SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-KSB
x ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the
fiscal year ended December 31, 2007
OR
£ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the
transition period from___________ to __________
Commission
file number 1-12830
BioTime,
Inc.
(Name of
small business issuer as specified in its charter)
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California
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94-3127919
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(State
or other jurisdiction of
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No.)
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6121
Hollis Street
Emeryville,
California 94608
(Address
of principal executive offices) (Zip Code)
Issuer’s
telephone number, including area code (510) 350-2940
Securities
registered pursuant to Section 12(b) of the Act:
None
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Securities
registered pursuant to Section 12(g) of the Act
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Title
of class
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Common Shares, no par
value
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Title
of class
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Common Share Purchase
Warrants
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Check
whether the issuer is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. Yes o No x
Check whether
the issuer (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes x No o
Check if
there is no disclosure of delinquent filers pursuant to Item 405 of Regulation
S-B contained in this form, and no disclosure will be contained, to
the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. 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 x
The
issuer’s revenues for the fiscal year ended December 31, 2007 were
$1,046,121
The
approximate aggregate market value of voting common shares held by nonaffiliates
of the issuer computed by reference to the price at which common shares were
sold as of March 25, 2007 was $3,517,793. Shares held by
each executive officer and director and by each person who beneficially owns
more than 5% of the outstanding common shares have been excluded in that such
persons may under certain circumstances be deemed to be
affiliates. This determination of affiliate status is not necessarily
a conclusive determination for other purposes.
23,044,374
(Number
of common shares outstanding as of March 4, 2008)
Documents
Incorporated by Reference
None
Transitional
Small Business Disclosure Format (check one): Yes o No x
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Statements
made in this Form 10-KSB that are not historical facts may constitute
forward-looking statements that are subject to risks and uncertainties that
could cause actual results to differ materially from those
discussed. Words such as “expects,” “may,” “will,” “anticipates,”
“intends,” “plans,” “believes,” “seeks,” “estimates,” and similar expressions
identify forward-looking statements. See “Risk Factors” and Note 1 to
Financial Statements.
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Item 1.
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Description
of Business
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Overview
Since its
inception in November 1990, BioTime has been engaged primarily in research and
development activities, which have culminated in the commercial launch of
Hextend®,
our lead product, and a clinical trial of PentaLyte®. Our
operating revenues have been generated primarily from licensing fees and from
royalties on the sale of Hextend. During October 2007, we entered the
field of regenerative medicine where we plan to develop stem cell related
products and technology for diagnostic, therapeutic and research use. Our
ability to generate substantial operating revenue depends upon our success in
developing and marketing or licensing our plasma volume expanders, stem cell
products, and organ preservation solutions and technology for medical and
research use.
Products for Stem Cell
Research
On
October 10, 2007, Michael D. West, Ph.D. became BioTime's new Chief Executive
Officer. Dr. West will help spearhead BioTime's entry into the field of
regenerative medicine by initiating the development of advanced human stem cell
products and technology for diagnostic, therapeutic and research
use. Regenerative medicine refers to therapies based on human
embryonic stem (“hES”) cell technology that are designed to rebuild cell and
tissue function lost due to degenerative disease or injury. To
further these ends, in December 2007, BioTime created a new, wholly-owned
subsidiary called Embryome Sciences, Inc.™ (“Embryome
Sciences”). Human embryonic stem cells are capable of becoming all of
the thousands of different cell types in the body. Since embryonic stem cells
can now be derived in a noncontroversial manner, they are increasingly likely to
be utilized in a wide array of future therapies to restore the function of
organs damaged by degenerative diseases such as heart failure, stroke, and
diabetes. The future challenge for regenerative medicine is to
navigate the complexity of human development and manufacture purified
populations of desired cell types. Embryome Sciences represents the
merger of new technologies in the field of genomics with the biology of
embryonic stem cells to provide scientists with a detailed "roadmap" of the
human developmental tree, the factors to push the cells into desired lineages,
and tools to purify the desired cell types.
We
believe that the development of products in the embryomics sector may allow
Embryome Sciences to commercialize products more quickly, using less capital,
than developing therapeutic products from stem cells. Embryome
Sciences' plan is to market its products and services to companies and academic
researchers in this growing industry to provide them with the tools they need to
attain their goals.
The new
BioTime subsidiary plans to launch several kinds of research products in
the next two years. One such product is a commercial database
that will provide the first detailed map of the embryome, thereby aiding
researchers in navigating the complexities of human development and in
identifying the many hundreds of cell types coming from embryonic stem
cells. This map of the human and mouse embryome will take the form of
a relational database that would permit researchers to chart the cell lineages
of human development, the genes expressed in those cell types, and antigens
present on the cell surface of those cells that can be used in
purification. The relational database will be built using core
software licensed, on an exclusive basis for this purpose, from Targeted
Therapeutics Consulting, Inc., which currently operates a relational database
for cancer therapy research and the development of anti-cancer
drugs. When the new embryome database is operational, Embryome
Sciences will provide researchers access to it through an internet
website. Embryome Sciences plans to launch this web-based database in
the second quarter of 2008. The new website may also be used to
market stem cell research products developed by Embryome Sciences and by other
companies.
In order
to manufacture specific cell types from embryonic stem cells, researchers need
to use factors that induce those cells to become a desired cell
type. Embryome Sciences plans to develop growth and differentiation
factors that can do this, and hopes to launch the first of these products
beginning in 2008.
Another
category of near-term embryomics products that Embryome Sciences will pursue, to
be launched beginning in 2009, is a line of purification tools useful to
researchers in quality control of products for regenerative
medicine.
We, and our wholly-owned subsidiary Embryome Sciences, Inc., have signed a
letter of intent with International Stem Cell Corporation and its wholly-owned
subsidiary Lifeline Cell Technology (“Lifeline”) to jointly produce and
distribute a wide array of research products from human embryonic stem cell
technology. Embryome Sciences and Lifeline intend to jointly
manufacture products serving the complex needs of this industry, including cells
and related products that will allow researchers to identify and study the
thousands of cell types that can be made from hES cells. Among these
planned products are ESpy TM
cell lines (complex derivatives of hES cells that send beacons of light in
response to the activation of particular genes). The progenitor cell lines will
be produced and distributed in joint efforts utilizing Embryome Science’s
proprietary “Embryomics™” technology, its future Embryome.com online database, and technology and approved hES cell lines licensed
from the Wisconsin Alumni Research Foundation (WARF). Lifeline will
contribute its manufacturing and quality control expertise, the use of its
facilities, and use of Lifeline’s technologies.
The
proposed collaboration among Lifeline, BioTime, and Embryome Sciences is subject
to the execution of a definitive agreement.
Our
ability to commercialize our planned stem cell research products is dependent
upon the success of our research and development program, and our ability to
obtain the capital needed for the financing of that program.
Plasma
Volume Expanders and Related Products
Our first
product, Hextend, is a physiologically balanced blood plasma volume expander,
for the treatment of hypovolemia. Hypovolemia is a condition caused
by low blood volume, often from blood loss during surgery or from
injury. Hextend maintains circulatory system fluid volume and blood
pressure and helps sustain vital organs during surgery. Hextend,
approved for use in major surgery, is the only blood plasma volume expander that
contains lactate, multiple electrolytes, glucose, and a medically approved form
of starch called hetastarch. Hextend is sterile to avoid risk of
infection. Health insurance reimbursements and HMO coverage now
include the cost of Hextend used in surgical procedures.
We are
also developing two other blood volume replacement products, PentaLyte® and
HetaCool®, which, like Hextend, have been formulated to maintain the patient’s
tissue and organ function by sustaining the patient’s fluid volume and
physiological balance. We have conducted a Phase II clinical trial
using PentaLyte in the treatment of hypovolemia in cardiac
surgery. PentaLyte contains a lower molecular weight hydroxyethyl
starch than Hextend, and is more quickly metabolized. PentaLyte is
designed for use when short lasting volume expansion is
desirable. Our ability to complete clinical studies of PentaLyte will
depend on our cash resources and the costs involved, which are not presently
determinable.
Hextend
is being distributed in the United States and Canada by Hospira, Inc., and in
South Korea by CJ Corp. (“CJ”) under exclusive licenses from
us. Hospira also has the right to obtain regulatory approval and
market Hextend in Latin America and Australia. Summit Pharmaceuticals
International Corporation (“Summit”) has a license to develop Hextend and
PentaLyte in Japan, the People’s Republic of China, and
Taiwan. Summit has entered into sublicenses with Maruishi
Pharmaceutical Co., Ltd. (“Maruishi”) to obtain regulatory approval,
manufacture, and market Hextend in Japan, and Hextend and PentaLyte in China and
Taiwan. See “Licensing” for more information about our licensing
arrangements with Hospira, CJ and Summit.
We are
also continuing to develop solutions for low temperature
surgery. Once a sufficient amount of data from successful low
temperature surgery has been compiled, we plan to seek permission to use Hextend
as a complete replacement for blood under near-freezing
conditions. We currently plan to market Hextend for complete blood
volume replacement at very low temperatures under the registered trademark
“HetaCool®”
after FDA approval is obtained, although the time frame for such approval is
presently uncertain.
BioTime
scientists believe the HetaCool program has the potential to produce a product
that could be used in very high fluid volumes (50 liters or more per procedure
if HetaCool were used as a multi-organ donor preservation solution or to
temporarily replace substantially all of the patient’s circulating blood volume)
in cardiovascular surgery, trauma treatment, and organ
transplantation. However, the cost and time to complete the
development of HetaCool, including clinical trials, cannot presently be
determined.
Until
such time as we are able to successfully commercialize any of the various
projected regenerative medicine products and can complete the development of
PentaLyte and HetaCool and enter into commercial license agreements for those
products and additional foreign commercial license agreements for Hextend, we
will depend upon royalties from the sale of Hextend by Hospira and CJ as our
principal source of revenues.
The
amount and pace of research and development work that we can do or sponsor, and
our ability to commence and complete clinical trials required to obtain FDA and
foreign regulatory approval of products, depends upon the amount of money we
have. Future research and clinical study costs are not presently
determinable due to many factors, including the inherent uncertainty of these
costs and the uncertainty as to timing, source, and amount of capital that will
become available for these projects. We have already curtailed the
pace of our product development efforts due to the limited amount of funds
available, and we may have to postpone further laboratory and clinical studies,
unless our cash resources increase through growth in revenues, the completion of
licensing agreements, additional equity investment, borrowing or third party
sponsorship.
Hextend®,
PentaLyte®, and HetaCool® are registered trademarks of BioTime.
The
Market for Plasma Volume Expanders
We are
developing Hextend, PentaLyte, HetaCool and other synthetic plasma expander
solutions to treat acute blood loss that occurs as a result of trauma injuries
and during many kinds of surgery. These products are synthetic, can
be sterilized, and can be manufactured in large volumes. Hextend,
PentaLyte, and HetaCool contain constituents that may maintain physiological
balance when used to replace lost blood volume.
Hextend
is also currently being used to treat hypovolemia subsequent to trauma or low
blood pressure due to shock by emergency room physicians. After
appropriate clinical testing and regulatory approval, it may be used by
paramedics to treat acute blood loss in trauma victims being transported to the
hospital. Hextend is part of the Tactical Combat Casualty Care
protocol and has been purchased by the U.S. Armed Forces through intermittent
large volume orders.
Approximately
10,000,000 surgeries take place in the United States each year, and blood
transfusions are required in approximately 3,000,000 of those
cases. Transfusions are also required to treat patients suffering
severe blood loss due to traumatic injury. Many more surgical and
trauma cases do not require blood transfusions but do involve significant
bleeding that can place the patient at risk of suffering from shock caused by
the loss of fluid volume (hypovolemia) and physiological
balance. Whole blood and packed red cells generally cannot be
administered to a patient until the patient’s blood has been typed and
sufficient units of compatible blood or red cells can be
located. Periodic shortages of supply of donated human blood are not
uncommon, and rare blood types are often difficult to locate. The use
of human blood products also poses the risk of exposing the patient to
blood-borne diseases such as AIDS and hepatitis.
Due to
the risks and cost of using human blood products, even when a sufficient supply
of compatible blood is available, physicians treating patients suffering blood
loss are generally not permitted to transfuse red blood cells until the
patient’s level of red blood cells has fallen to a level known as the
“transfusion trigger.” During the course of surgery, while blood
volume is being lost, the patient is infused with plasma volume expanders to
maintain adequate blood circulation. During the surgical procedure,
red blood cells are not generally replaced until the patient has lost
approximately 45% to 50% of his or her red blood cells, thus reaching the
transfusion trigger at which point the transfusion of red blood cells may be
required. After the transfusion of red blood cells, the patient may
continue to experience blood volume loss, which will be replaced with plasma
volume expanders. Even in those patients who do not require a
transfusion, physicians routinely administer plasma volume expanders to maintain
sufficient fluid volume to permit the available red blood cells to circulate
throughout the body and to maintain the patient’s physiological
balance.
Several
units of fluid replacement products are often administered during
surgery. The number of units will vary depending upon the amount of
blood loss and the kind of plasma volume expander
administered. Crystalloid products must be used in larger volumes
than colloid products such as Hextend.
The
Market for Products for Hypothermic Surgery
More than 400,000 coronary bypass and
other open-heart surgeries are performed in the United States each
year. Current estimates indicate that more than one million people
over age 55 have pathological changes associated with the aortic
arch. Open-heart procedures often require the use of cardio-pulmonary
bypass equipment to do the work of the heart and lungs during the
surgery. During open-heart surgery and surgical procedures for the
treatment of certain cardiovascular conditions such as large aneurysms,
cardiovascular abnormalities and damaged blood vessels in the brain, surgeons
must temporarily interrupt the flow of blood through the
body. Interruption of blood flow can be maintained only for short
periods of time at normal body temperatures because many critical organs,
particularly the brain, are quickly damaged by the resultant loss of
oxygen. As a result, certain surgical procedures are performed at low
temperatures because lower body temperature helps to minimize the chance of
damage to the patient’s organs by reducing the patient’s metabolic rate, thereby
decreasing the patient’s needs during surgery for oxygen and nutrients that
normally flow through the blood.
Current
technology limits the degree to which surgeons can lower a patient’s temperature
and the amount of time the patient can be maintained at a low body temperature
because blood, even when diluted, cannot be circulated through the body at
near-freezing temperatures. As a result, surgeons face severe time
constraints in performing surgical procedures requiring blood flow interruption,
and those time limitations prevent surgeons from correcting certain
cardiovascular abnormalities.
Uses
and Benefits of Hextend, PentaLyte and HetaCool
Our first
three blood volume replacement products, Hextend, PentaLyte, and HetaCool, have
been formulated to maintain the patient’s tissue and organ function by
sustaining the patient’s fluid volume and physiological
balance. Hextend, PentaLyte, and HetaCool are composed of a
hydroxyethyl starch, electrolytes, sugar and lactate in an aqueous
base. Hextend and HetaCool use a high molecular weight hydroxyethyl
starch (hetastarch) whereas PentaLyte uses a lower, molecular weight
hydroxyethyl starch (pentastarch). The hetastarch is retained in the
blood longer than the pentastarch, which may make Hextend and HetaCool the
products of choice when a larger volume of plasma expander or blood replacement
solution for low temperature surgery is needed, or where the patient’s ability
to restore his own blood proteins after surgery is
compromised. PentaLyte, with pentastarch, would be eliminated from
the blood faster than Hextend and HetaCool and might be used when less plasma
expander is needed or where the patient is more capable of quickly restoring
lost blood proteins. We believe that by testing and bringing these
products to the market, we can increase our market share by providing the
medical community with solutions to match patients’ needs.
Certain
clinical test results indicate that Hextend is effective at maintaining blood
calcium levels when used to replace lost blood volume. Calcium can be
a significant factor in regulating blood clotting and cardiac
function. Clinical studies have also shown that Hextend maintains
acid-base better than saline-based surgical fluids. We expect that PentaLyte
will also be able to maintain blood calcium levels and acid-base balance based
upon the fact that the electrolyte formulation of PentaLyte is identical to that
of Hextend.
Albumin
produced from human plasma is also used as plasma volume expander, but it is
expensive and subject to supply shortages. Additionally, an FDA
warning has cautioned physicians about the risk of administering albumin to
seriously ill patients.
We have
not attempted to synthesize potentially toxic and costly oxygen-carrying
molecules such as hemoglobin because the loss of fluid volume and physiological
balance may contribute as much to shock as the loss of the oxygen-carrying
component of the blood. Surgical and trauma patients are routinely
given supplemental oxygen and retain a substantial portion of their own red
blood cells. Whole blood or packed red blood cells are generally not
transfused during surgery or in trauma care until several units of plasma volume
expanders have been administered and the patient’s blood cell count has fallen
to the transfusion trigger. Therefore, the lack of oxygen-carrying
molecules in BioTime solutions should not pose a significant contraindication to
use.
However,
our scientists have conducted laboratory animal experiments in which they have
shown that Hextend can be successfully used in conjunction with a
hemoglobin-based oxygen carrier solution approved for veterinary purposes to
completely replace the animal’s circulating blood volume without any subsequent
transfusion and without the use of supplemental oxygen. By diluting
these oxygen carrier solutions, Hextend may reduce the potential toxicity and
costs associated with the use of those products. Once such solutions have
received regulatory approval and become commercially available, this sort of
protocol may prove valuable in markets in parts of the developing world where
the blood supply is extremely unsafe. These applications may also be
useful in combat where logistics make blood use impracticable.
Hextend is our proprietary
hetastarch-based synthetic blood plasma volume expander, designed especially to
treat hypovolemia in surgery where patients experience significant blood loss.
An important goal of the Hextend development program was to produce a product
that can be used in multi-liter volumes. The safety related secondary
endpoints targeted in the U.S. clinical study included those involving
coagulation. We believe that the low incidence of adverse events
related to blood clotting in the Hextend patients demonstrates that Hextend may
be safely used in amounts exceeding 1.5 liters. An average of 1.6
liters of Hextend was used in the Phase III clinical trials, with an average of
two liters for patients who received transfused blood products.
Hextend
is also being used in surgery with cardio-pulmonary bypass
circuits. In order to perform heart surgery, the patient’s heart must
be stopped and a mechanical apparatus is used to oxygenate and circulate the
blood. The cardio-pulmonary bypass apparatus requires a blood
compatible fluid such as Hextend to commence and maintain the process of
diverting the patient’s blood from the heart and lungs to the mechanical
oxygenator and pump. In a clinical trial conducted in 2001, cardiac
surgery patients treated with Hextend, maintained more normal kidney function,
experienced less pain and nausea, showed less deep venous thrombosis, avoided
dialysis, and had shorter delay times to first meal compared to those treated
with other fluids.
PentaLyte is our proprietary
pentastarch-based synthetic plasma expander, designed especially for use when a
faster elimination of the starch component is desired and
acceptable. Although Hextend can be used in these cases, some
physicians appear to prefer a solution which can be metabolized faster and
excreted earlier when the longer term protection provided by Hextend is not
required. PentaLyte combines the physiologically balanced Hextend
formulation with pentastarch that has a lower molecular weight and degree of
substitution than the hetastarch used in Hextend. Plasma expanders
containing pentastarch are currently widely used around the
world. Our present plan is to seek approval of PentaLyte for use in
the treatment of hypovolemia. We have conducted a Phase II clinical
study using PentaLyte in cardiac surgery for that purpose.
HetaCool is a modified
formulation of Hextend. HetaCool is specifically designed for use at
low temperatures. Surgeons are already using Hextend and a variety of
other solutions to carry out certain limited procedures involving shorter term
(up to nearly one hour) arrest of brain and heart function at temperatures
between 15o and
25o
C. However, we are not aware of any fluid currently used in medical
practice or any medically approved protocol allowing operations that can
completely replace all of a patient’s blood at temperatures close to the ice
point. We believe that very low temperature bloodless surgical
techniques could be developed for open heart and minimally invasive closed chest
cardiovascular surgeries, removal of tumors from and the repair of aneurysms in
the brain, heart, and other areas, as well as in the treatment of trauma,
toxicity and cancer.
In
medical use, HetaCool would be introduced into the patient’s body during the
cooling process. Once the patient’s body temperature is nearly ice
cold, and heart and brain function are temporarily arrested, the surgeon would
perform the operation. During the surgery, HetaCool may be circulated
throughout the body in place of blood, or the circulation may be arrested for a
period of time if an interruption of fluid circulation is
required. Upon completion of the surgery, the patient would be slowly
warmed and blood would be transfused.
Hextend
has already been used to partially replace blood during cancer surgery in which
a patient’s body temperature was lowered to 15oC and his
heart was stopped for 27 minutes while the tumor was removed. The
patient recovered without incident, and a case study of the procedure was
published in the April 2002 issue of the Canadian Journal of
Anesthesia. Hypothermic techniques may also have an important
use in treating trauma patients that have experienced severe blood
loss. We have conducted a research program using HetaCool in animal
models of trauma at the State University of New York Health Science Center in
Brooklyn. Laboratory results there have already supported the
feasibility of using HetaCool to treat subjects following severe
hemorrhage.
Organ
Transplant Products
The
Market for Organ Preservation Solutions
Organ
transplant surgery is a growing field. Each year in the United
States, approximately 5,000 donors donate organs, and approximately 5,000 people
donate skin, bone and other tissues. As more surgeons have gained the
necessary expertise, and surgical methods have been refined, the number of
transplant procedures has increased, as has the percentage of successful
transplants. Organ transplant surgeons and their patients face two
major obstacles: the shortage of available organs from donors, and the limited
amount of time that a transplantable organ can be kept viable between the time
it is harvested from the donor and the time it is transplanted into the
recipient.
The
scarcity of transplantable organs makes them too precious to lose and increases
the importance of effective preservation technology and
products. Current organ removal and preservation technology generally
requires multiple preservation solutions to remove and preserve effectively
different groups of organs. The removal of one organ can impair the
viability of other organs. Available technology does not permit
surgeons to keep the remaining organs viable within the donor’s body for a
significant time after the first organ is removed. Currently, an
organ available for transplant is flushed with an ice-cold solution during the
removal process to deactivate the organ and preserve its tissues, and then the
organ is transported on ice to the recipient. The ice-cold solutions
currently used, together with transportation on ice, keep the organ healthy for
only a short period of time. For example, the storage time for hearts
is limited to approximately six hours. Because of the short time span
available for removal and transplant of an organ, potential organ recipients may
not receive the needed organs.
We are
seeking to address this problem by developing a more effective organ
preservation solution that will permit surgeons to harvest all transplantable
organs from a single donor. We believe that preserving the viability
of all transplantable organs and tissues simultaneously, at low temperatures,
would extend by several hours the time span in which the organs can be preserved
prior to transplant.
Using
HetaCool for Multi-Organ Preservation
We are
seeking to develop HetaCool for use as a single solution that can simultaneously
preserve all of a single donor’s organs. When used as an organ
preservation solution, HetaCool would be perfused into the donor’s body while
the body is chilled, thereby eliminating an undesirable condition called “warm
ischemia,” caused when an organ is warm while its blood supply is
interrupted. The use of HetaCool in conjunction with the chilling of
the body should help to slow down the process of organ deterioration by a number
of hours so that a surgeon can remove all organs for donation and
transplant. We currently estimate that each such preservation
procedure could require as much as 50 liters of HetaCool.
We
believe that the ability to replace an animal’s blood with HetaCool, to maintain
the animal at near freezing temperatures for several hours, and then revive the
animal, would demonstrate that the solution could be used for human multi-organ
preservation. BioTime scientists have revived animals after more than
six hours of cold blood-substitution, and have observed heart function in
animals maintained cold and blood-substituted for more than eight
hours. An objective of our research and development program is to
extend the time span in which animal subjects can be maintained in a cold,
blood-substituted state before revival or removal of organs for transplant
purposes. Organ transplant procedures using animal subjects could
then be conducted to test the effectiveness of Hextend as an organ
preservative.
Long-term
Tissue and Organ Banking
The
development of marketable products and technologies for the preservation of
tissues and vital organs for weeks and months is a long-range goal of our
research and development plan. To permit such long-term organ banking
we are attempting to develop products and technologies that can protect tissues
and organs from the damage that occurs when human tissues are subjected to
subfreezing temperatures.
HetaFreeze® is one of a family
of BioTime freeze-protective solutions that may ultimately allow the extension
of time during which organs and tissues can be stored for future transplant or
surgical grafting. In laboratory experiments, our proprietary
freeze-protective compounds have already been used to preserve
skin. Silver dollar-sized full thickness shaved skin samples have
been removed after saturation with HetaFreeze solution, frozen at liquid
nitrogen temperatures and stored for periods ranging from days to
weeks. The grafts were then warmed and sewn onto the backs of host
animals. Many of these grafts survived. In other
experiments, rat femoral arteries were frozen to liquid nitrogen temperatures,
later thawed and then transplanted into host rats. These grafts were
proven to last up to four months. The work was published in the
October 2002 issue of the Annals of Plastic
Surgery.
We have
also developed a patent pending devise for hyperbaric freezing and thawing of
tissues in a manner that might reduce or eliminate structural damage to the
cells or tissue samples. This technology may have application in
biological and medical research and in the storage of cells and tissues for
medical use.
Our
scientists have also shown that animals can be revived to consciousness after
partial freezing with their blood replaced by HetaFreeze. While this
technology has not developed to an extent that allows long term survival of the
laboratory subjects and their organs, a better understanding of the effects of
partial freezing could allow for extended preservation times for vital organs,
skin and blood vessels.
Research
and Development Strategy
Plasma
Volume Expanders and Organ Preservation Solutions
The
greatest portion of our research and development efforts has been devoted to the
development of Hextend, PentaLyte and HetaCool for conventional surgery,
emergency care, low temperature surgery, and multi-organ
preservation. A lesser portion of our research and development
efforts have been devoted to developing solutions and protocols for storing
organs and tissues at subfreezing temperatures. As the first products
achieve market entry, more effort will be expended to bring the next tier of
products to maturity.
Experiments
intended to test the efficacy of our low temperature blood replacement solutions
involve replacing the animal’s blood with our solution, maintaining the animal
in a cold blood-substituted state for a period of time, and then attempting to
revive the animal. An integral part of that effort has been the
development of techniques and procedures or “protocols” for use of our products
at low temperatures. A substantial amount of data has been
accumulated through animal tests, including the proper surgical techniques,
drugs and anesthetics, the temperatures and pressures at which blood and blood
replacement solutions should be removed, restored and circulated, solution
volume, the temperature range, and times, for maintaining circulatory arrest,
and the rate at which the subject should be rewarmed.
We have
also done research for the development of products for low temperature
preservation of tissues and cells. This area of research includes our
work with HetaFreeze and a patent pending device for hyperbaric freezing and
thawing of tissues in a manner that might reduce or eliminate structural damage
to the cells or tissue samples.
We have
been also conducting two collaborative research programs at the University of
California at Berkeley. One program is testing our solutions and
protocols designed for organ preservation, and the other program is an
interventive gerontology project focused on the identification of specific
factors central to aging of the brain and the development of medical and
pharmacological strategies to treat senescence-related
consequences. To date this collaborative research has led to three
journal articles. One study, the results of which were published in
Neuroendocrinology Letters and in Mechanisms of Aging and Development,
demonstrated that a loss of hypothalamic estrogen-binding cells in females may
play a role in reproductive aging. The other study, the results of
which were published in the International Journal of Developmental Neuroscience
in 2007, indicated that the loss of insulin-like Growth Factor Receptor-1
containing cells, within specific hypothalamic areas, may play a key role in
aging. As funding permits, we may conduct further research to better
understand the cause and effect of these age-related degenerative conditions,
and to identify possible therapies that may be developed through the use of hES
cell technology.
We intend
to continue to foster relations with research hospitals and medical schools for
the purpose of conducting collaborative research projects because we believe
that such projects will introduce our potential products to members of the
medical profession and provide us with objective product evaluations from
independent research physicians and surgeons.
Stem
Cell Research Products
In
addition to our work with plasma volume expanders and organ preservation
solutions, we plan to focus on near-term commercialization opportunities
presented by stem cell research programs. We believe that the
development of products for use in stem cell research provides an opportunity to
commercialize products more quickly, using less capital, than developing
therapeutic products. Our plan is to market to companies and academic
researchers in the stem cell industry some of the tools they need to attain
their goals.
We are
conducting our stem cell research product business through our recently
organized subsidiary, Embryome Sciences, Inc. We plan to
launch several kinds of research products in the next two
years. One such product is a commercial embryome database that will
provide a map that researchers may use to navigate the complexities of human
development and to identify the many hundreds of cell types coming from hES
cells. Like the field of "genomics," where companies mapped the human
DNA, we believe that there is an important need for a map of the human
"embryome" in stem cell research. This map would take the form of a
relational data base that would permit researchers to chart the cell lineages of
human development, the genes expressed in those cell types, and antigens present
on the cell surface of those cells that can be used in
purification. We plan to launch this web-based database in the early
part of 2008.
We also
plan to develop growth and differentiation factors, and hope to launch the first
of these products beginning in 2008. In order to manufacture specific
cell types from hES cells, researchers need to use factors that signal to hES
cells to become a desired cell type. We may market these reagents
from a new BioTime website.
Another category
of near-term products that we plan to develop includes purification ligands
useful to researchers in purification and quality control analysis of products
in regenerative medicine. We hope to be able to launch the first of these
products in 2009.
We, and our wholly-owned subsidiary Embryome Sciences, Inc., have signed a
letter of intent with International Stem Cell Corporation and its wholly-owned
subsidiary Lifeline Cell Technology (“Lifeline”) to jointly produce and
distribute a wide array of research products from human embryonic stem cell
technology. Embryome Sciences and Lifeline intend to jointly
manufacture products serving the complex needs of this industry, including cells
and related products that will allow researchers to identify and study the
thousands of cell types that can be made from hES cells. Among these
planned products are ESpy TM
cell lines (complex derivatives of hES cells that send beacons of light in
response to the activation of particular genes). The progenitor cell lines will
be produced and distributed in joint efforts utilizing Embryome Science’s
proprietary “Embryomics™” technology, its future Embryome.com online database, and technology and approved hES cell lines licensed
from the Wisconsin Alumni Research Foundation (WARF). Lifeline will
contribute its manufacturing and quality control expertise, the use of its
facilities, and use of Lifeline’s technologies.
The
proposed collaboration among Lifeline, BioTime, and Embryome Sciences is subject
to the execution of a definitive agreement.
We have
obtained a license from the Wisconsin Alumni Research Foundation to use their
patented technology and cell lines in our research program. See
“Patents and Trade Secrets—Licensed Patents.” We may seek to obtain
licenses to additional stem cell technology for use in developing new stem cell
products, and we may also enter into collaborative product development
arrangements with other companies in the stem cell industry if such
opportunities arise on terms acceptable to us.
Licensing
Hospira
Hospira
has the exclusive right to manufacture and sell Hextend in the United States,
Canada, Latin America and Australia under a license agreement with
us. Hospira is presently marketing Hextend in the United
States. Hospira’s license applies to all therapeutic uses other than
those involving hypothermic surgery where the patient’s body temperature is
lower than 12°C (“Hypothermic Use”), or replacement of substantially all of a
patient’s circulating blood volume (“Total Body Washout”).
Hospira
pays us a royalty on total annual net sales of Hextend. The royalty
rate is 5% plus an additional .22% for each $1,000,000 of annual net sales, up
to a maximum royalty rate of 36%. The royalty rate for each year is
applied on a total net sales basis. Hospira’s obligation to pay
royalties on sales of Hextend will expire on a country by country basis when all
patents protecting Hextend in the applicable country expire and any third party
obtains certain regulatory approvals to market a generic equivalent product in
that country. The relevant composition patents begin to expire in
2014 and the relevant methods of use patents expire in 2019.
We have
the right to convert Hospira’s exclusive license to a non-exclusive license or
to terminate the license outright if certain minimum sales and royalty payments
are not met. In order to terminate the license outright, we would pay
a termination fee in an amount ranging from the milestone payments we received
to an amount equal to three times prior year net sales, depending upon when
termination occurs. Hospira has agreed to manufacture Hextend for
sale by us in the event that the exclusive license is terminated.
Hospira
has certain rights to acquire additional licenses to manufacture and sell our
other plasma expander products in their market territory. If Hospira
exercises these rights to acquire a license to sell such products for uses other
than Hypothermic Surgery or Total Body Washout, in addition to paying royalties,
Hospira will be obligated to pay a license fee based upon our direct and
indirect research, development and other costs allocable to the new
product. If Hospira desires to acquire a license to sell any of our
products for use in Hypothermic Surgery or Total Body Washout, the license fees
and other terms of the license will be subject to negotiation between the
parties. For the purpose of determining the applicable royalty rates,
net sales of any such new products licensed by Hospira will be aggregated with
sales of Hextend. If Hospira does not exercise its right to acquire a
new product license, we may manufacture and sell the product ourselves or we may
license others to do so.
Hospira supplied us with batches of
PentaLyte for our clinical trial, and performed characterization and stability
studies, and other regulatory support needed for our clinical
studies. The foregoing description of the Hospira license agreement
is a summary only and is qualified in all respects by reference to the full text
of that license agreement.
CJ
Corp.
CJ
markets Hextend in South Korea under an exclusive license from us. CJ
paid us a license fee to acquire their right to market Hextend. CJ
also pays us a royalty on sales of Hextend. The royalty will range
from $1.30 to $2.60 per 500 ml unit of product sold, depending upon the price
approved by Korea’s National Health Insurance. CJ is also responsible
for obtaining the regulatory approvals required to manufacture and market
PentaLyte, including conducting any clinical trials that may be required, and
will bear all related costs and expenses.
The
foregoing description of the CJ license is a summary only and is qualified in
all respects by reference to the full text of the CJ license
agreement.
Summit
We have
entered into agreements with Summit to develop Hextend and PentaLyte in Japan,
the People’s Republic of China, and Taiwan. Summit has sublicensed to
Maruishi the right to manufacture and market Hextend in Japan, and the right to
manufacture and market Hextend and PentaLyte in China and Taiwan. The
licenses do not include Hypothermic Use.
Under the
sublicense, Maruishi will complete clinical trials required and obtain
regulatory approval to market the licensed products. Summit will also
participate in the clinical trial and regulatory approval process. A
Phase II clinical trial using Hextend in surgery is presently being conducted in
Japan, and if the results are favorable, Summit plans to begin a Phase III trial
during 2008. Maruishi will not be obligated to begin to seek
regulatory approval of Hextend or PentaLyte in China and Taiwan earlier than six
months after the results of the Phase II study of Hextend in Japan or our Phase
II study of PentaLyte in the United States are made available to them, or March
2009, whichever is later.
The
revenues from licensing fees, royalties, and net sales, and any other payments
made for co-development, manufacturing, or marking rights to Hextend and
PentaLyte in Japan will be shared between BioTime and Summit as follows: 40% to
us and 60% to Summit. Net sales means the gross revenues from the
sale of a product, less rebates, discounts, returns, transportation costs, sales
taxes and import/export duties.
Summit
paid us fees for the right to co-develop Hextend and PentaLyte in Japan, and
Summit has also paid us a share of a sublicense fee payment from
Maruishi. Additional milestone payments of 100,000,000 yen each, of
which BioTime will receive 40%, are payable by Maruishi to Summit when a new
drug application for Hextend is filed in Japan and when the new drug application
is approved. The filing of a new drug application in Japan will not
be done until clinical trials are completed, which could take several
years. We will also be entitled to receive 40% of the royalties paid
by Maruishi to Summit on sales in Japan. Royalties will range from
12% to 20% of net sales, depending upon the amount of Hextend
sold. The royalty rates are subject to reduction if Summit does not
complete its participation in Phase III trials of Hextend and the new drug
application, or if Summit elects to co-market Hextend in
Japan. However, if Summit sells Hextend, we will also be entitled to
receive 40% of Summit’s net sales revenues.
We will
pay to Summit 8% of all net royalties that we receive from the sale of PentaLyte
in the United States, plus 8% of any license fees that we receive in
consideration of granting a license to develop, manufacture and market PentaLyte
in the United States. Net royalties means royalty payments received
during a calendar year, minus the following costs and expenses incurred during
such calendar year: (a) all taxes assessed (other than taxes determined with
reference to our net income) and credits given or owed by us in connection with
the receipt of royalties on the sale of PentaLyte in the United States, and (b)
all fees and expenses payable by us to the United States Food and Drug
Administration (directly or as a reimbursement of any licensee) with respect to
PentaLyte. In the case of license fees received from Hospira based
upon the combined sale of PentaLyte and Hextend, the portion of that license fee
that will be deemed to be a paid on account of the sale of PentaLyte will be
determined by multiplying the total license fee paid by a fraction, the
numerator of which will be the total net sales of PentaLyte in the United States
for the applicable period and the denominator of which shall be the total net
sales of Hextend and PentaLyte in the United States for the same
period.
