to be effective. We need not give any notice of the Outside Date.
Beneficiary may from time to time without charge transfer this L/C, in whole but not in part,
to any transferee (the
Transferee
). Issuer shall look solely to Beneficiary for payment
of any fee for any transfer of this L/C. Beneficiary or Transferee shall consummate such transfer
by delivering to Issuer the original of this L/C and a Transfer Notice substantially in the form of
Exhibit B
, purportedly signed by Beneficiary, and designating Transferee. Issuer shall promptly
reissue or amend this L/C in favor of Transferee as Beneficiary. Upon any transfer, all references
to Beneficiary shall automatically refer to Transferee, who may then exercise all rights of
Beneficiary. Issuer expressly consents to any transfers made from time to time in compliance with
this paragraph.
Any notice to Beneficiary shall be in writing and delivered by hand with receipt acknowledged
or by overnight delivery service such as FedEx (with proof of delivery) at the above address, or
such other address as Beneficiary may specify by written notice to Issuer. A copy of any such
notice shall also be delivered, as a condition to the effectiveness of such notice, to:
(or such replacement as Beneficiary designates from time to time by written notice).
No amendment that adversely affects Beneficiary shall be effective without Beneficiarys
written consent.
This L/C is subject to and incorporates by reference: (a) the Uniform Customs and Practice for
Documentary Credits, International Chamber of Commerce Publication No. 500 (the UCP); and (b) to
the extent not inconsistent with the UCP,
Article 5
of the Uniform Commercial Code of the
State of New York.
Very truly yours,
[Issuer Signature]
EXHIBIT K-2
EXHIBIT A
FORM OF SIGHT DRAFT
[BENEFICIARY LETTERHEAD]
TO:
[Name and Address of Issuer]
SIGHT DRAFT
AT SIGHT, pay to the Order of
, the sum of
United States Dollars
($
). Drawn under [Issuer] Letter of Credit No.
dated
.
[Issuer is hereby directed to pay the proceeds of this Sight Draft solely to the following account:
.]
[Name and signature block, with signature or purported signature of Beneficiary]
Date:
EXHIBIT K-3
EXHIBIT B
FORM OF TRANSFER NOTICE
[BENEFICIARY LETTERHEAD]
TO:
[Name and Address of Issuer] (the
Issuer
)
TRANSFER NOTICE
By signing below, the undersigned, Beneficiary (the Beneficiary) under Issuers Letter of Credit
No.
dated
(the L/C), transfers the L/C to the following transferee
(the Transferee):
[Transferee Name and Address]
The original L/C is enclosed. Beneficiary directs Issuer to reissue or amend the L/C in favor of
Transferee as Beneficiary. Beneficiary represents and warrants that Beneficiary has not
transferred, assigned, or encumbered the L/C or any interest in the L/C, which transfer,
assignment, or encumbrance remains in effect.
[Name and signature block, with signature or purported signature of Beneficiary]
Date:
EXHIBIT K-4
EXHIBIT L
RECIPROCAL EASEMENT AGREEMENT
RECORDING REQUESTED BY:
BMR-9865 Towne Centre Drive LLC
General Counsel / Finance Department
17140 Bernardo Center Drive, Suite 222
San Diego, CA 92128
SPACE ABOVE LINE FOR RECORDERS USE ONLY
RECIPROCAL EASEMENT AND COVENANT AGREEMENT
This RECIPROCAL EASEMENT AND COVENANT AGREEMENT (together with all exhibits attached hereto
and by this reference incorporated herein, this
Agreement
) is made and entered into as of
, 2007 (the
Effective Date
), by and between BMR-9885 TOWNE CENTRE DRIVE LLC, a Delaware
limited liability company (together with its successors and assigns, the
Parcels 1&2
Owner
), whose address is 17140 Bernardo Center Drive, Suite 222, San Diego, California 92128
and BMR-9865 TOWNE CENTRE DRIVE LLC, a Delaware limited liability company (together with its
successors and assigns, the
Parcel 3 Owner
and, together with the Parcels 1&2 Owner, the
Owners
)), whose address is 17140 Bernardo Center Drive, Suite 222, San Diego, California
92128.
RECITALS
A. WHEREAS, the Parcels 1&2 Owner owns three (3) parcels of real property located in the City
of San Diego, County of San Diego, State of California, legally described as: (1) Parcel 1 of
Parcel Map 18286 filed with the San Diego County Recorder on June 21, 1999 (together with any
easements and appurtenances thereto, the
Parcel 1 Land
); (2) Parcel 2 of Parcel Map 18286
filed with the San Diego County Recorder on June 21, 1999 (together with any easements and
appurtenances thereto, the
Parcel 2 Land
and, together with the Parcel 1 Land, the
Parcels 1&2 Land
); and (3) Parcel 3 of Parcel Map 18286 filed with the San Diego County
Recorder on June 21, 1999 (together with any easements and appurtenances thereto, the
Parcel 3
Land
and, collectively with the Parcel 1 Land and the Parcel 2 Land, the
Parcels
).
The Parcels 1&2 Land is improved by two (2) buildings consisting of approximately 104,870 square
feet of space (the
Parcels 1&2 Building
), and the Parcel 3 Land is improved by one (1)
building consisting of approximately 11,000 square feet of space (the
Parcel 3 Building
).
B. WHEREAS, concurrently herewith, the Parcels 1&2 Owner is conveying to the Parcel 3 Owner
all of its right, title and interest in the Parcel 3 Land, together with the Parcel 3 Building.
C. WHEREAS, the Parcel 3 Owner intends to construct an additional building on the Parcel 3
Land (the
Additional Parcel 3 Building
and, collectively with the Parcels 1&2 Building
and the Parcel 3 Building, the
Buildings
), totaling approximately 83,866 rentable square
feet.
D. WHEREAS, the Parcel 3 Land is improved by, among other things, a fitness center, a full
court basketball/sports courts, outdoor seating areas, dressing, locker and working rooms,
restrooms, and showers (the
Recreation Facilities
).
E. WHEREAS, pursuant to that certain: (a) Amended and Restated Lease dated as of January 26,
2007 (the
Parcels 1&2 Lease
), the Parcels 1&2 Owner is leasing the Parcels 1&2 Building
to Illumina, Inc., a Delaware corporation (the
Parcels 1&2 Tenant
); (b) Lease dated as of
January 26, 2007 (the
Parcel 3 Lease
), the Parcel 3 Owner is leasing a portion of the
Parcel 3 Building and, upon completion, the Additional Parcel 3 Building, to Illumina, Inc., a
Delaware corporation (the
Parcel 3 Tenant
); and (c) Eastgate Pointe Building D Lease
dated as of July 6, 2000 (the
Diversified Lease
), Diversified Eastgate Pointe, LLC, a
California limited liability company (as successor in interest to Matsix Investments, Inc.,
Diversified
and,
EXHIBIT L-1
together with the Parcels 1&2 Tenant and the Parcel 3 Tenant, the
Tenants
), is leasing a portion
of the Parcel 3 Building.
F. WHEREAS, the Parcels 1&2 Owner and the Parcel 3 Owner desire to grant each other and their
respective Tenants certain rights to use their respective Parcels, including access rights, parking
rights, and certain rights to use the Recreation Facilities, all in accordance with the following.
NOW, THEREFORE
, in consideration of the foregoing and for other good and valuable
consideration, the receipt and accuracy of which is hereby acknowledged, the parties hereto hereby
agree as follows:
AGREEMENT
1.
Grant of Easement Rights, Etc.
1.1
Grant by Parcels 1&2 Owner
. Subject to the terms and conditions hereof: the
Parcels 1&2 Owner hereby grants, bargains, sells and conveys perpetually to the Parcel 3 Owner and
its successors in title, for the benefit of, and appurtenant to, the Parcel 3 Land, a
non-exclusive easement and right of way (the
Parcels 1&2 Driveway Easement
) for the
Parcel 3 Benefited Parties (as defined below) over, upon, through and across the portions of the
easement area described on
Exhibit A
attached hereto and incorporated hereby (the
Parcels 1&2 Driveway Servient Tenement
), to be used in common with the Parcels 1&2
Benefited Parties (as defined below), for vehicular or pedestrian ingress, egress and access
(
Access
) to and from the public streets adjacent to the Parcel 3 Land.
1.2
Grant by Parcel 3 Owner
. Subject to the terms and conditions hereof: the Parcel 3
Owner hereby grants, bargains, sells and conveys perpetually to the Parcels 1&2 Owner and its
successors in title, for the benefit of, and appurtenant to, the Parcels 1&2 Land, the following
easements and licenses:
(a)
Parcel 3 Driveway Easement
: a non-exclusive easement and right of way (the
Parcel 3 Driveway Easement
) for the Parcels 1&2 Benefited Parties over, upon,
through and across the portions of the easement area described on
Exhibit A
attached
hereto and incorporated hereby (the
Parcel 3 Driveway Servient Tenement
and
together with the Parcels 1&2 Driveway Servient Tenement, the
Driveway Servient
Tenements
), to be used in common with the Parcel 3 Benefited Parties, for Access to and
from the public streets adjacent to Parcels 1&2 Land.