Summit
paid us a fee to acquire the China and Taiwan license. We also will
be entitled to receive 50% of the royalties and milestone payments payable to
Summit by its third-party sublicensee, Maruishi. Milestone payments
of 20,000,000 yen are payable by Maruishi when the first new drug application
for Hextend is filed and when the first clinical study of PentaLyte begins under
the sublicense. An additional milestone payment of 30,000,000 yen is
payable by Maruishi when the first new drug application for PentaLyte is filed
under the sublicense.
The
foregoing description of the Summit agreement is a summary only and is qualified
in all respects by reference to the full text of the Summit
agreements.
Other
Licensing Efforts
We are
discussing prospective licensing arrangements with other pharmaceutical
companies that have expressed their interest in marketing our products
abroad. In licensing
arrangements that include marketing rights, the participating pharmaceutical
company would be entitled to retain a large portion of the revenues from sales
to end users and would pay us a royalty on net sales. There is no
assurance that any such licensing arrangements can be made.
Manufacturing
Manufacturing
Arrangements
Hospira
manufactures Hextend for use in the North American market, and CJ manufactures
Hextend for use in South Korea. NPBI International, BV, a Netherlands
company (“NPBI”), has manufactured batches of Hextend for our use in seeking
regulatory approval in Europe. Hospira, CJ, and NPBI have the
facilities to manufacture Hextend and other BioTime products in commercial
quantities. If Hospira and CJ choose not to manufacture and market
PentaLyte or other BioTime products, and if NPBI declines to manufacture BioTime
products on a commercial basis, other manufacturers will have to be found that
would be willing to manufacture products for us or any licensee of our
products.
Facilities
Required - Plasma Volume Expanders
Any
products that are used in clinical trials for regulatory approval in the United
States or abroad, or that are approved by the FDA or foreign regulatory
authorities for marketing, have to be manufactured according to “good
manufacturing practices” (“GMP”) at a facility that has passed regulatory
inspection. In addition, products that are approved for sale will
have to be manufactured in commercial quantities, and with sufficient stability
to withstand the distribution process, and in compliance with such domestic and
foreign regulatory requirements as may be applicable. The active
ingredients and component parts of the products must be medical grade or
themselves manufactured according to FDA-acceptable “good manufacturing
practices.”
We do not
have facilities to manufacture our plasma volume expander products in commercial
quantities, or under “good manufacturing practices.” Acquiring a
manufacturing facility would involve significant expenditure of time and money
for design and construction of the facility, purchasing equipment, hiring and
training a production staff, purchasing raw material and attaining an efficient
level of production. Although we have not determined the cost of
constructing production facilities that meet FDA requirements, we expect that
the cost would be substantial, and that we would need to raise additional
capital in the future for that purpose. To avoid the incurrence of
those expenses and delays, we are relying on Hospira and CJ for the production
of Hextend, but there can be no assurance that satisfactory arrangements will be
made for any new products that we may develop.
Facilities
Required—Stem Cell Products
We
recently acquired, under a sublease, an 11,000 square foot tissue culture
facility in Alameda, California. The facility is GMP capable and has
previously been certified as Class 1000 and Class 10,000 laboratory space, and
includes cell culture and manufacturing equipment previously validated for use
in GMP manufacture of cell based products. Our subsidiary, Embryome
Sciences, Inc., will use the facility for the production of embryonic progenitor
cells, progenitor cell lines, and products derived from those embryonic
progenitor cell lines.
Raw
Materials
Although
most ingredients in the products we are developing are readily obtainable from
multiple sources, we know of only a few manufacturers of the hydroxyethyl
starches that serve as the primary drug substance in Hextend, PentaLyte and
HetaCool. Hospira and CJ presently have a source of supply of the
hydroxyethyl starch used in Hextend, PentaLyte and HetaCool, and have agreed to
maintain a supply sufficient to meet market demand for Hextend in the countries
in which they market the product. We believe that we will be able to
obtain a sufficient supply of starch for our needs in the foreseeable future,
although we do not have supply agreements in place. If for any reason
a sufficient supply of hydroxyethyl starch could not be obtained, we or a
licensee would have to acquire a manufacturing facility and the technology to
produce the hydroxyethyl starch according to good manufacturing practices. We
would have to raise additional capital to participate in the development and
acquisition of the necessary production technology and facilities, which may not
be feasible.
If
arrangements cannot be made for a source of supply of hydroxyethyl starch, we
would have to reformulate our solutions to use one or more other starches that
are more readily available. In order to reformulate our products, we
would have to perform new laboratory testing to determine whether the
alternative starches could be used in a safe and effective synthetic plasma
volume expander, low temperature blood substitute or organ preservation
solution. If needed, such testing would be costly to conduct and
would delay our product development program, and there is no certainty that any
such testing would demonstrate that an alternative ingredient, even if
chemically similar to the one currently used, would be as safe or
effective.
Marketing
Plasma
Volume Expanders
Hextend
is being distributed in the United States by Hospira and in South Korea by CJ
under exclusive licenses from us. Hospira also has the right to
obtain licenses to manufacture and sell other BioTime products. We
have granted Hospira the right to market Hextend in Latin America and Australia,
we have granted CJ the right to market PentaLyte in South Korea, and we have
licensed to Summit the right to market Hextend and PentaLyte in Japan, China and
Taiwan, but our licensees will have to first obtain the foreign regulatory
approvals required to sell our product in those countries.
Because
Hextend is a surgical product, sales efforts must be directed to physicians and
hospitals. The Hextend marketing strategy is designed to reach its
target customer base through sales calls and an advertising campaign focused on
the use of a plasma-like substance to replace lost blood volume and the ability
of Hextend to support vital physiological processes.
Hextend
competes with other products used to treat or prevent hypovolemia, including
albumin, generic 6% hetastarch solutions, and crystalloid
solutions. The competing products have been commonly used in surgery
and trauma care for many years, and in order to sell Hextend, physicians must be
convinced to change their product loyalties. Although albumin is
expensive, crystalloid solutions and generic 6% hetastarch solutions sell at low
prices. In order to compete with other products, particularly those
that sell at lower prices, Hextend will have to be recognized as providing
medically significant advantages.
The FDA
has required the manufacturers of 6% hetastarch in saline solutions to change
their product labeling by adding a warning stating that those products are not
recommended for use as a cardiac bypass prime solution, or while the patient is
on cardiopulmonary bypass, or in the immediate period after the pump has been
disconnected. We have not been required to add that warning to the
labeling of Hextend. An article discussing this issue entitled “6%
Hetastarch in Saline Linked to Excessive Bleeding in Bypass Surgery” appeared in
the December 2002 edition of Anesthesiology
News. We understand that a number of hospitals have switched
from 6% hetastarch in saline to Hextend due to these concerns.
As part
of the marketing program, a number of studies have been conducted that show the
advantages of receiving Hextend and other BioTime products during
surgery. As these studies are completed, the results are presented at
medical conferences and articles written for publication in medical
journals. We are also aware of independent studies using Hextend that
are being conducted by physicians and hospitals who may publish their findings
in medical journals or report their findings at medical
conferences. The outcome of future medical studies and timing of the
publication or presentation of the results could have an effect on Hextend
sales.
Stem
Cell Research Products
In
addition to our work with plasma volume expanders and organ preservation
solutions, we plan to focus on near-term commercialization opportunities
presented by stem cell research programs. We believe that the
development of products for use in stem cell research provides an opportunity to
commercialize products more quickly, using less capital, than developing
therapeutic products. Our plan is to market to companies and academic
researchers in the stem cell industry some of the tools they need to attain
their goals.
We are
conducting our stem cell research product business through our recently
organized subsidiary, Embryome Sciences, Inc. One of our first
product goals for Embryome Sciences is the development and launch of a
relational data base database that will provide a map that researchers may use
to navigate the complexities of human development and to identify the many
hundreds of cell types coming from hES cells. The relational database
will be built using core software licensed, on an exclusive basis for this
purpose, from Targeted Therapeutics Consulting, Inc., which currently operates a
relational database for cancer therapy research and the development of
anti-cancer drugs. When the new embryome database is operational,
Embryome Sciences will provide researchers access to it through an internet
website. Embryome Sciences plans to launch this web-based database in
the second quarter of 2008. The new website may also be used to
market other stem cell research products developed by Embryome Sciences and by
other companies.
Our
ability to commercialize our planned stem cell research products is dependent
upon the success of our research and development program, and our ability to
obtain the capital needed for the financing of that program. We may
also enter into collaborative product development and marketing arrangements
with other companies in the stem cell industry if such opportunities arise on
terms acceptable to us.
Government
Regulation
The FDA
and foreign regulatory authorities will regulate our proposed products as drugs,
biologicals, or medical devices, depending upon such factors as the use to which
the product will be put, the chemical composition and the interaction of the
product on the human body. In the United States, products that are
intended to be introduced into the body, such as blood substitute solutions for
low temperature surgery and plasma expanders, will be regulated as drugs and
will be reviewed by the FDA staff responsible for evaluating
biologicals.
Our
domestic human drug products will be subject to rigorous FDA review and approval
procedures. After testing in animals, an Investigational New Drug
Application (IND) must be filed with the FDA to obtain authorization for human
testing. Extensive clinical testing, which is generally done in three
phases, must then be undertaken at a hospital or medical center to demonstrate
optimal use, safety and efficacy of each product in humans. Each
clinical study is conducted under the auspices of an independent Institutional
Review Board (“IRB”). The IRB will consider, among other things,
ethical factors, the safety of human subjects and the possible liability of the
institution. The time and expense required to perform this clinical
testing can far exceed the time and expense of the research and development
initially required to create the product. No action can be taken to
market any therapeutic product in the United States until an appropriate New
Drug Application (“NDA”) has been approved by the FDA. Even after
initial FDA approval has been obtained, further studies may be required to
provide additional data on safety or to gain approval for the use of a product
as a treatment for clinical indications other than those initially
targeted. In addition, use of these products during testing and after
marketing could reveal side effects that could delay, impede or prevent FDA
marketing approval, resulting in a FDA-ordered product recall, or in FDA-imposed
limitations on permissible uses.
The FDA
regulates the manufacturing process of pharmaceutical products, requiring that
they be produced in compliance with “good manufacturing
practices.” See “Manufacturing.” The FDA also regulates
the content of advertisements used to market pharmaceutical
products. Generally, claims made in advertisements concerning the
safety and efficacy of a product, or any advantages of a product over another
product, must be supported by clinical data filed as part of an NDA or an
amendment to an NDA, and statements regarding the use of a product must be
consistent with the FDA approved labeling and dosage information for that
product.
Sales of
pharmaceutical products outside the United States are subject to foreign
regulatory requirements that vary widely from country to
country. Even if FDA approval has been obtained, approval of a
product by comparable regulatory authorities of foreign countries must be
obtained prior to the commencement of marketing the product in those
countries. The time required to obtain such approval may be longer or
shorter than that required for FDA approval.
California
Proposition 71
In
November 2004, California State Proposition 71 (“Prop. 71”), the
California Stem Cell Research and Cures Initiative, was adopted by state-wide
referendum. Prop. 71 provides for a state-sponsored program designed
to encourage stem cell research in the State of California, and to finance such
research with State funds totaling approximately $295 million annually for
10 years beginning in 2005. This initiative creates the
California Institute for Regenerative Medicine, which will provide grants,
primarily but not exclusively, to academic institutions to advance both hES cell
research and adult stem cell research. The implementation of Prop. 71
is being challenged in several lawsuits filed in 2005. As stated
above, hES cell research is now one of our primary areas of focus. It
is unclear whether we are eligible to directly receive Prop. 71 generated
funds. However, we intend to apply for any funding that becomes
available. We also expect to benefit from collaborations with
academic and other institutions eligible for Prop. 71 funding for research in
the use of hES cells for various diseases and conditions. Generally,
hES cell research does not qualify for federal funding due to restrictions on
embryonic stem cell research. Prop. 71 is specifically targeting
research in the embryonic stem cell field. We consider government
support to be important confirmation of the quality of our technology, but do
not rely on government programs as a significant source of financial
support.
Patents
and Trade Secrets
We
currently hold 25 issued United States patents having composition and methods of
use claims covering our proprietary solutions, including Hextend and
PentaLyte. The most recent U.S. patents were issued during
2002. Some of our allowed claims in the United States, which include
the composition and methods of use of Hextend and PentaLyte, are expected to
remain in force until 2014 in the case of the composition patents and 2019 in
the case of the methods of use patents. Patents covering certain of
our solutions have also been issued in several countries of the European Union,
Australia, Israel, Russia, South Africa, South Korea, Japan, China, Hong Kong,
Taiwan and Singapore, and we have filed patent applications in other foreign
countries for certain products, including Hextend, HetaCool, and
PentaLyte. Certain device patents describing our hyperbaric (high
pressure oxygen) chamber, and proprietary microcannula (a surgical tool) have
also been issued in the United States and overseas, both of which - although
only used in research so far - have possible indications in clinical
medicine. We have also filed patent applications for our new device
designed to freeze and thaw tissues.
There is
no assurance that any additional patents will be issued. There is
also the risk that any patents that we hold or later obtain could be challenged
by third parties and declared invalid or infringing of third party claims.
Further, the enforcement of patent rights often requires litigation against
third party infringers, and such litigation can be costly to
pursue.
In
addition to patents, we rely on trade secrets, know-how and continuing
technological advancement to maintain our competitive position. We
have entered into intellectual property, invention and non-disclosure agreements
with our employees and it is our practice to enter into confidentiality
agreements with our consultants. There can be no assurance, however,
that these measures will prevent the unauthorized disclosure or use of our trade
secrets and know-how or that others may not independently develop similar trade
secrets and know-how or obtain access to our trade secrets, know-how or
proprietary technology.
Licensed
Patents
On
January 3, 2008, we entered into a Commercial License and Option Agreement (the
“WARF License”) with Wisconsin Alumni Research Foundation
(“WARF”). The WARF License permits us to use certain patented and
patent pending technology belonging to WARF, as well as certain stem cell
materials, for research and development purposes, and for the production and
marketing of Research Products and Related Products. “Research
Products” are products used as research tools, including in drug discovery and
development. “Related Products” are products other than Research
Products, Diagnostic Products, or Therapeutic Products. “Diagnostic
Products” are products or services used in the diagnosis, prognosis, screening
or detection of disease in humans. “Therapeutic Products” are
products or services used in the treatment of disease in humans.
We agreed
to pay WARF a license fee of $225,000 in two installments. The first installment
of $10,000 was paid during February 2008, and the remaining $215,000 is due on
the earlier of (i) thirty (30) days after we raise $5,000,000 or more of new
equity financing, or (ii) January 3, 2009. A maintenance fee of
$25,000 will be due annually on January 3 of each year during the term of the
WARF License.
We will
pay WARF royalties on the sale of products and services under the WARF
License. The royalty will be 4% on the sale of Research Products and
2% on the sale of Related Products. The royalty is payable on sales
by us or by any sublicensee. The royalty rate is subject to certain
reductions if we also become obligated to pay royalties to a third party in
order to sell a product.
We will
also pay WARF $25,000 toward reimbursement of the costs associated with
preparing, filing and maintaining the licensed WARF patents. That fee
is payable in two installments. The first installment of $5,000 was
paid during February 2008, and the remaining $20,000 is due on the earlier of
(i) thirty (30) days after we raise $5,000,000 or more of new equity financing,
or (ii) January 3, 2009.
We have
an option to negotiate with WARF to obtain a license to manufacture and market
Therapeutic Products, excluding products in certain fields of
use. The issuance of a license for Therapeutic Products would depend
upon our submission and WARF’s acceptance of a product development plan, and our
reaching agreement with WARF on the commercial terms of the license such as a
license fee, royalties, patent reimbursement fees, and other contractual
matters.
The WARF
License shall remain in effect until the expiration of the latest expiration
date of the licensed patents. However, we may terminate the WARF
License prior to the expiration date by giving WARF at least ninety days written
notice, and WARF may terminate the WARF License if we (a) fail to make any
payment to WARF, (b) fail to submit any required report to WARF, (c) commit any
breach of any other covenant in the WARF License that is not remedied within
ninety days after written notice from WARF, or (d) commit any act of bankruptcy,
become insolvent, are unable to pay our debts as they become due, file a
petition under any bankruptcy or insolvency act, or have any such petition filed
against us which is not dismissed within sixty days, or offers its creditors any
component of the patents or materials covered by the WARF License.
Competition
Plasma
Volume Expanders
Our
plasma volume expander solutions will compete with products currently used to
treat or prevent hypovolemia, including albumin, other colloid solutions, and
crystalloid solutions presently manufactured by established pharmaceutical
companies, and with human blood products. Some of these products, in
particular crystalloid solutions, are commonly used in surgery and trauma care
and sell at low prices. In order to compete with other products,
particularly those that sell at lower prices, our products will have to be
recognized as providing medically significant advantages. Like
Hextend, the competing products are being manufactured and marketed by
established pharmaceutical companies that have large research facilities,
technical staffs and financial and marketing resources. B.Braun
presently markets Hespan, an artificial plasma volume expander containing 6%
hetastarch in saline solution. Hospira and Baxter International
manufacture and sell a generic equivalent of Hespan. As a result of
the introduction of generic plasma expanders and new proprietary products,
competition in the plasma expander market has intensified and wholesale prices
have declined. Hospira, which markets Hextend in the United States,
is also the leading seller of generic 6% hetastarch in saline solution and
recently obtained the right to sell Voluven®, a plasma volume expander
containing a 6% low molecular weight hydroxyethyl starch in saline solution.
Sanofi-Aventis, Baxter International, and Alpha Therapeutics sell albumin, and
Hospira, Baxter International, and B.Braun sell crystalloid
solutions.
To
compete with new and existing plasma expanders, we have developed products that
contain constituents that may prevent or reduce the physiological imbalances,
bleeding, fluid overload, edema, poor oxygenation, and organ failure that can
occur when competing products are used. To compete with existing
organ preservation solutions, we have developed solutions that can be used to
preserve all organs simultaneously and for long periods of time.
A number
of other companies are known to be developing hemoglobin and synthetic red blood
cell substitutes and technologies. Our products have been developed
for use either before red blood cells are needed or in conjunction with the use
of red blood cells. In contrast, hemoglobin and other red blood cell
substitute products are designed to remedy hypoxia and similar conditions that
may result from the loss of oxygen-carrying red blood cells. Those
products would not necessarily compete with our products unless the oxygenating
molecules were included in solutions that could replace fluid volume and prevent
or reduce the physiological imbalances as effectively as our
products. Generally, red blood cell substitutes are more expensive to
produce and potentially more toxic than Hextend and PentaLyte.
The
competition we face is likely to intensify further as new products and
technologies reach the market. Superior new products are likely to
sell for higher prices and generate higher profit margins once acceptance by the
medical community is achieved. Those companies that are successful in
introducing new products and technologies to the market first may gain
significant economic advantages over their competitors in the establishment of a
customer base and track record for the performance of their products and
technologies. Such companies will also benefit from revenues from
sales that could be used to strengthen their research and development,
production, and marketing resources. All companies engaged in the
medical products industry face the risk of obsolescence of their products and
technologies as more advanced or cost effective products and technologies are
developed by their competitors. As the industry matures, companies
will compete based upon the performance and cost effectiveness of their
products.
Products
for Stem Cell Research
The stem
cell industry is characterized by rapidly evolving technology and intense
competition. Our competitors include major multinational
pharmaceutical companies, specialty biotechnology companies, and chemical and
medical products companies operating in the fields of regenerative medicine,
cell therapy, tissue engineering, and tissue regeneration. Many of
these companies are well-established and possess technical, research and
development, financial, and sales and marketing resources significantly greater
than ours. In addition, certain smaller biotech companies have formed
strategic collaborations, partnerships, and other types of joint ventures with
larger, well established industry competitors that afford these companies’
potential research and development and commercialization
advantages. Academic institutions, governmental agencies, and other
public and private research organizations are also conducting and financing
research activities which may produce products directly competitive to those we
are developing.
We
believe that some of our competitors are trying to develop stem and progenitor
cell-based technologies which may compete with our potential stem cell products
based on efficacy, safety, cost, and intellectual property
positions.
We may
also face competition from companies that have filed patent applications
relating to the cloning or differentiation of stem cells. We may be
required to seek licenses from these competitors in order to commercialize
certain of our proposed products, and such licenses may not be
granted.
Employees
As of
December 31, 2007, we employed nine persons on a full-time basis and one person
on a part-time basis. Four full-time employees hold Ph.D. Degrees in
one or more fields of science.
|
Item
2.
|
Description
of Property
|
We occupy
our office and laboratory facility in Heritage Square in Emeryville, California
under a lease that will expire on May 31, 2010, with a five year extension
option. We presently occupy approximately 5,244 square feet of space and pay
monthly rent in the amount of $15,551. Our rent will increase by 3%
each year during the initial five year term. If the option to extend
the lease is exercised, monthly rent will be set at 95% of fair market rent at
that time. In addition to rent, we will pay our pro rata share of
operating expenses and real estate taxes for the building in which our space is
located or for the Heritage Square project as a whole, as applicable, based upon
the ratio that the number of square feet we rent bears to the total number of
square feet in the building or project.
We have entered
into a sublease of approximately 11,000 square feet of office and research
laboratory spaced at 1301 Harbor Bay Parkway, in Alameda,
California. We plan to move our headquarters from our present
Emveryville location to this new facility. The sublease will expire
on November 30, 2010, but we have an early termination right that permits us to
terminate the sublease on July 31, 2008. Base monthly rent will be
$22,000 during 2008, $22,600 during 2009, and $23,339.80 during
2010. In addition to base rent, we will pay a prorata share of real
property taxes and certain costs related to the operation and maintenance of the
building in which the subleased premises are located.
|
Item
3.
|
Legal
Proceedings
|
We are
not presently involved in any material litigation or proceedings, and to our
knowledge no such litigation or proceedings are contemplated.
|
Submission
of Matters to a Vote of Security
Holders
|
None.
Part II
|
Item 5.
|
Market
for Common Equity, Related Stockholder Matters and Small Business Issuer
Purchases of Equity Securities
|
BioTime
common shares were traded on the American Stock Exchange from August 31, 1999
until July 14, 2005, and have been quoted on the OTC Bulletin Board under the
symbol BTIM since July 15, 2005.
The
following table sets forth the range of high and low sale or bid prices for the
common shares for the fiscal years ended December 31, 2006 and 2007 based on
transaction data as reported by the Nasdaq OTC Bulletin Board:
|
Quarter
Ended
|
High
|
Low
|
|
March
31, 2006
|
0.46
|
0.28
|
|
June
30, 2006
|
0.41
|
0.21
|
|
September
30, 2006
|
0.39
|
0.18
|
|
December
31, 2006
|
0.49
|
0.20
|
|
March
31, 2007
|
0.75
|
0.26
|
|
June
30, 2007
|
0.75
|
0.44
|
|
September
30, 2007
|
0.49
|
0.27
|
|
December
31, 2007
|
0.69
|
0.27
|
Over-the-counter
market quotations may reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual
transactions.
As of
March 17, 2008, there were 4,191 holders of the common shares.
BioTime
has paid no dividends on its common shares since its inception and does not plan
to pay dividends on its common shares in the foreseeable future. We
are also prohibited from paying dividends under the terms of a Revolving Line of
Credit Agreement.
The
following table shows certain information concerning the options and warrants
outstanding and available for issuance under all of our compensation plans and
agreements as of December 31, 2007.
|
Plan
Category
|
Number
of Shares to be
Issued
Upon Exercise
of
Outstanding Options,
Warrants,
and Rights
|
Weighted
Average
Exercise
Price of the
Outstanding
Options,
Warrants,
and Rights
|
Number
of Shares Remaining
Available
for Future Issuance
Under
Equity Compensation
Plans
|
|
Equity
Compensation Plans
Approved
by Shareholders
|
9,181,199
|
$1.96
|
786,168
|
|
Equity
Compensation Plans
Not
Approved By
Shareholders*
|
2,000,000
|
$0.50
|
__
|
*We have
granted stock options to certain officers subject to shareholder approval of an
amendment of our 2002 Employee Stock Option Plan. We intend to submit
that amendment to our shareholders for approval at our next annual
meeting.
During March 2008, we issued 10,000
common shares to a new lender who provided additional credit to us under the
line of credit. These shares were issued without registration under
the Securities Act of 1933, as amended, in reliance upon the exemption provided
by Section 4(2) thereunder.
|
Management’s
Discussion and Analysis or Plan of
Operation
|
Overview
We are in
the business of developing blood plasma volume expanders and related products,
and stem cell related products and technology for diagnostic, therapeutic and
research use. Our operating revenues have been generated primarily from
licensing fees and from royalties on the sale of Hextend. Our ability
to generate substantial operating revenue depends upon our success in developing
and marketing or licensing our plasma volume expanders and stem cell products
and technology for medical and research use.
Royalties
on sales of Hextend that occurred during the fourth quarter of 2006 through the
third quarter of 2007 are reflected in our financial statements for the year
ended December 31, 2007. We received $776,679 in royalties from Hextend sales
during 2007. This represents a decrease of 17% from $933,478 in
royalties from Hextend sales in 2006. The largest contributing factor
to the decrease in royalties from 2006 was a decrease from the record large
volume orders by the U.S. Armed Forces that we saw in the second half of
2006. Hextend is part of the Tactical Combat Casualty Care protocol
and has been purchased by the U.S. Armed Forces through intermittent large
volume orders. The decrease was partially offset by a continued
increase in sales to hospitals along with unit price increases to
hospitals.
Royalties
of $308,900 on sales that occurred during the fourth quarter of 2007 will be
reflected in our financial statements for the first quarter of
2008. This represents a 55% increase from royalty revenues of
$199,264 received during the same period last year. The increase
in royalties is due to an increase in both sales to the military and sales to
hospitals, which were augmented by an increase in the unit average sales price
to hospitals.
During
the year ended December 31, 2006, we received $500,000 from Summit for the right
to co-develop Hextend and PentaLyte in Japan, China, and Taiwan. A
portion of the cash payment will be a partial reimbursement of BioTime’s
development costs of Hextend and a portion will be a partial reimbursement of
BioTime’s development costs of PentaLyte. This payment is reflected
on our balance sheet as deferred revenue. See Note 4 to financial
statements for further discussion of the appropriate accounting.
We have
conducted a Phase II clinical trial of PentaLyte in which PentaLyte was used to
treat hypovolemia in cardiac surgery. Our ability to commence and
complete additional clinical studies of PentaLyte depends on our cash resources
and the costs involved, which are not presently
determinable. Clinical trials of PentaLyte in the United States may
take longer and may be more costly than the Hextend clinical trials, which cost
approximately $3,000,000. The FDA permitted us to proceed directly
into a Phase III clinical trial of Hextend involving only 120 patients because
the active ingredients in Hextend had already been approved for use in plasma
expanders by the FDA in other products. Because PentaLyte contains a starch
(pentastarch) that has not been approved by the FDA for use in a plasma volume
expander (although pentastarch is approved in the US for use in certain
intravenous solutions used to collect certain blood cell fractions), we had to
complete Phase I and Phase II clinical trials of PentaLyte. A
subsequent Phase III trial may involve more patients than the Hextend trials,
and we do not know yet the actual scope or cost of the clinical trials that the
FDA will require for PentaLyte or the other products we are
developing.
During
April 2007, Hospira declined an opportunity to commercialize PentaLyte®
under the terms we offered. Hospira will continue to manufacture and
sell Hextend®
under its License Agreement with us, and we will offer other pharmaceutical
companies the opportunity to license PentaLyte®.
Plasma
volume expanders containing pentastarch have been approved for use in certain
foreign countries including Canada, certain European Union countries, and
Japan. The regulatory agencies in those countries may be more willing
to accept applications for regulatory approval of PentaLyte based upon clinical
trials smaller in scope than those that may be required by the FDA. This would
permit us to bring PentaLyte to market overseas more quickly than in the United
States, provided that suitable licensing arrangements can be made with
multinational or foreign pharmaceutical companies to obtain financing for
clinical trials and manufacturing and marketing arrangements.
Although
we plan to launch our first products for stem cell research during 2008 and
2009, we cannot predict the amount of revenue that those products might
generate. We will depend upon royalties from the sale of Hextend by
Hospira and CJ as our principal source of revenues for the near
future. Those royalty revenues will be supplemented by any revenues
that we may receive from our stem cell research products, and by license fees if
we enter into new commercial license agreements for our products.
The
amount and pace of research and development work that we can do or sponsor, and
our ability to commence and complete clinical trials required to obtain FDA and
foreign regulatory approval of products, depends upon the amount of money we
have. Future research and clinical study costs are not presently
determinable due to many factors, including the inherent uncertainty of these
costs and the uncertainty as to timing, source, and amount of capital that will
become available for these projects. We have already curtailed the
pace of our product development efforts due to the limited amount of funds
available, and we may have to postpone further laboratory and clinical studies,
unless our cash resources increase through growth in revenues, the completion of
licensing agreements, additional equity investment, borrowing or third party
sponsorship.
Because
our research and development expenses, clinical trial expenses, and production
and marketing expenses will be charged against earnings for financial reporting
purposes, management expects that there will be losses from operations in the
near term.
Results
of Operations
Year
Ended December 31, 2007 and Year Ended December 31, 2006
For the
year ended December 31, 2007, we recognized $776,679 of royalty revenues,
compared with $933,478 recognized for the year ended December 31,
2006. This 17% decrease in royalties is attributable to a decrease in
product sales by Hospira. The largest contributing factor to this
overall decrease in royalties was a decrease in sales from the record large
volume orders by the U.S. Armed Forces that we saw in the second half of
2006. Hextend is part of the Tactical Combat Casualty Care protocol
and has been purchased by the U.S. Armed Forces through intermittent, large
volume orders, which makes it difficult to predict sales to them in subsequent
periods. The decrease in royalties from 2006 was partially offset by
a continued increase in sales to hospitals along with unit price increases to
hospitals.
Under our
License Agreement, Hospira reports sales of Hextend and pays us the royalties
and license fees due on account of such sales within 90 days after the end of
each calendar quarter. We recognize such revenues in the quarter in
which the sales report is received, rather than the quarter in which the sales
took place, as we do not have sufficient sales history to accurately predict
quarterly sales. For example, royalties on sales made during the
fourth quarter of 2007 will not be recognized until the first quarter of fiscal
year 2008.
We
recognized $255,549 and $172,371 of license fees from CJ and Summit during 2007
and 2006, respectively. Full recognition of license fees has been
deferred, and is being recognized over the life of the contract, which has been
estimated to last until approximately 2019 based on the current expected life of
the governing patent covering our products in Korea and Japan.
We have
been awarded a $299,990 research grant by the NIH for use in the development of
HetaCool. We were granted $149,994 for the project during 2004 and
$149,996 during 2005. We have received $254,244 of the grant funds
through December 31, 2007. In 2007, the time period for drawing down
the remainder of the grant funds was extended for another year, running through
March 31, 2008.
Research
and development expenses decreased to $967,864 for the year ended December 31,
2007, from $1,422,257 for the year ended December 31, 2006. The
decrease is chiefly attributable to the conclusion of our Phase II trials of
PentaLyte. Research and development expenses include laboratory study
expenses, salaries, preparation of regulatory applications for our products,
manufacturing of solution for trials, and consultants’ fees.
General
and administrative expenses decreased to $1,300,630 for the year ended December
31, 2007 from $1,491,622 for the year ended December 31, 2006. This
change reflects a decrease of approximately $21,000 in general and
administrative salary expense due to a voluntary salary reduction plan in effect
for the latter half of 2007, a decrease of approximately $88,000 in general and
administrative consulting expenses, a decrease of approximately $32,000 in
insurance costs charged to general and administrative expense, a decrease of
approximately $17,000 in investor/public relations expenses, a decrease of
approximately $32,000 in accounting expenses, a decrease of approximately
$34,000 in printing costs, and a decrease of approximately $23,000 in patent
expenses. These decreases were offset to some extent by an increase
of approximately $18,000 in office expenses and supplies, an increase of
approximately $2,000 in telephone charges allocated to general and adminstrative
expense, an increase of approximately $4,000 in miscellaneous expenses, and an
increase of approximately $32,000 in travel expenses. General and
administrative expenses include salaries allocated to general and administrative
accounts, scientific consulting fees, expenditures for patent costs, trademark
expenses, insurance costs allocated to general and administrative expenses,
stock exchange-related costs, depreciation expense, shipping expenses, marketing
costs, and other miscellaneous expenses.
Our
interest expense increased by approximately $76,000 during 2007 primarily due to
interest incurred on our lines of credit (See Note 3).
For the
year ended December 31, 2007, other income decreased to $16,926 from $44,357 for
the year ended December 31, 2006. The difference is chiefly
attributable to decrease in interest income due to lower cash
balances.
Taxes
At
December 31, 2007 we had a cumulative net operating loss carryforward of
approximately $45,350,000 for federal
income tax purposes. Our effective tax rate differs from the
statutory rate because we have recorded a 100% valuation allowance against our
deferred tax assets, as we do not consider realization to be more likely than
not.
Liquidity
and Capital Resources
During
2007 we received approximately $810,000 of cash in our
operations. Our sources of that cash were: approximately $780,000 of
royalty revenues from Hospira; approximately $10,000 of NIH grant money; and
$20,000 from CJ. During the same period our total research and
development expenditures were approximately $968,000 and our administrative
expenditures were approximately $1.3 million. We had no contractual
obligations as of December 31, 2007, with the exception of a fixed,
non-cancelable operating lease on our office and laboratory facilities in
Emeryville, California. Under this lease, we are committed to make
payments of $15,761 per month, increasing 3% annually, plus our pro rata share
of operating costs for the building and office complex, through May 31, 2010.
In April 2008, we
entered into a sublease of office and research laboratory space in Alameda,
California. We plan to move our headquarters from our present
Emeryville location to this new facility. The sublease will expire on
November 30, 2010, but we have an early termination right that permits us to
terminate the sublease on July 31, 2008. Base monthly rent will be
$22,000 during 2008, $22,600 during 2009, and $23,339.80 during
2010. In addition to base rent, we will pay a pro rata share of real
property taxes and certain costs related to the operation and maintenance of the
building in which the subleased premises are located.
At
December 31, 2007 we had $9,501 of cash on hand and $375,000 left available on
our line of credit. At our projected rate of spending, which includes
possible spending cuts, our cash on hand, anticipated royalties from the sale of
Hextend, licensing fees, and our available revolving line of credit will allow
us to operate through November 15, 2008.
We will
need to obtain additional equity capital or licensing fees during 2008 to
finance our current operations because our current line of credit and our
royalty revenues are not sufficient to fund our operating expenses operations
beyond November 15, 2008.
During
April, 2007 we submitted to Hospira a report of the results of our Phase II
clinical study of PentaLyte. Hospira subsequently declined an
opportunity to commercialize PentaLyte®
under the terms we offered. Hospira will continue to manufacture and
sell Hextend®
under its License Agreement with us, and we will offer other pharmaceutical
companies the opportunity to license PentaLyte®.
Since
inception, we have primarily financed our operations through the sale of equity
securities, licensing fees, royalties on product sales by our licensees, and
borrowings. The amount of license fees and royalties that may be
earned through the licensing and sale of our products and technology, the timing
of the receipt of license fee payments, and the future availability and terms of
equity financing, are uncertain. The unavailability or inadequacy of
financing or revenues to meet future capital needs could force us to modify,
curtail, delay or suspend some or all aspects of our planned
operations. Sales of additional equity securities could result in the
dilution of the interests of present shareholders.