(b)
Parking Easement
: from and after substantial completion of the Additional
Parcel 3 Building, a non-exclusive easement and right of way (the
Parking
Easement
) for the Parcels 1&2 Benefited Parties over, upon, through and across the
portions of the easement area and to use the parking spaces described on
Exhibit B
attached hereto and incorporated hereby (the
Parking Servient Tenement
), to be
used in common with the Parcel 3 Benefited Parties, for vehicular parking and Access to the
Parcels 1&2 Land. The Parcel 3 Owner has the right to reasonably establish the location of
the pedestrian pathways in the Parking Servient Tenement so as to minimize (i) the impact on
the number of parking spaces within the Parcel 3 Land and (ii) the likely disruption to the
Parcel 3 Benefited Parties.
(c)
Recreation Facilities
: a non-exclusive license (the
Recreation
Facilities License
and, collectively with the Parcel 3 Driveway Easement, the Parking
Easement and the Access Easement, the
Parcel 3 Easements
and, together with the
Parcels 1&2 Driveway Easement, the
Easements
)) for the Parcels 1&2 Benefited
Parties, to be used in common with the Parcel 3 Benefited Parties, to Access, use and enjoy
the Recreation Facilities located on the Parcel 3 Land. The Recreation Facilities License
shall include the right of ingress, egress and regress for pedestrian traffic over and
across any and all sidewalks, elevators, stairways, paths, valleys and lanes within Parcel 3
Land which provides reasonably direct access from the Parcels 1&2 Land to the Recreation
Facilities, as further described on
Exhibit C
attached hereto and incorporated
hereby (the
Recreation Facilities Servient Tenement
and, collectively with the
Parcel 3 Driveway Servient Tenement, and the Parking Servient Tenement, the
Parcel 3
Servient
EXHIBIT L-2
Tenements
and, together with the Parcels 1&2 Driveway Servient Tenement, the
Servient Tenements
).
1.3
Temporary Parking Easement
. In addition to the Parcel 3 Easements granted in
Section 1.2
, the Parcel 3 Owner hereby grants, bargains, sells and conveys to the Parcels
1&2 Owner and its successors in title, for the benefit of, and appurtenant to, the Parcels 1&2
Land, a non-exclusive temporary easement and right of way (the
Temporary Parking
Easement
) for the Parcels 1&2 Benefited Parties over, upon, through and across the portions of
the easement area and to use the parking spaces and the pedestrian pathways described on
Exhibit D
attached hereto and incorporated hereby (the
Temporary Parking Servient
Tenement
), to be used in common with the Parcel 3 Benefited Parties, for vehicular parking and
Access to the Parcels 1&2 Land. The Parcel 3 Owner has the right to reasonably establish the
location of the pedestrian pathways in the Temporary Parking Servient Tenement so as to minimize
(a) the impact on the number of parking spaces within the Parcel 3 Land and (b) the likely
disruption to the Parcel 3 Benefited Parties. The Temporary Parking Easement shall be irrevocable
until substantial completion of the Additional Parcel 3 Building (the
Additional Parcel 3
Building Substantial Completion Date
). During the term of the Temporary Parking Easement, the
Temporary Parking Easement shall be considered for all purposes under this Agreement as a Parking
Easement. Immediately upon the Additional Parcel 3 Building Substantial Completion Date, the
Temporary Parking Easement shall immediately terminate.
1.4
In General
. For purposes of this Agreement the following shall apply:
(a) The term
Parcels 1&2 Benefited Parties
shall mean the Parcels 1&2 Owner,
the Parcels 1&2 Tenant, and any person from time to time entitled to the use and occupancy
of any portion of the improvements on the Parcel 3 Land as an owner or under any lease,
sublease, license, concession or other similar agreement, and any of their officers,
directors, members, employees, agents, contractors, customers, vendors, suppliers, visitors,
guests, invitees, licensees, tenants, subtenants and concessionaires.
(b) The term
Parcel 3 Benefited Parties
shall mean the Parcel 3 Owner, the
Parcel 3 Tenant, Diversified, and any person from time to time entitled to the use and
occupancy of any portion of the improvements on the Parcels 1&2 Land as an owner or under
any lease, sublease, license, concession or other similar agreement, and any of their
officers, directors, members, employees, agents, contractors, customers, vendors, suppliers,
visitors, guests, invitees, licensees, tenants, subtenants and concessionaires.
(c) The term
Benefited Parties
shall mean the Parcels 1&2 Benefited Parties
and the Parcel 3 Benefited Parties.
(d) The Easements are not exclusive. Without limiting the generality of the foregoing,
each Owner may also use their property for any purposes which does not unreasonably
interfere with such uses by the other Owner, and/or convey easements appurtenant or in gross
upon, under, over and across their property to other persons, public and private, for the
same purposes as the other Owners use thereof, and for other purposes which do not
unreasonably interfere with such uses by the other Owner, without necessity for further
consent or documentation of any kind by such Owner.
(e) This Agreement, and the protective covenants, conditions, restrictions, grants of
easements, licenses, rights, rights-of-way, liens, charges and equitable servitudes set
forth therein or herein, shall, except as otherwise expressly provided therein or herein,
(a) be irrevocable and perpetual in nature (other than the Temporary Parking Easement), (b)
be binding upon all persons having or acquiring any right, title or interest in any property
encumbered thereby, or any part thereof, and upon any successors or assigns to any such
right, title or interest, (c) inure to the benefit of all persons having or acquiring any
right, title or interest in any properties benefited thereby, or any part thereof, and upon
any successors or assigns to any such right, title or interest, and (d) constitute covenants
running with the land pursuant to applicable law, including without limitation Section 1468
of the Civil Code of the State of California.
EXHIBIT L-3
(f) The Parcel 3 Easements shall be appurtenant to and shall run with fee title to the
Parcels 1&2 Land. The Parcels 1&2 Driveway Easement shall be appurtenant to and shall run
with fee title to the Parcel 3 Land.
(g) Nothing herein contained shall be deemed to be a gift or dedication of any rights
in any Parcels to or for the benefit of the general public or for any public purposes
whatsoever, it being the intention of the parties hereto that this Agreement shall be
strictly limited to and for the purposes herein expressed.
2.
Covenants of the Parcels 1&2 Owner
. The Parcels 1&2 Owner covenants and agrees as
follows:
2.1
Injury, Damage, and Indemnification
.
The Parcels 1&2 Owner shall exercise its
rights and perform its obligations under this Agreement so as to reasonably minimize interference
with the use of the Parcel 3 Land or unreasonably disturb any of the Parcel 3 Benefited Parties,
including any construction or alteration work undertaken by the Parcel 3 Owner on the Parcel 3
Land. Subject to
Section 6.4
, if, in entering any of the Parcel 3 Servient Tenements, any
of the Parcels 1&2 Benefited Parties causes any damage other than ordinary wear and tear, to
landscaping, pavement, site improvements, or other real or personal property located on the Parcel
3 Land, or causes any injury to any person, whether such damage, release, or injury is intentional
or unintentional, then the Parcels 1&2 Owner shall:
(a) promptly reimburse the Parcel 3 Owner the cost to repair any and all physical damage as
necessary to substantially restore the affected area to the condition that existed immediately
before such physical damage; and
(b) indemnify, defend, and hold harmless the Parcel 3 Owner from and against any and all
demands, claims, liabilities, losses, costs, expenses, actions, causes of action, damages or
judgments, and all expenses (including, without limitation, attorneys fees, mechanics liens,
charges and disbursements) incurred in investigating or resisting the same (collectively,
Claims
) resulting from such damage or injury in accordance with
Section 8
.
2.2
No Change of Use
. The Parcels 1&2 Owner shall not permit or create a substantial,
permanent or indefinite change in its use of the Parcels 1&2 Driveway Easement.
3.
Covenants of the Parcel 3 Owner
. The Parcel 3 Owner covenants and agrees as
follows:
3.1
Injury, Damage, and Indemnification
.
Subject to
Section 6.4
, if, in
entering the Parcels 1&2 Driveway Servient Tenement, any of the Parcel 3 Benefited Parties cause
any damage other than ordinary wear and tear, to landscaping, pavement, site improvements, or other
real or personal property located on the Parcels 1&2 Driveway Servient Tenement, or causes any
injury to any person, whether such damage, release, or injury is intentional or unintentional, then
the Parcel 3 Owner shall:
(a) promptly reimburse the Parcels 1&2 Owner the cost to repair any and all physical damage as
necessary to substantially restore the affected area to the condition that existed immediately
before such physical damage; and
(b) indemnify, defend, and hold harmless the Parcels 1&2 Owner from and against any and Claims
resulting from such damage or injury in accordance with
Section 8
.
3.2
No Change of Use
. The Parcel 3 Owner shall not permit or create a substantial,
permanent or indefinite change in its use of the Parcel 3 Easements other than in connection with
the construction of the Additional Parcel 3 Building.
4.
Maintenance and Repair of Servient Tenements
.
4.1
Maintenance of Servient Tenements
.
(a)
General Provisions
.
(i) As used in this Agreement, the term
Maintenance
(or as a verb, to
Maintain
) means maintain, repair, sweep, and otherwise operate the Servient
EXHIBIT L-4
Tenements, as applicable, so that at all times the Servient Tenements, as applicable,
are in a reasonable condition and state of reasonable repair sufficient for use in
accordance with this Agreement.
(ii) As used in this Agreement, the term good condition and repair means in a
condition which is not less than the condition of such Servient Tenement on the date on
which this Agreement was initially recorded, normal wear and tear excepted.
(b)
Driveway Servient Tenements
. The Parcels 1&2 Owner and the Parcel 3 Owner
shall each, at their respective cost and expense, Maintain all paved surfaces within the
portion of the Driveway Servient Tenement on its respective parcel of land with a paved
surface and in a smooth, clean, orderly, safe and good state of repair and condition.
(c)
Parking Servient Tenement
. The Parcel 3 Owner shall on a timely basis
perform all Maintenance for the Parking Servient Tenement at the Parcel 3 Owners sole cost
and expense. The Parking Servient Tenement shall be maintained in good condition and
repair, including all paved surfaces within the portion of the Parking Servient Tenement
with a paved surface and in a smooth, clean, orderly, safe and good state of repair and
condition. The Parcel 3 Owner shall make all repairs or replacements of, in, on, under,
within, upon or about such, property, whether said repairs involve ordinary or extraordinary
repairs or replacements, necessary to keep the same in safe and good operating and
condition, howsoever the necessity or desirability thereof may arise, and whether or not
necessitated by wear, tear, obsolescence, defects or otherwise.
(d)
Recreation Facilities
.
(i) The Parcel 3 Owner shall on a timely basis perform all Maintenance for the
Recreation Facilities Servient Tenement at the Parcel 3 Owners sole cost and expense. The
Recreation Facilities Servient Tenement shall be maintained in good condition and repair,
including all paved surfaces within the portion of the Recreation Facilities Servient
Tenement with a paved surface and in a smooth, clean, orderly, safe and good state of repair
and condition
(ii) The Parcel 3 Owner shall on a timely basis Maintain in good condition and repair
and make all repairs or replacements of, in, on, under, within, upon or about such,
Recreation Facilities, whether said repairs or replacements are to the interior or exterior
thereof, or structural or non-structural components thereof, or involve ordinary or
extraordinary repairs or replacements, necessary to keep the same in safe and good operating
and condition, howsoever the necessity or desirability thereof may arise, and whether or not
necessitated by wear, tear, obsolescence, defects or otherwise. In the event the Parcel 3
Owner decides to replace any of the Recreation Facilities, the Parcel 3 Owner shall replace
such Recreation Facilities with Recreation Facilities substantially equivalent or better and
providing substantially the same quality of service or better.
(iii) No material changes in the improvements or use of the Recreation Facilities shall
be permitted without the prior written approval of Parcels 1&2 Owner, which consent shall
not be unreasonably withheld, conditioned or delayed.
4.2
Waste
. Neither the Parcels 1&2 Owner nor the Parcel 3 Owner shall suffer or
commit, and shall use all reasonable precaution to prevent, waste to any of their respective
Servient Tenements.
4.3
Failure to Maintain the Servient Tenements
. If an Owner shall fail to perform the
Maintenance of its respective Servient Tenements as set forth in
Section 4.1
, the other
Owner shall have the right, but not the obligation, (a) following thirty (30) days written notice
and opportunity to cure (or such longer period as may be necessary to cure such failure if such
default cannot be completed within such period provided such Owner commences to cure within said
thirty (30) day period and thereafter diligently prosecutes such cure to completion), or (b) in the
case of any facts or circumstances that create an imminent risk of damage to such Servient
Tenements or injury to, or death of, persons, without written notice, to perform such Maintenance
as it deems reasonable and necessary. Upon written demand, the Owner in default
EXHIBIT L-5
shall reimburse the other Owner for the reasonable costs incurred by it in performing such
Maintenance. Such written demand for payment shall include a statement of costs and reasonable
detail of expenses.
4.4
Damage or Destruction
. Subject to
Section 4.5
, if any portion of the
Servient Tenements are damaged by fire or other perils, then the Owner of such Servient Tenements
shall, at such Owners sole cost and expense, commence and proceed diligently with the work of
repair, reconstruction and restoration of such Servient Tenements, in as timely a manner as
practicable under the circumstances.
4.5
Condemnation
. Notwithstanding anything to the contrary set forth herein, neither
Owner shall have any obligation to restore, reconstruct or replace any of the Servient Tenements
located on its property in the event that such Servient Tenements is taken pursuant to a
condemnation (or similar) action by a governmental or quasi-governmental entity. In any of such
events, this Agreement shall automatically terminate without the need for any further action by any
Owner as to such Servient Tenements that has been affected by such casualty or condemnation.
4.6
Compliance with Law
. Each Owner and each Benefited Party shall, at its sole cost
and expense, promptly comply with all federal, state and local laws, ordinances, regulations,
codes, rules, orders and safety guidelines pertaining to this Agreement, the Parcels 1&2 Land, the
Parcel 3 Land, or any other matter within the scope of this Agreement (collectively,
Laws
) and all recorded documents or recorded amendments thereto affecting the Parcels or
any portion thereof, and with the requirements of any board of fire underwriters or other similar
body now or hereafter constituted relating to or affecting the condition, use or occupancy of the
Parcels.
4.7
Rules and Regulations
. The Parcel 3 Owner may establish and modify, from time to
time, reasonable rules and regulations (the
Rules and Regulations
) governing the use of
the Recreation Facilities. The Parcels 1&2 Owner covenants and agrees to use commercially
reasonable efforts to cause the Parcels 1&2 Benefited Parties to comply with all applicable Rules
and Regulations. The Parcel 3 Owner shall have the right to refuse to allow any of the Parcels 1&2
Benefited Parties access to the Recreation Facilities if such Parcels 1&2 Benefited Party has not
complied with the applicable Rules and Regulations after receiving written notice of such failure
to comply.
4.8
Use of Easements
.
(a) The use of the Easements by the parties hereto shall be expressly conditioned upon
the compliance by such parties with each of the terms and conditions specified in this
Agreement (including, but not limited to, the applicable Rules and Regulations), which Rules
and Regulations shall be uniformly applied by the parties hereto to all Benefited Parties
without discrimination.
(b) No fence or other barrier shall be erected or permitted within or across any
portion of the Driveway Servient Tenements or the Parking Servient Tenement which would
prevent or obstruct the passage of pedestrian or vehicular travel; provided, however, that
the foregoing shall not prohibit the temporary erection of barricades which are reasonably
necessary for security and/or safety purposes in connection with the construction of the
Additional Parcel 3 Building, provided that all such work shall be conducted to reasonably
minimize the interference with the use of such Servient Tenement, and such work shall be
diligently prosecuted to completion.
(c)
Access Cards
. Notwithstanding any other provision of this Agreement, the
Parcel 3 Owner shall have the right to restrict access to the Recreation Facilities located
in the Parcel 3 Building, subject to the provisions of this
Section 4.8
:
(i) The access to the Recreation Facilities if locked, shall incorporate into their
design a system of being opened by an access card, entry key, remote control mechanism or
other similar controlled access device (an
Access Card
). The Parcel 3 Owner shall
provide to the Parcels 1&2 Owner a reasonable initial supply of Access Cards (the
reasonableness of such supply to be measured in terms of the number of Parcels 1&2 Benefited
Parties that will be accessing the Recreation Facilities).
EXHIBIT L-6
The
Parcel 3 Owner further shall provide any additional Access Cards reasonably required by
the Parcels 1&2 Owner from time to time, and the Parcels 1&2 Owner shall reimburse the
Parcel 3 Owner for the actual cost thereof.
(ii) The Parcels 1&2 Owner shall maintain a list of those Parcels 1&2 Benefited Parties
to whom Access Cards have been provided, and the Parcels 1&2 Owner shall provide copies of
such lists from time to time upon request to the Parcel 3 Owner.
(iii) The intent of the foregoing is that the scope of the access, ingress and egress rights
enjoyed by the Parcels 1&2 Owner of the Recreation Facilities shall not be diminished by the
provisions of this
Section 4.8
except that exercise of such rights of the Recreation
Facilities may be controlled by the Access Cards so long as the Parcel 3 Owner provides the Parcels
1&2 Owner with Access Cards that operate in the manner described in this
Section 4.8
.
5.
Construction of Additional Parcel 3 Building
: Before the Parcel 3 Owner commences
any construction of the Additional Parcel 3 Building, the Parcel 3 Owner agrees to coordinate and
discuss any necessary security precautions or restrictions to the Easements necessary to protect
the Parcels 1&2 Benefited Parties in connection with the Parcels 1&2 Benefited Parties use of the
Parcel 3 Easements. The Parcel 3 Owner shall have the ability to relocate the Parcel 3 Easements
at its own expense to any other location on the Parcel 3 Land so long as relocation shall continue
to reasonably provide Access to the Recreation Facilities or the Parcels 1&2 Land, as applicable.
6.
Insurance
: The Owners shall procure and maintain the following insurance:
6.1
Insurance
. Each Owner shall, at its own cost and expense, procure and maintain in
effect, a comprehensive public liability insurance with limits of not less than Five Million
Dollars ($5,000,000) per occurrence for death or bodily injury and property damage with respect to
the their respective Parcel. Such insurance policies shall name the other Owner, BioMed Realty,
L.P., BioMed Realty Trust, Inc., and Mortgagees as additional insureds.
6.2
Insurance Provisions
. Each policy described in this
Section 6
shall
provide that the knowledge or acts or omissions of any insured party shall not invalidate the
policy as against any other insured party or otherwise adversely affect the rights of any other
insured party under any such policy; (ii) shall provide (except for liability insurance described
in
Section 6.1
, for which it is inapplicable) by endorsement or otherwise, that the
insurance shall not be invalidated should any of the insureds under the policy waive in writing
prior to a loss any or all rights of recovery against any party for loss occurring to the property
insured under the policy, if such provisions or endorsements are available and provided that such
waiver by the insureds does not invalidate the policy or diminish or impair the insureds ability
to collect under the policy, or unreasonably increase the premiums for such policy unless the party
to be benefited by such endorsement or provision pays such increase; (iii) shall provide for a
minimum of thirty (30) days advance written notice of the cancellation, non-renewal or material
modification thereof to all insureds thereunder; (iv) shall include a standard mortgagee
endorsement and loss payable clause in favor of the Mortgagees reasonably satisfactory to them; and
(v) shall not include a co-insurance clause.