In April
2006, we entered into a Revolving Line of Credit Agreement (the “Credit
Agreement”) with Alfred D. Kingsley, Cyndel & Co., Inc., and George
Karfunkel, investors in BioTime, under which we were permitted to borrow up to
$500,000 for working capital purposes at an interest rate of 10% per
annum. The maturity date of the Credit Agreement was the earlier of
(i) October 31, 2007 and (ii) such date on which the we shall have received an
aggregate of $600,000 through (A) the sale of capital stock, (B) the collection
of license fees, signing fees, milestone fees, or similar fees in excess of
$1,000,000 under any present or future agreement pursuant to which we grant one
or more licenses to use our patents or technology, (C) funds borrowed from other
lenders, (D) any combination of sources under clauses (A) through
(C). Under the Credit Agreement, we were allowed to prepay, and the
credit line would have been reduced by, any funds received prior to the maturity
date from those sources discussed above. In consideration for making
the line of credit available, we issued to the investors a total of 99,999
common shares. The line of credit was collateralized by a security
interest in our right to receive royalty and other payments under our license
agreement with Hospira. The market value of BioTime common stock was
$0.38 per common share on April 12, 2006, valuing the shares at
$38,000.
In
October 2007 and March 2008, we amended our Revolving Line of Credit
Agreement (See Note 3 and Note 10 to our Financial Statements). The
amendments increased the line of credit, increased the interest rate to 12% per
annum, and extended the maturity date of the line of credit to November 15,
2008. The line of credit may mature prior to November 15, 2008 if we
receive an aggregate of $4,000,000 through (A) the sale of capital stock,
(B) the collection of licensing fees, signing fees, milestone fees, or
similar fees in excess of $2,500,000 under any present or future agreement
pursuant to which we grant one or more licenses to use our patents or
technology, (C) funds borrowed from other lenders, or (D) any
combination of sources under clauses (A) through (C). The line of
credit is collateralized by a security interest in our right to receive royalty
and other payments under the license agreement with Hospira
The
amendments permit us to borrow up to $2,500,000 under our Revolving Line of
Credit Agreement, and as of April 2, 2008 we had received loan commitments from
the lenders for $2,050,000. In consideration for amending the line of
credit, we agreed to issue to the lenders a total of 420,000 common shares
during March and April of 2008, which had a value of $158,800 on the dates
of issue, and we will issue up to 90,000 additional shares to the lenders if we
receive commitments for the entire $2,500,000 million line of
credit.
Our
lenders have been given the right to exchange their line of credit promissory
notes for our common shares at a price of $1.00 per share, and/or for common
stock of our subsidiary Embryome Sciences, Inc. at a price of $2.00 per
share.
Report of Independent
Registered Public Accounting Firm
To
the Board of Directors and Shareholders of
BioTime,
Inc.
We
have audited the accompanying consolidated balance sheet of BioTime, Inc. (the
“Company”) as of December 31, 2007, and the related consolidated statements of
operations, shareholders’ equity (deficit), and cash flows for each of the years
in the two-year period ended December 31, 2007. These consolidated
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In
our opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of BioTime, Inc. as of December 31,
2007, and the results of its operations and its cash flows for each of the years
in the two-year period ended December 31, 2007, in conformity with accounting
principles generally accepted in the United States of America.
The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1
to the financial statements, the Company has a working capital deficit of
$1,316,356, a shareholders’ deficit of $3,046,389 and an accumulated deficit of
$43,844,497. These conditions, among others, raise substantial doubt about the
Company’s ability to continue as a going concern. Management’s plans in regard
to these matters are also described in Note 1. The accompanying consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
|
/s/
Rothstein, Kass & Company, P.C.
|
|
Roseland,
New Jersey
|
|
April
11, 2008
|
Item
7.
Financial Statements
BIOTIME,
INC.
CONSOLIDATED BALANCE SHEET
|
December
31,
2007
|
||||
|
ASSETS
|
||||
|
CURRENT
ASSETS
|
||||
|
Cash
and cash equivalents
|
$ | 9,501 | ||
|
Prepaid
expenses and other current assets
|
132,145 | |||
|
Total
current assets
|
141,646 | |||
|
Equipment,
net of accumulated depreciation of $585,765
|
12,480 | |||
|
Deposits
and other assets
|
20,976 | |||
|
TOTAL
ASSETS
|
$ | 175,102 | ||
|
LIABILITIES
AND SHAREHOLDERS' DEFICIT
|
||||
|
CURRENT
LIABILITIES
|
||||
|
Accounts
payable and accrued liabilities
|
$ | 480,374 | ||
|
Line
of credit payable
|
716,537 | |||
|
Deferred
license revenue, current portion
|
261,091 | |||
|
Total
current liabilities
|
1,458,002 | |||
|
Stock
appreciation rights compensation liability
|
13,151 | |||
|
Deferred
license revenue, net of current portion
|
1,740,702 | |||
|
Deferred
rent, net of current portion
|
9,636 | |||
|
Total
long-term liabilities
|
1,763,489 | |||
|
COMMITMENTS
AND CONTINGENCIES
|
||||
|
SHAREHOLDERS'
DEFICIT:
|
||||
|
Common
shares, no par value, authorized 50,000,000 shares; issued and outstanding
23,034,374 shares
|
40,704,136 | |||
|
Contributed
capital
|
93,972 | |||
|
Accumulated
deficit
|
(43,844,497 | ) | ||
|
Total
shareholders' deficit
|
(3,046,389 | ) | ||
|
TOTAL
LIABILITIES AND SHAREHOLDERS' DEFICIT
|
$ | 175,102 | ||
See notes
to consolidated financial statements.
BIOTIME,
INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
Year
Ended
December
31,
|
||||||||
|
2007
|
2006
|
|||||||
|
REVENUE:
|
||||||||
|
License
fees
|
$ | 255,549 | $ | 172,371 | ||||
|
Royalty
from product sales
|
776,679 | 933,478 | ||||||
|
Grant
income
|
13,893 | 56,166 | ||||||
|
Total
revenue
|
1,046,121 | 1,162,015 | ||||||
|
EXPENSES:
|
||||||||
|
Research
and development
|
(967,864 | ) | (1,422,257 | ) | ||||
|
General
and administrative
|
(1,300,630 | ) | (1,491,622 | ) | ||||
|
Total
expenses
|
(2,268,494 | ) | (2,913,879 | ) | ||||
|
Loss
from operations
|
(1,222,373 | ) | (1,751,864 | ) | ||||
|
INTEREST
EXPENSE AND OTHER INCOME:
|
||||||||
|
Interest
and other expense
|
(232,779 | ) | (157,114 | ) | ||||
|
Other
income
|
16,926 | 44,357 | ||||||
|
Total
interest expense and other income
|
(215,853 | ) | (112,757 | ) | ||||
|
NET
LOSS
|
$ | (1,438,226 | ) | $ | (1,864,621 | ) | ||
|
BASIC
AND DILUTED LOSS PER COMMON SHARE
|
$ | (0.06 | ) | $ | (0.08 | ) | ||
|
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:BASIC AND
DILUTED
|
22,853,278 | 22,538,003 | ||||||
See notes
to consolidated financial statements.
BIOTIME,
INC.
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
|
Common
Shares
|
||||||||||||||||||||
|
Number
of
Shares
|
Amount
|
Contributed
Capital
|
Accumulated
Deficit
|
Total
Shareholders’
Equity
(Deficit)
|
||||||||||||||||
|
BALANCE
AT JANUARY 1, 2006
|
22,339,312 | $ | 40,251,097 | $ | 93,972 | $ | (40,541,650 | ) | $ | (196,581 | ) | |||||||||
|
Common
shares issued for line of credit
|
99,999 | 37,999 | 37,999 | |||||||||||||||||
|
Shares
granted for services
|
135,000 | 43,876 | 43,876 | |||||||||||||||||
|
Exercise
of warrants
|
63 | 126 | 126 | |||||||||||||||||
|
Options
granted under FASB 123(R)
|
113,980 | 113,980 | ||||||||||||||||||
|
NET
LOSS
|
(1,864,621 | ) | (1,864,621 | ) | ||||||||||||||||
|
BALANCE
AT DECEMBER 31, 2006
|
22,574,374 | 40,447,078 | 93,972 | (42,406,271 | ) | (1,865,221 | ) | |||||||||||||
|
Common
shares issued for line of credit
|
200,000 | 106,000 | 106,000 | |||||||||||||||||
|
Shares
granted for services
|
260,000 | 103,000 | 103,000 | |||||||||||||||||
|
Options
granted under FASB 123(R)
|
48,058 | 48,058 | ||||||||||||||||||
|
NET
LOSS
|
(1,438,226 | ) | (1,438,226 | ) | ||||||||||||||||
|
BALANCE
AT DECEMBER 31, 2007
|
23,034,374 | $ | 40,704,136 | $ | 93,972 | $ | (43,844,497 | ) | $ | (3,046,389 | ) | |||||||||
See notes
to consolidated financial statements.
BIOTIME,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
Year
Ended
December
31,
|
||||||||
|
2007
|
2006
|
|||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
||||||
|
Net
loss
|
$ | (1,438,226 | ) | $ | (1,864,621 | ) | ||
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
|
Depreciation
|
4,833 | 6,003 | ||||||
|
Amortization
of deferred license revenue
|
(255,549 | ) | (168,461 | ) | ||||
|
Amortization
of line of credit costs
|
61,486 | 20,508 | ||||||
|
Stock-based
compensation for services
|
151,059 | 167,643 | ||||||
|
Interest
on royalty obligation
|
129,458 | 138,813 | ||||||
|
Changes
in operating assets and liabilities:
|
||||||||
|
Accounts
receivable
|
3,675 | — | ||||||
|
Prepaid
expenses and other current assets
|
(33,632 | ) | (5,227 | ) | ||||
|
Accounts
payable and accrued expenses
|
46,441 | (144,670 | ) | |||||
|
Interest
accrued - line of credit
|
21,600 | — | ||||||
|
Deposits
and other assets
|
— | 62,899 | ||||||
|
Deferred
rent
|
1,737 | 5,579 | ||||||
|
Share-based
compensation liability
|
13,151 | — | ||||||
|
Deferred
license revenue
|
53,987 | 519,315 | ||||||
|
Net
cash used in operating activities
|
(1,239,980 | ) | (1,262,219 | ) | ||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
|
Purchase
of property
|
(6,473 | ) | (10,664 | ) | ||||
|
Net
cash used in investing activities
|
(6,473 | ) | (10,664 | ) | ||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
|
Issuance
of common shares for cash
|
— | 126 | ||||||
|
Proceeds
from line of credit
|
694,937 | — | ||||||
|
Net
cash provided by financing activities
|
694,937 | 126 | ||||||
|
NET DECREASE
IN CASH AND CASH EQUIVALENTS
|
(551,516 | ) | (1,272,757 | ) | ||||
|
CASH
AND CASH EQUIVALENTS:
|
||||||||
|
At
beginning of year
|
561,017 | 1,833,774 | ||||||
|
At
end of year
|
$ | 9,501 | $ | 561,017 | ||||
|
SUPPLEMENTAL
SCHEDULE OF NONCASH FINANCING AND INVESTING ACTIVITIES :
|
||||||||
|
Issuance
of stock related to line of credit agreement
|
$ | 106,000 | $ | — | ||||
|
Decrease
in royalty obligation due to licensee payment
|
$ | — | $ | 356,000 | ||||
|
Issuance
of warrants to guarantors for participation in the Rights
Offer
|
$ | — | $ | 30,000 | ||||
|
Extension
of existing warrant terms
|
$ | — | $ | 152,812 | ||||
| Supplemental disclosure of cash flow information, cash paid during year for interest | $ | 81,721 | $ | 17,722 | ||||
See notes
to consolidated financial statements.
BIOTIME,
INC.
NOTES
TO FINANCIAL STATEMENTS
|
1.
|
Organization
|
General - BioTime, Inc. was
organized November 30, 1990 as a California corporation. BioTime is a biomedical
organization engaged in the development of synthetic plasma expanders, blood
volume substitute solutions, and organ preservation solutions, for use in
surgery, trauma care, organ transplant procedures, and other areas of
medicine. In December 2007, BioTime formed Embryome Sciences, Inc., a
wholly-owned subsidiary. As of December 31, 2007, there was no
financial activity conducted or recorded for this subsidiary.
Principles of Consolidation –
The accompanying consolidated financial statements include the accounts
of Embryome Sciences, Inc., a wholly-owned subsidiary of BioTime. As
of December 31, 2007, there was no financial activity with respect to this
subsidiary. All intercompany accounts and transactions have been
eliminated in consolidation.
Certain Significant Risks and
Uncertainties - BioTime’s operations are subject to a number of factors
that can affect its operating results and financial condition. Such factors
include but are not limited to the following: the results of clinical trials of
BioTime’s pharmaceutical products; BioTime’s ability to obtain United States
Food and Drug Administration and foreign regulatory approval to market its
pharmaceutical products; BioTime’s ability to develop new stem cell research
products and technologies; competition from products manufactured and sold or
being developed by other companies; the price of and demand for BioTime
products; BioTime’s ability to obtain additional financing and the terms of any
such financing that may be obtained; BioTime’s ability to negotiate favorable
licensing or other manufacturing and marketing agreements for its products; the
availability of ingredients used in BioTime’s products; and the availability of
reimbursement for the cost of BioTime’s pharmaceutical products (and related
treatment) from government health administration authorities, private health
coverage insurers and other organizations.
Liquidity and Going Concern -
At December 31, 2007, BioTime had $9,501 of cash on hand and negative working
capital of $1,316,356, a shareholders’ deficit of $3,046,389 and an accumulated
deficit of $43,844,497. BioTime will continue to need additional
capital and greater revenues to continue its current operations and to continue
to conduct its product development and research programs. Sales of additional
equity securities could result in the dilution of the interests of present
shareholders. BioTime is also continuing to seek new agreements with
pharmaceutical companies to provide product and technology licensing fees and
royalties. The availability and terms of equity financing and new
license agreements are uncertain. The unavailability or inadequacy of
additional financing or future revenues to meet capital needs could force
BioTime to modify, curtail, delay or suspend some or all aspects of its planned
operations. To mitigate these factors, management has instituted a
cost-cutting plan which included a reduction in discretionary general and
administrative expenses such as public relations. Additionally, in October
2007, BioTime’s line of credit for working capital was increased and the
maturity date was extended (see Note 3). BioTime will continue to
seek additional financing or capital as well as additional licensing revenues
from its current and future patents. In view of the matters described
above, BioTime’s continued operations are dependent on its ability to raise
additional capital, obtain additional financing, and succeed in generating more
revenue from its operations. The financial statements do not include
any adjustments relating to the recoverability and classification of recorded
asset amounts and classification of liabilities should the company be unable to
continue as a going concern.
|
2.
|
Summary
of Significant Accounting Policies
|
Financial Statement
Estimates - The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Revenue recognition – BioTime complies with the Securities and
Exchange Commission’s (“SEC”) Staff Accounting Bulletin (“SAB”) No. 101, Revenue
Recognition, as amended by SAB No. 104. Royalty and license fee revenues consist
of product royalty payments and fees under license agreements and are recognized
when earned and reasonably estimable. BioTime recognizes revenue in
the quarter in which the royalty report is received rather than the quarter in
which the sales took place, as it does not have sufficient sales history to
accurately predict quarterly sales. Up-front nonrefundable fees where
BioTime has no continuing performance obligations are recognized as revenues
when collection is reasonably assured. In situations where continuing
performance obligations exist, up-front nonrefundable fees are deferred and
amortized ratably over the performance period. If the performance
period cannot be reasonably estimated, BioTime amortizes nonrefundable fees over
the life of the contract until such time that the performance period can be more
reasonably estimated. Milestones, if any, related to scientific or
technical achievements are recognized in income when the milestone is
accomplished if (a) substantive effort was required to achieve the milestone,
(b) the amount of the milestone payment appears reasonably commensurate with the
effort expended and (c) collection of the payment is reasonably assured.
BioTime
also defers costs, including finders’ fees, which are directly related to
license agreements for which revenue has been deferred. Deferred
costs are charged to expense proportionally and over the same period that
related deferred revenue is recognized as revenue. Deferred costs are
net against deferred revenues in BioTime’s balance sheet.
Grant
income is recognized as revenue when earned.
Cash and cash equivalents – BioTime
considers all highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents.
Concentrations of credit risk -
Financial instruments that potentially subject BioTime to significant
concentrations of credit risk consist primarily of cash and cash
equivalents. BioTime limits the amount of credit exposure of cash
balances by maintaining its accounts in high credit quality financial
institutions. Cash equivalent deposits with financial institutions
may, at times, exceed federally issued limits; however, BioTime has not
experienced any losses on such accounts.
Equipment - Equipment is stated at
cost. Equipment is being depreciated using the straight-line method over a
period of thirty-six to eighty-four months.
Deferred costs (other assets) -
Certain costs incurred in obtaining the line of credit have been deferred and
are being amortized over the term of the line of credit agreements.
Patent costs - Patent costs associated with obtaining patents on
products being developed are expensed as general and administrative expenses
when incurred. These costs totaled $103,204 and $126,618, for the years ended
December 31, 2007 and 2006, respectively.
Research and development –
BioTime complies with the accounting requirements of Statement of Financial
Accounting Standards (“SFAS”) No.2, Accounting for Research and Development
Costs. Research and development costs are expensed when incurred and consist
principally of salaries, payroll taxes, research and laboratory fees, hospital
and consultant fees related to clinical trials, and BioTime’s PentaLyte solution
for use in human clinical trials.
Income Taxes - BioTime
accounts for income taxes in accordance with SFAS No. 109, Accounting for Income
Taxes, which prescribes the use of the asset and liability method whereby
deferred tax asset or liability account balances are calculated at the balance
sheet date using current tax laws and rates in effect. Valuation
allowances are established when necessary to reduce deferred tax assets when it
is more likely than not that a portion or all of the deferred tax assets will
not be realized.
Stock-based Compensation - On
January 1, 2006, BioTime adopted SFAS No. 123 (revised 2004), “Share-Based
Payment” (“SFAS 123(R)”) which requires the measurement and recognition of
compensation expense for all share-based payment awards made to directors and
employees including employee stock options based on estimated fair values. SFAS
123(R) supersedes BioTime's previous accounting using the intrinsic value method
under Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock
Issued to Employees” for periods beginning in fiscal 2006. In March 2005, the
SEC issued SAB No. 107, “Valuation of Share-Based Payment Arrangements for
Public Companies”, which provides supplemental implementation guidance for SFAS
123(R). BioTime has applied the provisions of SAB 107 in its adoption of SFAS
123(R). Upon adoption of SFAS 123 (R), BioTime has continued to
utilize the Black-Scholes Merton option pricing model which was previously used
for BioTime's proforma disclosures under SFAS 123. BioTime's determination of
fair value of share-based payment awards on the date of grant using an
option-pricing model is affected by BioTime's stock price as well as assumptions
regarding a number of highly complex and subjective variables. These variables
include, but are not limited to, BioTime's expected stock price volatility over
the term of the awards, and the actual and the projected employee stock options
exercise behaviors. The expected term of options granted is derived from
historical data on employee exercises and post-vesting employment termination
behavior. The risk-free rate is based on the U.S Treasury rates in effect during
the corresponding period of grant. Because changes in the subjective assumptions
can materially affect the estimated value, in management's opinion, the existing
valuation models may not provide an accurate measure of the fair value of
BioTime's employee stock options. Although the fair value of employee stock
options is determined in accordance with SFAS 123(R) and SAB 107 using an
option-pricing model, that value may not be indicative of the fair value
observed in a willing buyer/willing seller market transaction.
Loss per share – BioTime
complies with the accounting and reporting requirements of SFAS No. 128,
“Earnings Per Share.” Basic net loss per share is computed by
dividing net loss available to common stockholders by the weighted-average
common shares outstanding for the period. Diluted net loss per share reflects
the weighted-average common shares outstanding plus the potential effect of
dilutive securities or contracts which are convertible to common shares such as
options, warrants, convertible debt, and preferred stock (using the treasury
stock method) and shares issuable in future periods, except in cases where the
effect would be anti-dilutive. Diluted loss per share for the years
ended December 31, 2007 and 2006 excludes any effect from 3,333,332 options and
7,847,867 warrants; 1,811,664 options and 7,943,314 warrants, respectively, as
their inclusion would be antidilutive.
Fair value of financial
instruments - The carrying amount of BioTime’s financial instruments,
consisting of cash, accounts receivable, and short-term payables, approximates
their fair value due to their short-term maturity.
Reclassification – Certain
prior year amounts have been reclassified to conform to the current year
presentation.
Recently issued accounting
standards –
In July 2006, the Financial Accounting Standards Board issued
Interpretation (FIN) No. 48, “Accounting for Uncertainty in Income Taxes”
(FIN 48). FIN 48 creates a single accounting and disclosure model for uncertain
tax positions, provides guidance on the minimum threshold that a tax uncertainty
is required to meet before it can be recognized in the financial statements and
applies to all tax positions taken by a company; both those deemed to be routine
as well as those for which there may be a high degree of
uncertainty.
FIN 48
establishes a two-step approach for evaluating tax positions. The first step,
recognition, occurs when a company concludes (based solely on the technical
aspects of the tax matter) that a tax position is more likely than not to be
sustained on examination by a taxing authority. The second step, measurement, is
only considered after step one has been satisfied and measures any tax benefit
at the largest amount that is deemed more likely than not to be realized upon
ultimate settlement of the uncertainty. Tax positions that fail to qualify for
initial recognition are recognized in the first subsequent interim period that
they meet the more likely than not standard, when they are resolved through
negotiation or litigation with the taxing authority or upon the expiration of
the statute of limitations. Derecognition of a tax position previously
recognized would occur when a company subsequently concludes that a tax position
no longer meets the more likely than not threshold of being sustained. FIN 48
also significantly expands the financial statement disclosure requirements
relating to uncertain tax positions. FIN 48 is effective for fiscal years
beginning after December 15, 2006. Differences between the amounts
recognized in the balance sheet prior to adoption and the amounts recognized in
the balance sheet after adoption will be accounted for as a cumulative effect
adjustment to the beginning balance of retained earnings. BioTime does not
believe that the adoption of FIN 48 will have a material effect on its financial
statements.
In
September 2006, the Financial Accounting Standards Board (the “FASB”) issued
SFAS No. 157, “Fair Value Measurements” (SFAS No. 157), which defines
fair value, establishes a framework for measuring fair value and requires
additional disclosures about fair value measurements. SFAS No. 157 is
effective for fiscal years beginning after November 15, 2007. BioTime
is currently evaluating the effect, if any, the adoption of SFAS No. 157
will have on its financial statements.
In
February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial
Assets and Financial Liabilities”. SFAS 159 permits entities to
choose to measure many financial instruments, and certain other items, at fair
value. SFAS 159 applies to reporting periods beginning after November
15, 2007. BioTime is currently evaluating the effect, if any, that
the adoption of SFAS 159 will have on its financial statements.
|
3.
|
Lines
of Credit
|
In March
2006, BioTime entered into a Revolving Line of Credit Agreement (the “Credit
Agreement”) with Alfred D. Kingsley, Cyndel & Co., Inc., and George
Karfunkel, investors in BioTime, under which BioTime could borrow up to $500,000
for working capital purposes at an interest rate of 10% per annum. In
consideration for making the line of credit available, BioTime issued to the
investors a total of 99,999 common shares which had a value of $38,000 on the
date of issue. The line of credit is collateralized by a security
interest in BioTime’s right to receive royalty and other payments under the
license agreement with Hospira.
In
October 2007, the Credit Agreement was amended to increase the line of credit to
$1,000,000, and to increase the interest rate to 12% per annum. The
maturity date of the line of credit was extended to the earlier of (i) April 30,
2008 or (ii) when BioTime receives an aggregate of $2,000,000 through (A) the
sale of capital stock, (B) the collection of licensing fees, signing fees,
milestone fees, or similar fees in excess of $1,000,000 (C) funds borrowed from
other lenders, or (D) any combination of sources under clauses (A) through
(C). In consideration for amending the line of credit, BioTime issued
to the investors a total of 200,000 common shares, which had a value of $106,000
on the date of issue.
BioTime
also obtained a line of credit from American Express in August 2004, which
allows for borrowings up to $43,600; at December 31, 2007, BioTime had drawn
$34,937 against this line. Interest is paid monthly on borrowings at a total
rate equal to the prime rate plus 3.99%; however, regardless of the prime rate,
the interest rate payable will at no time be less than 9.49%.
BioTime
also secured a line of credit from Advanta in November 2006, which allows for
borrowings up to $35,000; at December 31, 2007, BioTime had drawn the entire
$35,000 against this line. Interest is payable on borrowings at a
Variable Rate Index, which will at no time be less than 8.25%.
|
4.
|
Royalty
Obligation
|
In
December 2004, BioTime entered into an agreement with Summit Pharmaceuticals
International Corporation (“Summit”) to co-develop Hextend and PentaLyte for the
Japanese market. Under the agreement, BioTime received $300,000 in
December 2004, $450,000 in April 2005, and $150,000 in October
2005. The payments represent a partial reimbursement of BioTime’s
development cost of Hextend and PentaLyte. In June 2005, following
BioTime’s approval of Summit’s business plan for Hextend, BioTime paid to Summit
a one-time fee of $130,000 for their services in preparing the
plan. The agreement states that revenues from Hextend and PentaLyte
in Japan will be shared between BioTime and Summit as follows: BioTime 40% and
Summit 60%. Additionally, BioTime will pay Summit 8% of all net
royalties received from the sale of PentaLyte in the United States.
The
accounting treatment of the payments from Summit falls under the guidance of
Emerging Issues Task Force (“EITF”) Issue No. 88-18, “Sales of Future
Revenues.” EITF 88-18 addresses the accounting treatment when an
enterprise (BioTime) receives cash from an investor (Summit) and agrees to pay
to the investor a specified percentage or amount of the revenue or a measure of
income of a particular product line, business segment, trademark, patent, or
contractual right. The Emerging Issues Task Force reached a consensus on six
independent factors that would require reclassification of the proceeds as
debt. BioTime met one of the factors: BioTime was determined to have
had significant continuing involvement in the generation of the cash flows to
the investor due to BioTime’s supervision of the Phase II clinical trials of
PentaLyte. As a result, BioTime initially recorded the net proceeds
from Summit to date of $770,000 as long-term debt to comply with EITF 88-18 even
though BioTime is not legally indebted to Summit for that
amount.
In July
2005, Summit sublicensed the rights to Hextend in Japan to
Maruishi. In consideration for the license, Maruishi agreed to pay
Summit a series of milestone payments: Yen 70,000,000, (or $593,390 based on
foreign currency conversion rates at the time) upon executing the agreement, and
Yen 100,000,000 upon regulatory filing in Japan, and Yen 100,000,000 upon
regulatory approval of Hextend in Japan. Consistent with the terms of
the BioTime and Summit agreement, Summit paid 40% of that amount, or $237,356,
to BioTime during October 2005. BioTime does not expect the
regulatory filing and approval milestones to be attained for several
years.
The
initial accounting viewed the potential repayment of the $770,000 imputed debt
to come only from the 8% share of US PentaLyte revenues generated by BioTime and
paid to Summit. BioTime first became aware of the terms of the
Maruishi and Summit agreement during the fourth quarter of 2005, prepared an
estimate of the future cash flows, and determined that Summit would earn a
majority of their return on investment from their agreement with Maruishi, and
not the 8% of BioTime’s U.S. PentaLyte sales. Considering this, the
$770,000 was viewed as a royalty obligation which will be reduced by Summit’s 8%
share of BioTime’s U.S. PentaLyte sales plus Summit’s 60% share of Japanese
revenue. Accordingly, BioTime recorded the entire amount paid by
Maruishi to Summit for the sublicense of $593,390 as deferred revenue, to be
amortized over the remaining life of the patent through
2019. BioTime’s 40% share of this payment was collected in October
2005 and the remaining 60% share was recorded as a reduction of the long-term
royalty obligation of BioTime to Summit. Interest on the long-term
royalty obligation was accrued monthly using the effective interest method
beginning October 2005, using a rate of 25.2% per annum, which BioTime has
determined is the appropriate interest rate when the future cash flows from the
transaction are considered.
In 2007,
BioTime completed its Phase II trials of PentaLyte, however was unable to find a
suitable licensing agreement for the product. At this time, BioTime
has deemed the continuation of the clinical trials necessary to bring this
product to market to be a significantly lower priority than it had been in the
past. Correspondingly, it is less likely that proceeds from the 8% of
PentaLyte US sales will be sufficient to pay down the Summit Royalty Obligation
prior to the expiration of the patents. As a result of this change in
accounting estimates, BioTime has reevaluated treatment of this
transaction. The transaction no longer meets any of the factors that
require it to fall under the guidance from EITF88-18. Consequently,
BioTime has reclassified the royalty obligation to deferred revenue and is
amortizing it over the remaining life of the underlying patents.
|
5.
|
Shareholders’
Deficit
|
During
April 1998, BioTime entered into a financial advisory services agreement with
Greenbelt, Corp., a corporation controlled by Alfred D. Kingsley and Gary K.
Duberstein, who are also shareholders of BioTime. BioTime agreed to
indemnify Greenbelt and its officers, affiliates, employees, agents, assignees,
and controlling person from any liabilities arising out of or in connection with
actions taken on BioTime's behalf under the agreement. The agreement
was renewed annually through March 31, 2007. BioTime paid Greenbelt
$45,000 in cash and issued 135,000 common shares for the twelve months ending
March 31, 2006, and paid $90,000 in cash and issued 200,000 common shares for
the twelve months ending March 31, 2007. Greenbelt permitted BioTime
to defer paying certain cash fees until October 2007. In return for
allowing the deferral, Greenbelt was issued an additional 60,000 common shares
by BioTime.
Activity
related to the Greenbelt agreement is presented in the table below:
|
Balance
included
in
Accounts
Payable
at
January
1
|
Add:
Cash-
based
expense
accrued
|
Add:
Stock-based
expense
accrued
|
Less:
Cash
payments
|
Less:
Value
of
stock-based
payments
|
Balance
included
in
Accounts
Payable
at
December
31,
|
|
|
2007
|
$108,000
|
$22,500
|
$62,500
|
$(0)
|
$(103,000)
|
$90,000
|
|
2006
|
$65,138
|
$78,750
|
$52,987
|
$(45,000)
|
$(43,875)
|
$108,000
|
BioTime,
as part of rights offerings and other agreements, has issued warrants to
purchase its common stock. Activity related to warrants in 2007 and
2006 is presented in the table below:
|
Number
of
Shares
|
Per
share
Warrant
price
|
Weighted
Average
Exercise
Price
|
||||||||||
|
Outstanding,
January 1, 2006
|
8,220,972 | $ | 1.47-8.14 | $ | 2.03 | |||||||
|
Exercised
|
(63 | ) | 2.00 | 2.00 | ||||||||
|
Expired
in 2006
|
(277,595 | ) | 1.47-8.14 | 2.70 | ||||||||
|
Shares
under warrants at December 31, 2006
|
7,943,314 | $ | 1.34-3.92 | 2.00 | ||||||||
|
Expired
in 2007
|
(95,447 | ) | $ | 1.34-3.92 | 2.17 | |||||||
|
Outstanding,
December 31, 2007
|
7,847,867 | $ | 2.00 | $ | 2.00 | |||||||
At
December 31, 2007, 7,847,867 warrants to purchase common stock with a weighted
average exercise price of $2.00 and a weighted average remaining contractual
life of 2.84 years were outstanding.
In March
2006, the board of directors approved an increase in the authorized number of
common shares to 50,000,000 shares.
In
October 2007, BioTime granted certain executives options to purchase 2,000,000
of BioTime’s common shares (the “Options”) under BioTime’s 2002 Employee Stock
Option Plan, as amended (the “2002 Plan”). The Options are paired
with stock appreciation rights ("SARs") with respect to 1,302,030
shares. The exercise price of the Options and the SARs is $0.50 per
share. The Options and SARs will vest at the rate of 1/60th of the
number of Options or SARs granted at the end of each full month of
employment.
The
vested portion of the Option and SARs shall expire on the earliest of
(A) seven (7) years from the date of grant, (B) three months after the executive
ceases to be an employee of BioTime for any reason other than his death or
disability, or (C) one year after he ceases to be an employee of BioTime due to
his death or disability; provided that if he dies during the three month period
described in clause (B), the expiration date of the vested portion of this
Option shall be one year after the date of his death. In addition, if
a SAR is exercised, the vested portion of the Option shall expire as to a number
of shares for which the SAR was exercised, and the vested and unvested portion
of the SAR shall expire when the shareholders of BioTime approve an amendment to
the 2002 Plan increasing the number of common shares available under the 2002
Plan from 2,000,000 to 4,000,000 shares..
|
6.
|
Stock
Option Plans
|
During
1992, BioTime adopted the 1992 Stock Option Plan (the "1992
Plan"). Options granted under the 1992 Plan expire five to ten years
from the date of grant and may be fully exercisable immediately, or may be
exercisable according to a schedule or conditions specified by the Board of
Directors or the Option Committee. As of December 31, 2007, options to purchase
119,500 shares had been granted and were outstanding at exercise prices ranging
from $3.00 to $11.75 under the 1992 Plan. At December 31, 2007, no
options were available for future grants under the 1992 Plan.
During
2002, BioTime adopted the 2002 Plan, which was amended during December 2004 to
reserve 2,000,000 common shares for issuance under options granted to eligible
persons. During October 2007 the Board of Directors approved an
amendment to the 2002 Plan that will permit the grant of options to purchase up
to an additional 2,000,000 common shares. The 2007 amendment is
subject to approval by BioTime’s shareholders. No options may be
granted under the 2002 Plan more than ten years after the date the 2002 Plan was
adopted by the Board of Directors, and no options granted under the 2002 Plan
may be exercised after the expiration of ten years from the date of
grant. Under the 2002 Plan, options to purchase common shares may be
granted to employees, directors and certain consultants at prices not less than
the fair market value at date of grant for incentive stock options and not less
than 85% of fair market value for other stock options. These options
expire five to ten years from the date of grant and may be fully exercisable
immediately, or may be exercisable according to a schedule or conditions
specified by the Board of Directors or the Compensation
Committee. The 2002 Plan also permits BioTime to sell common shares
to employees subject to vesting provisions under restricted stock agreements
that entitle BioTime to repurchase unvested shares at the employee’s cost upon
the occurrence of specified events, such as termination of
employment. BioTime may permit employees or consultants, but not
executive officers or directors, who purchase stock under restricted stock
purchase agreements to pay for their shares by delivering a promissory note that
is secured by a pledge of their shares. Under the 2002 Plan, as of
December 31, 2007, BioTime had granted to certain employees, consultants, and
directors, options to purchase a total of 3,213,832 common shares at exercise
prices ranging from $0.32 to $2.17 per share. The grant of 1, 213,832
options is subject to shareholder approval of the 2007 amendment of the 2002
Plan.
On
January 1, 2006, BioTime adopted SFAS 123(R), which requires the measurement and
recognition for all share-based payment awards made to BioTime’s employees and
directors including employee stock options. The following table
summarizes stock-based compensation expense related to employee and director
stock options awards for the years ended December 31, 2007 and 2006, which was
allocated as follows:
|
Year
Ended December 31,
|
||||||||
|
2007
|
2006
|
|||||||
|
All
stock-based compensation expense:
|
||||||||
|
Research
and Development
|
$ | — | $ | 26,874 | ||||
|
General
and Administrative
|
48,058 | 87,106 | ||||||
|
Stock
appreciation rights
|
13,151 | |||||||
|
All
stock-based compensation expense included in operating
expense
|
61,209 | 113,980 | ||||||
|
Total
stock-based compensation expense
|
$ | 61,209 | $ | 113,980 | ||||
BioTime
adopted SFAS 123(R) using the modified prospective transition method, which
requires the application of the accounting standard as of January 1, 2006, the
first day of BioTime’s fiscal year 2006. BioTime’s financial
statements as of and for the year ended December 31, 2006, reflect the impact of
SFAS 123(R). As of December 31, 2007, total unrecognized compensation
costs related to unvested stock options was $379,682, which is expected to be
recognized as expense over a weighted average period of approximately 4.8
years.
For all
applicable periods, the value of each employee and director stock option was
estimated on the date of grant using the Black-Scholes Merton model for the
purpose of the pro forma financial disclosures in accordance with SFAS
123.