6.3
Limits of Liability
. Insurance specified in this
Section 6
shall be
jointly reviewed by the Owners periodically at the request of any Owner, but no review will be
required more often than annually, to determine if such limits, deductible amounts and types of
insurance are reasonable and prudent in view of the type, place and amount of risk to be
transferred and the financial responsibility of the insureds, and to determine whether such limits,
deductible amounts and types of insurance comply with the requirements of all applicable Laws and
whether on a risk management basis, additional types of insurance or endorsements against special
risks should be carried or whether required coverages or endorsements should be deleted. In
connection with such periodic review, each Owner shall make reasonably available to the other any
Mortgagee (as defined below) insurance requirements that apply to such Owner. Limits of liability
may not be less than limits required by Mortgagees. Such limits shall be increased or decreased,
deductible amounts increased or decreased or types of insurance shall be modified, if
justified, based upon said review, and upon any such increase, decrease or modification, the
Owners shall, at any Owners election, execute an instrument in recordable form confirming such
increase, decrease or modification, which any Owner may record with the San Diego County Recorders
Office as a supplement to this Agreement.
EXHIBIT L-7
6.4
Waiver
. Provided that such a waiver does not invalidate the respective policy or
policies or diminish or impair the insureds ability to collect under such policy or policies, each
Owner hereby waives all claims for recovery from the other Owner for any loss or damage to any of
its property insured (or required hereunder to be insured) under valid and collectible insurance
policies to the extent of any recovery collectible (or which would have been collectible had such
insurance required hereunder been obtained) under such insurance policies plus any deductible
amounts.
6.5
Delegate
. Each Owner shall have the right to delegate its obligations under this
Section 6
to its respective Tenants.
7.
Reimbursements
: Any reimbursements due to a Owner from the other Owner which are
not paid within fifteen (15) days of receipt of any invoice therefore shall bear interest at a rate
equal to the prime rate, as published in
The Wall Street Journal
from time to time, plus three
percent (3%) per annum, not to exceed the highest rate allowed by law. If
The Wall Street Journal
no longer publishes such prime rate, then the Parcel 3 Owner shall reasonably designate a
substitute publication that is nationally recognized as an authoritative source for interest rate
information.
8.
Indemnification
: Subject to
Section 6.4
, each Owner (hereinafter as used
in this
Section 8
, the
Indemnifying Owner
) covenants and agrees, at its sole cost
and expense, to indemnify, defend and hold harmless the other Owner (hereinafter as used in this
Section 8.1
, the
Indemnitee
) from and against any and all Claims, against
Indemnitee, for losses, liabilities, damages, judgments, costs and expenses by or on behalf of any
Person other than the Indemnitee, arising from: (a) the Indemnifying Owners negligent use,
possession or management of the Indemnifying Owners property or activities therein; and (b) the
Indemnifying Owners or any of such Indemnifying Owners Benefited Parties use, exercise or
enjoyment of the applicable Easements, except to the extent caused by the Indemnitees gross
negligence or willful misconduct. Notwithstanding anything to the contrary in this
Section
8.1
, the Parcel 3 Owner shall have no responsibility to the Parcels 1&2 Owner for any Claims
arising out of, caused by, or resulting from any of the Parcels 1&2 Benefited Parties use of the
Recreation Facilities or the negligence of any of the Parcel 3 Benefited Parties in connection with
the operation and maintenance of such Recreation Facilities.
9.
Remedies
. In the event of any breach, violation, or failure to perform or satisfy
any of the duties or obligations contained in this Agreement (including without limitation using
any Servient Tenement in any manner not permitted by this Agreement), the Owner to which such duty
or obligation is owed shall have the right to provide written notice to the affecting Owner
describing in reasonable detail the nature of the breach, violation or failure. If such breach,
violation or failure is not cured within thirty (30) days after delivery of such notice, the Owner
delivering the notice shall have the right to enforce all easements, rights, rights-of-way, charges
and equitable servitudes now or hereafter imposed pursuant to this Agreement. Any court hearing a
dispute with respect to such alleged breach shall have the power to award all rights and remedies
available at law or in equity; provided, however, that no breach of this Agreement by a Owner shall
entitle any other Owner to cancel, rescind or terminate the rights granted to the breaching Owner
hereunder; and provided further that such complaining Owner shall have the right (a) to require the
breaching Owner to remedy the breach, and (b) in the event of a default in the payment of any
amount due and payable under this Agreement, either Owner, in addition to any other remedy provided
herein or by law, shall have the right to recover a money judgment for the amount due and payable,
including costs and reasonable attorneys fees.
10.
Limitation of Liability
.
10.1
Limitation of Liability
. The liability under this Agreement of an Owner shall be
limited to and enforceable solely against the assets of such Owner constituting an interest in the
Parcels (including insurance and condemnation proceeds attributable to the Parcels) and no other
assets of such Owner.
10.2
Transfer of Ownership
. If an Owner shall sell, assign, transfer, convey or
otherwise dispose of its portion of the Parcel (other than as security for a loan to such Owner),
EXHIBIT L-8
then (a) such Owner shall be entirely freed and relieved of any and all covenants and obligations
arising under this Agreement which accrue under this Agreement from and after the date such Owner
shall so sell, assign, transfer, convey or otherwise dispose of its interest in such portion of the
Parcel, and (b) the person or entity who succeeds to Owners interest in such portion of the Parcel
shall be deemed to have assumed any and all of the covenants and obligations arising under this
Agreement of such Owner both theretofore accruing or which accrue under this Agreement from and
after the date such Owner shall so sell, assign, transfer, convey or otherwise dispose of its
interest in such Parcel.
11.
Miscellaneous
11.1
Term
. The covenants, conditions and restrictions contained in this Agreement
shall be enforceable by the Owners and their respective successors and assigns for the term of this
Agreement which shall be perpetual (or if the law provides for a time limit on any covenant,
condition, or restriction, then such covenant, condition or restriction shall be enforceable for
such shorter period permitted by law), subject to amendment as set forth in
Section 11.8
.
If the law provides for such shorter period, then upon expiration of such shorter period, said
covenants, conditions and restrictions shall be automatically extended without further act or deed
of the Owners, except as may be required by law, for successive periods of ten (10) years, subject
to amendment or termination as set forth in
Section 11.8
.
11.2
Further Assurances
. Each Owner shall each promptly upon request take such
further actions, and execute such further documents, as shall be reasonably necessary or
appropriate from time to time to implement and effectuate the intentions of the Owners as expressed
in this Agreement.
11.3
Estoppel Certificates
. At any time and from time to time, within fifteen (15)
days after written request by either Owner or any institutional mortgagee of an Owner, the Owner
receiving such a request shall deliver to the requesting Owner and/or institutional mortgagee a
statement in writing certifying that this Agreement is unmodified and in full force and effect (or
specifying each such modification), and stating whether or not there is any default in the
performance of any provision contained in this Agreement (and specifying each such default, if
any). If an Owner or institutional mortgagee shall fail or refuse to deliver such a statement
within such period, then as against such Owner or institutional mortgagee, this Agreement shall be
deemed to be in full force and effect with no defaults hereunder.
11.4
Notices
. Any notice, consent, demand, bill, statement or other communication
required or permitted to be given hereunder shall be in writing and shall be given by personal
delivery, overnight delivery with a reputable nationwide overnight delivery service, or certified
mail (return receipt requested), and if given by personal delivery, shall be deemed delivered upon
receipt; if given by overnight delivery, shall be deemed delivered one (1) day after deposit with a
reputable nationwide overnight delivery service; and, if given by certified mail (return receipt
requested), shall be deemed delivered three (3) business days after the time the notifying party
deposits the notice with the United States Postal Service. Any notices given pursuant to this
Agreement shall be sent to the following addresses or at such other single address within the
United States as a party may specify by notice to the other:
If to Parcels 1&2 Owner:
BMR-9885 Towne Centre Drive LLC
17140 Bernardo Center Drive, Suite 222
San Diego, California 92128
Attn: General Counsel/Real Estate
Facsimile: (858) 985-9843
If to Parcel 3 Owner:
BMR-9865 Towne Centre Drive LLC
17140 Bernardo Center Drive, Suite 222
San Diego, California 92128
Attn: General Counsel/Real Estate
Facsimile: (858) 985-9843
EXHIBIT L-9
11.5
Governing Law; Modification
. This Agreement shall be governed by, construed and
interpreted in accordance with the internal laws of the State of California, without reference to
choice of law principles.
11.6
Third Party Beneficiaries
. This Agreement is made and entered into for the sole
protection and benefit of the parties hereto, their successors and assigns, and no other person or
entity shall under any circumstances be deemed to be a beneficiary of any of the rights, remedies,
terms and provisions of this Agreement.
11.7
Waiver of Jury Trial
. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES
HERETO HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER
OF THIS AGREEMENT AND THE RELATIONSHIP BETWEEN THE PARTIES HERETO THAT IS BEING ESTABLISHED. THE
PARTIES HERETO ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT
EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THE PARTIES HERETO
FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT
EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.