The
weighted-average estimated fair value of stock options granted during the years
ended December 31, 2007 and 2006 was $0.20 and $0.16 per share, respectively,
using the Black-Scholes Merton model with the following weighted-average
assumptions:
|
Year Ended
December
31,
2007
|
Year Ended
December
31,
2006
|
|
|
Expected
lives in years
|
5
|
5
|
|
Risk
free interest rates
|
4.38%
|
4.60%
|
|
Volatility
|
100%
|
89%
|
|
Dividend
yield
|
0%
|
0%
|
For
options granted prior to 2006 and valued in accordance with SFAS 123, the
expected life and the expected volatility of the stock options were based upon
historical data. Forfeitures of employee stock options were accounted
for on an as-incurred basis.
General
Option Information
A summary
of all option activity under the 1992 and 2002 option plans for the years ended
December 31, 2007 and 2006 is as follows:
|
Options
Available
for
Grant
|
Number
of
Options
Outstanding
|
Weighted
Average Exercise Price
|
|||||||
|
January
1, 2006
|
887,336
|
1,477,164
|
$
|
3.31
|
|||||
|
Granted
|
(509,500)
|
509,500
|
0.32
|
||||||
|
Forfeited/expired
|
30,000
|
(175,000)
|
5.51
|
||||||
|
December
31, 2006
|
407,836
|
1,811,664
|
|
2.20
|
|||||
|
Granted
|
(40,000)
|
2,040,000
|
0.29
|
||||||
|
Forfeited/expired
|
328,332
|
(388,332)
|
3.05
|
||||||
|
December
31, 2007
|
696,168
|
3,463,332
|
$
|
1.72
|
|||||
Additional
information regarding options outstanding as of December 31, 2007 is as
follows:
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||
|
Range
of
Exercise
Prices
|
Number
Outstanding
|
Weighted
Avg.
Remaining
Contractual
Life
(yrs)
|
Weighted
Avg.
Exercise
Price
|
Number
Exercisable
|
Weighted
Avg.
Exercise
Price
|
|||||
|
$.32-$.34
|
484,500
|
4.77
|
$0.32
|
484,500
|
$0.32
|
|||||
|
.74-1.55
|
198,332
|
2.24
|
1.27
|
188,332
|
1.29
|
|||||
|
2.00-2.17
|
591,000
|
1.96
|
2.02
|
591,000
|
2.02
|
|||||
|
11.75
|
59,500
|
1.28
|
11.75
|
59,500
|
11.75
|
|||||
|
$0.32-$11.75
|
1,333,332
|
2.99
|
$1.72
|
1,323,332
|
$1.73
|
|||||
General
Stock Appreciation Rights Information
On
October 10, 2007, BioTime granted a total of 1,302,030 Stock Appreciation Rights
(“SARs”) to two new employees. The SARs have a weighted average
exercise price of $0.50 per share, and are being amortized over five
years. As of December 31, 2007, none of the SARs had expired or been
forfeited.
|
7.
|
Commitments
and Contingencies
|
BioTime
occupies approximately 5,244 square feet of office and laboratory space in
Heritage Square in Emeryville, California under a five year
lease. BioTime moved to this facility in May
2005. Monthly rent will increase by 3% each year
during the initial five year term. If BioTime exercises its option to
extend the lease, then monthly rent will be set at 95% of the fair market rent
at that time. In addition to rent, BioTime will pay its pro rata
share of operating expenses and real estate taxes for the building in which
BioTime’s space is located or for the Heritage Square project as a whole, as
applicable, based upon the ratio that the number of square feet rented by
BioTime bears to the total number of square feet in the building or
project.
Rent
expenses totaled $189,158 and $192,521 for the years ended December 31, 2007 and
2006, respectively. Remaining minimum annual lease payments under the
lease are as follows:
|
Year
|
Minimum
lease payments
|
|||
|
2008
|
$ |
135,857
|
||
|
2009
|
139,933 | |||
|
2010
|
59,022 | |||
Indemnification – Under
BioTime’s bylaws, BioTime has agreed to indemnify its officers and directors for
certain events or occurrences arising as a result of the officer or director
serving in such capacity. The term of the indemnification period is for the
officer’s or director’s lifetime. The maximum potential amount of future
payments that BioTime could be required to make under the indemnification
provisions contained in BioTime’s bylaws is unlimited. However,
BioTime has a directors and officers liability insurance policy that limits its
exposure and enables it to recover a portion of any future amounts
paid. As a result of the insurance policy coverage, BioTime believes
the estimated fair value of these indemnification agreements is minimal and no
liabilities were recorded for these agreements as of December 31,
2007.
Under the
license agreements with Hospira and CJ, BioTime will indemnify Abbott
Laboratories (Hospira’s predecessor), Hospira, and/or CJ for any cost or expense
resulting from any third party claim or lawsuit arising from alleged patent
infringement, as defined, by Abbott, Hospira, or CJ relating to actions covered
by the applicable license agreement. Management believes that the
possibility of payments under the indemnification clauses is
remote. Therefore, BioTime has not recorded a provision for potential
claims as of December 31, 2007. BioTime enters into indemnification provisions
under (i) agreements with other companies in the ordinary course of business,
typically with business partners, licensees, contractors, hospitals at which
clinical studies are conducted, and landlords, and (ii) agreements with
investors, underwriters, investment bankers, and financial advisers. Under these
provisions, BioTime generally agrees to indemnify and hold harmless the
indemnified party for losses suffered or incurred by the indemnified party as a
result of BioTime’s activities or, in some cases, as a result of the indemnified
party’s activities under the agreement. These indemnification
provisions often include indemnifications relating to representations made by
BioTime with regard to intellectual property rights. These
indemnification provisions generally survive termination of the underlying
agreement. In some cases, BioTime has obtained liability insurance
providing coverage that limits its exposure for indemnified matters. The maximum
potential amount of future payments that BioTime could be required to make under
these indemnification provisions is unlimited. BioTime has not
incurred material costs to defend lawsuits or settle claims related to these
indemnification agreements. As a result, BioTime believes the
estimated fair value of these agreements is minimal. Accordingly,
BioTime has no liabilities recorded for these agreements as of December 31,
2007.
|
8.
|
Income
Taxes
|
The
primary components of the net deferred tax asset are:
|
Year
Ended December 31,
2007
|
||||
|
Deferred
tax asset:
|
||||
|
Net
operating loss carryforwards
|
$ | 16,198,000 | ||
|
Research
& development and other credits
|
1,797,000 | |||
|
Other,
net
|
1,001,000 | |||
|
Total
|
18,996,000 | |||
|
Valuation
allowance
|
(18,996,000 | ) | ||
|
Net
deferred tax asset
|
$ | -0- | ||
Income
taxes differed from the amounts computed by applying the U.S. federal income tax
of 34% to pretax losses from operations as a result of the
following:
|
Year Ended December
31,
|
2007
|
2006
|
|
Computed
tax benefit at federal statutory rate
|
34%
|
34%
|
|
Permanent
differences, primarily nondeductible interest due to write off of royalty
obligation
|
(0)
|
(4%)
|
|
Losses
for which no benefit has been recognized
|
(32%)
|
(39%)
|
|
State
tax benefit, net of effect on federal income taxes
|
0%
|
6%
|
|
Research
and development and other credits
|
2%
|
3%
|
|
0%
|
0%
|
No tax
benefit has been recorded through December 31, 2007 because of the net operating
losses incurred and a full valuation allowance provided. A valuation allowance
is provided when it is more likely than not that some portion of the deferred
tax asset will not be realized. BioTime established a 100% valuation allowance
for all periods presented due to the uncertainty of realizing future tax
benefits from its net operating loss carryforwards and other deferred tax
assets.
As of
December 31, 2007, BioTime has net operating loss carryforwards of approximately
$45,350,000 for federal and $13,320,000 for state tax purposes, which expire
through 2027. In addition, BioTime has tax credit carryforwards for
federal and state tax purposes of $1,020,000 and $777,000, respectively, which
expire through 2027.
Internal
Revenue Code Section 382 places a limitation (the “Section 382 Limitation”) on
the amount of taxable income that can be offset by net operating loss (“NOL”)
carryforwards after a change in control (generally greater than 50% change in
ownership within a three-year period) of a loss corporation. California has
similar rules. Generally, after a control change, a loss corporation cannot
deduct NOL carryforwards in excess of the Section 382 Limitation. Due to these
“change in ownership” provisions, utilization of the NOL and tax credit
carryforwards may be subject to an annual limitation regarding their utilization
against taxable income in future periods.
|
9.
|
Enterprise-wide
Disclosures
|
Geographic
Area Information
Revenues,
including license fees and royalties, by geographic area are based on the
country of domicile of the counterparty to the agreement.
|
Year
ended December 31,
|
2007
|
2006
|
||||||
|
Revenues
|
||||||||
|
Domestic
|
$ | 790,572 | $ | 993,554 | ||||
|
Asia
|
255,549 | 168,461 | ||||||
|
Total
revenues
|
$ | 1,046,121 | $ | 1,162,015 | ||||
All of
BioTime’s assets are located at its Emeryville, California
facility.
Major
Customers
BioTime
has two major customers comprising significant amounts of total revenues as
follows:
|
Year
ended December 31,
|
2007
|
2006
|
|
%
of Total Revenues
|
||
|
Hospira
|
74%
|
80%
|
|
CJ
Corp
|
10%
|
8%
|
10.
Subsequent Events
In
January 2008, BioTime signed a licensing agreement with the Wisconsin Alumni
Research Foundation (“WARF”) to 173 patents and patent applications filed
internationally relating to human embryonic stem cell technology created by
James Thomson at the University of Wisconsin-Madison. The agreement requires the
payment of approximately $250,000 prior to January 2009.
In
February 2008, BioTime received royalties in the amount of $308,900 from
Hospira; this amount is based on sales of Hextend made by Hospira in the fourth
quarter of 2007, and will be reflected in BioTime’s consolidated financial
statements for the first quarter of 2008.
On March
31, 2008, BioTime entered into an amendment to its Financial Adviser Agreement
with Greenbelt Corp, renewing that agreement through December 31,
2008. Greenbelt has served as BioTime’s financial adviser since
1998. Under the amendment, BioTime will pay Greenbelt a fee of
$135,000 in cash and 300,000 common shares. The shares shall be
issued as follows: 150,000 shares on April 1, 2008, and 75,000 shares on October
1, 2008, and January 2, 2009. The cash fee will be payable in three
equal installments of $45,000 each on October 1, 2008, and January 2,
2009. BioTime may elect to defer until January 2, 2009 the cash
payments due on July 1, 2008 and October 1, 2008, and if it does so, BioTime
will issue to Greenbelt 30,000 additional common shares at the time the deferred
cash payment is made.
The
agreement will terminate on December 31, 2008, unless BioTime or Greenbelt
terminates it on an earlier date. In the event of an early
termination, BioTime will pay Greenbelt a pro rata portion of the cash and
shares earned during the calendar quarter in which the agreement terminated,
based upon the number of days elapsed.
In March
2008, BioTime entered into amendments to its Credit Agreement that increased the
line of credit and extended the maturity date of the line of credit to November
15, 2008. The line of credit may mature prior to November 15, 2008 if
BioTime receives an aggregate of $4,000,000 through (A) the sale of capital
stock, (B) the collection of licensing fees, signing fees, milestone fees,
or similar fees in excess of $2,500,000 under any present or future agreement
pursuant to which BioTime grants one or more licenses to use its patents or
technology, (C) funds borrowed from other lenders, or (D) any
combination of sources under clauses (A) through (C).
The
amendments permit BioTime to borrow up to $2,500,000, and as of April 2, 2008
BioTime had received loan commitments from lenders for $2,050,000. In
consideration for the increased line of credit and later maturity date, BioTime
agreed to issue to the lenders a total of 420,000 common shares during March and
April 2008, which had a value of $158,800 on the dates of issue, and will issue
up to 90,000 additional shares to the lenders if it receives commitments for the
entire $2,500,000 million line of credit.
In April 2008,
BioTime entered into a sublease of approximately 11,000 square feet of
office and research laboratory spaced at 1301 Harbor Bay Parkway, in Alameda,
California. BioTime plans to move its headquarters from its present
Emeryville location to this new facility. The sublease will expire on
November 30, 2010, but BioTime has an early termination right that permits it to
terminate the sublease on July 31, 2008. Base monthly rent will be
$22,000 during 2008, $22,600 during 2009, and $23,339.80 during
2010. In addition to base rent, BioTime will pay a pro rata share of
real property taxes and certain costs related to the operation and maintenance
of the building in which the subleased premises are located.
|
Item 8.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
Not
applicable.
|
Item 8A.
|
Controls
and Procedures
|
Evaluation
of Disclosure Controls and Procedures
It is
management’s responsibility to establish and maintain adequate internal control
over all financial reporting pursuant to Rule 13a-15 under the Securities
Exchange Act of 1934 (the “Exchange Act”). Our management, including
our principal executive officer, our principal operations officer, and our
principal financial officer, have reviewed and evaluated the effectiveness of
our disclosure controls and procedures as of a date within ninety (90) days of
the filing date of this Form 10-KSB annual report. Following this
review and evaluation,
management collectively determined that our disclosure controls and
procedures are effective to ensure that information required to be disclosed by
us in reports that we file or submit under the Exchange Act (i) is recorded,
processed, summarized and reported within the time periods specified in SEC
rules and forms, and (ii) is accumulated and communicated to management,
including our chief executive officer, our chief operations officer, and our
chief financial officer, as appropriate to allow timely decisions regarding
required disclosure.
Changes
in Internal Control over Financial Reporting
There
were no changes in our internal control over financial reporting that occurred
during the period covered by this Annual Report on Form 10-KSB that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
Management’s
Report on Internal Control over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial
reporting, as defined in Exchange Act Rule 13a-15(f), is a process designed by,
or under the supervision of, our principal executive officer, our principal
operations officer, and our principal financial officer, and effected by our
Board of Directors, management, and other personnel, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles and includes those policies and procedures
that:
|
·
|
Pertain
to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of our
assets;
|
|
·
|
Provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being
made only in accordance with authorizations of our management and
directors; and
|
|
·
|
Provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have
a material effect on the financial
statements.
|
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. All internal control
systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation. The scope of management’s assessment of
the effectiveness of internal control over financial reporting includes our
consolidated subsidiary.
Our
management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2007. Based on this assessment,
management believes that, as of that date, our internal control over financial
reporting was effective.
This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit us to provide only management's report in
this annual report.
|
Item 8B.
|
Other
Information
|
During
October 2007 we agreed to issue 200,000 common shares, and during March 2008 we
agreed to issue 10,000 common shares, to our lenders under the terms of our
Credit Agreement. In connection with the most recent amendment of our
Credit Agreement, on March 31, 2008, we agreed to issue up to 500,000 additional
common shares to our lenders. These shares were or will be issued in
reliance upon an exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended.
PART
III
|
Item 9.
|
Directors,
Executive Officers, Promoters, Control Persons and Corporate Governance;
Compliance With Section 16(a) of the Exchange
Act
|
Directors
and Executive Officers
The names
and ages of our directors and executive officers of BioTime are as
follows:
Michael D. West, Ph.D., 54,
became our Chief Executive Officer during October 2007, and has served on the
Board of Directors since 2002. Dr. West is
Adjunct Professor of Bioengineering at the University of California,
Berkeley. Dr. West has extensive academic and business experience in
age-related degenerative diseases, telomerase molecular biology and human
embryonic stem cell research and development. Prior to becoming our
Chief Executive Officer, Dr. West served as President and Chief Scientific
Officer of Advanced Cell Technology, Inc., a company he founded in 1998, that is
engaged in developing human stem cell technology for use in regenerative
medicine. , Dr. West also founded Geron Corporation of Menlo Park,
California, and from 1990 to 1998 he was a Director and Vice President, where he
initiated and managed programs in telomerase diagnostics, oligonucleotide-based
telomerase inhibition as anti-tumor therapy, and the cloning and use of
telomerase in telomerase-mediated therapy wherein telomerase is utilized to
immortalize human cells. From 1995 to 1998 he organized and managed
the research between Geron and its academic collaborators James Thomson and John
Gearhart that led to the first isolation of human embryonic stem and human
embryonic germ cells. Dr. West received a B.S. Degree from Rensselaer
Polytechnic Institute in 1976, an M.S. Degree in Biology from Andrews University
in 1982, and a Ph.D. from Baylor College of Medicine in 1989 concentrating on
the biology of cellular aging.
Hal Sternberg, Ph.D., 54, is
our Vice President of Research, and has served on the Board of Directors since
1990. Dr. Sternberg was a visiting scientist and research Associate
at the University of California at Berkeley from 1985-1988, where he supervised
a team of researchers studying Alzheimer’s Disease. Dr. Sternberg
received his Ph.D. from the University of Maryland in Biochemistry in
1982.
Harold Waitz, Ph.D., 65, is
our Vice President of Engineering and Regulatory Affairs, and has served on the
Board of Directors since 1990. He received his Ph.D. in Biophysics
and Medical Physics from the University of California at Berkeley in
1983.
Judith Segall, 54, is our Vice
President of Technology and Secretary, and has served on the Board of Directors
from 1990 through 1994, and from 1995 through the present date. Ms.
Segall received a B.S. in Nutrition and Clinical Dietetics from the University
of California at Berkeley in 1989.
Valeta Gregg, 54, joined the
Board of Directors during October 2004. Ms. Gregg is Vice President
and Assistant General Counsel, Patents of Regeneron Pharmaceuticals, Inc., a
Tarrytown, New York based company engaged in the development of pharmaceutical
products for the treatment of a number of serious medical conditions, including
cancer, diseases of the eye, rheumatoid arthritis and other inflammatory
conditions, allergies, asthma, and obesity. Prior to joining
Regeneron in 2002, Ms. Gregg worked as a patent attorney, at Klauber &
Jackson in Hackensack, New Jersey from 2001 to 2002, and for Novo Nordisk A/S
and its United States subsidiary from 1996 to 2001, and for Fish &
Richardson, P.C., Menlo Park, California from 1994 to 1996. Ms. Gregg
received her law degree from University of Colorado School of Law in 1992 and
received a Ph.D in Biochemistry from the University of Alberta in
1982.
Executive
Officers
Michael
West, Robert Peabody, Hal Sternberg, Harold Waitz, Judith Segall, and Steven
Seinberg are the only executive officers of BioTime. From 2003 until
Dr. West became Chief Executive Officer, Hal Sternberg, Harold Waitz, and Judith
Segall served as members of the Office of the President. The members
of the Office of the President collectively exercised the powers of the Chief
Executive Officer.
Robert W. Peabody, CPA, 53,
joined BioTime as Senior Vice President and Chief Operating Officer in October
2007. Prior to joining BioTime, Mr. Peabody served as Vice President-Grant
Administration for Advanced Cell Technology, Inc., and also served on their
Board of Directors from 1998 to 2006. Prior to joining ACT, Mr.
Peabody spent 14 years as a Regional Controller for Ecolab, Inc., a Fortune 500
specialty chemical manufacturer and service company. Mr. Peabody, along with Dr.
West, was a co-founder of Geron Corporation of Menlo Park, Ca. He has also
been an audit manager for Ernst and Young where he was on the audit staff
serving the firm's clients whose shares are publicly traded. Mr. Peabody
received a Bachelor Degree in Business Administration from The University of
Michigan and is a Certified Public Accountant.
Steven A. Seinberg, J.D., 41,
became Chief Financial Officer and Treasurer during August
2001. Prior to assuming these positions, Mr. Seinberg worked for over
five years as BioTime’s Director of Financial and Legal Research, a position
that involved, among other duties, contract modifications and management of our
intellectual property portfolio. Mr. Seinberg received a J.D. from
Hastings College of the Law in San Francisco in 1994.
There are
no family relationships among our directors or officers.
Committees
of the Board
The Board
of Directors had an Audit Committee, a Compensation Committee and a Nominating
Committee until October 2007, when Michael West became Chief Executive Officer
and was no longer eligible to serve on those committees. The charters
of each of those committees requires the members to be directors who are
“independent” in accordance with Section 121(A) of the American Stock Exchange
(AAMEX@)
listing standards and Section 10A-3 under the Securities Exchange Act of 1934,
as amended. Dr. West ceased to be an independent director when he
became Chief Executive Officer, leaving those committees with only one member
who qualifies as “independent.”
The Board
of Directors determined that Michael West was an audit committee financial
expert within the meaning of Item 407(d)) of SEC Regulation S-K during his
tenure on the committee, on the basis of Mr. West’s experience as the President
of Advanced Cell Technology, Inc. and as a founder of Geron, Inc. Mr.
West has had oversight over the performance of the chief financial and
accounting officers of those companies.
The Board
of Directors intends to reinstate the Audit Committee at such time as we have a
sufficient number of directors who qualify as “independent” in accordance with
Section 121(A) of the American Stock Exchange (AAMEX@)
listing standards and Section 10A-3 under the Securities Exchange Act of 1934,
as amended.
A copy of
the Audit Committee Charter has been posted on our internet website and can be
found at www.biotimeinc.com.
Compliance
with Section 16(a) of the Securities Exchange Act of 1934
Section
16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
requires our directors and executive officers and persons who own more than ten
percent (10%) of a registered class of our equity securities to file with the
Securities and Exchange Commission (the “SEC”) initial reports of ownership and
reports of changes in ownership of common shares and other BioTime equity
securities. Officers, directors and greater than ten percent
beneficial owners are required by SEC regulations to furnish us with copies of
all reports they file under Section 16(a).
To our
knowledge, based solely on our review of the copies of such reports furnished to
us, all Section 16(a) filing requirements applicable to our officers, directors,
and greater than ten percent beneficial owners were complied with during the
fiscal year ended December 31, 2007, except that Alfred D. Kingsley, Greenbelt
Corp., and Gary K Duberstein filed a delinquent Form 4 during May 2007, Mr.
Kingsley filed a delinquent Form 4 during October 2007, Robert Peabody filed a
delinquent Form 3 during October 2007, and Michael West filed a delinquent Form
4 during October 2007.
Code
of Ethics
We have
adopted a Code of Ethics that applies to our principal executive officer, our
principal financial officer and accounting officer, our other executive
officers, and our directors. The purpose of the Code of Ethics is to
promote (i) honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships; (ii) full, fair, accurate, timely and understandable disclosure
in reports and documents that we file with or submit to the Securities and
Exchange Commission and in our other public communications; (iii) compliance
with applicable governmental rules and regulations, (iv) prompt internal
reporting of violations of the Code to an appropriate person or persons
identified in the Code; and (v) accountability for adherence to the
Code. A copy of our Code of Ethics has been posted on our internet
website and can be found at www.biotimeinc.com.
|
Item 10.
|
Executive
Compensation
|
During
October 2007, we entered into an employment agreement with our Chief Executive
Officer, Dr. Michael West, pursuant to which he is entitled to receive an annual
salary of $250,000, an annual bonus equal to the lesser of (A) $65,000 or (B)
the sum of 65% of Consulting Fees and 6.5% of Grant Funds we receive during each
fiscal year; provided that (x) we obtained the grant that is the source of the
Grant Funds during the term of his employment, (y) the grant that is the source
of the Grant Funds is not a renewal, extension, modification, or novation of a
grant (or a new grant to fund the continuation of a study funded by a prior
grant from the same source) obtained us prior to his employment, and (z) the
grant that is the source of the Grant Funds was not obtained by us substantially
through the efforts of any consultant or independent contractor compensated by
us for obtaining the grant. Grant Funds means money actually paid to
us during a fiscal year as a research grant by any federal or state government
agency or any not for profit non-government organization, and expressly excludes
(1) license fees, (2) royalties, (3) Consulting Fees, (4) capital contributions
to us or any of our subsidiaries, or any joint venture of any kind (regardless
of the legal entity through which the joint venture is conducted) to which we
are a party, and (5) any other payments received by us from a business or
commercial enterprise for research and development of products or technology
pursuant to a contract or agreement for the commercial development of a product
or technology. Consulting Fees means money we receive under a
contract that entitles us to receive a cash fee for providing scientific and
technical advice to third parties concerning stem cells.
Dr. West
was granted an option to purchase 1,500,000 common shares (the AOption@)
under the 2002 Plan. The Option is paired with stock appreciation
rights ("SARs") with respect to 976,500 shares. The exercise price of
the Option and the SARs is $0.50. The Option and the SARs will vest
(as thereby become exercisable) at the rate of 1/60th of the number of Option
shares or SARs at the end of each full month of employment. Vesting
will depend on Dr. West=s
continued employment by us through the applicable vesting date, and will be
subject to the terms and conditions of the 2002 Plan and a Stock Option
Agreement consistent with the 2002 Plan and Dr. West’s Employment
Agreement. The unvested portion of the Option and the SARs shall not
be exercisable.
The
vested portion of the Option and the SARs shall expire on the earliest of (A)
seven (7) years from the date of grant, (B) three months after Dr. West ceases
to be employed by us for any reason other than his death or disability, or (C)
one year after he ceases to be employed by us due to his death or disability;
provided that if he dies during the three month period described in clause (B),
the expiration date of the vested portion of the Option shall be one year after
the date of his death. In addition, (X) if the SAR is exercised, the
vested portion of the Option shall expire as to a number of shares for which the
SAR was exercised, and (Y) the vested and unvested portion of the SARs shall
expire when our shareholders approve an amendment to the 2002 Plan increasing
the number of common shares available under the 2002 Plan from 2,000,000 to
4,000,000 shares. The Option and the SARs, respectively, shall not be
exercisable after it has expired.
The SARs
may not be exercised, in whole or in part, until the vested portion of the
Option has been exercised in full. A vested SAR may be exercised by
delivering a written notice to us specifying the number of SAR shares being
exercised. Upon exercise of an SAR, Dr. West shall be entitled to
receive a payment of cash per SAR share exercised equal to the amount by which
the fair market value of a BioTime common share on the date of exercise exceeds
the exercise price of the SAR. The fair market value of a BioTime
common share shall be determined by the Board of Directors in the manner
provided in the 2002 Plan. SARs may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by
the laws of descent or distribution and may be exercised only by Dr. West during
his lifetime.
In the
event that Dr. West’s employment is terminated for “cause,” as defined in his
Employment Agreement, or as a result of his death or disability, or his
resignation, he will be entitled to receive payment for all unpaid salary,
accrued but unpaid bonus, if any, and vacation accrued as of the date of his
termination of employment.
If we
terminate Dr. West’s employment without “cause,” he will be entitled to
additional benefits, consisting of payment of either three months base salary,
if he was employed by us for less than two years, or six months base salary if
he was employed by us for at least two years. In addition, 50% of the
then unvested shares subject to Dr. West’s Option will vest if he was employed
by us for at least two years. However, if a termination of Dr. West’s
employment without “cause” occurs within twelve months following a “Change in
Control,” Dr. West will be entitled to four months base salary if he was
employed by us for less than two years, or twelve months base salary if he was
been employed by us for at least two years; and 50% of the then unvested shares
subject to Dr. West’s Option will vest if he was been employed for less than two
years, or one 100% of the then unvested shares subject to his Option if he was
employed for at least two years.
"Change
of Control" means (A) the acquisition of our voting securities by a person or an
Affiliated Group entitling the holder to elect a majority of our directors;
provided, that an increase in the amount of voting securities held by a person
or Affiliated Group who on the date of the Employment Agreement owned
beneficially owned (as defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended, and the regulations thereunder) more than 10% of our voting
securities shall not constitute a Change of Control; and provided, further, that
an acquisition of voting securities by one or more persons acting as an
underwriter in connection with a sale or distribution of voting securities shall
not constitute a Change of Control, (B) the sale of all or substantially all of
our assets; or (C) a merger or consolidation in which we merge or consolidate
into another corporation or entity in which our stockholders immediately before
the merger or consolidation do not own, in the aggregate, voting securities of
the surviving corporation or entity (or the ultimate parent of the surviving
corporation or entity) entitling them, in the aggregate (and without regard to
whether they constitute an Affiliated Group) to elect a majority of the
directors or persons holding similar powers of the surviving corporation or
entity (or the ultimate parent of the surviving corporation or
entity). A Change of Control shall not be deemed to have occurred if
all of the persons acquiring our voting securities or assets or merging or
consolidating with us are one or more of our direct or indirect subsidiary or
parent corporations. "Affiliated Group" means (A) a person and one or
more other persons in control of, controlled by, or under common control with
such person; and (B) two or more persons who, by written agreement among them,
act in concert to acquire voting securities entitling them to elect a majority
of our directors. “Person” includes both people and
entities.
The
following table summarizes certain information concerning the compensation paid
during the past two fiscal years to each our Chief Executive Officer and the
members of the Office of the President who collectively exercised the powers of
the Chief Executive Officer during 2007:
SUMMARY
COMPENSATION TABLE
|
Name and principal position
|
Year
|
Salary
|
Bonus
|
Stock
awards
|
Option
awards
|
Nonequity
incentive
plan
compensation
|
Nonqualified
deferred
compensation
earnings
|
All
other
compensation
|
Total
|
||||||||||||||||||||||||
|
Michael
D. West
|
2007
|
$ | 62,500 | $ | -- | $ | -- | $ | 9,819 | $ | -- | $ | -- | $ | -- | $ | 72,319 | ||||||||||||||||
|
Chief
Executive Officer
|
|
||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||
|
Judith
Segall
|
2007
|
$ | 97,200 | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | $ | 97,200 | ||||||||||||||||
|
Vice
President – Operations
Corporate
Secretary
|
2006
|
$ | 108,000 | $ | -- | $ | -- | $ | 10,913 | $ | -- | $ | -- | $ | -- | $ | 118,913 | ||||||||||||||||
|
Hal
Sternberg
|
2007
|
$ | 90,000 | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | $ | 90,000 | ||||||||||||||||
|
Vice
President – Research
|
2006
|
$ | 100,000 | $ | -- | $ | -- | $ | 10,913 | $ | -- | $ | -- | $ | -- | $ | 110,913 | ||||||||||||||||
|
Harold
Waitz
|
2007
|
$ | 90,000 | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | $ | 90,000 | ||||||||||||||||
|
Vice
President-
Regulatory
Affairs & Engineering
|
2006
|
$ | 100,000 | $ | -- | $ | -- | $ | 10,913 | $ | -- | $ | -- | $ | -- | $ | 110,913 | ||||||||||||||||
On
November 24, 2006, the Board of Directors granted Judith Segall, Harold Waitz,
and Hal Sternberg options to purchase 80,000 common shares, each, at an exercise
price of $0.32 per shares. Each option was granted under our 2002
Plan. The options will expire five years from the date of grant, or
within three months after termination of the executive’s employment, subject to
certain exceptions in the event of death or disability. The exercise price of
the options was equal to 150% of the closing price the common shares as reported
on the Nasdaq OTCBB on November 22, 2006, the last trading day before the
effective date of the grant.
Stock
Options
The
following table summarizes certain information concerning stock options held as
of December 31, 2007 by our Chief Executive Officer and the members of the
Office of the President who collectively exercised the powers of the Chief
Executive Officer during 2007.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
|
Option Awards
|
||||
|
Number
of Securities
|
Number
of Securities
|
|||
|
Underlying
Unexercised
|
Underlying
Unexercised
|
Option
Exercise
|
Option
Expiration
|
|
|
Name
|
Options Exercisable
|
Options Unexercisable
|
Price
|
Date
|
|
Michael
West
|
20,000(1)
|
$1.55
|
March
30, 2008
|
|
|
20,000(1)
|
$2.17
|
March
7, 2009
|
||
|
20,000(1)
|
$1.26
|
March
20, 2010
|
||
|
20,000(1)
|
$0.34
|
March
27, 2011
|
||
|
20,000(1)
|
$0.74
|
June
1, 2014
|
||
|
1,500,000(2)
|
1,450,000
|
$0.50
|
October
9, 2014
|
|
|
Judith
Segall
|
50,000(3)
|
$2.00
|
May
31, 2009
|
|
|
125,000(4)
|
$2.00
|
November
7, 2010
|
||
|
80,000(5)
|
$0.32
|
November
23, 2011
|
||
|
Hal
Sternberg
|
50,000(3)
|
$2.00
|
May
31, 2009
|
|
|
80,000(5)
|
$0.32
|
November
23, 2011
|
||
|
Harold
Waitz
|
50,000(3)
|
$2.00
|
May
31, 2009
|
|
|
80,000(5)
|
$0.32
|
November
23, 2011
|
|
(1)
|
These
options were granted to Dr. West during his service as a non-employee
director.
|
|
(2)
|
These
options become exercisable at the rate of 25,000 per month during the term
of Dr. West’s employment.
|
|
(3)
|
12,500
options became exercisable on June 1, 2004 and the remaining options
became exercisable in three equal annual
installments.
|
|
(4)
|
125,000
options became exercisable on November 8,
2005
|
|
(5)
|
80,000
options became exercisable on November 24,
2006
|
Compensation
of Directors
During
2007, the two directors who were not then employees each received options to
purchase 20,000 common shares exercisable at $0.74 per share, which was the
closing price of the common shares reported on the OTCBB on April 30,
2007. The options granted to these directors vested and became
exercisable in equal quarterly installments based on continued service on the
Board of Directors. Directors and members of committees of the Board of
Directors who are employees are not compensated for serving as directors or
attending meetings of the Board or committees of the Board. Directors
are entitled to reimbursements for their out-of-pocket expenses incurred in
attending meetings of the Board or committees of the Board. Directors
who are our employees are also entitled to receive compensation as
employees.
The
following table summarizes certain information concerning the compensation paid
during the past fiscal year to each of the current members of the Board of
Directors who were not our employees on the date the compensation was
awarded. Dr. West became our Chief Executive Officer during October
2007.
DIRECTOR
COMPENSATION
|
Name
|
Fees Earned or Paid In
Cash
|
Option
Awards
|
Total
|
||||||||
|
Michael
West(1)
|
-- | $ | 11,446 | $ | 11,446 | ||||||
|
Valeta
Gregg(2)
|
--
|
$ | 11,446 | $ | 11,446 | ||||||
(1) At
December 31, 2007 Michael West held options to purchase 1,600,000 common shares
at exercise prices ranging from $0.34 to $2.17 per share, which includes options
to purchase 1,500,000 common shares granted to him in his capacity as Chief
Executive Officer.
(2) At
December 31, 2007 Valeta Gregg held options to purchase 58,332 common shares at
exercise prices ranging from $0.34 to $1.26 per share.
|
Item
11.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
The
following table sets forth information as of March 14, 2008 concerning
beneficial ownership of common shares by each shareholder known by us to be the
beneficial owner of 5% or more of our common shares. Information
concerning certain beneficial owners of more than 5% of the common shares is
based upon information disclosed by such owners in their reports on Schedule 13D
or Schedule 13G.
Security
Ownership of Certain Beneficial Owners
|
Number
of
|
Percent
of
|
|
|
Shares
|
Total
|
|
|
Alfred
D. Kingsley(1)
|
10,030,540
|
38.4%
|
|
Gary
K. Duberstein
|
||
|
Greenbelt
Corp.
|
||
|
Greenway
Partners, L.P.
|
||
|
Greenhouse
Partners, L.P.
|
||
|
150
E. 57th
Street, Suite 24E
|
||
|
New
York, New York 10022
|
||
|
Neal
C. Bradsher(2)
|
3,071,106
|
12.6%
|
|
Broadwood
Partners, L.P.
|
||
|
Broadwood
Capital, Inc.
|
||
|
724
Fifth Avenue, 9th
Floor
|
||
|
New
York, NY 10019
|
||
|
George
Karfunkel (3)
|
2,392,041
|
9.8%
|
|
59
Maiden Lane
|
||
|
New
York, New York 10038
|
|
Cyndel
& Co., Inc (4)
|
1,633,770
|
6.8%
|
|
Patrick
Kolenik
|
||
|
Huntington
Laurel Partnership
|
||
|
36
Golf Lane
|
||
|
Huntington,
NY 11743
|
||
|
Cynthia
Bayern
|
||
|
Steven
Bayern
|
||
|
26
West Broadway #1004
|
||
|
Long
Beach, NY 11561
|
___________________________
(1) Includes
1,716,698 shares presently owned by Greenbelt Corp, 334,632 shares that may be
acquired by Greenbelt Corp. upon the exercise of certain warrants, 527,942
shares owned by Greenway Partners, L.P., 448,121 shares that may be acquired by
Greenway Partners, L.P. upon the exercise of certain warrants, 4,719,522 shares
owned solely by Alfred D. Kingsley, 2,270,689 shares that may be acquired by Mr.
Kingsley upon the exercise of warrants, 12,256 shares owned solely by Gary K.