11.8
Amendment
. This Agreement may be amended or otherwise modified only in a writing
signed and acknowledged by the Parcels 1&2 Owner and the Parcel 3 Owner, or their respective
successors and assigns;
provided
,
however
, (a) for so long as the Parcels 1&2 Lease
is in full force and effect, any such amendment or modification shall be subject to: (i) the prior
written consent of the original named tenant under the Parcels 1&2 Lease, which consent pursuant to
Section 14.2.5
of the Parcels 1&2 Lease shall not be unreasonably withheld, conditioned or
delayed, and (ii) solely with respect to amendments or modifications that could reasonably be
expected to have a material adverse effect on obligations assumed by any successors and assigns of
the original named tenant under the Parcels 1&2 Lease, the prior written consent of any such
successors and assigns, which consent pursuant to
Section 14.2.5
of the Parcels 1&2 Lease
shall not be unreasonably withheld, conditioned or delayed; and (b) for so long as the Parcel 3
Lease is in full force and effect, any such amendment or modification shall be subject to: (i) the
prior written consent of the original named tenant under the Parcel 3 Lease, which consent pursuant
to
Section 17.7
of the Parcel 3 Lease shall not be unreasonably withheld, conditioned or
delayed, and (ii) solely with respect to amendments or modifications that could reasonably be
expected to have a material adverse effect on obligations assumed by any successors and assigns of
the original named tenant under the Parcel 3 Lease, the prior written consent of any such
successors and assigns, which consent pursuant to
Section 17.7
of the Parcel 3 Lease shall
not be unreasonably withheld, conditioned or delayed. All amendments or modifications which result
in an increase of the costs and expenses to be incurred by such successor and assign under
Section 14.2.2
of the Parcels 1&2 Lease or
Section 17.3
of the Parcel 3 Lease shall
be deemed material and adverse.
11.9
No Partnership
. Each of the parties to this Agreement agree that by this
Agreement no partnership, joint venture or other relationship is created other than a contractual
relationship to perform the obligations specifically and expressly stated in this Agreement.
11.10
Notice to Mortgagees Rights of Mortgagee
:
(a) The term
Mortgage
as used herein shall mean any mortgage (or any trust
deed) of an interest in the Parcel given primarily to secure the repayment of money owed by
the mortgagor. The term
Mortgagee
as used herein shall mean the Mortgagee from
time to time under any such Mortgage (or the beneficiary under any such trust deed).
(b) If a Mortgagee shall have served on the Owners, by personal delivery or by
registered or certified mail return receipt requested, a written notice
specifying the name and address of such Mortgagee, such Mortgagee shall be given a copy
of each and every notice required to be given by one party to the others at the same
EXHIBIT L-10
time as
and whenever such notice shall thereafter be given by one party to the others, at the
address last furnished by such Mortgagee. The address of any existing Mortgagee shall be as
set forth in its consent to subordination to be attached hereto in connection with such
Mortgage. After receipt of such notice from a Mortgagee, no notice thereafter given by
either party shall be deemed to have been given unless and until a copy thereof shall have
been so given to the Mortgagee. If a Mortgagee so provides or otherwise requires, and
notice thereof is given by the Mortgagee as provided above:
(i) A Mortgagee shall have the absolute right, but no duty or obligation, to cure or
correct a breach of this Agreement by the Owner whose property is secured by the Mortgagees
Mortgage within any applicable cure period provided for such breach by such mortgagor Owner
plus an additional period of twenty (20) days after notice to the Mortgagee of expiration of
the cure period allowed the mortgagor Owner before the other Owner may exercise any right or
remedy to which it may be entitled as a Benefitted Party, except exercise of a self-help
right in an emergency situation.
(ii) Should any prospective Mortgagee require a modification or modifications of this
Agreement, which modification or modifications will not cause an increased cost or expense
to the Owner whose property is not subject to the Mortgage of such Mortgagee or in any other
way materially and adversely change the rights and obligations of such Owner, then and in
such event, such Owner agrees that this Agreement may be so modified and agrees to execute
whatever documents are reasonably required therefor and deliver the same to the other Owner
within ten (10) business days following written requests therefor by the other Owner or
prospective Mortgagee.
11.11
Mortgagee Protection Provisions
. No breach or violation of the terms of this
Agreement shall defeat or render invalid the lien of any Mortgage encumbering the Parcels 1&2 Land
or the Parcel 3 Land or any portions thereof; provided, however, that this Agreement and all
provisions hereof shall be binding upon and effective against any subsequent owner of the property
or portion thereof whose title is acquired by foreclosure, trustees sale, a deed in lieu, or other
remedies provided in such Mortgage, but such subsequent owners shall take title free and clear of
any of the previous owners violations of the terms of this Agreement that occurred before such
transfer of title or occupancy.
11.12
Attorneys Fees
. In the event any legal action, proceeding or arbitration is
commenced to interpret or enforce the terms of, or obligations arising out of, this Agreement, or
to recover damages for the breach hereof, the party prevailing in any such action, proceeding or
arbitration shall be entitled to recover from the non-prevailing party all reasonable attorneys
fees, costs and expenses incurred by the prevailing party.
11.13
Counterparts
. This Agreement may be executed in one or more counterparts, each
of which, when taken together, shall constitute one and the same document.
[Signature Page Follows]
EXHIBIT L-11
IN WITNESS WHEREOF,
the Owners have executed and delivered this Agreement as of the Effective
Date.
|
|
|
|
|
|
|
|
|
|
|
PARCELS 1&2 OWNER
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BMR-9885 TOWNE CENTRE DRIVE LLC,
a Delaware limited liability company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
BIOMED REALTY, L.P.,
|
|
|
|
|
|
|
a Maryland limited partnership
|
|
|
|
|
|
|
its Member
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PARCEL 3 OWNER
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BMR-9865 TOWNE CENTRE DRIVE LLC,
a Delaware limited liability company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
BIOMED REALTY, L.P.,
|
|
|
|
|
|
|
a Maryland limited partnership
|
|
|
|
|
|
|
its Member
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
|
|
Title:
|
|
|
|
|
EXHIBIT L-12
ACKNOWLEDGMENTS
STATE OF CALIFORNIA
COUNTY OF SAN DIEGO
On
before me,
,
a Notary Public, personally appeared , personally known to me (or proved to me on the basis of
satisfactory evidence) to be the
person(s) whose name is/are subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their authorized capacit(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf
of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
|
|
|
Signature of Notary Public
|
|
|
(This area for official notarial seal)
STATE OF CALIFORNIA
COUNTY OF SAN DIEGO
On
before me,
,
a Notary Public, personally appeared
, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name is/are subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their authorized capacit(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf
of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
|
|
|
Signature of Notary Public
|
|
|
(This area for official notarial seal)
EXHIBIT L-13
CONSENT OF PARCELS 1&2 TENANT
THE UNDERSIGNED, as the tenant under that certain under that Lease (the
Parcels 1&2 Lease
),
as more particularly defined in Recital D of the foregoing Reciprocal Easement and Covenant
Agreement (
Agreement
) to which this Consent is attached, hereby (a) consents to the execution and
recording of the foregoing Agreement against the undersigneds leasehold interest in the real
property subject to the Parcels 1&2 Lease, and (b) agrees that the Parcels 1&2 Lease is subject and
subordinate to the Agreement.
Dated as of
, 2007.
|
|
|
|
|
|
|
ILLUMINA, INC.,
|
|
|
a Delaware corporation
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
EXHIBIT L-14
CONSENT OF PARCEL 3 TENANT
THE UNDERSIGNED, as the tenant under that certain under that Lease (the
Parcel 3 Lease
), as
more particularly defined in Recital D of the foregoing Reciprocal Easement and Covenant Agreement
(
Agreement
) to which this Consent is attached, hereby: (a) consents to the execution and
recording of the foregoing Agreement against the undersigneds leasehold interest in the real
property subject to the Parcel 3 Lease, and (b) agrees that the Parcel 3 Lease is subject and
subordinate to the Agreement.
Dated as of
, 2007.
|
|
|
|
|
|
|
ILLUMINA, INC.,
|
|
|
a Delaware corporation
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
EXHIBIT L-15
CONSENT OF DIVERSIFIED
THE UNDERSIGNED, as the tenant under that certain under that Eastgate Pointe Building D
Lease dated as of July 6, 2000 (the
Diversified Lease
), as more particularly defined in Recital D
of the foregoing Reciprocal Easement and Covenant Agreement (
Agreement
) to which this Consent is
attached, hereby consents to the execution and recording of the foregoing Agreement against the
undersigneds leasehold interest in the real property subject to the Diversified Lease, and agrees
that the Diversified Lease is subject and subordinate to the Agreement.