Duberstein, and 680 shares that may be acquired by Mr. Duberstein upon the
exercise of certain warrants. Mr. Kingsley and Mr. Duberstein control
Greenbelt Corp. and may be deemed to beneficially own the warrants and shares
that Greenbelt Corp. beneficially owns. Greenhouse Partners, L.P. is
the general partner of Greenway Partners, L.P., and Mr. Kingsley and Mr.
Duberstein are the general partners of Greenhouse Partners,
L.P. Greenhouse Partners, L.P., Mr. Kingsley, and Mr. Duberstein may
be deemed to beneficially own the shares that Greenway Partners, L.P.
owns. Mr. Duberstein disclaims beneficial ownership of the shares and
warrants owned solely by Mr. Kingsley, and Mr. Kingsley disclaims beneficial
ownership of the shares owned solely by Mr. Duberstein.
(2) Includes
1,650,805 shares owned by Broadwood Partners, L.P., 1,377,393 shares that may be
acquired by Broadwood Partners, L.P upon the exercise of certain warrants,
37,358 shares owned by Neal C. Bradsher, and 5,550 shares that may be acquired
by Mr. Bradsher upon the exercise of certain warrants. Broadwood
Capital, Inc. is the general partner of Broadwood Partners, L.P., and Mr.
Bradsher is the President of Broadwood Capital, Inc. Mr. Bradsher and
Broadwood Capital, Inc. may be deemed to beneficially own the shares that
Broadwood Partners, L.P. owns.
(3) Includes
1,379,878 shares that maybe acquired upon the exercise of certain
warrants.
(4) Includes
104,762 shares owned by Cyndel & Co., Inc., 135,714 shares that Cyndel maybe
acquire upon the exercise of certain warrants, 40,000 shares owned by
partnership of which Cynthia Bayern is a general partner, 95,000 shares that Dr.
Bayern may acquire upon the exercise of certain warrants, 180,000 shares owned
by Steven Bayern and 200,000 shares that Steven Bayern may acquire upon the
exercise of certain warrants, 222,897shares owned by Huntington Laurel
Partnership, 220,297 shares that Huntington Laurel Partnership may be acquire
upon the exercise of certain warrants, 205,100 shares owned by Patrick Kolenik,
55,000 shares owned by Mr. Kolenik’s wife jointly with a third party, and
175,000 shares that Mr. Kolenik may acquire upon the exercise of certain
warrants. Steven Bayern and Cynthia Bayern are husband and wife and
each may be deemed to beneficially own the shares beneficially owned by the
other. Mr. Bayern and Mr. Kolenik are the shareholders, officers and
directors of Cyndel and may be deemed to beneficially own the shares that Cyndel
owns. Mr. Bayern and Mr. Kolenik are the members of the general
partner of Huntington Laurel Partnership and may be deemed to beneficially own
the shares owned by that partnership.
Security
Ownership Of Management
The
following table sets forth information as of March 14, 2008 concerning
beneficial ownership of common shares by each member of the Board of Directors,
certain executive officers, and all officers and directors as a
group.
|
Number
of
|
Percent
of
|
|
|
Shares
|
Total
|
|
|
Michael
D. West(1)
|
275,000
|
1.2%
|
|
|
|
|
|
Judith
Segall(2)
|
712,669
|
3.0%
|
|
|
||
|
Hal
Sternberg(3)
|
410,201
|
1.8%
|
|
|
|
|
|
Harold
D. Waitz(4)
|
338,625
|
1.5%
|
|
|
|
|
|
Valeta
Gregg(5)
|
58,333
|
*
|
|
|
|
|
|
All
officers and directors
|
|
|
|
as
a group (7 persons)(6)
|
1,958,160
|
8.2%
|
___________________________
|
*
|
Less
than 1%
|
(1) Includes
275,000 shares that may be acquired upon the exercise of certain stock options
that are presently exercisable or that may become exercisable within 60
days. Excludes 1,325,000 shares that may be acquired upon the
exercise of certain stock options that are not presently exercisable and that
will not become exercisable within 60 days.
(2) Includes
255,000 shares that may be acquired upon the exercise of certain stock options,
and 45,337 shares that may be acquired upon the exercise of certain
warrants.
(3) Includes
130,000 shares that may be acquired upon the exercise of certain options and
25,931 shares that may be acquired upon the exercise of certain
warrants.
(4) Includes
2,952 shares held for the benefit of Dr. Waitz’s children, 130,000 shares that
may be acquired by Dr. Waitz upon the exercise of certain stock options, 38,379
shares that may be acquired by Dr. Waitz upon the exercise of certain warrants
(including 720 warrants held for the benefit of Dr. Waitz’s
children).
(5) Includes
58,332 shares that may be acquired upon the exercise of certain
options.
(6) Includes
1,121,312 shares that may be acquired upon the exercise of certain
options and warrants. Excludes certain shares that may be acquired
upon the exercise of certain options that are not presently exercisable and will
not become exercisable within 60 days.
|
Item
12.
|
Certain
Relationships and Related Transactions , and Director
Independence
|
Certain
Transactions
During
April 1998, we entered into a financial advisory services agreement with
Greenbelt Corp., a corporation controlled by Alfred D. Kingsley and Gary K.
Duberstein, who are also BioTime shareholders. We agreed to indemnify
Greenbelt and its officers, affiliates, employees, agents, assignees, and
controlling person from any liabilities arising out of or in connection with
actions taken on our behalf under the agreement. The agreement was
renewed annually through March 31, 2007. We paid Greenbelt $45,000
cash and issued 135,000 common shares for the twelve months ending March 31,
2006, and we paid $90,000 in cash and issued 200,000 common shares for services
rendered for the twelve months ending March 31, 2007. Greenbelt
permitted us to defer paying certain cash fees until October 2007. In
return for allowing the deferral, we issued Greenbelt an additional 60,000
common shares. We have agreed to file a registration statement, at
our expense, to register Greenbelt’s shares for sale under the Securities Act of
1933, as amended, upon Greenbelt’s request.
During
April 2006, we entered into a Revolving Line of Credit Agreement (the “Credit
Agreement”) with Alfred D. Kingsley, Cyndel & Co., Inc., and George
Karfunkel under which we could borrow up to $500,000 for working capital
purposes at an interest rate of 10% per annum. In consideration for
making the line of credit available, we issued to the lenders a total of 99,999
common shares.
In
October 2007, the Credit Agreement was amended to increase the line of credit to
$1,000,000, to increase the interest rate to 12% per annum, and to extend the
maturity date to April 30, 2008. The loan payable to Cyndel &
Co., Inc. was paid in full, and Broadwood Partners, LP joined the lender group.
In consideration for extending the maturity date of the new line of
credit, we issued to the lenders a total of 200,000 common shares.
The
Credit Agreement was amended again during March 2008 to further increase the
amount of the line of credit and extend the maturity date. See
“Management’s Discussion and Analysis or Plan of Operation—Liquidity and Capital
Resources” and Note 3 and Note 10 to our Financial
Statements.
Director
Independence
Valeta
Gregg is the only member of the Board of Directors qualifies as “independent” in
accordance with Section 121(A) of the American Stock Exchange (AAMEX@)
listing standards and Section 10A-3 under the Securities Exchange Act of 1934,
as amended. The other directors, Michael D. West, Judith Segall, Hal
Sternberg, and Harold Waitz do not qualify as “independent” because they are our
full time employees and executive officers.
Ms. Gregg
served on the Audit Committee, the Nominating Committee and the Compensation
Committee during 2007. The only compensation or remuneration that we
have provided to Ms. Gregg during her tenure as a director has been compensation
as a non-employee director. Ms. Gregg and the members of her family
have not participated in any transaction with us that would disqualify her as an
“independent” director under the standard described above and in the charters to
the committees of the Board of Directors on which she served.
|
Exhibits.
|
(a-1)
Financial Statements.
The
following financial statements of BioTime, Inc. are filed in the Form
10-K:
Notes to
Financial
Statements
(a-2)
Financial Statement Schedules
All
schedules are omitted because the required information is inapplicable or the
information is presented in the financial statements or the notes
thereto.
(a-3)
Exhibits.
|
Exhibit
|
|
|
Numbers
|
Description
|
|
3.1
|
Articles
of Incorporation.†
|
|
3.2
|
Amendment
of Articles of Incorporation.***
|
|
3.3
|
By-Laws,
As Amended.#
|
|
4.1
|
Specimen
of Common Share Certificate.+
|
|
4.2
|
Form
of Warrant Agreement between BioTime, Inc. and American Stock Transfer
& Trust Company++
|
|
4.3
|
Form
of Amendment to Warrant Agreement between BioTime, Inc. and American Stock
Transfer & Trust Company. +++
|
|
4.4
|
Form
of Warrant+++
|
|
10.1
|
Intellectual
Property Agreement between BioTime, Inc. and Hal
Sternberg.+
|
|
10.2
|
Intellectual
Property Agreement between BioTime, Inc. and Harold
Waitz.+
|
|
10.3
|
Intellectual
Property Agreement between BioTime, Inc. and Judith
Segall.+
|
|
10.4
|
Intellectual
Property Agreement between BioTime, Inc. and Steven
Seinberg.*
|
|
10.5
|
Agreement
between CMSI and BioTime Officers Releasing Employment Agreements, Selling
Shares, and Transferring Non-Exclusive License.+
|
|
10.6
|
Agreement
for Trans Time, Inc. to Exchange CMSI Common Stock for BioTime, Inc.
Common Shares.+
|
|
10.7
|
2002
Stock Option Plan, as amended.##
|
|
10.8
|
Exclusive
License Agreement between Abbott Laboratories and BioTime,
Inc. (Portions of this exhibit have been omitted pursuant to a
request for confidential treatment).###
|
|
10.9
|
Modification
of Exclusive License Agreement between Abbott Laboratories and BioTime,
Inc. (Portions of this exhibit have been omitted pursuant to a request for
confidential treatment).^
|
|
10.10
|
Exclusive
License Agreement between BioTime, Inc. and CJ
Corp.**
|
|
10.11
|
Hextend
and PentaLyte Collaboration Agreement between BioTime, Inc. and Summit
Pharmaceuticals International Corporation.‡
|
|
10.12
|
Lease
dated as of May 4, 2005 between BioTime, Inc. and Hollis R& D
Associates ‡‡
|
|
10.13
|
Addendum
to Hextend and PentaLyte Collaboration Agreement Between BioTime Inc. And
Summit Pharmaceuticals International Corporation‡‡‡
|
|
10.14
|
Amendment
to Exclusive License Agreement Between BioTime Inc. and Hospira,
Inc.††
|
|
10.15
|
Hextend
and PentaLyte China License Agreement Between BioTime, Inc. and Summit
Pharmaceuticals International Corporation.†††
|
|
10.16
|
Revolving
Credit Line Agreement between BioTime, Inc, Alfred D. Kingsley, Cyndel
& Co., Inc., and George Karfunkel, dated April 12,
2006.††††
|
|
10.17
|
Security
Agreement executed by BioTime, Inc., dated April 12,
2006.††††
|
|
10.18
|
Form
of Revolving Credit Note of BioTime, Inc. in the principal amount of
$166,666.67 dated April 12, 2006.††††
|
|
10.19
|
First
Amended and Restated Revolving Line of Credit Agreement, dated October 17,
2007. ####
|
|
10.20
|
Form
of Amended and Restated Revolving Credit Note. ####
|
|
10.21
|
Form
of Revolving Credit Note. ####
|
|
10.22
|
First
Amended and Restated Security Agreement, dated October 17, 2007.
####
|
|
10.23
|
Employment
Agreement, dated October 10, 2007, between BioTime, Inc. and Michael D.
West.++++
|
|
10.24
|
Commercial
License and Option Agreement between BioTime and Wisconsin Alumni Research
Foundation.****
|
|
10.25
|
Second
Amended and Restated Revolving Line of Credit Agreement, dated February
15, 2008.‡‡‡‡
|
|
10.26
|
Form
of Amended and Restated Revolving Credit Note.‡‡‡‡
|
|
10.27
|
Second
Amended and Restated Security Agreement, dated February 15,
2008.‡‡‡‡
|
| 10.28 | Third Amended and Restated Revolving Line of Credit Agreement, March 31, 2008. ~ |
| 10.29 | Third Amended and Restated Security Agreement, dated March 31, 2008. ~ |
| 10.30 | Sublease Agreement between BioTime, Inc. and Avigen, Inc.++++ |
|
23.1
|
Consent
of Rothstein, Kass & Company, P.C.++++
|
|
31
|
Rule
13a-14(a)/15d-14(a) Certification++++
|
|
32
|
Section
1350 Certification++++
|
†Incorporated
by reference to BioTime’s Form 10-K for the fiscal year ended June 30,
1998.
+
Incorporated by reference to Registration Statement on Form S-1, File Number
33-44549 filed with the Securities and Exchange Commission on December 18, 1991,
and Amendment No. 1 and Amendment No. 2 thereto filed with the Securities and
Exchange Commission on February 6, 1992 and March 7, 1992,
respectively.
#
Incorporated by reference to Registration Statement on Form S-1, File Number
33-48717 and Post-Effective Amendment No. 1 thereto filed with the Securities
and Exchange Commission on June 22, 1992, and August 27, 1992,
respectively.
++ Incorporated by reference
to Registration Statement on Form S-2, File Number 333-109442, filed with the
Securities and Exchange Commission on October 3, 2003, and Amendment No.1
thereto filed with the Securities and Exchange Commission on November 13,
2003.
+++Incorporated
by reference to Registration Statement on Form S-2, File Number 333-128083,
filed with the Securities and Exchange Commission on September 2,
2005.
##
Incorporated by reference to Registration Statement on Form S-8, File Number
333-101651 filed with the Securities and Exchange Commission on December 4, 2002
and Registration Statement on Form S-8, File Number 333-122844 filed with the
Securities and Exchange Commission on February 23, 2005.
###
Incorporated by reference to BioTime’s Form 8-K, filed April 24,
1997.
^
Incorporated by reference to BioTime’s Form 10-Q for the quarter ended June 30,
1999.
*
Incorporated by reference to BioTime’s Form 10-K for the year ended December 31,
2001.
**
Incorporated by reference to BioTime’s Form 10-K/A-1 for the year ended December
31, 2002.
‡ Incorporated by
reference to BioTime’s Form 8-K, filed December 30, 2004
‡‡
Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form S-2 File Number 333-109442, filed with the Securities and
Exchange Commission on May 24, 2005
‡‡‡ Incorporated by
reference to BioTime’s Form 8-K, filed December 20, 2005
††
Incorporated by reference to BioTime’s Form 8-K, filed January 13,
2006
†††
Incorporated by reference to BioTime’s Form 8-K, filed March 30,
2006
††††
Incorporated by reference to BioTime’s Form 10-K For the year ended December 31,
2005
***
Incorporated by reference to BioTime’s Form 10-Q for the quarter ended June 30,
2006.
****
Incorporated by reference to BioTime’s Form 8-K, filed January 9,
2008.
‡‡‡‡
Incorporated by reference to BioTime’s Form 8-K, filed March 10,
2008.
~ Incorporated by reference to BioTime's Form 8-K filed April 4,
2008.
++++Filed
herewith
|
Item 14.
|
Principal
Accountant Fees and Services
|
Rothstein,
Kass and Company (“RKCO”) audited our annual financial statements for the fiscal
year ended December 31, 2007. We first engaged RKCO as our auditors
in February 2007. BDO Seidman, LLP (“BDO”) audited our annual
financial statements for the fiscal year ended December 31, 2005, reviewed our
financial statements included in our quarterly reports on Form 10-QSB for the
first three quarters of 2006, and reissued their report on our fiscal year 2005
financial statements in conjunction with the filing of our 2006
10-KSB.
Audit Fees. RKCO
billed us $95,000 in 2007 for the audit of our annual financial statements and
for the review of our financial statements included in our quarterly reports on
Form 10-QSB.
Audit-Related
Fees. BDO billed us $20,466 for audit-related fees during the
fiscal year ended December 31 2007. These fees were incurred in
connection with the resissuance of BDO’s report on our fiscal year 2005
financial statements in conjunction with the filing of our 2006
10-KSB.
Tax Fees. RKCO
billed us $6,000 for review and preparation of U.S. federal, state, and local
tax returns during the fiscal year ended December 31, 2007. BDO
billed us $7,000 for review and preparation of U.S. federal, state, and local
tax returns during the fiscal year ended December 31, 2006.
Other Fees. There
were no other fees charged to us by RKCO or BDO during the fiscal years ended
December 31, 2006 and 2007.
The prior
approval of the Board of Directors is required for the engagement of our
auditors to perform any non-audit services for us. Other than de
minimis services incidental to audit services, non-audit services shall
generally be limited to tax services such as advice and planning and financial
due diligence services. All fees for such non-audit services must be approved by
the Board of Directors, except to the extent otherwise permitted by applicable
SEC regulations.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report on Form 10-KSB to be signed on
its behalf by the undersigned, thereunto duly authorized on the 11th day of
April, 2008.
|
BIOTIME,
INC.
|
|
|
By: /s/Michael D.
West
|
|
|
Michael
D. West, Ph.D., Chief Executive
Officer
|
|
Signature
|
Title
|
Date
|
|
|
/s/Michael D. West
|
Chief
Executive Officer
|
April 11,
2008
|
|
|
Michael
D. West, Ph.D.
|
and
Director
|
||
|
/s/Judith Segall
|
Vice
President -Operations and
|
April 11,
2008
|
|
|
Judith
Segall
|
Director
|
||
|
/s/Hal Sternberg
|
Vice
President-Research and
|
April 11,
2008
|
|
|
Hal
Sternberg, Ph.D.
|
Director
|
||
|
/s/Harold D. Waitz
|
Vice
President-Regulatory Affairs
|
April 11,
2008
|
|
|
Harold
D. Waitz, Ph.D.
|
and
Director
|
||
|
/s/Steven A. Seinberg
|
Chief
Financial Officer
|
April 11,
2008
|
|
|
Steven
A. Seinberg
|
(Principal
Financial and Accounting
Officer)
|
||
|
/s/Valeta Gregg
|
|||
|
Valeta
Gregg, Ph.D.
|
Director
|
April
11, 2008
|
|
Exhibit
|
|
|
Numbers
|
Description
|
|
3.1
|
Articles
of Incorporation.†
|
|
3.2
|
Amendment
of Articles of Incorporation.***
|
|
3.3
|
By-Laws,
As Amended.#
|
|
4.1
|
Specimen
of Common Share Certificate.+
|
|
4.2
|
Form
of Warrant Agreement between BioTime, Inc. and American Stock Transfer
& Trust Company++
|
|
4.3
|
Form
of Amendment to Warrant Agreement between BioTime, Inc. and American Stock
Transfer & Trust Company. +++
|
|
4.4
|
Form
of Warrant+++
|
|
10.1
|
Intellectual
Property Agreement between BioTime, Inc. and Hal
Sternberg.+
|
|
10.2
|
Intellectual
Property Agreement between BioTime, Inc. and Harold
Waitz.+
|
|
10.3
|
Intellectual
Property Agreement between BioTime, Inc. and Judith
Segall.+
|
|
10.4
|
Intellectual
Property Agreement between BioTime, Inc. and Steven
Seinberg.*
|
|
10.5
|
Agreement
between CMSI and BioTime Officers Releasing Employment Agreements, Selling
Shares, and Transferring Non-Exclusive License.+
|
|
10.6
|
Agreement
for Trans Time, Inc. to Exchange CMSI Common Stock for BioTime, Inc.
Common Shares.+
|
|
10.7
|
2002
Stock Option Plan, as amended.##
|
|
10.8
|
Exclusive
License Agreement between Abbott Laboratories and BioTime,
Inc. (Portions of this exhibit have been omitted pursuant to a
request for confidential treatment).###
|
|
10.9
|
Modification
of Exclusive License Agreement between Abbott Laboratories and BioTime,
Inc. (Portions of this exhibit have been omitted pursuant to a request for
confidential treatment).^
|
|
10.10
|
Exclusive
License Agreement between BioTime, Inc. and CJ Corp.**
|
|
10.11
|
Hextend
and PentaLyte Collaboration Agreement between BioTime, Inc. and Summit
Pharmaceuticals International
Corporation.‡
|
|
10.12
|
Lease
dated as of May 4, 2005 between BioTime, Inc. and Hollis R& D
Associates ‡‡
|
|
10.13
|
Addendum
to Hextend and PentaLyte Collaboration Agreement Between BioTime Inc. And
Summit Pharmaceuticals International Corporation‡‡‡
|
|
10.14
|
Amendment
to Exclusive License Agreement Between BioTime Inc. and Hospira,
Inc.††
|
|
10.15
|
Hextend
and PentaLyte China License Agreement Between BioTime, Inc. and Summit
Pharmaceuticals International Corporation.†††
|
|
10.16
|
Revolving
Credit Line Agreement between BioTime, Inc, Alfred D. Kingsley, Cyndel
& Co., Inc., and George Karfunkel, dated April 12,
2006.††††
|
|
10.17
|
Security
Agreement executed by BioTime, Inc., dated April 12,
2006.††††
|
|
10.18
|
Form
of Revolving Credit Note of BioTime, Inc. in the principal amount of
$166,666.67 dated April 12, 2006.††††
|
|
10.19
|
First
Amended and Restated Revolving Line of Credit Agreement, dated October 17,
2007. ####
|
|
10.20
|
Form
of Amended and Restated Revolving Credit Note. ####
|
|
10.21
|
Form
of Revolving Credit Note. ####
|
|
10.22
|
First
Amended and Restated Security Agreement, dated October 17, 2007.
####
|
|
10.23
|
Employment
Agreement, dated October 10, 2007, between BioTime, Inc. and Michael D.
West.++++
|
|
10.24
|
Commercial
License and Option Agreement between BioTime and Wisconsin Alumni Research
Foundation.****
|
|
10.25
|
Second
Amended and Restated Revolving Line of Credit Agreement, dated February
15, 2008.‡‡‡‡
|
|
10.26
|
Form
of Amended and Restated Revolving Credit Note.‡‡‡‡
|
|
10.27
|
Second
Amended and Restated Security Agreement, dated February 15,
2008.‡‡‡‡
|
| 10.28 | Third Amended and Restated Revolving Line of Credit Agreement, March 31, 2008. ~ |
| 10.29 | Third Amended and Restated Security Agreement, dated March 31, 2008. ~ |
| 10.30 | Sublease Agreement between BioTime, Inc. and Avigen, Inc.++++ |
|
23.1
|
Consent
of Rothstein, Kass & Company, P.C.++++
|
|
Rule
13a-14(a)/15d-14(a) Certification++++
|
|
|
Section
1350 Certification++++
|
†
Incorporated by reference to BioTime’s Form 10-K for the fiscal year ended June
30, 1998.
+
Incorporated by reference to Registration Statement on Form S-1, File Number
33-44549 filed with the Securities and Exchange Commission on December 18, 1991,
and Amendment No. 1 and Amendment No. 2 thereto filed with the Securities and
Exchange Commission on February 6, 1992 and March 7, 1992,
respectively.
#
Incorporated by reference to Registration Statement on Form S-1, File Number
33-48717 and Post-Effective Amendment No. 1 thereto filed with the Securities
and Exchange Commission on June 22, 1992, and August 27, 1992,
respectively.
++ Incorporated by reference
to Registration Statement on Form S-2, File Number 333-109442, filed with the
Securities and Exchange Commission on October 3, 2003, and Amendment No.1
thereto filed with the Securities and Exchange Commission on November 13,
2003.
+++Incorporated
by reference to Registration Statement on Form S-2, File Number 333-128083,
filed with the Securities and Exchange Commission on September 2,
2005.
##
Incorporated by reference to Registration Statement on Form S-8, File Number
333-101651 filed with the Securities and Exchange Commission on December 4, 2002
and Registration Statement on Form S-8, File Number 333-122844 filed with the
Securities and Exchange Commission on February 23, 2005.
###
Incorporated by reference to BioTime’s Form 8-K, filed April 24,
1997.
^
Incorporated by reference to BioTime’s Form 10-Q for the quarter ended June 30,
1999.
*
Incorporated by reference to BioTime’s Form 10-K for the year ended December 31,
2001.
**
Incorporated by reference to BioTime’s Form 10-K/A-1 for the year ended December
31, 2002.
‡ Incorporated by
reference to BioTime’s Form 8-K, filed December 30, 2004
‡‡
Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form S-2 File Number 333-109442, filed with the Securities and
Exchange Commission on May 24, 2005
‡‡‡ Incorporated by
reference to BioTime’s Form 8-K, filed December 20, 2005
††
Incorporated by reference to BioTime’s Form 8-K, filed January 13,
2006
†††
Incorporated by reference to BioTime’s Form 8-K, filed March 30,
2006
††††
Incorporated by reference to BioTime’s Form 10-K For the year ended December 31,
2005
***
Incorporated by reference to BioTime’s Form 10-Q for the quarter ended June 30,
2006.
****
Incorporated by reference to BioTime’s Form 8-K, filed January 9,
2008.
‡‡‡‡
Incorporated by reference to BioTime’s Form 8-K, filed March 10,
2008.
~ Incorporated by reference to BioTime's Form 8-K filed April 4,
2008.
++++Filed
herewith
68
Exhibit
10.23
EMPLOYMENT
AGREEMENT
THIS
AGREEMENT is made October 10, 2007, by and between BioTime, Inc. (the
"Company"), and Michael D. West ("Executive").
W I T N E S S E T
H:
WHEREAS,
the Company desires to employ Executive, and Executive is willing to accept such
employment, all on the terms and subject to the conditions hereinafter set
forth;
NOW,
THEREFORE, in consideration of the terms and conditions hereinafter set forth,
the parties hereto agree as follows:
1. Engagement
(a) Position and
Duties. The Company agrees to employ Executive in the
position of Chief Executive Officer. Executive shall perform the
duties and functions as are normally carried out by a Chief Executive Officer of
a developer of pharmaceutical or medical products of a size comparable to the
Company that has a class equity securities registered under Section 12 of the
Securities Exchange Act of 1934, as amended, and as the Board of Directors of
the Company (the "Board of Directors") shall from time to time reasonably
determine. Without limiting the generality of the immediately
preceding sentence, Executive shall expand the scope of the Company's research
and development program into the field of human stem cell research to the extent
that the Company has or obtains sufficient capital for such purpose, except to
the extent that the Board of Directors determines that the Company should
abandon, forego, or limit stem cell research and
development. Executive shall devote his best efforts, skills and
abilities, on a full-time basis, exclusively to the Company's business pursuant
to, and in accordance with, reasonable business policies and procedures, as
fixed from time to time by the Board of Directors of the
Company. Executive covenants and agrees that he will faithfully
adhere to and fulfill such policies as are established from time to time by the
Board of Directors.
(b) No Conflicting
Obligations. Executive represents and warrants to the Company
that he is under no obligations or commitments, whether contractual or
otherwise, that are inconsistent with his obligations under this Agreement or
that would prohibit him, contractually or otherwise, from performing his duties
as Chief Executive Officer of the Company.
(c) No Unauthorized Use of Third Party
Intellectual Property. Executive represents and warrants that
he will not use or disclose, in connection with his employment by the Company,
any patents, trade secrets, confidential information, or other proprietary
information or intellectual property as to which any other person has any right,
title or interest, except to the extent that the Company holds a valid license
or other written permission for such use from the owner(s)
thereof. Executive represents and warrants to the Company that he has
returned all property and confidential information belonging to any prior
employer.
2. Compensation
(a) Salary and
Bonuses. During the term of this Agreement, the Company shall
pay to the Executive:
(i) Annual Salary. The
Company shall pay Executive an annual salary of two hundred fifty thousand
dollars ($250,000.00) the ("Annual Salary"). Executive=s salary
shall be paid in equal bi-monthly installments, consistent with the Company=s regular
salary payment practices. Executive=s salary may
be adjusted from time-to-time by the Company without affecting this
Agreement.
(ii)
Bonus. In
addition to his Annual Salary, Executive shall be entitled to receive an annual
bonus equal to the lesser of (A) sixty-five thousand dollars ($65,000.00) or (B)
the sum of 65% of Consulting Fees and 6.5% of Grant Funds received by the
Company during each fiscal year; provided that (x) the grant that is the source
of the Grant Funds was obtained by the Company during the term of Executive=s employment
by the Company, (y) the grant that is the source of the Grant Funds is not a
renewal, extension, modification, or novation of a grant (or a new grant to fund
the continuation of a study funded by a prior grant from the same source)
obtained by the Company prior to Executive=s employment
by the Company, and (z) the grant that is the source of the Grant Funds was not
obtained by the Company substantially through the efforts of any consultant or
independent contractor compensated by the Company for obtaining the
grant. The bonus shall be paid on a monthly basis, subject to the
Company's receipt of the funds from which the bonus it to be paid.
(A) Grant
Funds means money actually paid to the Company during a fiscal year as a
research grant by any federal or state government agency or any not for profit
non-government organization, and expressly excludes (1) license fees, (2)
royalties, (3) Consulting Fees, (4) capital contributions to the Company or any
subsidiary of the Company, or any joint venture of any kind (regardless of the
legal entity through which the joint venture is conducted) to which the Company
is a party, and (5) any other payments received by the Company by a business or
commercial enterprise for research and development of products or technology
pursuant to a contract or agreement for the commercial development of a product
or technology.
(B) Consulting
Fees means money actually received by the Company under a contract
that entitles the Company to receive a cash fee for providing scientific and
technical advice to third parties concerning stem cells.
(b) Expense
Reimbursements. The Company shall reimburse Executive for
reasonable travel and other business expenses incurred by Executive in the
performance of his duties hereunder, subject to the Company's policies and
procedures in effect from time to time, and provided that Executive submits
supporting vouchers.
2
(c) Benefit
Plans. Executive shall be eligible (to the extent he
qualifies) to participate in any retirement, pension, life, health, accident and
disability insurance, stock option plan or other similar employee benefit plans
which may be adopted by the Company (or any other member of a consolidated group
of which the Company is a part) for its executive officers or other
employees.
(d) Stock
Options/SARs. The Company will grant Executive an option
to purchase 1,500,000 of the Company=s common
shares (the AOption@) under the
Company=s 2002
Employee Stock Option Plan (the APlan@). The
Option shall be paired with a stock appreciation right ("SAR") with respect to
976,500 shares that may be exercised only as provided in this
Agreement.
(i) The
exercise price of the Option and the SAR will be the greater of $0.50 per share
and the Fair Market Value of the Company=s common
shares on the date of grant determined in accordance with the
Plan. The Option and the SAR will vest (as thereby become
exercisable) as follows: 1/60th of the number of Option shares will vest at the
end of each full month of employment. Vesting will depend on
Executive=s continued
employment with the Company through the applicable vesting date, and will be
subject to the terms and conditions of the Plan and a Stock Option Agreement
consistent with the Plan and this paragraph. The unvested portion of
the Option and the SARs shall not be exercisable.
(ii) The
vested portion of the Option and the SAR shall expire on the earliest of (A)
seven (7) years from the date of grant, (B) three months after Executive ceases
to be an employee of the Company for any reason other than Executive=s death or
Disability (as defined below), or (C) one year after Executive ceases to be an
employee of the Company due to his death or Disability; provided that if
Executive dies during the three month period described in clause (B) of this
paragraph, the expiration date of the vested portion of the Option shall be one
year after the date of his death. In addition, (X) if the SAR is
exercised, the vested portion of the Option shall expire as to a number of
shares for which the SAR was exercised, and (Y) the vested and unvested portion
of the SAR shall expire when the shareholders of the Company approve an
amendment to the Plan described below. The Option and the SAR,
respectively, shall not be exercisable after it has expired.
(iii) Except
as specifically set forth in this Section, Executive=s rights
under the Plan, or any other stock option plan later adopted by the Company,
shall be governed solely by the terms of the Plan, or the later adopted stock
option plan.
(iv) The
SAR may not be exercised, in whole or in part, until the vested portion of the
Option has been exercised in full. A vested SAR may be exercised by
the Executive by delivering a written notice to the Company specifying the
number of SAR shares being exercised. Upon exercise of an SAR,
Executive shall be entitled to receive a payment of cash per SAR share exercised
equal to the amount by which the fair market value of a Company common share on
the date of exercise exceeds the exercise price of the SAR. The fair market
value of a Company common share shall be determined by the Board of Directors in
the manner provided in the Plan. The amount payable
3
to
Executive upon exercise of an SAR shall be subject to all applicable, federal,
state, and local income tax withholdings, FICA and similar state withholdings,
and any other applicable payroll tax withholding. SARs may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Executive, only by the
Executive.
(v) On
the date of this Agreement, the number of shares available for the grant of
options under the Plan, as approved by the shareholders of the Company, is less
than 1,500,000. The Board of Directors has approved an amendment to
the Plan that would increase the number of shares available for the exercise of
options; however, the amendment is subject to approval by the shareholders of
the Company. The Company will submit the Plan amendment to its
shareholders for approval at its next annual meeting of shareholders, and the
Board of Directors will recommend that the shareholders approve the
amendment. The Board of Directors has reserved 523,377 shares under
the Plan, as previously approved by the shareholders, for the Option granted to
Executive.
(e) Vacation; Sick
Leave. Executive shall be entitled to three weeks of vacation
without reduction in compensation, during each calendar year. Such
vacation shall be taken at such time as is consistent with the needs and
policies of the Company. All vacation days and sick leave days shall
accrue based upon days of service. Executive shall also be entitled
to leave from work, without reduction in compensation for ten days during each
calendar year, due to illness subject to the policies and procedures of the
Company, and subject to the provisions of this Agreement governing termination
due to disability, sickness or illness. The Company may, from time to
time, adopt policies governing the disposition of unused vacation days and sick
leave days remaining at the end of the Company's fiscal year; which policies may
govern whether unused vacation days or sick leave days will be paid, lost, or
carried over into subsequent fiscal years.
3. Competitive
Activities. During the term of Executive=s employment
with the Company and for three years thereafter, Executive shall not, for
himself or any third party, directly or indirectly employ, solicit for
employment or recommend for employment any person employed by the
Company. During the term of Executive=s
employment, he shall not, directly or indirectly as an employee, contractor,
officer, director, member, partner, agent, or equity owner, engage in any
activity or business that competes or could reasonably be expected to compete
with the business of the Company. Executive acknowledges that
there is a substantial likelihood that the activities described in this Section
would (a) involve the unauthorized use or disclosure of the Company=s
Confidential Information and that use or disclosure would be extremely difficult
to detect, and (b) result in substantial competitive harm to the Company's
business. Executive has accepted the limitations of this
Section as a reasonably practicable and unrestrictive means of
preventing such use or disclosure of Confidential Information and preventing
such competitive harm.
4
4. Inventions/Intellectual
Property/Proprietary Information
(a) Inventions and
Discoveries Belong to the Company. Any and all
inventions, discoveries, improvements or intellectual property which Executive
may conceive or make during the period of employment relating to or in any way
pertaining to or connected with the systems, products, apparatus, or methods
employed, manufactured, constructed or researched by the Company shall be the
sole and exclusive property of the Company. The obligations
provided for by this Agreement, except for the requirements as to disclosure in
Section, do not apply to any rights Executive may have acquired in connection
with an invention, discovery, improvement or intellectual property for which no
equipment, supplies, facility, or trade secret information of the Company was
used and which was developed entirely on the Executive=s own time
and (a) which at the time of conception or reduction to practice does not relate
directly or indirectly to the business of the Company or to the Company=s actual or
demonstrable anticipated research or development, or (b) which does not result
from any work performed by Executive for the Company. The parties understand and
agree that this limitation is intended to be consistent with California Labor
Code, Section 2870, a copy of which is attached as Exhibit A. If
Executive wishes to clarify that something created by him prior to his
employment by the Company that relates to the Company=s actual or
proposed business is not within the scope of this Agreement, he has listed it on
Appendix B in a manner that does not violate any third party
rights. To the extent allowed by law, the rights assigned by
Executive to the Company includes all rights of paternity, integrity, disclosure
and withdrawal and any other rights that may be known as or referred to as Amoral
rights,@ Aartist=s
rights,@ Adroit
moral,@
or the like (collectively AMoral
Rights@). To
the extent Executive retains any such Moral Rights under applicable law, he
hereby ratifies and consents to any action that may be taken with respect to
such Moral Rights by or authorized by the Company and agrees not to assert any
Moral Rights with respect thereto. Executive shall confirm in writing
any such ratifications, consents and agreements from time to time as requested
by the Company.
(b) Disclosure of
Inventions and Discoveries. Executive agrees to disclose
promptly to the Company all improvements, discoveries, or inventions which
Executive may make solely, jointly, or commonly with others, and to assign as
appropriate such improvements, discoveries, inventions or intellectual property
to the Company, where the rights are the property of the
Company. Executive agrees to execute and sign any and all
applications, assignments, or other instruments which the Company may deem
necessary in order to enable the Company, at its expense, to apply for,
prosecute, and obtain patents of the United States or foreign countries for the
improvements, discoveries, inventions or intellectual property, or in order to
assign or convey to or vest in the Company the sole and exclusive right, title,
and interest in and to said improvements, discoveries, inventions, or
patents. Executive hereby irrevocably designates and appoints the
Company as Executive's agent and attorney-in-fact, coupled with an interest and
with full power of substitution, to act for and in Executive's behalf to execute
and file any document and to do all other lawfully permitted acts to further the
purposes of this paragraph with the same legal force and effect as if executed
by Executive. This paragraph is applicable
5
whether
or not the invention, discovery, improvement or intellectual property was made
under the circumstances described in paragraph (a) of this
Section. Executive agrees to make such disclosures understanding that
they will be received in confidence and that, among other things, they are for
the purpose of determining whether or not rights to the related invention,
discovery, improvement, or intellectual property is the property of the
Company.
(c) Confidential and
Proprietary Information. During his employment, Executive will
have access to the Company's trade secrets and confidential
information. Confidential Information means all information and
ideas, in any form, relating in any manner to matters such as: the
Company=s products;
formulas; technology and know-how; inventions; clinical trial plans and data;
business plans; marketing plans; the identity, expertise and compensation of
employees and contractors; systems, procedures, and manuals; customers;
suppliers; joint venture partners; research collaborators; licensees; and
financial information. Confidential Information also shall
include any information of any kind, whether belonging to the Company or any
third party, that the Company has agreed to keep secret or confidential under
the terms of any agreement with any third party. Confidential
Information does not include: (i) information that is or becomes
publicly known through lawful means other than unauthorized disclosure by
Executive; (ii) information that was rightfully in Executive=s possession
prior to his employment with the Company and was not assigned to the Company or
was not disclosed to Executive in his capacity as a director or other fiduciary
of the Company; or (iii) information disclosed to Executive, after the
termination of his employment by the Company, without a confidential restriction
by a third party who rightfully possesses the information and did not obtain it,
either directly or indirectly, from the Company, and who is not subject to an
obligation to keep such information confidential for the benefit of the Company
or any third party with whom the Company has a contractual
relationship. Executive understands and agrees that all Confidential
Information shall be kept confidential by Executive both during and after his
employment by the Company. Executive further agrees that he will not,
without the prior written approval by the Company, disclose any Confidential
Information, or use any Confidential Information in any way, either during the
term of his employment or at any time thereafter, except as required by the
Company in the course of his employment.
5. Termination of
Employment. Executive understands and agrees that his
employment has no specific term. This Agreement, and the employment
relationship, are "at will" and may be terminated by either party with or
without cause upon written notice to the other. Executive agrees to
give the Company thirty (30) days advance written notice of his intent to
terminate his employment with the Company. Except as otherwise agreed
in writing or as otherwise provided in this Agreement, upon termination of
Executive's employment, the Company shall have no further obligation to
Executive by way of compensation or otherwise as expressly provided in this
Agreement.
(a) Separation
Benefits. Upon termination of Executive=s employment
with the Company for any reason, Executive will receive the severance benefits
set forth below, but
6
Executive
will not be entitled to any other compensation, award or damages with respect to
his employment or termination of employment.
(i) Termination for Cause, Death,
Disability, or Resignation. In the event of Executive=s
termination for Cause, or termination as a result of his death or Disability, or
his Resignation, Executive will be entitled to receive payment for all unpaid
salary, accrued but unpaid bonus, if any, and vacation accrued as of the date of
his termination of employment. Executive will not be entitled
to any cash severance benefits or additional vesting of any Company stock
options or other equity or cash awards.
(ii) Termination Without
Cause. In the event of Executive=s
termination without Cause, he will be entitled to (A) the benefits set forth in
paragraph (a)(i) of this Section, (B) payment in an amount equal to either (1)
three months base salary if Executive has been employed by the Company for less
than two years, or (2) six months base salary if Executive has been employed by
the Company for at least two years, which in either case may be paid in a lump
sum or, at the election of the Company, in installments consistent with the
payment of Executive=s salary
while employed by the Company, subject to such payroll deductions and
withholdings as are required by law, and (C) accelerated vesting of fifty
percent (50%) of the then unvested shares subject to the Option if Executive has
been employed by the Company for at least two years. The elimination
of Executive's position or a material reduction in his assigned duties or
related salary shall be considered termination without Cause.
(iii) Change of
Control. In the event the Company (or any successor in
interest to the Company that has assumed the Company=s obligation
under this Agreement) terminates Executive=s employment
without Cause within twelve (12) months following a Change in Control, in lieu
of the benefits set forth in paragraph (a)(ii) of this Section, Executive will
be entitled to (A) the benefits set forth in paragraph (a)(i) of this Section,
(B) a lump sum payment in an amount equal to either (1) four months base salary
if Executive has been employed by the Company for less than two years, or (2)
twelve months base salary if Executive has been employed by the Company for at
least two years, subject to such payroll deductions and withholding as are
required by law; and (C) accelerated vesting of either (1) fifty percent (50%)
of the then unvested shares subject to the Option if Executive has been employed
by the Company for less than two years, or (2) one hundred percent (100%) of the
then unvested shares subject to the Option if Executive has been employed by the
Company for at least two years.
(b) Release. Any
other provision of this Agreement notwithstanding, paragraphs (a)(ii) and
(a)(iii) of this Section shall not apply unless the Executive (i) has
executed a general release of all claims (in a form prescribed by the Company)
and (ii) has returned all property of the Company in the Executive=s
possession.
(c) Continuation of
Certain Benefits. In the event of
the termination of Executive's employment for any reason other than his death,
Executive's benefits will be continued under the Company=s then
existing benefit plans and policies for so long as provided
7
under the
terms of such plans and policies and as required by applicable
law. If Executive elects to continue his health insurance
coverage under the Consolidated Omnibus Budget Reconciliation Act (ACOBRA@) following
the termination of his employment, then the Company shall pay the Executive's
monthly premium under COBRA until the earlier of (i) the expiration of the
Executive=s
continuation coverage under COBRA, and (ii) the date when the Executive
receives substantially equivalent health insurance coverage in connection with
new employment or self-employment.
(d) Definitions. For purposes of
this Section, the following definitions shall apply:
(i)
"Affiliated Group" means (A) a Person and one or more other Persons in control
of, controlled by, or under common control with such Person; and (B) two or more
Persons who, by written agreement among them, act in concert to acquire Voting
Securities entitling them to elect a majority of the directors of the
Company.
(ii) "Cause" means:
(A) the failure to properly perform Executive=s job
responsibilities, as determined reasonably and in good faith by the Board of
Directors; (B) commission of any act of fraud, gross misconduct or dishonesty
with respect to the Company; (C) conviction of, or plea of guilty or Ano
contest@ to, any
felony, or a crime involving moral turpitude; (D) breach of any provision of
this Agreement or any provision of any proprietary information and inventions
agreement with the Company; (E) failure to follow the lawful directions of the
Board of Directors; (F) chronic alcohol or drug abuse, (G) obtaining in
connection with any transaction in which the Company or any of its subsidiaries
or affiliates is a party to a material undisclosed financial benefit for himself
or for any member of his immediate family or for any corporation, partnership,
limited liability company, or trust in which he or any member of his immediate
family owns a material financial interest; or (H) harassing or discriminating
against, or participating or assisting in the harassment of or discrimination
against, any employee of the Company (or any of any of subsidiary or affiliate
of the Company) based upon gender, race, religion, ethnicity, or
nationality.
(iii) "Change
of Control" means (A) the acquisition of Voting Securities of the Company by a
Person or an Affiliated Group entitling the holder thereof to elect a majority
of the directors of the Company; provided, that an increase in the amount of
Voting Securities held by a Person or Affiliated Group who on the date of this
Agreement owned beneficially owned (as defined in Section 13(d) of the
Securities Exchange Act of 1934, as amended, and the regulations thereunder)
more than 10% of the Voting Securities shall not constitute a Change of Control;
and provided, further, that an acquisition of Voting Securities by one or more
Persons acting as an underwriter in connection with a sale or distribution of
such Voting Securities shall not constitute a Change of Control under this
clause (A); (B) the sale of all or substantially all of the assets of the
Company; or (C) a merger or consolidation of the Company with or into another
corporation or entity in which the stockholders of the Company immediately
before such merger or consolidation do not own, in the aggregate, Voting
Securities
8
of the
surviving corporation or entity (or the ultimate parent of the surviving
corporation or entity) entitling them, in the aggregate (and without regard to
whether they constitute an Affiliated Group) to elect a majority of the
directors or persons holding similar powers of the surviving corporation or
entity (or the ultimate parent of the surviving corporation or entity);
provided, however, that in no event shall any transaction described in clauses
(A), (B) or (C) be a Change of Control if all of the Persons acquiring Voting
Securities or assets of the Company or merging or consolidating with the Company
are one or more direct or indirect subsidiary or parent corporations of the
Company.
(iv) "Disability"
shall mean Executive=s inability
to perform the essential functions of his job responsibilities for a period of
one hundred eighty (180) consecutive days or one hundred eighty (180) days in
the aggregate in any twelve (12) month period.
(v) "Person"
means any natural person or any corporation, partnership, limited liability
company, trust, unincorporated business association or other
entity.
(vi) "Voting
Securities" means shares of capital stock or other equity securities entitling
the holder thereof to regularly vote for the election of directors (or for
person performing a similar function if the issuer is not a corporation), but
does not include the power to vote upon the happening of some condition or event
which has not yet occurred.
6. Turnover of Property and Documents on
Termination. Executive agrees that on or before termination of
his employment, he will return to the Company all equipment and other property
belonging to the Company, and all originals and copies of Confidential
Information (in any and all media and formats, and including any document or
other item containing Confidential Information) in Executive's possession or
control, and all of the following (in any and all media and formats, and whether
or not constituting or containing Confidential Information) in Executive's
possession or control: (a) lists and sources of customers; (b)
proposals or drafts of proposals for any research grant, research or development
project or program, marketing plan, licensing arrangement, or other arrangement
with any third party; (c) reports, job or laboratory notes, specifications, and
drawings pertaining to the Company's research, development, products, patents,
and technology; and (d) any and all inventions or intellectual property
developed by Executive during the course of employment.
7. Arbitration. Except
for injunctive proceedings against unauthorized disclosure of confidential
information, any and all claims or controversies between the Company and
Executive, including but not limited to (a) those involving the construction or
application of any of the terms, provisions, or conditions of this Agreement;
(b) all contract or tort claims of any kind; and (c) any claim based on any
federal, state or local law, statute, regulation or ordinance, including claims
for unlawful discrimination or harassment, shall be settled by arbitration in
accordance with the then current Employment Dispute Resolution Rules of the
American Arbitration Association. Judgment on the award rendered by
the arbitrator(s) may be entered by
9
any court
having jurisdiction thereof. The location of the arbitration shall be
San Francisco, California. Unless the parties mutually agree
otherwise, the arbitrator shall be a retired judge selected from a panel
provided by the American Arbitration Association, or the Judicial Arbitration
and Mediation Service (JAMS). The Company shall pay the arbitrators
fees and costs. Each party shall pay for its own costs and
attorneys= fees, if
any. However, if any party prevails on a statutory claim which
affords the prevailing party attorneys= fees, the
arbitrator may award reasonable attorneys= fees and
costs to the prevailing party.
EXECUTIVE
UNDERSTANDS AND AGREES THAT THIS AGREEMENT TO ARBITRATE CONSTITUTES A WAIVER OF
HIS RIGHT TO A TRIAL BY JURY OF ANY MATTERS COVERED BY THIS AGREEMENT TO
ARBITRATE.
8. Severability. In
the event that any of the provisions of this Agreement shall be held to be
invalid or unenforceable in whole or in part, those provisions to the extent
enforceable and all other provisions shall nevertheless continue to be valid and
enforceable as though the invalid or unenforceable parts had not been included
in this Agreement. In the event that any provision relating to the
time period of restriction shall be declared by a court of competent
jurisdiction to exceed the maximum time period such court deems reasonable and
enforceable, then the time period of restriction deemed reasonable and
enforceable by the court shall become and shall thereafter be the maximum time
period.
9. Agreement Read and
Understood. Executive acknowledges that he has carefully read
the terms of this Agreement, that he has had an opportunity to consult with an
attorney or other representative of his own choosing regarding this Agreement,
that he understands the terms of this Agreement, and that he is entering this
agreement of his own free will.
10. Complete Agreement,
Modification. This Agreement is the complete agreement between
the parties on the subjects contained herein and supersedes all previous
correspondence, promises, representations, and agreements, if any, either
written or oral. No provision of this Agreement may be modified,
amended, or waived except by a written document signed both by the Company and
Executive.
11. Governing Law. This
Agreement shall be construed and enforced according to the laws of the State of
California.
12. Assignability. This
Agreement, and the rights and obligations of the parties under this Agreement,
may not be assigned by Executive. The Company may assign any of its
rights and obligations under this Agreement to any successor or surviving
corporation, limited liability company, or other entity resulting from a merger,
consolidation, sale of assets, sale of stock, sale of membership interests, or
other reorganization, upon condition that the assignee shall assume, either
expressly or by operation of law, all of the Company's obligations under this
Agreement.
10
13. Survival. This
Section 13 and the covenants and agreements contained in Sections 4 and 6 of
this Agreement shall survive termination of this Agreement and Executive's
employment.
14. Notices. Any
notices or other communication required or permitted to be given under this
Agreement shall be in writing and shall be mailed by certified mail, return
receipt requested, or sent by next business day air courier service, or
personally delivered to the party to whom it is to be given at the address of
such party set forth on the signature page of this Agreement (or to such other
address as the party shall have furnished in writing in accordance with the
provisions of this Section 14).
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and
year first above written.
|
EXECUTIVE:
|
|
/s/
Michael D.
West
|
|
Michael
D. West
|
|
COMPANY:
|
|
BIOTIME,
INC.
|
|
By: /s/ Hal
Sternberg
|
|
Title: V.P./Office of the
President
|
|
Address:
|
6121
Hollis Street
|
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Emeryville,
California 94608
|
11
APPENDIX A
California
Labor Code Section 2870.
Application
of provision providing that employee shall assign or offer to assign rights in
invention to employer.
(a) Any
provision in an employment agreement which provides that an employee shall
assign, or offer to assign, any of his or her rights in an invention to his or
her employer shall not apply to an invention that the employee developed
entirely on his or her own time without using the employer=s equipment,
supplies, facilities, or trade secret information except for those inventions
that either:
(i) Relate
at the time of conception or reduction to practice of the invention to the
employer=s business,
or actual or demonstrably anticipated research or development of the employer;
or
|
|
(ii)
|
Result
from any work performed by the employee for his
employer.
|
(b) To
the extent a provision in an employment agreement purports to require an
employee to assign an invention otherwise excluded from being required to be
assigned under subdivision (a), the provision is against the public policy of
this state and is unenforceable.
12
APPENDIX
B
PRIOR
MATTERS
None
13
Sublease
Agreement
This
Sublease Agreement (this “Sublease”),
dated March 20, 2008 for reference purposes only, is entered into by and
between Avigen, Inc., a Delaware corporation (“Sublandlord”),
and BioTime, Inc., a California corporation (“Subtenant”).
Recitals
A.
Sublandlord leases certain premises
consisting of approximately 67,482 square feet in a building, located at 1301
Harbor Bay Parkway, Alameda, California, pursuant to that certain Office Lease
dated as of November 2, 2000, between Lincoln-RECP Empire OPCO, a Delaware
limited liability company, as landlord (the “Original Master
Landlord”) and Sublandlord, as tenant, as amended by that certain First
Amendment to Lease Agreement dated as of December 1, 2000, that certain
Second Amendment to Lease Agreement dated as of February 13, 2001 and that
certain letter agreement dated as of January 26, 2004 (collectively, as further
amended or otherwise modified from time to time, the “Master
Lease”), a copy of which is attached as Exhibit A,
as more particularly described therein (the “Premises”). Capitalized
terms used but not defined herein have the same meanings given in the Master
Lease.
B.
Subsequently, Original Master Landlord
sold and assigned all of its right, title and interest in and to the Master
Lease to ARE-Harbor Bay No. 4, llc, a Delaware limited liability company, who in
turn sold and assigned all of its right, title and interest in and to the Master
Lease to SKS Harbor Bay Associates, LLC, a Delaware limited liability company
(“Master
Landlord”).
C.
Sublandlord desires to sublease
to Subtenant, and Subtenant desires to sublease from Sublandlord a portion of
the Premises consisting of approximately 11,000 rentable square feet, and more
particularly shown on the layout attached at Exhibit B
hereto (“Sublease
Premises”) upon the terms and conditions provided for
herein.
Now,
Therefore, in consideration of the mutual covenants and conditions contained
herein, Sublandlord and Subtenant covenant and agree as follows:
Agreement
1.
Sublease
Premises. On and subject to the terms and conditions below,
Sublandlord hereby leases to Subtenant, and Subtenant hereby leases from
Sublandlord, the Sublease Premises. In addition, Subtenant shall be
entitled to share nonexclusive use of the restrooms and lobby areas (the “Sublease Common
Areas”) identified on Exhibit
B.
2.
Term. The
term of this Sublease (the “Term”) shall
commence on April 1, 2008 (the “Commencement
Date”), provided Sublandlord has theretofore obtained the consent of
Master Landlord, and shall expire November 30, 2010, unless sooner terminated
pursuant to any provision hereof.
1
3.
Possession;
Early Possession.
(a) If
for any reason Sublandlord cannot deliver possession of the Sublease Premises to
Subtenant on the Commencement Date due to reasons beyond Sublandlord’s
reasonable control, Sublandlord shall not be subject to any liability therefor,
nor shall such failure affect the validity of this Sublease or the obligations
of Subtenant hereunder or extend the term hereof, provided that no rent shall be
due hereunder until possession of the Sublease Premises has been delivered to
Subtenant. Sublandlord shall use commercially reasonable efforts to
obtain Master Landlord’s written consent to this
Sublease. Notwithstanding the foregoing, if Sublandlord cannot obtain
the consent of Master Landlord to this Sublease within thirty (30) days after
execution of this Sublease by Sublandlord and Subtenant, then either Sublandlord
or Subtenant may terminate this Sublease by giving written notice thereof to the
other.
(b) Subject
to Master Landlord’s consent and approval of this Sublease, Subtenant shall be
entitled to commence installation of Subtenant’s furniture, fixtures and
equipment and occupy the Sublease Premises for its business purposes at any time
prior to the Commencement Date; provided, however, that (i) Subtenant shall not
unreasonably interfere with or disrupt any work being performed by Sublandlord
in the Sublease Premises during such early occupancy, and (ii) prior to any such
entry, Subtenant shall provide Sublandlord and Master Landlord with proof of
Subtenant’s insurance as required hereunder. Any entry by Subtenant
onto the Sublease Premises prior to the Commencement Date shall be upon and
subject to all of the terms of this Sublease (including Subtenant’s obligations
regarding indemnity and insurance) except those regarding the obligation to pay
Rent (as defined below), which shall commence on the Rent Commencement
Date. Subtenant agrees that Sublandlord shall not be liable in any
way for any injury, loss or damage which may occur to any of Subtenant’s
property placed upon or installed in the Sublease Premises prior to the
Commencement Date, the same being at Subtenant’s sole risk, and Subtenant shall
be liable for all injury, loss or damage to persons or property arising as a
result of such entry into the Sublease Premises by Subtenant or its agents,
contractors, employees and representatives.
4.
Rent.
(a) Rent. Commencing
on April 1, 2008 (the “Rent Commencement
Date”) and continuing throughout the term of this Sublease, Subtenant
shall pay monthly rent consisting of Base Rent and Additional Rent (as defined
below) (collectively, “Rent”) to
Sublandlord in the following amounts:
(i)
Base
Rent. Except to the extent provided in Section 4(c) below,
Subtenant shall pay to Sublandlord monthly base rent (“Base Rent”)
on the first (1st) day of each calendar month as follows:
|
Period
|
Amount
|
|||
|
From
the Rent Commencement Date through December 31, 2008
|
$ | 22,000.00 | ||
|
January
1, 2009 – December 31, 2009
|
$ | 22,660.00 | ||
|
January
1, 2010 – November 30, 2010
|
$ | 23,339.80 | ||
2
(ii)
Additional
Rent. In addition to Base Rent, Subtenant shall also pay to
Sublandlord on the first (1st) day of each calendar month an amount equal to
eighteen percent (18%) of the estimated amount of “Tenant’s Share” of “Direct
Expenses” (as defined in the Master Lease) (“Master Lease
Charges”). Subtenant shall also pay eighteen percent (18%) of
other amounts of Additional Rent due to Master Landlord under the Master Lease
(unless related exclusively to the Premises retained by Sublandlord), which
shall be payable to Sublandlord as and when payments are due from Sublandlord
pursuant to the Master Lease, but at least five (5) business days prior to the
date Sublandlord must pay such amounts to Master Landlord (“Additional
Charges”). Notwithstanding the foregoing, except for recurring
monthly installments of Master Lease Charges which shall be due as provided
above, in no event shall payment be due less than ten (10) business days after
receipt of written invoice by Subtenant. “Additional
Rent” is hereby defined as Master Lease Charges, Additional Charges,
Direct Costs and all other amounts owing by Subtenant hereunder.
(iii) Direct
Costs. From and after the Commencement Date, Subtenant shall
further pay to Sublandlord on the first (1st) day of each calendar month, as
Additional Rent, an amount estimated by Sublandlord to be the monthly amount of
any costs and expenses applicable to the Sublease Premises which are paid
directly by Sublandlord, including, but not limited to, utilities, personal
property taxes and real property taxes, as well as eighteen percent (18%) of the
reasonable cost incurred by Sublandlord to clean and maintain the Sublease
Common Areas (“Direct
Costs”). At any time, Sublandlord or Subtenant may cause, at
Subtenant’s expense, any utilities to be separately metered or charged directly
to Subtenant by the provider.
(iv) Subtenant’s Right to Review
Direct
Costs.
(A) Sublandlord’s Direct Cost
Statement. No less often than
annually, Sublandlord shall provide Subtenant with a consolidated statement
setting forth the total amount of the estimated payments made by Subtenant in
the previous year and the actual costs allocated to Subtenant pursuant to this Sublease. If the total estimated payments made for
the year are insufficient to meet the costs allocated to Subtenant, then
Subtenant shall pay to Sublandlord such deficit within thirty (30) days after
receipt by Subtenant of notice thereof. If Subtenant is due a refund
for the period, then Sublandlord shall pay such refund to Subtenant within (30)
days after determination thereof. The provisions of this Section 4(a)(iv)
shall survive the termination of the Sublease.
(B) Subtenant’s Right to Audit
Direct
Costs. Not more often than once
each calendar year, Subtenant, upon thirty (30) days advance written notice
thereof to Sublandlord, at Subtenant’s sole cost and expense, may retain an
independent Certified Public Accountant reasonably acceptable to Sublandlord, to
review and audit Sublandlord’s books and records with regard to the Direct Costs for the Sublease Premises. If Sublandlord and Subtenant determine that Subtenant overpaid its share of any Direct Costs,
Sublandlord shall refund to Subtenant the amount of such overpayment within
thirty (30) days. If Sublandlord
and Subtenant determine that Subtenant
underpaid its share of Direct
Costs, Subtenant shall pay to Sublandlord
the amount of such deficiency within thirty (30) days. If
Sublandlord and Subtenant determine that Subtenant overpaid its share of Direct Costs by
more than five percent (5%) (after the
annual reconciliation has occurred as provided in Section 4(a)(iv)(A)
above), Sublandlord shall reimburse
Subtenant for the reasonable actual
costs of Subtenant’s audit not to exceed Five Thousand Dollars
($5,000.00).
3
(v)
Exclusions. Notwithstanding
the foregoing, in the event any amounts payable by Sublandlord to Master
Landlord are (A) due to Subtenant’s breach of any provision of the Master Lease
or this Sublease, (B) due to Subtenant’s negligence or willful misconduct, or
(C) are for the sole benefit of Subtenant, then such amounts shall not be
prorated between Sublandlord and Subtenant and shall be the sole responsibility
of Subtenant.
(b) Payment of
Rent. If the Commencement Date does not fall on the first day
of a calendar month, Rent for the first month shall be prorated on a daily basis
based upon a calendar month. Rent shall be payable to Sublandlord in
lawful money of the United States, in advance, without prior notice, demand, or
offset, on or before the first day of each calendar month during the term
hereof. All Rent shall be paid to Sublandlord at the address
specified for notices to Sublandlord in Section 14 below.
(c) Initial
Rent. Notwithstanding any provision of this Sublease to the
contrary, upon execution of this Sublease, Subtenant shall deliver to
Sublandlord the sum of One Hundred Thousand Dollars ($100,000.00), representing
the initial four (4) months’ Base Rent, Master Lease Charges and Direct
Costs. In the event that Subtenant does not exercise the termination
right set forth in Section 5 below, Subtenant shall pay to Sublandlord the
sum of Thirty-Eight Thousand Six Hundred and 00/100 Dollars ($38,600.00) (the
“Catch-up
Payment”) on or before August 1, 2008. In the event that the
Sublease is duly terminated in accordance with the provisions of Section 5,
below, Subtenant will not be required to pay the Catch-up Payment to
Sublandlord.
(d) Abatement. In
the event of any casualty or condemnation affecting the Sublease Premises, Rent
payable by Subtenant shall be abated hereunder for the portion of the Sublease
Premises so affected, but only to the extent that Rent under the Master Lease
for such portion of the Sublease Premises is abated, and Subtenant waives any
right to terminate this Sublease in connection with such casualty or
condemnation except to the extent the Master Lease is also terminated as to the
Premises or as expressly provided in Section 26(a) below.
5.
Termination
Option. Subtenant shall have the right terminate this Sublease
by giving written notice to Sublandlord on or before July 15, 2008 (the “Notice
Date”), in which case this Sublease shall terminate as of July 31, 2008,
and Subtenant shall surrender the Sublease Premises to Sublandlord in the
condition required by this Sublease on or before such date. If
Subtenant fails to deliver such written notice on or before the Notice Date,
Subtenant shall have no further right to terminate this Sublease except as
expressly set forth in this Sublease.
4
6.
Security
Deposit. Provided that Subtenant has not exercised its right
to terminate this Sublease, on or before the Notice Date, Subtenant shall
deposit with Sublandlord the sum of Fifty Thousand Dollars ($50,000.00) as a
security deposit (“Security
Deposit”). Subtenant hereby grants to Sublandlord a security
interest in the Security Deposit, including, but not limited to, replenishments
thereof. If Subtenant
fails to pay Rent or other charges when due under this Sublease, or fails to
perform any of its other obligations hereunder, Sublandlord may use or apply all
or any portion of the Security Deposit for the payment of any Rent or other
amount then due hereunder and unpaid, for the payment of any other sum for which
Sublandlord may become obligated by reason of Subtenant’s default or breach, or
for any loss or damage sustained by Sublandlord as a result of Subtenant’s
default or breach. If Sublandlord so uses any portion of the Security
Deposit, Subtenant shall restore the Security Deposit to the full amount
originally deposited within ten (10) business days after Sublandlord’s written
demand. Subtenant hereby waives any restrictions on the uses to which
the Security Deposit may be put that is contained in California Civil Code
Section 1950.7 or any successor statute. Sublandlord shall not be
required to keep the Security Deposit separate from its general accounts, and
shall have no obligation or liability for payment of interest on the Security
Deposit. The Security Deposit, or so much thereof as had not
theretofore been applied by Sublandlord, shall be returned to Subtenant within
thirty (30) days of the expiration or earlier termination of this Sublease,
provided Subtenant has vacated the Sublease Premises in the condition required
under the terms of this Sublease.
7.
Assignment
and Subletting. Subtenant may not assign, sublet, transfer,
pledge, hypothecate or otherwise encumber the Sublease Premises, in whole or in
part, or permit the use or occupancy of the Sublease Premises by anyone other
than Subtenant , unless Subtenant has obtained Master Landlord’s consent in
accordance with Article 14 of the Master Lease and Sublandlord’s consent, which
consent shall not be unreasonably withheld or
delayed. Notwithstanding the foregoing, Subtenant may sublease a portion of the Subleased
Premises to Embryome Sciences, Inc. (“Embryome”) without the consent of Sublandlord or Master
Landlord. Regardless of
Sublandlord’s consent, no subletting or assignment to Embryome or any other
party shall release Subtenant of its obligations hereunder. Any rent
or other consideration payable to Subtenant pursuant to any sublease or
assignment permitted by this paragraph which is in excess of the Rent payable to
Sublandlord pursuant hereto (“Sublease Bonus
Rent”) shall be divided equally between Sublandlord and Subtenant, after payment to Master
Landlord of any “Transfer Premium” required to be paid under the Master Lease
and deduction of the following actual and reasonable expenses paid to
unaffiliated third-parties: (i) brokerage and marketing fees; (ii)
legal fees in connection with execution of the assignment or sublease; and (iii)
cost to demise the Sublease Premises. All such Sublease Bonus Rent shall be determined on a
dollars per square foot basis, by aggregating all subrents received by Subtenant
and dividing such amount by the total number of square feet of subleased space
and subtracting from such amount the Rent per square
foot payable by Subtenant for such space.
8.
Condition
of Sublease Premises.
(a) Except
as expressly set forth herein, Subtenant agrees that (i) Sublandlord has made no
representations or warranties of any kind or nature whatsoever respecting the
Sublease Premises, their condition or suitability for Subtenant’s use; and (ii)
Subtenant agrees to accept the Sublease Premises “as is, where is,” with all
faults, without any obligation on the part of Sublandlord to modify, improve or
otherwise prepare the Sublease Premises for Subtenant’s occupancy. To
the knowledge of Sublandlord’s manager of facilities, all structural elements of
the Sublease Premises and all piping, and wiring above the ceilings or otherwise
intruding into the Sublease Premises that are servicing other tenants are
operating in a good and workmanlike manner and are in material compliance with
all applicable statutes, ordinances and regulations.
5
(b) Sublandlord
has not made an independent investigation of the Premises or determination with
respect to the physical and environmental condition of the Premises including,
without limitation, the existence of any underground tanks, pumps, piping, toxic
or hazardous substances on the Premises. No investigation has been
made by Sublandlord to ensure compliance with the “Americans With Disabilities
Act” (“ADA”). ADA
may require a variety of changes to the Sublease Premises, including potential
removal of barriers to access by disabled persons and provision of auxiliary
aids and services for hearing, vision or speech impaired
persons. Subtenant shall rely solely on its own investigations and/or
that of a licensed professional specializing in the areas referenced in this
Section º8. Notwithstanding the foregoing, Sublandlord represents and
warrants that (i) its corporate counsel has not received any notice from a
governmental authority indicating that the Sublease Premises are in violation of
any law pertaining to the Sublease Premises; and (ii) the Sublease Premises are
not subject to any enforcement or correction order(s) issued by any governmental
authority.
9.
Use. Subtenant
may use the Sublease Premises for general office purposes and approved
biotechnology laboratory use, as allowed in the Master Lease and this Sublease,
and for no other purpose. Subtenant shall promptly comply with all
applicable statutes, ordinances, rules, regulations, orders, restrictions of
record, and requirements in effect during the term of this Sublease governing,
affecting and regulating the Sublease Premises, including, but not limited to,
the use thereof. Subtenant shall not use or permit the use of the
Sublease Premises in a manner that will create waste or a nuisance, interfere
with or disturb other tenants in the Building or violate the provisions of the
Master Lease. Subtenant acknowledges and agrees that the operation
and use of the Sublease Premises may require that Subtenant apply for and
receive licenses and/or permits from various federal, state and local
governments, and Subtenant covenants and agrees to apply for and receive such
licenses and/or permits as are required. Subtenant shall provide to
Sublandlord copies of any such licenses and/or permits to the extent applicable
to the Sublease Premises. Subtenant acknowledges, agrees and
covenants that its occupancy, operation and use of such Sublease Premises shall
be in accordance with: (a) all applicable state and federal
regulations; (b) all licenses and permits that either Subtenant or
Sublandlord has received or receives in the future respecting such Sublease
Premises; and (c) all policies and procedures Sublandlord has reasonably
promulgated respecting such Sublease Premises.
10. Furniture
and Equipment. During the term of this Sublease, Subtenant
shall have the exclusive right to use the modular work stations, furniture and
equipment identified on Exhibit
C hereto (“Furniture and
Equipment”). Subtenant shall accept such Furniture and
Equipment in its “as-is” condition without any representation or warranty by
Sublandlord. Subtenant’s insurance as required under this Sublease
shall include an all risk property insurance policy for the Furniture and
Equipment for its full replacement value, and Subtenant shall maintain the
Furniture and Equipment during the term hereof in at least the same condition it
was in as of the Commencement Date, normal wear and tear
excepted. Provided Subtenant has not terminated this Sublease as
provided in Section 4 above, Subtenant shall purchase the Furniture and
Equipment at a total cost of Seventy-One Thousand Nine Hundred Ninety-Five
Dollars ($71,995.00) (including tax). Commencing August 1, 2008,
Subtenant shall pay Two Thousand Five Hundred Seventy-One and 26/100 Dollars
($2,571.26) per month (each an “Equipment
Payment”) to Sublandlord until full payment for the Furniture and
Equipment is made to Sublandlord. Sublandlord shall transfer title to
the Furniture and Equipment to Subtenant upon receipt of the full amount of the
Equipment Cost pursuant to a written Bill of Sale in a form reasonably
acceptable to Subtenant. If at the expiration or earlier termination
of this Sublease, Subtenant has not paid to Sublandlord the entire amount of the
Furniture and Equipment Cost, Subtenant shall at Subtenant’s option (i) return
the Furniture and Equipment to Sublandlord in the same condition received,
ordinary wear and tear excepted, or (ii) pay Sublandlord the remainder of the
Equipment Payment and remove the Furniture and Equipment from the Sublease
Premises, in which case Sublandlord shall transfer title thereto to Subtenant
pursuant to a written Bill of Sale in a form reasonably acceptable to
Subtenant.
6
11. Incorporation
of Master Lease; Maintenance and Repair.
(a) All
of the terms and provisions of the Master Lease, except as expressly modified in
this Sublease or as provided in subsections (b), (c) and (d) below, are
incorporated into and made a part of this Sublease, and the rights and
obligations of the parties under the Master Lease are hereby imposed upon the
parties hereto with respect to the Sublease Premises, the Sublandlord being
substituted for the Landlord in the Master Lease, the Subtenant being
substituted for the Tenant in the Master Lease provided, however, that the term
“Landlord” in the following Paragraphs of the Master Lease (i) shall mean
Master Landlord, not Sublandlord: 6.1 (Standard Tenant Services)
excepting the last paragraph; 6.4 (Additional Services);
6.5 (Alternate Electric Service of Provider); 7.2 (Maintenance by
Landlord); 7.3 (Landlord’s Repairs and Maintenance Obligations);
8.3 (Landlord’s Property); 14 (Assignment and Subletting);
18 (Subordination); 23 (Parking); the first two sentences of 24.8
(Signs); 24.27 (Building Name and Signage); and 26 (Americans with
Disabilities Act), and (ii) shall mean both Master Landlord and
Sublandlord: 5 (Use); 6.2 (Interruption of Use);
7.4 (Tenant’s Failure to Perform Repairs and Maintenance Obligations);
8.1 (Landlord’s Consent to Alterations); 8.2 (Manner of Construction);
9 (Covenant Against Liens); 10 (Indemnification and Insurance); 17
(Estoppel Certificates); 21 (Compliance with Law); 22 (Entries by
Landlord); 24.30 (Landlord Renovations); 27.3 (Tenant’s Environmental
Obligations); 27.4 (Environmental Indemnity); 27.5 (Survival);
27.6 (Exculpation); and 28 (Financial Statements). It is
further understood that where reference is made in the Master Lease to the
“Premises,” the same shall mean the Sublease Premises as defined herein; where
reference is made to the “Commencement Date,” the same shall mean the
Commencement Date as defined herein; and where reference is made to the “Lease,”
the same shall mean this Sublease. The parties specifically agree
that any provisions relating to any construction obligations of “Landlord” under
the Master Lease with respect to construction that occurred or was to have
occurred prior to the Commencement Date hereof, are hereby
deleted. Sublandlord shall not be liable to Subtenant for any failure
by Master Landlord to perform its obligations under the Master Lease, nor shall
such failure by Master Landlord excuse performance by Subtenant of its
obligations hereunder; provided, however, that Sublandlord shall use its
commercially reasonable efforts to cause Master Landlord to perform its
obligations under the Master Lease. Anything in the Master Lease to
the contrary notwithstanding, no personal liability shall at any time be
asserted or enforceable by Subtenant against Sublandlord’s stockholders,
directors, officers or partners on account of any of Sublandlord’s obligations
or actions under this Sublease.