Dated as of
, 2007.
|
|
|
|
|
|
|
DIVERSIFIED EASTGATE POINTE, LLC
|
|
|
a California limited liability company
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
EXHIBIT L-16
RECIPROCAL EASEMENT AND COVENANT AGREEMENT
EXHIBITS
|
|
|
Exhibit A
|
|
Driveway Servient Tenement
|
|
|
|
Exhibit B
|
|
Parking Servient Tenement
|
|
|
|
Exhibit C
|
|
Recreation Facilities Servient Tenement
|
|
|
|
Exhibit D
|
|
Temporary Parking Servient Tenement
|
EXHIBIT L-17
EXHIBIT A
DRIVEWAY SERVIENT TENEMENT
TOWN
CENTRE DRIVE
EXHIBIT L-18
EXHIBIT B
PARKING SERVIENT TENEMENT
TOWN CENTRE DRIVE
EXHIBIT L-19
EXHIBIT C
RECREATION FACILITIES SERVIENT TENEMENT
TOWN CENTRE DRIVE
EXHIBIT L-20
EXHIBIT D
TEMPORARY PARKING SERVIENT TENEMENT
TOWN CENTRE DRIVE
EXHIBIT L-21
EXHIBIT M
FORM OF SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
RECORDED AT REQUEST OF
AND WHEN RECORDED RETURN TO:
SUBORDINATION, NONDISTURBANCE, AND ATTORNMENT AGREEMENT
This Subordination, Nondisturbance, and Attornment Agreement (
Agreement
) is made as
of
,
between
(
Lender
), a
, having its
principal place of business at
,
,
and Illumina, Inc.
(
Tenant
), a Delaware corporation, having its principal place of business at 9855 through
9885 Towne Centre Drive, San Diego, California.
Recitals:
A. Lender has agreed to make a loan to BMR-9865 Towne Center Drive LLC, a Delaware limited
liability company (
Landlord
), to be secured by a deed of trust, dated
,
, and recorded on
,
, as Instrument No.
, in the Official
Records of San Diego County, California (together with all amendments, increases, renewals,
modifications, consolidations, spreaders, combinations, supplements, replacements, substitutions,
and extensions, either current or future, referred to hereafter as the
Mortgage
)
encumbering Landlords ownership interest in real property located in San Diego County, State of
California. The legal description of the encumbered real property (the
Mortgage
Premises
) is set forth in Exhibit A, attached to this Agreement. The Mortgage, together with
the promissory note or notes, the loan agreement(s), and other documents executed in connection
with it are hereafter collectively referred to as the Loan Documents.
B. On
,
, Tenant and Landlord entered into that certain Lease for a portion
of the Mortgage Premises (the
Lease
). The Lease creates a leasehold estate in favor of
Tenant for space (the
Leased Premises
) located on the Mortgage Premises.
C. In connection with execution of the Mortgage, Landlord also executed and delivered to
Lender an
[Assignment of Leases, Rents and Profits]
dated
,
, and recorded on
,
, as Instrument No.
, in the Official Records of the County Recorder
of San Diego, California concerning all rents, issues and profits from the Mortgage Premises. This
document, together with all amendments, renewals, modifications consolidations, replacements,
substitutions and extensions, is hereafter referred to as the
Assignment of Rents
.
TO CONFIRM their understanding concerning the legal effect of the Mortgage and the Lease, in
consideration of the mutual covenants and agreements contained in this Agreement and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, Lender and Tenant,
intending to be legally bound, agree and covenant as follows:
1.
Representations and Warranties
. Tenant warrants and represents that the Lease is
in full force and effect and that, as of the date of this Agreement and to Tenants actual
knowledge, there is no default under the Lease by Landlord or Tenant.
2.
Tenant Subordination
.
2.1 Subject to the provisions of
Section 3
, the Loan Documents shall constitute a lien
or charge on the Mortgage Premises that is prior and superior to the Lease, to the leasehold estate
created by it, and to all rights and privileges of Tenant under it; by this
EXHIBIT M-1
Agreement, the Lease, the leasehold estate created by it, together with all rights and
privileges of Tenant under it, is, subject to
Section 3
, subordinated, at all times, to the
lien or charge of the Loan Documents in favor of Lender.
2.2 By executing this Agreement, Tenant, subject to
Section 3
, subordinates the Lease
and Tenants interest under it to the lien right and security title, and terms of the Loan
Documents, and to all advances or payments made, or to be made, under any Loan Document.
3.
Nondisturbance
.
3.1 Lender consents to the Lease.
3.2 Despite Tenants subordination under
Section 2
, Tenants peaceful and quiet
possession of the Leased Premises shall not be disturbed and Tenants rights and privileges under
the Lease, shall not be diminished by Lenders exercise of its rights or remedies under the Loan
Documents (subject to the provisions of
Section 5
), provided that:
(a) no Default (as defined in the Lease) exists; and
(b) the Lease has not been canceled or terminated (without regard to whether Landlord
or Tenant is then in default under the Lease).
3.3 Tenant shall not be named or joined in any foreclosure, trustees sale, or other
proceeding to enforce the Loan Documents unless such joinder shall be legally required to perfect
the foreclosure, trustees sale, or other proceeding.
4.
Attornment
.
4.1 If Lender shall succeed to Landlords interest in the Mortgage Premises by foreclosure of
the Mortgage, by deed in lieu of foreclosure, or in any other manner, Tenant shall be bound to
Lender (and Lender shall be bound to Tenant) under all the terms, covenants and conditions of the
Lease for the balance of its term with the same force and effect as if Lender were the Landlord
under the Lease. Tenant shall be deemed to have full and complete attornment to, and to have
established direct privity between Tenant and:
(a) Lender when in possession of the Mortgage Premises;
(b) a receiver appointed in any action or proceeding to foreclose the Mortgage;
(c) any party acquiring title to the Mortgage Premises; or
(d) any successor to Landlord.
4.2 Tenants attornment is self-operating, and it shall continue to be effective without
execution of any further instrument by any of the parties to this Agreement or the Lease. Lender
agrees to give Tenant written notice if Lender has succeeded to the interest of the Landlord under
the Lease. Subject to
Section 5
, the terms of the Lease are incorporated into this
Agreement by reference.
4.3 If the interests of Landlord under the Lease are transferred by foreclosure of the
Mortgage, deed in lieu of foreclosure, or otherwise, to a party other than Lender
(
Transferee
), in consideration of, and as condition precedent to, Tenants agreement to
attorn to any such Transferee, Transferee shall be deemed to have assumed all terms, covenants, and
conditions of the Lease to be observed or performed by Landlord from the date on which the
Transferee succeeds to Landlords interests under the Lease; provided that the liability of any
Transferee to Tenant under the terms of the Lease shall be limited in the same manner as Lenders
liability is limited under
Section 5
.
5.
Lender as Landlord
. If Lender shall succeed to the interest of Landlord under the
Lease, Lender shall be bound to Tenant under all the terms, covenants and conditions of the Lease,
and Tenant shall, from the date of Lenders succession to the Landlords interest under the Lease,
have the same remedies against Lender for breach of the Lease that Tenant would have had under the
Lease against Landlord; provided, however, that despite anything to the
EXHIBIT M-2
contrary in this Agreement or the Lease, Lender, as successor to the Landlords interest,
shall not be:
(a) liable for any act or omission of any previous landlord (including Landlord),
provided that the foregoing shall not be construed to limit Tenants right to possession of
the Leased Premises for the entire term of the Lease, as extended, on the terms and
conditions of the Lease;
(b) subject to any offsets or defenses which Tenant might have had against any previous
landlord (including Landlord) relating to any event or occurrence before the date of
attornment. The foregoing shall not limit either (a) Tenants right to exercise against
successor landlord any offset right otherwise available to Tenant because of events
occurring after the date of attornment, or (b) successor landlords obligation to correct
any conditions that existed as of the date of attornment and that violate successor
landlords obligations as landlord under the Lease;
(c) unless actually received by Lender, bound by any rent or additional rent that
Tenant might have paid for more than one month in advance to any prior landlord (including
Landlord), other than, and only to the extent of, prepayments (if any) expressly required
under the Lease; or
(d) bound by an amendment or modification of the Lease which would materially adversely
affect any right of Landlord under the Lease made without Lenders written consent, which
consent shall not be unreasonably withheld, conditioned or delayed, except for any amendment
or modification evidencing Tenants exercise of any rights expressly granted to Tenant in
the Lease so long as such amendment or modification reflects the terms and conditions
provided with regards to such rights as reflected in the Lease. Notwithstanding the
foregoing, any modification, amendment or waiver made or entered into between Landlord and
Tenant shall be binding as between Landlord and Tenant.
6.
Notice of Default; Right To Cure
. Tenant agrees to give Lender prompt written
notice of any known default by Landlord under the Lease. Tenant agrees that, before Tenant
exercises any of its rights or remedies under the Lease, Lender shall have the right, but not the
obligation, to cure the default within the same time given Landlord in the lease to cure the
default, plus an additional thirty (30) days. Tenant agrees that the cure period shall be extended
by the time reasonably necessary for Lender to commence foreclosure proceedings and to obtain
possession of the Mortgage Premises, provided that this sentence shall not apply if the breach or
default by Landlord poses an immediate threat to the health, safety or welfare of Tenants
employees, customers or invitees at the Leased Premises, provided further that:
(a) Lender shall notify Tenant of Lenders intent to effect its remedy within thirty
(30) days after receipt of Tenants notice;
(b) Lender initiates immediate steps to foreclose on or to recover possession of the
Mortgage Premises;
(c) Lender initiates legal proceedings to appoint a receiver for the Mortgage Premises
or to foreclose on or recover possession of the Mortgage Premises within the thirty (30) day
period; and
(d) Lender prosecutes such proceedings and remedies with due diligence and continuity
to completion.
Tenant also agrees to its use its commercially reasonable efforts to give Lender notice of any
casualty damage to the Mortgage Premises, but Tenants failure to provide such notice shall not be
a default under this Agreement.
7.