7
(b) The
following Paragraphs of the Master Lease are expressly excluded and not
incorporated herein: 1.1 (Real Property, Building, Premises and
Complex); 2 (Lease Term); 3 (Base Rent); 4.1 (Additional Rent);
4.4 (Calculation and Payment of Additional Rent); the second sentence of
Section 8.1 (regarding roof penetration); 11 (Damage and Destruction);
12 (Condemnation); 13 (Quiet Enjoyment); 20 (Security Deposit and
Letter of Credit); the third, fourth and fifth sentences of Article
24.8 (Tenant’s Signs); 24.25 (Brokers); 24.28 (Building Directory);
Exhibit A, Exhibit C, and the Summary of Basic Lease
Information.
(c) Except
as provided in paragraphs (d) and (e) of this Section, Subtenant hereby assumes
and agrees to perform for Sublandlord’s benefit, during the term of this
Sublease, all of Sublandlord’s obligations with respect to the Sublease Premises
under the Master Lease, except as otherwise provided herein. In
connection with the foregoing, Sublandlord hereby assigns to Subtenant
Sublandlord’s rights under any artisan’s, mechanic’s, builder’s, materialman’s,
manufacturer’s and other warranties and guaranties to the extent the same relate
exclusively to the Sublease Premises and pertain to any matter which Subtenant
is obligated to repair or maintain hereunder. Subtenant shall not
commit or permit to be committed any act or omission which violates any term or
condition of the Master Lease. Notwithstanding anything to the
contrary contained herein, this Sublease shall be subject and subordinate to all
of the terms of the Master Lease and Master Landlord shall have all rights in
respect of the Master Lease and the Premises as set forth therein.
(d) Subject
to Subtenant's obligation under Section 4(a)(iii) to reimburse Sublandlord,
in the form of Additional Rent, for the Direct Costs, Sublandlord shall use
commercially reasonable efforts to provide to Subtenant the following services
on a 24 hour per day, 365 day per day basis: (i) heating,
ventilation or air-conditioning (“HVAC”)
service and supplies, maintenance or repairs related to the same;
(ii) electrical power and service, supplies, maintenance or repairs related
to the same; (iii) water and sewer; and (iv) plumbing service and
supplies, maintenance or repairs related to the same; provided, however, in no
event shall any failure or interruption of such services be deemed an actual or
constructive eviction of Subtenant, entitle Subtenant to any reduction of Rent
or result in any liability of Sublandlord to Subtenant except to the extent
caused by the gross negligence or willful misconduct of
Sublandlord. If Subtenant elects to use Sublandlord’s janitorial
service provider, Subtenant shall coordinate such service, at Subtenant’s cost
and with no liability to Sublandlord. In the event that Sublandlord
fails to maintain the HVAC equipment in a reasonable manner within a reasonable
time not to exceed two (2) business days after Subtenant provides written notice
of such failure to Sublandlord, subject to receipt of Master Landlord’s prior
consent to access the roof as provided in Section 7.1 of the Second Amendment to
the Master Lease, Subtenant may access the roof in order to repair such HVAC
equipment.
(e) Subject
to Subtenant's obligation under Section 4(a)(iii) to reimburse Sublandlord,
in the form of Additional Rent, for the Direct Costs, Sublandlord agrees to
repair and maintain all items required to be maintained and repaired by the
Tenant under the Master Lease; provided, however, that Subtenant shall bear all
costs of repairing any damage (excluding ordinary wear and tear) caused by the
acts of Subtenant and its employees, agents, invitees, and
contractors.
8
12. Insurance. Subtenant
shall be responsible for compliance with the insurance provisions of the Master
Lease, provided, however, any required property insurance as set forth in
Section 10.3.2 of the Master Lease shall be required only in connection
with the Sublease Premises and Subtenants’ property located
therein. Such insurance shall insure the performance by Subtenant of
its indemnification obligations hereunder and shall name Master Landlord and
Sublandlord as additional insureds. All insurance required under this
Sublease shall contain an endorsement requiring thirty (30) days’ written notice
from the insurance company to Subtenant and Sublandlord before cancellation or
change in the coverage, insureds or amount of any policy. Subtenant
shall provide Sublandlord with certificates of insurance evidencing such
coverage prior to the commencement of this Sublease.
13. Default. In
addition to defaults contained in Section 19 of the Master Lease, failure of
Subtenant to make any payment of Rent when due hereunder shall constitute an
event of default hereunder. If Subtenant’s default causes Sublandlord
to default under the Master Lease, Subtenant shall defend, indemnify and hold
Sublandlord harmless from all damages, costs (including reasonable attorneys’
fees), liability, expenses or claims to the extent caused by such
default.
14. Notices. The
addresses specified in the Master Lease for receipt of notices to each of the
parties are deleted and replaced with the following:
|
|
To Sublandlord
at:
|
Avigen,
Inc.
|
1301
Harbor Bay Parkway
Alameda,
California 94502
Attention: Chief
Executive Officer
|
|
To Subtenant
at:
|
BioTime,
Inc.
|
1301
Harbor Bay Parkway
Alameda,
California 94502
Attention: Chief
Executive Officer
|
|
with a copy
to:
|
Richard
S. Soroko, Esq.
|
Lippenberger,
Thompson, Welch,
Soroko
& Gilbert LLP
201 Tamal
Vista Blvd
Corte
Madera, California 94925
|
|
After Commencement
Date:
|
At
the Sublease Premises
|
15. Sublandlord’s
Obligations.
(a) To
the extent that the provision of any services or the performance of any
maintenance or any other act respecting the Sublease Premises, the Premises or
Building is the responsibility of Master Landlord (collectively, “Master Landlord
Obligations”), upon Subtenant’s request, Sublandlord shall make
reasonable efforts to cause Master Landlord to perform such Master Landlord
Obligations; provided, however, that in no event shall Sublandlord be liable to
Subtenant for any liability, loss or damage whatsoever in the event that Master
Landlord should fail to perform the same, nor shall Subtenant be entitled to
withhold the payment of Rent or terminate this Sublease. It is
expressly understood that the services and repairs which are incorporated herein
by reference, including, but not limited to, the maintenance of all of the fire
protection and life/safety systems, the roof and roof coverings, exterior
painting, exterior window cleaning, exterior lighting, parking areas, pavement,
landscaping, sprinkler systems, sidewalks, driveways and curbs, as well as
maintenance of Project common areas and structural portions of the floors,
foundations and exterior and interior load bearing walls and the structural
portions of the roof, will in fact be furnished by Master Landlord and not by
Sublandlord. In addition, Sublandlord shall not be liable for any
maintenance, restoration (following casualty or destruction) or repairs in or to
the Building or the Sublease Premises, other than its obligation hereunder to
use reasonable efforts to cause Master Landlord to perform its obligations under
the Master Lease; provided, however, that if Sublandlord fails to use reasonable
effort to cause Master Landlord to perform within ten (10) business days after
receipt of written notice of such failure from Subtenant, Sublandlord agrees
that Subtenant may, at Subtenant’s election, exercise such rights as Sublandlord
may have to enforce or seek the enforcement of Master Landlord’s obligations
under the Master Lease to the extent such obligations of Master Landlord affect
the Sublease Premises, all at Subtenant’s expense.
9
(b) Except
as otherwise provided herein, Sublandlord shall have no other obligations to
Subtenant with respect to the Sublease Premises or the performance of the Master
Landlord Obligations.
16. Early
Termination of Sublease. Except as expressly set forth in this
Section 15, if the Master Lease should terminate prior to the expiration of this
Sublease, Sublandlord shall have no liability to Subtenant on account of such
termination unless said termination was a result of default by
Sublandlord. To the extent that the Master Lease grants Sublandlord
any discretionary right to terminate the Master Lease, whether due to casualty,
condemnation, or otherwise, Sublandlord shall be entitled to exercise or not
exercise such right in its complete and absolute discretion.
17. Consent of
Master Landlord and Sublandlord. If Subtenant desires to take
any action which requires the consent or approval of Sublandlord pursuant to the
terms of this Sublease, prior to taking such action, including, without
limitation, making any alterations, then, notwithstanding anything to the
contrary herein, (a) Sublandlord shall have the same rights of approval or
disapproval as Master Landlord has under the Master Lease, and (b) Subtenant
shall not take any such action until it obtains the consent of Sublandlord and
Master Landlord, as may be required under this Sublease or the Master
Lease. This Sublease shall not be effective unless and until any
required written consent of the Master Landlord shall have been
obtained.
18. Indemnity. Subtenant
shall indemnify, defend, protect, and hold Sublandlord and Master Landlord
harmless from and against all actions, claims, demands, costs liabilities,
losses, reasonable attorneys’ fees, damages, penalties, and expenses
(collectively, “Claims”)
which may be brought or made against Sublandlord or which Sublandlord may pay or
incur to the extent caused by (i) a breach of this Sublease by Subtenant,
(ii) any violation of law by Subtenant or its employees, agents,
contractors or invitees (collectively, “Agents”)
relating to the use or occupancy of the Sublease Premises, (iii) any act or
omission by Subtenant or its Agents resulting in contamination of any part or
all of the Premises by Hazardous Materials, or (iv) the negligence or willful
misconduct of Subtenant or its Agents.
10
19. Brokers. Each
party hereto represents and warrants that it has dealt with no broker in
connection with this Sublease and the transactions contemplated
herein. Each party shall indemnify, protect, defend and hold the
other party harmless from all costs and expenses (including reasonable
attorneys’ fees) arising from or relating to a breach of the foregoing
representation and warranty.
20. Parking. Subtenant shall
be entitled to eighteen percent (18%) of the parking rights granted to
Sublandlord pursuant to the Master Lease.
21. Financial
Statements. Subtenant shall deliver to Sublandlord a copy of
each quarterly report on Form 10-Q and annual report on Form 10-K (“SEC Reports”)
filed by Subtenant with the Securities and Exchange Commission (the “SEC”) under
the Securities Exchange Act of 1934, as amended. Such SEC Reports
shall be delivered to Sublandlord within ten (10) business days after filing
with the SEC.
22. Surrender
of Sublease Premises. In lieu of any obligation or liability set forth in
the Master Lease, upon the termination of the Sublease, Subtenant shall
surrender the Sublease Premises to Sublandlord free of hazardous materials
introduced, discharged, released or placed on the Sublease Premises by
Subtenant, broom-clean and in as good a condition as on the Commencement Date,
ordinary wear and tear excepted, and except for any repairs or maintenance
required to be performed by Sublandlord. In addition, Subtenant shall
remove any alterations, additions and improvements constructed or installed by
Subtenant (whether or not made with Sublandlord’s consent), prior to the
termination of the Sublease and restore the Sublease Premises to its prior
condition, ordinary wear and tear excepted, repairing all damage caused by or
related to any such removal, all at Subtenant’s expense. Any property
of Subtenant not removed hereunder shall be deemed, at Sublandlord’s option, to
be abandoned by Subtenant and Sublandlord may store such property in Subtenant’s
name at Subtenant’s expense, and/or dispose of the same in any manner permitted
by law.
23. No Third
Party Rights. The benefit of the provisions of this Sublease
is expressly limited to Sublandlord and Subtenant and their respective permitted
successors and assigns. Under no circumstances will any third party
be construed to have any rights as a third party beneficiary with respect to any
of said provisions.
24. Quiet
Enjoyment. Subtenant shall peacefully have, hold and enjoy the
Sublease Premises, subject to the terms and conditions of this Sublease and
subject to the Master Lease, provided that Subtenant pays all rent and performs
all of Subtenant’s covenants and agreements contained herein.
25. Counterparts;
Entire Agreement; Amendment. This Sublease may be signed in
two or more counterparts, each of which shall be deemed an original and all of
which shall constitute one agreement. This Sublease represents the
entire agreement of Sublandlord and Subtenant with respect to the subject matter
hereof. This Sublease may not be amended except by a written
instrument executed by both parties hereto.
11
26. Damage and
Destruction.
(a) Termination of Master
Lease. If the Sublease Premises is damaged or destroyed and
Master Landlord or Sublandlord exercises any option either may have to terminate
the Master Lease, if any, this Sublease shall terminate as of the date of the
casualty. In the event of any such termination by Sublandlord,
Sublandlord shall use good faith efforts, at no cost to Sublandlord, to
assist Subtenant to enter into a direct lease with Master Landlord
(at Master Landlord’s sole discretion) if Subtenant so desires. If
the Master Lease imposes any repair or restoration obligation on Sublandlord,
Subtenant shall be responsible for all such obligations as they relate to the
Sublease Premises. In the event that after a damage or destruction of
the Sublease Premises, where the time estimated to restore the Sublease Premises
exceeds 180 days, Subtenant and Sublandlord shall each have the right to
terminate this Sublease on written notice to given to the other party within
thirty (30) days after determination of the amount of time to restore the
Sublease Premises, which termination shall be effective as of the date of the
casualty.
(b) Continuation of
Sublease. If the Master Lease or this Sublease is not
terminated following any damage or destruction as provided in subsection (a)
above, this Sublease shall remain in full force and effect, and Rent shall be
abated in accordance with Section 4(d) of this Sublease.
27. Eminent
Domain. If all or any part of the Sublease Premises is
condemned by eminent domain, inversely condemned or sold in lieu of
condemnation, for any public or a quasi-public use or purpose, this Sublease may
be terminated as of the date of title vesting in such proceeding by Sublandlord,
without first obtaining the consent of Subtenant.
28. Estoppel
Certificates. Subtenant or Sublandlord, within ten (10)
business days of each request by the other to do so, shall each execute and
deliver to the other estoppel certificate(s), (i) certifying that this
Sublease is unmodified and in full force and effect or, if modified, stating the
nature of such modification and certifying that this Sublease, as so modified,
is in full force and effect and the date to which the rent and other charges are
paid in advance, if any, and (ii) acknowledging that there are not, to its
knowledge, any uncured defaults on the part of the other party hereunder, or
stating the nature of defaults if such exist, and (iii) evidencing the
status of the Sublease, as may be reasonably required either by a prospective or
actual lender making a loan to Sublandlord or Subtenant
29. Signage. Subtenant
shall be entitled, at its sole cost and expense, to one (1) identification sign
outside of the Sublease Premises on the floor on which the Sublease Premises are
located. The location, quality, design, style, lighting and size of
such sign shall be consistent with the Master Landlord's Building standard
signage program and shall be subject to Master Landlord's prior written
approval, in accordance with the terms of the Master Lease and Sublandlord’s
approval, not to be unreasonably withheld, conditioned or
delayed. Upon the expiration or earlier termination of this Sublease,
Subtenant shall be responsible, at its sole cost and expense, for the removal of
its signage and the repair of all damage to the Building caused by such
removal. Except for such identification sign, Subtenant may not
install any signs on the exterior or roof of the Building or the Common Areas of
the Building, the Complex or the Real Property without the approval of the
Master Landlord and Sublandlord. Any signs, window coverings, or
blinds (even if the same are located behind the Master Landlord approved window
coverings for the Building), or other items visible from the exterior of the
Sublease Premises or Building are subject to the prior approval of Master
Landlord, in its sole and absolute discretion.
12
In
Witness Whereof, the parties have executed this Sublease as of the date first
written above.
|
Sublandlord:
|
Avigen,
Inc.,
|
||
|
a
Delaware corporation
|
|||
|
By:
/s/ Andrew A.
Sauter
|
|||
|
Name: Andrew A.
Sauter
|
|||
|
Title: Chief Financial
Officer
|
|||
|
Subtenant:
|
BioTime,
Inc.,
|
||
|
a
California corporation
|
|||
|
By:
/s/ Robert W.
Peabody
|
|||
|
Name:
Robert W.
Peabody
|
|||
|
Title:
Sr.V.P. &
COO
|
13
Exhibit
A
Master
Lease
OFFICE
LEASE
PARKWAY CENTER
ALAMEDA,
CALIFORNIA
LINCOLN-RECP
EMPIRE OPCO, LLC,
A
DELAWARE LIMITED LIABILITY COMPANY
AS
LANDLORD,
AND
AVIGEN,
INC.,
A
DELAWARE CORPORATION
AS
TENANT
TABLE
OF CONTENTS
|
ARTICLE
PAGE
|
|
|
Article
1 -- Real Property, Building, Premises and Complex
|
1
|
|
Article
2 -- Lease Term
|
2
|
|
Article
3 -- Base Rent
|
3
|
|
Article
4 -- Additional Rent
|
3
|
|
Article
5 -- Use of Premises
|
10
|
|
Article
6 -- Services and Utilities
|
11
|
|
Article
7 -- Repairs
|
14
|
|
Article
8 -- Additions and Alterations
|
15
|
|
Article
9 -- Covenant Against Liens
|
17
|
|
Article
10 -- Indemnification and Insurance
|
17
|
|
Article
11 -- Damage and Destruction
|
20
|
|
Article
12 -- Condemnation
|
21
|
|
Article
13 -- Covenant of Quiet Enjoyment
|
22
|
|
Article
14 -- Assignment and Subletting
|
22
|
|
Article
15 -- Surrender; Ownership and Removal of Trade Fixtures..
|
26
|
|
Article
16 -- Holding Over
|
26
|
|
Article
17 -- Estoppel Certificates
|
27
|
|
Article
18 -- Subordination
|
27
|
|
Article
19 -- Tenant's Defaults; Landlord's Remedies
|
28
|
|
Article
20 -- Security Deposit.
|
31
|
|
Article
21 -- Compliance with Law.
|
33
|
|
Article
22 -- Entry by Landlord
|
33
|
|
Article
23 -- Tenant Parking
|
34
|
|
Article
24 -- Miscellaneous Provisions
|
34
|
|
Article
25 -- Mortgagee Protection
|
40
|
|
Article
26 -- Americans With Disabilities Act
|
41
|
|
Article
27 -- Hazardous Materials
|
42
|
|
Article
28 -- Financial 23Statements
|
44
|
EXHIBITS
Exhibit
A -- Outline of Floor Plan of Premises
Exhibit B
- -- [Intentionally omitted.]
Exhibit
C -- Amendment to Lease
Exhibit
D -- Rules and Regulations
Exhibit
E -- Form of Tenant's Estoppel Certificate
i
PARKWAY
CENTER
SUMMARY
OF BASIC LEASE INFORMATION
This
Summary of Basic Lease Information ("SUMMARY") is hereby incorporated into and
made a part of the attached Office Lease. Each reference in the Office Lease to
any term of this Summary shall have the meaning as set forth in this Summary for
such term. In the event of a conflict between the terms of this Summary and the
Office Lease, the terms of the Office Lease shall prevail. Any capitalized terms
used Summary and not otherwise defined herein shall have the meaning as set
forth in the Office Lease.
|
TERMS
OF LEASE
|
DESCRIPTION
|
|
|
(References
are to the Office Lease)
|
||
|
1.
|
DATE:
|
November
2, 2000
|
|
2
|
LANDLORD:
|
LINCOLN-RECP
EMPIRE OPCO, LLC,
|
|
a
Delaware limited liability company
|
||
|
3.
|
ADDRESS
OF LANDLORD'S AGENT
|
Legacy
Partners Commercial, Inc.,
|
|
(SECTION
24.19):
|
101
Lincoln Centre Drive
|
|
|
Foster
City, California 94404
|
||
|
Attn: Mack
Laney, Sr. Vice President Operations
|
||
|
with
a copy to:
|
||
|
Legacy
Partners Commercial, Inc.,
|
||
|
1411
Harbor Bay Parkway, Suite 1000
|
||
|
Alameda,
California 94502
|
||
|
Attn: Property
Manager
|
||
|
4.
|
TENANT:
|
AVIGEN,
INC.,
|
|
a
Delaware corporation
|
||
|
5.
|
ADDRESS
OF TENANT:
|
1301
Harbor Bay Parkway
|
|
(SECTION
24.19):
|
Alameda,
California 94502
|
|
|
Attention: Thomas
J. Paulson
|
||
|
(Prior
to Lease Commencement Date)
|
||
|
and
|
||
|
1301
Harbor Bay Parkway
|
||
|
Alameda,
California 94502
|
||
|
Attention: Thomas
J. Paulson
|
||
|
(After
Lease Commencement Date)
|
||
|
6.
|
PREMISES,
BUILDING AND COMPLEX
|
|
|
(ARTICLE
1):
|
||
|
6.1
PREMISES:
|
Subject
to Article 2, approximately 67,482 rentable square feet of space located
on the first and second floors of the Building, as set forth in Exhibit A
attached hereto.
|
|
|
6.2
BUILDING: rentable square feet.
|
Approximately
67,482 rentable square feet.
|
|
|
6.3
COMPLEX:
|
Parkway Center;
Approximately 463,860
|
|
|
6.4
PREMISES ADDRESS:
|
1301
Harbor Bay Parkway
|
|
|
Alameda,
California 94502
|
||
|
Floor(s)
upon which the Premises are located: First and Second
|
||
|
7.
|
TERM:
|
|
|
7.1
LEASE TERM:
|
Ten
(10) years and Zero (0) months.
|
|
|
7.2
LEASE COMMENCEMENT DATE:
|
December
1, 2000
|
|
|
7.3
LEASE EXPIRATION DATE:
|
The
last day of the Term of the Lease shall be November 30, 2010, subject to
the provisions of Article 2.
|
|
|
7.4
AMENDMENT TO LEASE:
|
Landlord
and Tenant shall confirm the Lease Commencement Date and Lease Expiration
Date in an Amendment to Lease (Exhibit "C"), which may be required to be
executed pursuant to Article 2 of the Office
Lease.
|
|
ii
|
TERM
|
SQUARE
FEET
|
ANNUAL
RENTAL RATE
PER
RENTABLE SQUARE
FOOT
|
MONTHLY
INSTALLMENT
OF
BASE
RENT
|
|||||||||
|
12/1/00
-- 11/30/01
|
34,537 | $ | 24.00 | $ | 69,074.00 | |||||||
|
12/1/01
-- 11/30/02
|
34,537 | $ | 24.72 | $ | 71,146.22 | |||||||
|
12/1/02
-- 12/31/02
|
34,537 | $ | 25.44 | $ | 73,218.44 | |||||||
|
1/1/03
-- 11/30/03
|
67,482 | $ | 25.44 | $ | 143,061.84 | |||||||
|
12/1/03
-- 11/30/04
|
67,482 | $ | 26.28 | $ | 147,785.58 | |||||||
|
12/1/04
-- 11/30/05
|
67,482 | $ | 27.00 | $ | 151,834.50 | |||||||
|
12/1/05
-- 11/30/06
|
67,482 | $ | 27.84 | $ | 156,558.24 | |||||||
|
12/1/06
-- 11/30/07
|
67,482 | $ | 28.68 | $ | 161,281.98 | |||||||
|
12/1/07
-- 11/30/08
|
67,482 | $ | 29.52 | $ | 166,005.72 | |||||||
|
12/1/08
-- 11/30/09
|
67,482 | $ | 30.36 | $ | 170,729.46 | |||||||
|
12/1/09
-- 11/30/10
|
67,482 | $ | 31.32 | $ | 176,128.02 | |||||||
Base Rent
for the "Remaining Premises" (as defined in Article 2 below) shall be payable
from the "RP Commencement Date" (as defined in Article 2 below) through December
31, 2002, in accordance with the following schedule:
|
TERM
|
REMAINING
PREMISES
SQUARE FEET
|
REMAINING
PREMISES
--ANNUAL
RENTAL
RATE
PER RENTABLE
SQUARE
FOOT
|
MONTHLY
INSTALLMENT OF
BASE RENT
|
|||||||||
|
10/1/01
-- 5/31/02
|
32,945 | $ | 18.24 | $ | 50,076.40 | |||||||
|
6/1/02
-- 12/31/02
|
32,945 | $ | 19.08 | $ | 52,382.55 | |||||||
|
ADVANCE
RENT (SECTION 3.1):
|
Sixty-nine
Thousand Seventy-four Dollars
|
|
|
($69,074.00)
|
||
|
9.
|
ADDITIONAL
RENT (ARTICLE 4):
|
|
|
9.1
BASE YEAR FOR TENANT'S SHARE OF DIRECT EXPENSES
|
Calendar
year 2001
|
|
|
|
||
|
9.3
TENANT'S SHARE OF DIRECT EXPENSES FOR THE PREMISES
|
100%
of the Building.
|
|
|
|
14.55%
of the Complex.
|
|
|
10.
|
SECURITY
DEPOSIT (ARTICLE 20):
|
One
Hundred Fifty Thousand Dollars
|
|
($150,000.00)
|
||
|
11.
|
PARKING
(ARTICLE 23):
|
One
hundred fourteen (114) unreserved parking spaces, subject to adjustment
per Article 23
|
|
12.
|
BROKERS
(SECTION 24.35):
|
Aegis
Realty Partners for Tenant
|
|
Cushman
Realty Corporation for Landlord
|
||
|
13.
|
EXHIBITS:
|
A
through E, inclusive and attached
hereto.
|
iii
PARKWAY
CENTER
OFFICE
LEASE
This
Office Lease, which includes the preceding Summary attached hereto and
incorporated herein by this reference (the Office Lease and Summary to be known
sometimes collectively hereafter as the "Lease"), dated as of the date set forth
in Section 1 of the Summary, is made by and between LINCOLN-RECP EMPIRE OPCO,
LLC, a Delaware limited liability company ("Landlord"), and AVIGEN, INC., a
Delaware corporation ("Tenant").
ARTICLE
1 - REAL PROPERTY, BUILDING, PREMISES AND COMPLEX
1.1 REAL
PROPERTY, BUILDING, PREMISES AND COMPLEX. Upon and subject to the terms,
covenants and conditions hereinafter set forth in this Lease, Landlord hereby
leases to Tenant and Tenant hereby leases from Landlord the premises set forth
in Section 6 of the Summary (the "Premises"), which Premises are part of the
building (the "Building") specified in Section 6 of the Summary, and, as
applicable, which Building is part of the Complex ("Complex") specified in
Section 6 of the Summary. The outline of the floor plan of the Premises is set
forth in Exhibit A attached hereto. The Building, the Building's parking
facility ("Building Parking Facility"), any outside plaza areas, land and other
improvements surrounding the Building which are designated from time to time by
Landlord as "Common Areas" appurtenant to or servicing the Building and/or the
Complex, and the land upon which any of the foregoing are situated, are herein
sometimes collectively referred to as the "Real Property." Landlord and Tenant
hereby agree that for purposes of this Lease, as of the Lease Date, the rentable
square footage area of the Premises, the Building, and the Complex shall be
deemed to be the number of rentable square feet specified in Section 6 of the
Summary which number of rentable square feet for the Premises includes an
apportionment made by Landlord of a pro rata share of the core of the Building,
corridors, lobbies and other portions of the "Common Areas" within the Building
attributable to the Premises being leased by Tenant hereunder. Tenant is hereby
granted the right to the non-exclusive use of the common corridors and hallways,
stairwells, elevators, restrooms and other public or common areas located on the
Real Property (the "Common Areas"); provided, however, that the manner in which
such public and Common Areas are maintained and operated shall be at the sole
discretion of Landlord (but in a good condition, comparable to the condition of
other comparable buildings in the vicinity of the Complex) and the use thereof
shall be subject to such reasonable rules, regulations and restrictions as
Landlord may make from time to time. Landlord reserves the right to make
alterations or additions to or to change the location of elements of the Real
Property and the Common Areas thereof, subject to the condition that exercise of
any of such rights shall not unreasonably interfere with Tenant's use of the
Premises, or decrease the number of Tenant's parking spaces below the minimum
number set forth herein. Tenant hereby acknowledges and agrees that Landlord has
informed Tenant that, as of the date hereof, Landlord presently owns five (5) of
the eight (8) buildings situated within the Complex.
1.2
CONDITION OF PREMISES. No representations or warranties of any kind, express or
implied, respecting the condition of the Premises, Building, Complex or Real
Property have been made by Landlord or any agent of Landlord to Tenant, except
as expressly set forth herein. Tenant acknowledges that it has had an
opportunity to thoroughly inspect the condition of the Premises, and Tenant
accepts the Premises in the existing "AS IS" condition on the date hereof.
Tenant acknowledges and agrees that neither Landlord nor any of Landlord's
agents, representatives or employees has made any representations as to the
suitability, fitness or condition of the Premises for the conduct of Tenant's
business or for any other purpose. Any exception to the foregoing provisions
must be made by express written agreement by both parties. Notwithstanding
anything to the contrary in this Lease, Landlord warrants that on the
commencement of the term hereof, the Premises shall be "broom-clean" and the
Building and the Systems and Equipment, shall be in good working order,
condition, and repair, and free from material defects.
ARTICLE
2 - LEASE TERM
The terms
and provisions of this Lease shall be effective as of the date of this Lease
except for the provisions of this Lease relating to the payment of Rent or any
obligations to maintain, repair or comply with laws. The term of this Lease (the
"Lease Term") shall be as specified in Section 7.1 of the Summary and shall
commence on the date (the "Lease Commencement Date") specified in Section 7.2 of
the Summary, and shall terminate on the date (the "Lease Expiration Date") set
forth in Section 7.3 of the Summary, unless this Lease is sooner terminated as
hereinafter provided. Notwithstanding the foregoing, Tenant hereby acknowledges
that as of the Lease Date, the Premises are presently being occupied by
RESOURCE/PHOENIX, INC., a California corporation (the "Existing Tenant") under a
sublease from PEOPLESOFT USA, INC., a Delaware corporation ("PeopleSoft").
Landlord's delivery to Tenant of possession of the Premises by the Lease
Commencement Date is contingent upon (i) Landlord entering into lease
termination agreements with the Existing Tenant and with PeopleSoft satisfactory
to Landlord, and (ii) the Existing Tenant vacating the Premises and surrendering
possession thereof to Landlord by the Lease Commencement Date; provided that
Landlord shall use commercially reasonable efforts to enter into such lease
termination agreements and cause Existing Tenant to vacate the Premises and
surrender possession thereof to Landlord by the Lease Commencement Date.
Landlord anticipates that Landlord will be able to deliver approximately 34,537
rentable square feet of the Premises on the ground floor of the Building (the
"Initial Premises") to Tenant on or about the Lease Commencement Date; the
balance of the Premises on the second floor of the Building comprising
approximately 32,945 rentable square feet (the "Remaining Premises") is
anticipated to be delivered to Tenant on or about October 1, 2001 (the "RP
Commencement Date"). If Landlord, for any reason whatsoever, cannot deliver
possession of the Initial Premises to Tenant on the Lease Commencement Date,
Landlord shall not be subject to any liability nor shall the validity of the
Lease be affected; provided, the Term of this Lease and the obligation to pay
Rent or any obligations to maintain, repair or comply with laws shall commence
on the date possession is actually tendered to Tenant and the Lease Expiration
Date shall be extended commensurately. If Landlord, for any reason, cannot
deliver possession of the Remaining Premises to Tenant on the RP Commencement
Date (in the condition that exists on the day after the Existing Tenant vacates
the Remaining Premises) without any improvements, alterations, repairs,
refurbishment or other modifications being made thereto (except as may be
necessary to satisfy the requirements of Section 1.2 above), Landlord shall not
be subject to any liability nor shall the validity of this Lease be affected;
provided the RP Commencement Date shall be extended commensurately by the period
of time Landlord is delayed in so delivering possession of the Remaining
Premises to Tenant without any improvements, alterations, repairs, refurbishment
or other modifications being made thereto. For purposes of this Lease, the term
"Lease Year" shall mean each consecutive twelve (12) month period during the
Lease Term, provided that the last Lease Year shall end on the Lease Expiration
Date. If the Lease Commencement Date, the RP Commencement Date and/or the Lease
Expiration Date of this Lease is other than the Lease Commencement Date, the RP
Commencement Date and/or Lease Expiration Date specified in Section 7 of the
Summary, then at any time during the Lease Term, Landlord may deliver to Tenant
an Amendment to Lease in substantially the form as set forth in Exhibit C,
attached hereto, wherein the parties shall specify the actual Lease Commencement
Date, RP Commencement Date, Lease Expiration Date and the dates on which Tenant
is to commence paying Rent for the Initial Premises and the Remaining Premises,
respectively, and which document Tenant shall execute and return to Landlord
within five (5) days of receipt thereof. The word "Lease Term" whenever used
herein refers to the initial term of this Lease and any valid extension(s)
thereof. Notwithstanding the definition of Premises set forth in Section 6.1 of
the Summary, the Premises as used herein shall only refer to that portion of the
Building which has been delivered to Tenant.
1
ARTICLE
3 - BASE RENT
3.1
INITIAL PREMISES RENT COMMENCEMENT DATE. Tenant shall pay, without notice or
demand, to Landlord or Landlord's agent at the management office of the Complex,
or at such other place as Landlord may from time to time designate in writing,
in currency or a check for currency which, at the time of payment, is legal
tender for private or public debts in the United States of America, base rent
("Base Rent") as set forth in Section 8 of the Summary, payable in equal monthly
installments as specified in Section 8 of the Summary as and when required
pursuant to the terms of this Article 3 and thereafter in advance on or before
the first day of each and every month during the Lease Term, without any
abatement, setoff or deduction whatsoever, except as expressly set forth herein.
Tenant's obligation to commence payment of Base Rent for the Initial Premises
shall commence on the Lease Commencement Date. The Base Rent for the first full
month of the Lease Term (the "Advance Rent"), as set forth in Section 8 of the
Summary, shall be paid at the time of Tenant's execution of this Lease. The Base
Rent for any fractional part of a calendar month at the commencement or
termination of the Lease Term shall be a prorated amount of the Base Rent for a
full calendar month based upon the number of days of such month. All other
payments or adjustments required to be made under the terms of this Lease that
require proration on a time basis shall be prorated on the same
basis.
ARTICLE
4 - ADDITIONAL RENT
4.1
ADDITIONAL RENT. For the period commencing on the Lease Commencement Date and
continuing through December 31, 2001 Tenant shall not be required to pay "Direct
Expenses", as defined in Section 4.3.3 of this Lease. Commencing January 1,
2002, and continuing throughout the balance of the Lease Term, Tenant shall pay
as additional rent the "Tenant's Share", as defined in Section 4.3.8, of Direct
Expenses, which are in excess of the amount of Direct Expenses incurred during
the "Base Year," as that term is defined in Section 4.3.1 of this Lease. Such
additional rent, together with any and all other amounts payable by Tenant to
Landlord pursuant to the terms of this Lease (including, without limitation,
pursuant to Article 6), shall be hereinafter collectively referred to as the
"Additional Rent." The Base Rent and Additional Rent are herein collectively
referred to as the "Rent." All amounts due under this Article 4 as Additional
Rent shall be payable for the same periods and in the same manner, time and
place as the Base Rent. Without limitation on other obligations of Tenant which
shall survive the expiration of the Lease Term, the obligations of Tenant to pay
the Additional Rent provided for in this Article 4 which is properly
attributable to the Lease Term shall survive the expiration or earlier
termination of the Lease Term.
4.2
[INTENTIONALLY DELETED.]
4.3
DEFINITIONS. As used in this Article 4, the following terms shall have the
meanings hereinafter set forth:
4.3.1
"Base Year" shall mean the calendar year set forth in
Section
9.1 of the Summary.
4.3.2
"Calendar Year" shall mean each calendar year in which any portion of the Lease
Term falls, through and including the calendar year in which the Lease Term
expires.
4.3.3
"Direct Expenses" shall mean "Operating Expenses" and "Tax
Expenses."