Assignment of Rents
. If Landlord defaults in its performance of the terms of the
Loan Documents, Tenant agrees to recognize the Assignment of Rents made by Landlord to Lender and
shall pay to Lender, as assignee, from the time Lender gives Tenant written notice that Landlord is
in default under the terms of the Loan Documents, the rents under the Lease, but only those rents
that are due or that become due under the terms of the Lease after notice by
EXHIBIT M-3
Lender. Payments of rents to Lender by Tenant under the assignment of rents and Landlords
default shall continue until the first of the following occurs:
(a) No further rent is due or payable under the Lease;
(b) Lender gives Tenant written notice that the Landlords default under the Loan
Documents has been cured and instructs Tenant that the rents shall thereafter be payable to
Landlord; or
(c) The lien of the Mortgage has been foreclosed and the purchaser at the foreclosure
sale (whether Lender or a Transferee) gives Tenant written notice of the foreclosure sale.
On giving written notice, the purchaser shall succeed to Landlords interests under the
Lease, after which time the rents and other benefits due Landlord under the Lease shall be
payable to the purchaser as the owner of the Mortgage Premises.
8.
Tenants Reliance
. When complying with the provisions of
Section 7
, Tenant
shall be entitled to rely on the notices given by Lender under
Section 7
, and Landlord
agrees to release, relieve, protect and indemnify Tenant from and against any and all loss, claim,
damage, or liability (including reasonable attorneys fees) arising out of Tenants compliance with
such notice.
Tenant shall be entitled to full credit under the Lease for any rents paid to Lender in
accordance with
Section 7
to the same extent as if such rents were paid directly to
Landlord. Any dispute between Lender (or Lenders Transferee) and Landlord as to the existence of a
default by Landlord under the terms of the Mortgage, the extent or nature of such default, or
Lenders right to foreclosure of the Mortgage, shall be dealt with and adjusted solely between
Lender (or Transferee) and Landlord, and Tenant shall not be made a party to any such dispute
(unless required by law).
9.
Lenders Status
. Nothing in this Agreement shall be construed to be an agreement
by Lender to perform any covenant of the Landlord under the Lease unless and until it obtains title
to the Mortgage Premises by power of sale, judicial foreclosure, or deed in lieu of foreclosure, or
obtains possession of the Mortgage Premises under the terms of the Loan Documents.
10.
Cancellation of Lease
. Tenant agrees that it will not cancel, terminate, or
surrender the Lease, except at the normal expiration of the Lease term or as provided in the Lease,
or except as otherwise provided in
Section 5
above, enter into any agreement, amendment, or
modification of the Lease except any agreement, amendment, or modification contemplated by or
provided by the terms of the Lease unless Lender gives its prior written consent, which shall not
be unreasonably withheld, conditioned or delayed; provided, however, that no Lender consent shall
be required pursuant to a termination permitted under the Lease.
11.
Special Covenants
. Despite anything in this Agreement or the Lease to the
contrary, if Lender acquires title to the Mortgage Premises, Tenant agrees that: Lender shall have
the right at any time in connection with the sale or other transfer of the Mortgage Premises to
assign the Lease or Lenders rights under it to any person or entity, and that Lender, its
officers, directors, shareholders, agents, and employees shall be released from any further
liability under the Lease arising after the date of such transfer, provided that the assignee of
Lenders interest assumes Lenders obligations under the Lease (including liability for all
obligations accruing prior to the date of the assignment), in writing, from the date of such
transfer.
12.
Transferees Liability
. If a Transferee acquires title to the Mortgage Premises:
(a) Tenants recourse against Transferee for default under the Lease shall be limited
to the Mortgage Premises or any sale, insurance, or condemnation proceeds from the Mortgage
Premises;
(b) Tenant shall look exclusively to Transferees interests described in (a) above for
the payment and discharge of any obligations imposed on Transferee under this Agreement or
the Lease ; and
(c) Transferee, its officers, directors, shareholders, agents, and employees are
released and relieved of any personal liability under the Lease; and
EXHIBIT M-4
(d) Tenant shall not collect or attempt to collect any judgment out of any other
assets, or from any general or limited partners or shareholders of Transferee.
Notwithstanding the foregoing, Tenant reserves all rights and remedies available to it in law
or in equity against the prior landlord.
13.
Transferees Performance Obligations
. Subject to the limitations provided in
Sections 11
and
12
, if a Transferee acquires title to the Mortgage Premises, the
Transferee shall perform and recognize: all tenant improvement allowance provisions, all rent-free
and rent rebate provisions, and all options and rights of offer, in addition to Landlords other
obligations under the Lease.
14.
Notice
. All notices required by this Agreement shall be given in writing and
shall be deemed to have been duly given for all purposes when:
(a) deposited in the United States mail (by registered or certified mail, return
receipt requested, postage prepaid); or
(b) deposited with a nationally recognized overnight delivery service such as Federal
Express or Airborne.
Each notice must be directed to the party to receive it at its address stated below or at such
other address as may be substituted by notice given as provided in this Section.
The addresses are:
|
|
|
|
|
|
|
Lender:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attention:
|
|
|
|
|
|
|
|
|
|
|
|
Copy to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attention:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tenant:
|
|
Illumina, Inc.
|
|
|
9885 Towne Centre Drive
|
|
|
San Diego, CA 92121
|
|
|
Attention: Christian Henry
|
|
|
|
Copy to:
|
|
Allen Matkins Leck Gamble Mallory & Natsis LLP
|
|
|
501 West Broadway, 15
th
Floor
|
|
|
San Diego, CA 92121
|
|
|
Attention: Martin L. Togni, Esq.
|
Copies of notices sent to the parties attorneys or other parties are courtesy copies, and failure
to provide such copies shall not affect the effectiveness of a notice given hereunder.
15.
Miscellaneous Provisions
.
15.1 This Agreement may not be modified orally; it may be modified only by an agreement in
writing signed by the parties or their successors-in-interest. This Agreement shall inure to the
benefit of and bind the parties and their successors and assignees.
15.2 The captions contained in this Agreement are for convenience only and in no way limit or
alter the terms and conditions of the Agreement.
15.3 This Agreement has been executed under and shall be construed, governed, and enforced, in
accordance with the laws of the State of California except to the extent that California law is
preempted by the U.S. federal law. The invalidity or unenforceability of one or more provisions of
this Agreement does not affect the validity or enforceability of any other provisions.
EXHIBIT M-5
15.4 This Agreement has been executed in duplicate. Lender and Tenant agree that one (1) copy
of the Agreement will be recorded.
15.5 This Agreement shall be the entire and only agreement concerning subordination of the
Lease and the leasehold estate created by it, together with all rights and privileges of Tenant
under it, to the lien or charge of the Loan Documents and shall supersede and cancel, to the extent
that it would affect priority between the Lease and the Loan Documents, any previous subordination
agreements, including provisions, if any, contained in the Lease that provide for the subordination
of the Lease and the leasehold estate created by it to a deed of trust or mortgage.
15.6 This Agreement may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which copies, taken together,
shall constitute but one and the same instrument. Signature and acknowledgment pages may be
detached from the copies and attached to a single copy of this Agreement to physically form one
original document, which may be recorded without an attached copy of the Lease.
15.7 If any legal action or proceeding is commenced to interpret or enforce the terms of this
Agreement or obligations arising out of it, or to recover damages for the breach of the Agreement,
the party prevailing in such action or proceeding shall be entitled to recover from the
non-prevailing party or parties all reasonable attorneys fees, costs, and expenses it has
incurred.
15.8 Unless the context clearly requires otherwise, (a) the plural and singular numbers will
each be deemed to include the other; (b) the masculine, feminine, and neuter genders will each be
deemed to include the others; (c) shall, will, must, agrees, and covenants are each
mandatory; (d) may is permissive; (e) or is not exclusive; and (f) includes and including
are not limiting.
(Signature Page Follows)
EXHIBIT M-6
Executed on the date first above written.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LENDER:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[
|
|
|
|
],
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a [
|
|
|
|
]
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By;
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TENANT:
|
|
|
|
|
|
|
|
|
|
ILLUMINA, INC.,
a Delaware corporation
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accepted and Agreed To:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BMR-9865 TOWNE CENTRE DRIVE LLC,
a Delaware limited liability company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
BIOMED REALTY, L.P.,
a Maryland limited partnership
its Member
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXHIBIT M-7
ACKNOWLEDGMENTS
STATE OF CALIFORNIA
COUNTY OF SAN DIEGO
On
before me,
, a Notary Public, personally
appeared
, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name is/are subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their authorized capacit(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf
of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
|
|
|
|
|
|
|
|
Signature of Notary Public
|
(This area for official notarial seal)
STATE OF CALIFORNIA
COUNTY OF SAN DIEGO
On
before me,
, a Notary Public, personally
appeared
, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name is/are subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their authorized capacit(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf
of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
|
|
|
|
|
|
|
|
Signature of Notary Public
|
(This area for official notarial seal)
EXHIBIT M-8
STATE OF CALIFORNIA
COUNTY OF SAN DIEGO
On
before me,
, a Notary Public, personally
appeared
, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name is/are subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their authorized capacit(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf
of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
|
|
|
|
|
|
|
|
Signature of Notary Public
|
(This area for official notarial seal)
EXHIBIT M-9
EXHIBIT A
LEGAL DESCRIPTION
(See Attached)
EXHIBIT
M-10
SCHEDULE 1
DIVERSIFIED BUILDING PREMISES: RENT SCHEDULE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expiration
|
|
Square
|
|
Annual
|
|
|
|
|
|
|
|
|
|
Monthly
|
Start
Date
|
|
Date
|
|
feet
|
|
$/SF
|
|
Annual Rent
|
|
Monthly Rent
|
|
$/SF
|
|
Execution
|
|
8/17/2007
|
|
|
4,400
|
|
|
$
|
37.12
|
|
|
$
|
163,346.99
|
|
|
$
|
13,612.25
|
|
|
$
|
3.09
|
|
8/18/2007
|
|
8/17/2008
|
|
|
4,400
|
|
|
$
|
38.24
|
|
|
$
|
168,247.40
|
|
|
$
|
14,020.62
|
|
|
$
|
3.19
|
|
8/18/2008
|
|
8/17/2009
|
|
|
4,400
|
|
|
$
|
39.39
|
|
|
$
|
173,294.82
|
|
|
$
|
14,441.23
|
|
|
$
|
3.28
|
|
8/18/2009
|
|
8/17/2010
|
|
|
4,400
|
|
|
$
|
40.57
|
|
|
$
|
178,493.66
|
|
|
$
|
14,874.47
|
|
|
$
|
3.38
|
|
8/18/2010
|
|
8/17/2011
|
|
|
4,400
|
|
|
$
|
41.78
|
|
|
$
|
183,848.47
|
|
|
$
|
15,320.71
|
|
|
$
|
3.48
|
|
8/18/2011
|
|
8/17/2012
|
|
|
4,400
|
|
|
$
|
43.04
|
|
|
$
|
189,363.93
|
|
|
$
|
15,780.33
|
|
|
$
|
3.59
|
|
8/18/2012
|
|
8/17/2013
|
|
|
4,400
|
|
|
$
|
44.33
|
|
|
$
|
195,044.84
|
|
|
$
|
16,253.74
|
|
|
$
|
3.69
|
|
8/18/2013
|
|
8/17/2014
|
|
|
4,400
|
|
|
$
|
45.66
|
|
|
$
|
200,896.19
|
|
|
$
|
16,741.35
|
|
|
$
|
3.80
|
|
8/18/2014
|
|
8/17/2015
|
|
|
4,400
|
|
|
$
|
45.60
|
|
|
$
|
200,640.00
|
|
|
$
|
16,720.00
|
|
|
$
|
3.80
|
|
8/18/2015
|
|
8/17/2016
|
|
|
4,400
|
|
|
$
|
45.60
|
|
|
$
|
200,640.00
|
|
|
$
|
16,720.00
|
|
|
$
|
3.80
|
|
8/18/2016
|
|
8/17/2017
|
|
|
4,400
|
|
|
$
|
47.88
|
|
|
$
|
210,672.00
|
|
|
$
|
17,556.00
|
|
|
$
|
3.99
|
|
8/18/2017
|
|
8/17/2018
|
|
|
4,400
|
|
|
$
|
47.88
|
|
|
$
|
210,672.00
|
|
|
$
|
17,556.00
|
|
|
$
|
3.99
|
|
8/18/2018
|
|
8/17/2019
|
|
|
4,400
|
|
|
$
|
50.27
|
|
|
$
|
221,205.60
|
|
|
$
|
18,433.80
|
|
|
$
|
4.19
|
|
8/18/2019
|
|
8/17/2020
|
|
|
4,400
|
|
|
$
|
50.27
|
|
|
$
|
221,205.60
|
|
|
$
|
18,433.80
|
|
|
$
|
4.19
|
|
8/18/2020
|
|
8/17/2021
|
|
|
4,400
|
|
|
$
|
52.79
|
|
|
$
|
232,265.88
|
|
|
$
|
19,355.49
|
|
|
$
|
4.40
|
|
8/18/2021
|
|
8/17/2022
|
|
|
4,400
|
|
|
$
|
52.79
|
|
|
$
|
232,265.88
|
|
|
$
|
19,355.49
|
|
|
$
|
4.40
|
|
8/18/2022
|
|
8/17/2023
|
|
|
4,400
|
|
|
$
|
55.43
|
|
|
$
|
243,879.17
|
|
|
$
|
20,323.26
|
|
|
$
|
4.62
|
|
8/18/2023
|
|
Initial
Expiration Date
|
|
|
4,400
|
|
|
$
|
55.43
|
|
|
$
|
243,879.17
|
|
|
$
|
20,323.26
|
|
|
$
|
4.62
|
|
SCHEDULE 1-1
TABLE OF CONTENTS
|
|
|
|
|
|
|
1.
|
|
Lease of Premises
|
|
|
2
|
|
|
|
|
|
|
|
|
2.
|
|
Basic Lease Provisions
|
|
|
2
|
|
|
|
|
|
|
|
|
3.
|
|
Term
|
|
|
4
|
|
|
|
|
|
|
|
|
4.
|
|
Landlords Construction Work and Tenant Improvements
|
|
|
4
|
|
|
|
|
|
|
|
|
5.
|
|
Possession and Commencement Date
|
|
|
7
|
|
|
|
|
|
|
|
|
6.
|
|
Rent
|
|
|
9
|
|
|
|
|
|
|
|
|
7.
|
|
Rent Adjustments
|
|
|
10
|
|
|
|
|
|
|
|
|
8.
|
|
Taxes
|
|
|
10
|
|
|
|
|
|
|
|
|
9.
|
|
[Intentionally Omitted]
|
|
|
12
|
|
|
|
|
|
|
|
|
10.
|
|
Security Deposit
|
|
|
12
|
|
|
|
|
|
|
|
|
11.
|
|
Use
|
|
|
14
|
|
|
|
|
|
|
|
|
12.
|
|
Diversified Lease and Subdivision
|
|
|
15
|
|
|
|
|
|
|
|
|
13.
|
|
Brokers
|
|
|
16
|
|
|
|
|
|
|
|
|
14.
|
|
Holding Over
|
|
|
16
|
|
|
|
|
|
|
|
|
15.
|
|
Property Management Fee
|
|
|
17
|
|
|
|
|
|
|
|
|
16.
|
|
Condition of Premises
|
|
|
17
|
|
|
|
|
|
|
|
|
17.
|
|
Regulations and Parking and Recreation Facilities
|
|
|
17
|
|
|
|
|
|
|
|
|
18.
|
|
Utilities and Services
|
|
|
18
|
|
|
|
|
|
|
|
|
19.
|
|
Alterations
|
|
|
20
|
|
|
|
|
|
|
|
|
20.
|
|
Repairs and Maintenance
|
|
|
22
|
|
|
|
|
|
|
|
|
21.
|
|
Liens
|
|
|
24
|
|
|
|
|
|
|
|
|
22.
|
|
Indemnification and Exculpation
|
|
|
25
|
|
|
|
|
|
|
|
|
23.
|
|
Insurance; Waiver of Subrogation
|
|
|
26
|
|
|
|
|
|
|
|
|
24.
|
|
Damage or Destruction
|
|
|
27
|
|
|
|
|
|
|
|
|
25.
|
|
Eminent Domain
|
|
|
29
|
|
|
|
|
|
|
|
|
26.
|
|
Defaults and Remedies
|
|
|
29
|
|
|
|
|
|
|
|
|
27.
|
|
Assignment or Subletting
|
|
|
33
|
|
|
|
|
|
|
|
|
28.
|
|
Attorneys Fees
|
|
|
35
|
|
|
|
|
|
|
|
|
29.
|
|
[Intentionally Omitted]
|
|
|
35
|
|
|
|
|
|
|
|
|
30.
|
|
Definition of Landlord
|
|
|
35
|
|
|
|
|
|
|
|
|
31.
|
|
Estoppel Certificate
|
|
|
36
|
|
|
|
|
|
|
|
|
32.
|
|
Joint and Several Obligations
|
|
|
36
|
|
|
|
|
|
|
|
|
33.
|
|
Limitation of Landlords Liability
|
|
|
36
|
|
|
|
|
|
|
|
|
34.
|
|
Premises Control by Landlord
|
|
|
37
|
|
|
|
|
|
|
|
|
35.
|
|
Quiet Enjoyment
|
|
|
37
|
|
|
|
|
|
|
|
|
36.
|
|
Subordination and Attornment
|
|
|
38
|
|
|
|
|
|
|
|
|
37.
|
|
Surrender
|
|
|
39
|
|
|
|
|
|
|
|
|
38.
|
|
Waiver and Modification
|
|
|
39
|
|
|
|
|
|
|
|
|
39.
|
|
Waiver of Jury Trial and Counterclaims
|
|
|
39
|
|
|
|
|
|
|
|
|
40.
|
|
Hazardous Materials
|
|
|
39
|
|
|
|
|
|
|
|
|
41.
|
|
Miscellaneous
|
|
|
41
|
|
|
|
|
|
|
|
|
42.
|
|
Option to Extend Term
|
|
|
42
|
|
|
|
|
|
|
|
|
43.
|
|
Tenants Authority
|
|
|
44
|
|
|
|
|
|
|
|
|
44.
|
|
Landlords Authority
|
|
|
44
|
|
|
|
|
|
|
|
|
45.
|
|
Confidentiality
|
|
|
44
|
|
|
|
|
|
|
|
|
46.
|
|
Excavation
|
|
|
44
|
|
|
|
|
|
|
|
|
47.
|
|
Telecommunications Equipment
|
|
|
44
|
|
|
|
|
|
|
|
|
48.
|
|
Access to Premises
|
|
|
44
|
|
|
|
|
|
|
|
|
49.
|
|
Secured Areas
|
|
|
45
|
|