4.3.4
"Expense Year" shall mean each Calendar Year, provided that Landlord, upon
notice to Tenant, may change the Expense Year from time to time to any other
twelve (12) consecutive-month period, and, in the event of any such change,
Tenant's Share of Direct Expenses shall be equitably adjusted by Landlord for
any Expense Year involved in any such change; provided further that any such
change shall not increase in the aggregate the amount of Direct Expenses payable
by Tenant throughout the Lease Term.
4.3.5
"Operating Expenses" shall mean all expenses, costs and amounts of every kind
and nature which Landlord shall pay during any Expense Year in excess of the
amount of said expenses for the Base Year because of or in connection with the
ownership, management, maintenance, repair, replacement, restoration or
operation of the Building, Complex and Real Property, including, without
limitation, any amounts paid for: (i) the cost of supplying all utilities
(subject to the provisions of Section 6.7), the cost of operating, maintaining,
repairing, renovating and managing the utility systems, mechanical systems,
sanitary and storm drainage systems, any elevator systems and all other "Systems
and Equipment" (as defined in Section 4.3.6 of this Lease), and the cost of
supplies and equipment and maintenance and service contracts in connection
therewith; (ii) the cost of licenses, certificates, permits and inspections, and
the cost of contesting the validity or applicability of any governmental
enactments which may affect Operating Expenses, and the costs incurred in
connection with implementation and operation of any transportation system
management program or similar program required by any governmental authority;
(iii) the cost of insurance carried by Landlord, in such amounts as Landlord may
reasonably determine or as may be required by any mortgagees or the lessor of
any underlying or ground lease affecting the Real Property, the Complex and/or
the Building, including any commercially
reasonable deductibles; (iv) the cost of landscaping, relamping, supplies,
tools, equipment and materials, and all fees, charges and other costs (including
consulting fees, legal fees and accounting fees) incurred in connection with the
management, operation, repair and maintenance of the Building, the Complex and
Real Property; (v) the cost of parking area repair, restoration, and
maintenance; (vi) any equipment rental agreements or management agreements
(including the cost of any management fee and the fair rental value of any
office space provided thereunder); (vii) wages, salaries and other compensation
and benefits of all persons directly engaged (whether or not 100% of such
person's efforts are devoted to this Building, Complex and Real Property,
provided that only the portion attributable to this Building, Complex and Real
Property shall be included in Operating Expenses) in the operation, management,
maintenance or security of the Building, the Complex and the Real Property, and
employer's Social Security taxes, unemployment taxes or insurance, and any other
taxes which may be levied on such wages, salaries, compensation and benefits;
(viii) payments under any easement, license, operating agreement, declaration,
restrictive covenant, underlying or ground lease (excluding rent), or instrument
pertaining to the sharing of costs by the Building, Complex or Real Property;
(ix) the cost of janitorial service, alarm and security service (if any security
service is provided by Landlord), window cleaning, trash removal, replacement of
wall and floor coverings, ceiling tiles and fixtures in lobbies, corridors,
restrooms and other common or public areas or facilities, maintenance and
replacement of curbs and walkways, repair to roofs and re-roofing; (x) any and
all levies, charges, fees and/or assessments payable to any applicable owner's
association and/or condominium association with respect to the Complex; (xi)
amortization (including interest on the unamortized cost) of the cost of
acquiring or the rental expense of personal property used in the maintenance,
operation and repair of the Building, Complex and Real Property; and (xii) the
cost of any capital improvements or other costs (I) which are intended as a
labor-saving device or to effect other economies in the operation or maintenance
of the Building, Complex and Real Property, to the extent that the same result
in savings, and (II) made to the Building, Complex or Real Property after the
Lease Commencement Date that are required under any governmental law or
regulation adopted subsequent to the Commencement Date, or (III) which are
reasonably determined by Landlord to be in the best interests of the Building,
the Complex and/or the Real Property; provided, however, that if any such cost
described in (I), (II) or (III) above, is a capital expenditure, such cost shall
be amortized (including interest on the unamortized cost) over its estimated
useful life as Landlord shall reasonably determine, which estimated useful life
shall be comparable to that used by landlords of comparable buildings in the
vicinity of the Complex. If Landlord is not furnishing any particular work or
service (the cost of which, if performed by Landlord, would be included in
Operating Expenses) to a tenant who has undertaken to perform such work or
service in lieu of the performance thereof by Landlord, Operating Expenses shall
be deemed to be increased by an amount equal to the additional Operating
Expenses which would reasonably have been incurred during such period by
Landlord if it had at its own expense furnished such work or service to such
tenant. If the Building or the Complex is not fully occupied during all or a
portion of any Expense Year (including the Base Year), Landlord shall make an
appropriate adjustment to the variable components of Operating Expenses for such
year or applicable portion thereof, employing sound accounting and management
principles, to determine the amount of Operating Expenses that would have been
paid had the Building and/or the Complex been fully occupied; and the amount so
determined shall be deemed to have been the amount of Operating Expenses for
such year, or applicable portion thereof. Landlord shall have the right, from
time to time, to equitably allocate some or all of the Operating Expenses among
different tenants of the Building and/or the Complex (the "Cost Pools"). Such
Cost Pools may include, without limitation, the office space tenants and retail
space tenants of the Building and/or the Complex. Notwithstanding anything to
the contrary set forth in this Lease, solely for the purpose of calculating the
amount of the Operating Expenses attributable to the Base Year, the term
Operating Expenses shall exclude any costs of any capital improvements or
expenditures (including all costs of a capital nature in any manner arising from
the deregulation of utilities)and any market-wide labor-rate increases due to
extraordinary circumstances, including, but not limited to, boycotts and
strikes, and utility rate increases due to extraordinary circumstances
including, but not limited to, conservation surcharges, boycotts, embargoes or
other shortages.
2
Notwithstanding
the foregoing, Operating Expenses shall not, however, include: (A) costs of
leasing commissions, attorneys' fees and other costs and expenses incurred in
connection with negotiations or disputes with present or prospective tenants or
other occupants of the Building or the Complex; (B) costs (including permit,
license and inspection costs) incurred in renovating or otherwise improving,
decorating or redecorating rentable space for other tenants or vacant rentable
space; (C) costs incurred due to the actual violation by Landlord of the terms
and conditions of any lease of space in the Building or the Complex; (D) costs
of overhead or profit increment paid to Landlord or to subsidiaries or
affiliates of Landlord for services in or in connection with the Building or the
Complex to the extent the same exceeds the costs of overhead and profit
increment included in the costs of such services which could be obtained from
third parties on a competitive basis; (E) except as otherwise specifically
provided in this Section 4.3.5, costs of interest on debt or amortization on any
mortgages, and rent payable under any ground lease of the Complex and/or Real
Property; (F) The cost of any service sold to any tenant (including Tenant) or
other occupant for which Landlord is entitled to be reimbursed as an additional
charge or rental over and above the basic rent and escalations payable under the
lease with that tenant; (G) Costs of a capital nature, except as expressly
provided in subsection (xii) above; (H) unless due to any fault or breach by
Tenant, any costs, fines, or penalties incurred due to violations by Landlord of
any governmental rule or authority, this Lease or any other lease in the
Property, or due to Landlord's gross negligence or willful misconduct; (I)
Management costs to the extent they exceed 5% of Rent; (J) The cost of
correcting any building code or other violations which were violations prior to
the Commencement Date; and (K) Costs associated with the investigation and/or
remediation of Hazardous Materials (hereafter defined) present in, on or about
any portion of the Project, unless such costs and expenses are the
responsibility of Tenant as provided in Section 27 hereof, in which event such
costs and expenses shall be paid solely by Tenant in accordance with the
provisions of Section 27 hereof. Additionally, in no event shall Operating
Expenses for any calendar year (or portion thereof) be less than the component
of Operating Expenses comprising a portion of the Base Year.
4.3.6
"Systems and Equipment" shall mean any plant, machinery, transformers, duct
work, cable, wires, and other equipment, facilities, and systems designed to
supply heat, ventilation, air conditioning and humidity or any other services or
utilities, or comprising or serving as any component or portion of the
electrical, gas, steam, plumbing, sprinkler, communications, alarm, security, or
fire/life safety systems or equipment, or any other mechanical, electrical,
electronic, computer or other systems or equipment which serve the Building in
whole or in part.
3
4.3.7
"Tax Expenses" shall mean all federal, state, county, or local governmental or
municipal taxes, fees, assessments, charges or other impositions of every kind
and nature, whether general, supplemental, special, ordinary or extraordinary,
(including, without limitation, real estate taxes, general and special
assessments, transit assessments, fees and taxes, child care subsidies, fees
and/or assessments, job training subsidies, fees and/or assessments, open space
fees and/or assessments, housing subsidies and/or housing fund fees or
assessments, public art fees and/or assessments, leasehold taxes or taxes based
upon the receipt of rent, including gross receipts or sales taxes applicable to
the receipt of rent, personal property taxes imposed upon the fixtures,
machinery, equipment, apparatus, systems and equipment, appurtenances, furniture
and other personal property used in connection with the Real Property), which
Landlord shall pay during any Expense Year because of or in connection with the
ownership, leasing and operation of the Complex and Real Property or Landlord's
interest therein.
4.3.7.1
Tax Expenses shall include, without limitation:
(i) Any
tax on Landlord's rent, right to rent or other income from the Complex and/or
the Real Property or as against Landlord's business of leasing any of the
Complex or the Real Property;
(ii) Any
assessment, tax, fee, levy or charge in addition to, or in substitution,
partially or totally, of any assessment, tax, fee, levy or charge previously
included within the definition of real property tax, it being acknowledged by
Tenant and Landlord that Proposition 13 was adopted by the voters of the State
of California in the June 1978 election ("Proposition 13") and that assessments,
taxes, fees, levies and charges may be imposed by governmental agencies for such
services as fire protection, street, sidewalk and road maintenance, refuse
removal and for other governmental services formerly provided without charge to
property owners or occupants. It is the intention of Tenant and Landlord that
all such new and increased assessments, taxes, fees, levies, and charges and all
similar assessments, taxes, fees, levies and charges be included within the
definition of Tax Expenses for purposes of this Lease;
(iii) Any
assessment, tax, fee, levy, or charge allocable to or measured by the area of
the Premises or the rent payable hereunder, including, without limitation, any
gross income tax upon or with respect to the possession, leasing, operating,
management, maintenance, alteration, repair, use or occupancy by Tenant of the
Premises, or any portion thereof;
(iv) Any
assessment, tax, fee, levy or charge, upon this transaction or any document to
which Tenant is a party, creating or transferring an interest or an estate in
the Premises; and
(v) Any
reasonable expenses incurred by Landlord in attempting to protest, reduce or
minimize Tax Expenses.
4.3.7.2
In no event shall the Tax Expenses for any Expense Year be less than the amount
of Tax Expenses for the Base Year.
4.3.7.3
Notwithstanding anything to the contrary contained in this Section 4.3.7, there
shall be excluded from Tax Expenses (i) all excess profits taxes, franchise
taxes, gift taxes, capital stock taxes, inheritance and succession taxes, estate
taxes, federal and state net income taxes, and other taxes to the extent
applicable to Landlord's net income (as opposed to rents, receipts or income
attributable to operations at the Building, Complex or Real Property), (ii) any
items included as Operating Expenses, (iii) any costs, fines or penalties
payable by Landlord as a result of any delinquent payment of a Tex Expense,
unless due to a fault or breach by Tenant, and (iv) any items paid by Tenant
under Section 4.5 of this Lease.
4.3.8
"Tenant's Share" shall mean the percentage(s) set forth in
Section
9.3 of the Summary. The Tenant's Share for the Building was calculated by
multiplying the number of rentable square feet of the Premises by 100 and
dividing the product by the total rentable square feet in the Building. In the
event either the rentable square feet of the Premises and/or the total rentable
square feet of the Building is changed, the Tenant's Share for the Building
shall be appropriately adjusted, and, as to the Expense Year in which such
change occurs, the Tenant's Share for the Building for such year shall be
determined on the basis of the number of days during such Expense Year that each
such Tenant's Share for the Building was in effect. The Tenant's Share for the
Complex was calculated by multiplying the number of rentable square feet of the
Premises by 100 and dividing the product by the total rentable square feet in
the Complex. In the event either the rentable square feet of the Building and/or
the total rentable square feet of the Complex is changed, the Tenant's Share for
the Complex shall be appropriately adjusted, and, as to the Expense Year in
which such change occurs, the Tenant's Share for the Complex for such year shall
be determined on the basis of the number of days during such Expense Year that
each such Tenant's Share for the Complex was in effect. Landlord represents that
the rentable square footage of the Premises, Building and Complex were all
measured by the same methodology.
4.4
CALCULATION AND PAYMENT OF ADDITIONAL RENT.
4.4.1
CALCULATION OF EXCESS. If for any Expense Year ending or commencing within the
Lease Term, Tenant's Share of Direct Expenses for such Expense Year exceeds
Tenant's Share of Direct Expenses for the Base Year, then Tenant shall pay to
Landlord, in the manner set forth in Section 4.4.2, below, and as Additional
Rent, an amount equal to the excess (the "Excess").
4.4.2
STATEMENT OF ACTUAL DIRECT EXPENSES AND PAYMENT BY TENANT.
4.4.2.1
Landlord shall endeavor to give to Tenant on or before the first day of the
sixth month following the end of each Calendar Year, a statement (the
"Statement") which shall state the Direct Expenses incurred or accrued for such
preceding Expense Year, and which shall indicate the amount, if any, of any
Excess. Upon receipt of the Statement for each Expense Year ending during the
Lease Term, if an Excess is present, Tenant shall pay, with its next installment
of Base Rent due, the full amount of the Excess for such Expense Year, less the
amounts, if any, paid during such Expense Year as "Estimated Excess," as that
term is defined in Section
4.4.3 of this Lease. In the event that the amount paid by Tenant during such
Expense Year as an Estimated Excess exceeds the actual Direct Expenses, Landlord
shall remit such difference to Tenant within thirty (30) days. The failure of
Landlord to timely furnish the Statement for any Expense Year shall not
prejudice or prevent Landlord from enforcing its rights under this Article 4.
Even though the Lease Term has expired and Tenant has vacated the Premises, when
the final determination is made of Tenant's Share of the Direct Expenses for the
Expense Year in which this Lease terminates, if an Excess is present, Tenant
shall immediately pay to Landlord an amount as calculated pursuant to the
provisions of Section 4.4.1 of this Lease, and any overpayment by Tenant shall
be returned to Tenant within thirty (30) days.
4
4.4.2.2
After delivery to Landlord of at least thirty (30) days' prior written notice,
Tenant, at its sole cost and expense through any accountant designated by it,
shall have the right to examine and/or audit the books and records evidencing
such costs and expenses for the previous one (1) calendar year, during
Landlord's reasonable business hours but not more frequently than once during
any calendar year. Any such accounting firm designated by Tenant may not be
compensated on a contingency fee basis. The results of any such audit (and any
negotiations between the parties related thereto) shall be maintained strictly
confidential by Tenant and its accounting firm and shall not be disclosed,
published or otherwise disseminated to any other party other than to Landlord
and its authorized agents. Landlord and Tenant each shall use its best efforts
to cooperate in such negotiations and to promptly resolve any discrepancies
between Landlord and Tenant in the accounting of such costs and expenses. If
through such audit it is conclusively determined that there is a discrepancy of
more than seven percent (7%) of the total expenses, then Landlord shall
reimburse Tenant for Tenant's reasonable out-of-pocket accounting costs and
expenses incurred by Tenant in performing such audit. However, if through such
audit it is conclusively determined that there is a discrepancy of seven percent
(7%) or less, then Tenant shall reimburse Landlord for the reasonable
out-of-pocket costs and expenses incurred by Landlord in connection with such
audit.
4.4.2.3
The provisions of this Section 4.4.2 shall survive the expiration or earlier
termination of the Lease Term.
4.4.3
STATEMENT OF ESTIMATED DIRECT EXPENSES. In addition, Landlord shall endeavor to
give Tenant a yearly expense estimate statement (the "Estimate Statement") which
shall set forth Landlord's reasonable estimate (the "Estimate") of what the
total amount of Direct Expenses for the then-current Expense Year, beginning
with calendar year 2002, shall be and the estimated Excess (the "Estimated
Excess") as calculated by comparing Tenant's Share of Direct Expenses, which
shall be based upon the Estimate, to Tenant's Share of Direct Expenses for the
Base Year. The failure of Landlord to timely furnish the Estimate Statement for
any Expense Year shall not preclude Landlord from enforcing its rights to
collect any Estimated Excess under this Article 4. Commencing January 1, 2002,
if pursuant to the Estimate Statement an Estimated Excess is calculated for the
then-current Expense Year, Tenant shall pay, with its next installment of Base
Rent due, a fraction of the Estimated Excess for the then-current Expense Year
(reduced by any amounts paid pursuant to the last sentence of this Section
4.4.3). Such fraction shall have as its numerator the number of months which
have elapsed in such current Expense Year to the month of such payment, both
months inclusive, and shall have twelve (12) as its denominator. Until a new
Estimate Statement is furnished, Tenant shall pay monthly, with the monthly Base
Rent installments, an amount equal to one-twelfth (1/12) of the total Estimated
Excess set forth in the previous Estimate Statement delivered by Landlord to
Tenant.
4.5 TAXES
AND OTHER CHARGES FOR WHICH TENANT IS DIRECTLY RESPONSIBLE. Tenant shall
reimburse Landlord upon demand for any and all taxes or assessments required to
be paid by Landlord (except to the extent included in Tax Expenses by Landlord),
excluding state, local and federal personal or corporate income taxes measured
by the net income of Landlord from all sources, and estate and inheritance
taxes, whether or not now customary or within the contemplation of the parties
hereto, when:
4.5.1
Said taxes are measured by or reasonably attributable to the cost or value of
Tenant's equipment, furniture, fixtures and other personal property located in
the Premises, or by the cost or value of any leasehold improvements made in or
to the Premises by or for Tenant, to the extent the cost or value of such
leasehold improvements exceeds the cost or value of a building standard
build-out as determined by Landlord regardless of whether title to such
improvements shall be vested in Tenant or Landlord;
4.5.2
Said taxes are assessed upon or with respect to the possession, leasing,
operation, management, maintenance, alteration, repair, use or occupancy by
Tenant of the Premises or any portion of the Complex and Real Property
(including the Building Parking Facility); or
4.5.3
Said taxes are assessed upon this transaction or any document to which Tenant is
a party creating or transferring an interest or an estate in the
Premises.
4.6 LATE
CHARGES. If any installment of Rent or any other sum due from Tenant shall not
be received by Landlord or Landlord's designee by the due date therefor, then
Tenant shall pay to Landlord a late charge equal to five percent (5%) of the
amount due plus any attorneys' fees incurred by Landlord by reason of Tenant's
failure to pay Rent and/or other charges when due hereunder. The late charge
shall be deemed Additional Rent and the right to require it shall be in addition
to all of Landlord's other rights and remedies hereunder, at law and/or in
equity and shall not be construed as liquidated damages or as limiting
Landlord's remedies in any manner. In addition to the late charge described
above, any Rent or other amounts owing hereunder which are not paid by the date
that they are due shall thereafter bear interest until paid at a rate (the
"Interest Rate") equal to the lesser of (i) the "Prime Rate" or "Reference Rate"
announced from time to time by the Bank of America (or such reasonable
comparable national banking institution as selected by Landlord in the event
Bank of America ceases to exist or publish a Prime Rate or Reference Rate), plus
four percent (4%), or (ii) the highest rate permitted by applicable law. If a
late charge or other charge becomes payable for any three (3) installments of
Rent within any twelve (12) month period, then Landlord, at Landlord's sole
option, can either require the Rent be paid quarterly in advance, or be paid
monthly in advance by cashier's check or by electronic funds
transfer.
5
ARTICLE
5 - USE OF PREMISES
Tenant
shall use the Premises solely for general office purposes consistent with the
character of the Building of a high quality nature and approved biotechnology
laboratory use, to the extent permitted by the City of Alameda and all
governmental authorities having jurisdiction thereof, and Tenant shall not use
or permit the Premises to be used for any other purpose or purposes whatsoever.
Tenant further covenants and agrees that it shall not use, or suffer or permit
any person or persons to use, the Premises or any part thereof for any use or
purpose contrary to the provisions of Exhibit D, attached hereto, or in
violation of the laws of the United States of America, the state in which the
Building is located, or the ordinances, regulations or requirements of the local
municipal or county governing body or other lawful authorities having
jurisdiction over the Building. Tenant shall not violate any provisions of any
ground or underlying leases, now or hereafter affecting the Building, Complex
and/or Real Property. Tenant shall also not violate any documents, matters or
instruments, including without limitation, any declarations of covenants,
conditions and restrictions, and any supplements thereto, each of which has been
or hereafter is recorded in any official or public records with respect to the
Premises, Building, Complex and/or Real Property, or any portion thereof. Tenant
agrees to, and does hereby, assume full and complete responsibility to ensure
that the Premises are adequate to fully meet the needs and requirements of
Tenant's intended operations of its business within the Premises, and Tenant's
use of the Premises and that same are in compliance with all applicable Laws
throughout the Lease Term. Additionally, Tenant shall be solely responsible for
the payment of all costs, fees and expenses associated with any modifications,
improvements or Alterations to the Premises, the Building, the Common Areas, the
Complex and/or the Real Property occasioned by the enactment of, or changes to,
any Laws arising from Tenant's particular use of the Premises or Alterations,
improvements or additions made to the Premises regardless of when such Laws
became effective. Tenant shall not do or permit anything to be done in or about
the Premises which will in any way obstruct or interfere with the rights of
Landlord, other tenants or occupants of the Building, other buildings in the
Complex, or other persons or businesses in the area, or injure or annoy other
tenants or use or allow the Premises to be used for any unlawful or
objectionable purpose, as determined by Landlord, in its reasonable discretion.
Tenant shall not cause, maintain or permit any private or public nuisance in, on
or about the Premises, Building, Common Areas, Complex and/or Real Property,
including, but not limited to, any offensive odors, noises, fumes or vibrations.
Tenant shall not damage or deface or otherwise commit or suffer to be committed
any waste in, upon or about the Premises. Tenant shall not place or store, nor
permit any other person or entity to place or store, any property, equipment,
materials, supplies, personal property or any other items or goods outside of
the Premises for any period of time. Tenant shall not install any radio or
television antenna, loudspeaker or other device on the roof or exterior walls of
the Building, without the prior written consent of the Landlord, which consent
shall not be unreasonably withheld, conditioned or delayed. In all circumstances
Tenant shall not interfere with radio or television broadcasting or reception or
other telecommunications broadcasting or reception from or in the Building or
elsewhere. Tenant shall place no loads upon the floors, walls, or ceilings of
the Premises in excess of the average pounds of live load per square foot floor
area specified for the Building by the applicable Uniform Building Code or which
may damage the Building or outside areas, with the partitions to be considered a
part of the live load. Landlord reserves the right to prescribe the weight and
position of all safes, files and heavy equipment which Tenant desires to place
in the Premises so as to distribute properly the weight thereof. Tenant's
business machines and mechanical equipment which cause vibration or noise that
may be transmitted to the Building structure or to any other space in the
Building shall be so installed, maintained and used by Tenant as to eliminate
such vibration or noise. Tenant shall be responsible for all structural
engineering required to determine structural load. Landlord shall not be
responsible for any damage or liability for any of such events. Tenant hereby
acknowledges and agrees that Landlord has informed Tenant that noise produced by
aircraft used at the Metropolitan Oakland International Airport
(the "Airport") which adjoins the Complex may be heard at the Premises. Tenant
further acknowledges and agrees that Landlord has informed Tenant that the
Premises are subject to a recorded noise easement and release pursuant to which
the owners of the Airport are released from any claims or lawsuits for damages
by any persons or entities using the Complex (including without limitation,
Tenant) with respect to airport operations, including without limitation,
aircraft related noise. Tenant shall, and hereby agrees to, indemnify, defend,
protect, and hold harmless the Landlord Parties (hereafter defined in Article
10) from and against all liabilities, damages, claims, losses, judgments,
charges and expenses (including reasonable attorneys' fees, costs of court and
expenses necessary in the prosecution or defense of any litigation including the
enforcement of this provision) arising from or in any way related to, directly
or indirectly, any claims made by Tenant, any employee, agent or invitee of
Tenant, or any person claiming by or through Tenant with respect to such airport
operations, including without limitation, aircraft related
noise.
ARTICLE
6 - SERVICES AND UTILITIES
6.1
STANDARD TENANT SERVICES. Landlord shall provide the following services on all
days during the Lease Term, unless otherwise stated below.
6.1.1
Subject to reasonable changes implemented by Landlord and to all governmental
rules, regulations and guidelines applicable thereto, Landlord shall provide
heating and air conditioning when necessary for normal comfort for normal office
use in the Premises, from Monday through Friday, during the period from 8:00
a.m. to 6:00 p.m., except for the date of observation of New Year's Day,
Presidents' Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
Christmas Day and other locally or nationally recognized holidays (collectively,
the "Holidays").
6.1.2
Landlord shall provide adequate electrical wiring and facilities and power for
normal general office use as reasonably determined by Landlord. Tenant shall
bear the cost of replacement of lamps, starters and ballasts for lighting
fixtures within the Premises.
6.1.3
Landlord shall provide city water from the regular Building outlets for
drinking, lavatory and toilet purposes, and for laboratory use to the extent
that such does not exceed the quantity that would be used for normal office
use.
6.1.4
Landlord shall provide janitorial services five (5) days per week, except the
date of observation of the Holidays, in and about the Premises and window
washing services in a manner consistent with other comparable buildings in the
vicinity of the Building.
6
6.1.5
Landlord shall provide non-exclusive automatic passenger elevator service at all
times.
6.1.6
Landlord shall provide non-exclusive freight elevator service subject to
scheduling by Landlord.
6.2
OVERSTANDARD TENANT USE. Tenant shall not, without Landlord's prior written
consent, use heat-generating machines, machines other than normal fractional
horsepower office machines, or equipment or lighting other than building
standard lights in the Premises, which may affect the temperature otherwise
maintained by the air conditioning system or increase the water normally
furnished for the Premises by Landlord pursuant to the terms of Section 6.1 of
this Lease. If Tenant uses water or heat or air conditioning in excess of that
supplied by Landlord pursuant to Section 6.1 of this Lease, or if Tenant's
consumption of electricity shall exceed six (6) watts per usable square foot of
the Premises, calculated on an annualized basis for the hours described in
Section
6.1.1 above, Tenant shall pay to Landlord, within ten (10) days after billing,
the cost of such excess consumption, the cost of the installation, operation,
and maintenance of equipment which is installed in order to supply such excess
consumption, and the cost of the increased wear and tear on existing equipment
caused by such excess consumption; and Landlord may install devices to
separately meter any increased use and in such event Tenant shall pay the
increased cost directly to Landlord, within ten (10) days after demand,
including the cost of such additional metering devices. If Tenant desires to use
heat, ventilation or air conditioning during hours other than those for which
Landlord is obligated to supply such utilities pursuant to the terms of Section
6.1 of this Lease, (i) Tenant shall give Landlord such prior notice, as Landlord
shall from time to time establish as appropriate, of Tenant's desired use, (ii)
Landlord shall supply such utilities to Tenant at such hourly cost to Tenant as
Landlord shall from time to time reasonably establish, based on Landlord's
actual costs therefor, and (iii) Tenant shall pay such cost within ten (10) days
after billing.
6.3
INTERRUPTION OF USE. Tenant agrees that Landlord shall not be liable for
damages, by abatement of Rent or otherwise, for failure to furnish or delay in
furnishing any service (including telephone and telecommunication services), or
for any diminution in the quality or quantity thereof, when such failure or
delay or diminution is occasioned, in whole or in part, by repairs,
replacements, or improvements, by any strike, lockout or other labor trouble, by
inability to secure electricity, gas, water, or other fuel at the Building after
reasonable effort to do so, by any accident or casualty whatsoever, by act or
default of Tenant or other parties, or by any other cause beyond Landlord's
reasonable control; and such failures or delays or diminution shall never be
deemed to constitute an eviction or disturbance of Tenant's use and possession
of the Premises or relieve Tenant from paying Rent or performing any of its
obligations under this Lease. Furthermore, Landlord shall not be liable under
any circumstances for a loss of, or injury to, property or for injury to, or
interference with, Tenant's business, including, without limitation, loss of
profits, however occurring, through or in connection with or incidental to a
failure to furnish any of the services or utilities as set forth in this Article
6.
Notwithstanding the foregoing, if an interruption or cessation of utilities
results from the gross negligence or willful misconduct of Landlord, or its
employees, agents and contractors, and not due to any fault or breach by Tenant,
and the Premises are not usable by Tenant for the conduct of Tenant's business
as a result thereof, Base Rent and applicable Direct Expenses not actually
incurred up to that point by Tenant shall be abated for the period which
commences five (5) business days after the date Tenant gives to Landlord notice
of such interruption until such utilities are restored.
6.4
ADDITIONAL SERVICES. Tenant shall provide Landlord the right of first offer with
respect to any additional services which may be required by Tenant, including,
without limitation, locksmithing, lamp replacement, additional janitorial
service, and additional repairs and maintenance, provided that Tenant shall pay
to Landlord upon billing, the sum of all costs to Landlord of such additional
services plus an administration fee not to exceed five percent (5%) of such
costs. Charges for any utilities or service for which Tenant is required to pay
from time to time hereunder, shall be deemed Additional Rent hereunder and shall
be billed on a monthly basis.
6.5
ALTERNATE ELECTRIC SERVICE PROVIDER. Notwithstanding anything to the contrary
contained herein, if permitted by applicable Laws, Landlord shall have the right
at any time and from time to time during the Term of this Lease to either
contract for service from a different company or companies (each such company
shall be referred to herein as an "Alternate Service Provider") other than the
company or companies presently providing electricity service for the Building,
the Complex or the Real Property (the "Electric Service Provider") or continue
to contract for service from the Electric Service Provider, at Landlord's sole
discretion. Tenant hereby agrees to cooperate with Landlord, the Electric
Service Provider, and any Alternate Service Provider at all times and, as
reasonably necessary, shall allow Landlord, the Electric Service Provider, and
any Alternate Service Provider reasonable access to the Building's electric
lines, feeders, risers, wiring, and any other machinery within the
Premises.
6.6
OFFICE AND COMMUNICATIONS SERVICES.
6.6.1
Landlord has advised Tenant that certain office and communications services may
be offered to tenants of the Building by a concessionaire under contract to
Landlord ("Provider"). Tenant shall be permitted to contract with Provider for
the provision of any or all of such services on such terms and conditions as
Tenant and Provider may agree. Tenant shall also be permitted to obtain office
and communications services from any other reputable person or entity in the
business of providing the same (herein called an "Alternate Provider"), provided
that Landlord shall not be required thereby to make any alterations in or to any
part of the Building or the use of any facilities or equipment of the Building,
and provided further that no such services provided by an Alternate Provider, or
any equipment or facilities used or to be used in connection therewith shall be
incompatible in any respect with, or shall interfere with or otherwise impair or
adversely affect, the operation, reliability or quality of the Building systems
or any services, equipment or facilities used or operated by Provider or any
other tenant in the Building.
6.6.2
Tenant acknowledges and agrees that: (i) Landlord has made no warranty or
representation to Tenant with respect to the availability of any such services,
whether provided by Provider or any Alternate Provider, or the quality,
reliability or suitability thereof; (ii) neither Provider nor any Alternate
Provider is acting as the agent or representative of Landlord in the provision
of such services, and Landlord shall have no liability or responsibility for any
failure or inadequacy of such services or any equipment or facilities used in
the furnishing thereof, or any act or omission of Provider or any Alternate
Provider or their agents, employees, representatives, officers or contractors;
(iii) Landlord shall have no responsibility or liability for the installation,
alteration, repair, maintenance, furnishing, operation adjustment or removal of
any such services, equipment or facilities; and (iv) any contract or other
agreement between Tenant and Provider or any Alternate Provider shall be
independent of this Lease, the obligations of Tenant hereunder, and the rights
of Landlord hereunder. Without limiting the generality of the foregoing, no
default or failure of Provider or any Alternate Provider with respect to any
such services, equipment, facilities, or under any contract or agreement
relating thereto, shall have any effect on this Lease or give to Tenant any
offset or defense to the full and timely performance of its obligations
hereunder, or entitle Tenant to any abatement of Rent or Additional Rent or any
other payment required to be made by Tenant hereunder, or constitute any actual
or constructive eviction of Tenant, or otherwise give rise to any other claim of
any nature against Landlord.
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6.7
UTILITIES FOR LABORATORY SPACE. In the event Tenant constructs a laboratory
within the Premises, Tenant shall cause such laboratory to be separately metered
and shall pay the utility companies directly for the cost of any utilities. In
the event Tenant pays the utility companies directly for the cost of any
utilities, costs for such utilities shall not be included in Direct
Expenses.
ARTICLE
7 - REPAIRS
7.1
TENANT'S REPAIRS. Subject to Landlord's repair obligations set forth in Sections
7.2, 11.1, and 12 below, Tenant shall, at Tenant's own expense, keep and
maintain the Premises, including all improvements, fixtures and furnishings
therein, in good and safe order, repair and condition at all times during the
Lease Term, which repair obligations shall include, without limitation, the
obligation to promptly and adequately repair all damage to the Premises and
replace or repair all damaged or broken fixtures and appurtenances; provided,
however, that, at Landlord's option if Tenant fails to make such repairs,
Landlord may, but need not, make such repairs and replacements, and Tenant shall
pay Landlord the cost thereof, including a percentage of the cost thereof (to be
uniformly established for the Building) sufficient to reimburse Landlord for all
overhead, general conditions, fees and other costs or expenses arising from
Landlord's involvement with such repairs and replacements forthwith upon being
billed for same, not to exceed five percent (5%) of the cost
thereof.
7.2
LANDLORD'S REPAIRS. Anything contained in Section 7.1 above to the contrary
notwithstanding, and subject to the provisions of Articles 11 and 12 of this
Lease, Landlord shall repair and maintain the structural portions of the
Building, roof (structure and membrane), foundation, and Systems and Equipment
including without limitation the basic plumbing, heating, ventilating, air
conditioning and electrical systems installed or furnished by Landlord (but not
including any non-base building facilities installed by or on behalf of Tenant);
provided, however, if such maintenance and repairs are caused in part or in
whole by the act, neglect, fault of or omission of any duty by Tenant or its
agents, servants, contractors, assignees, subtenants, employees or invitees,
Tenant shall pay to Landlord as additional rent, the reasonable cost of such
maintenance and repairs. Landlord shall not be liable for any failure to make
any such repairs, or to perform any maintenance unless such failure shall
persist for an unreasonable time after written notice of the need of such
repairs or maintenance is given to Landlord by Tenant. There shall be no
abatement of rent and no liability of Landlord by reason of any injury to or
interference with Tenant's business arising from the making of any repairs,
alterations or improvements in or to any portion of the Complex, the Building or
the Premises or in or to fixtures, appurtenances and equipment therein. Tenant
hereby waives and releases its right to make repairs at Landlord's expense under
Sections 1941 and 1942 of the California Civil Code; or under any similar law,
statute, or ordinance now or hereafter in effect.
ARTICLE
8 - ADDITIONS AND ALTERATIONS
8.1
LANDLORD'S CONSENT TO ALTERATIONS. Tenant may not make any improvements,
alterations, additions or changes to the Premises (collectively, the
"Alterations") without first procuring the prior written consent of Landlord to
such Alterations, which consent shall be requested by Tenant not less than
thirty (30) days prior to the commencement thereof, and which consent shall not
be unreasonably withheld, conditioned, or delayed by Landlord; provided,
however, Landlord may withhold its consent in its sole and absolute discretion
with respect to any Alterations which may affect the structural components of
the Building. Subject to section 8.2 below, Landlord hereby expressly grants to
Tenant the right to make roof penetrations in connection with Tenant's
alterations or improvements, subject to obtaining the prior written consent of
Landlord as to the location and manner of installation of any such roof
penetration, which consent shall not be unreasonably withheld, conditioned or
delayed. Tenant shall pay for all overhead, general conditions, fees and other
costs and expenses of the Alterations, and shall pay to Landlord a Landlord
supervision fee of five percent (5%) of the cost of the
Alterations.
8.2
MANNER OF CONSTRUCTION.
8.2.1
Landlord may impose, as a condition of its consent to all Alterations or repairs
of the Premises or about the Premises, such requirements as Landlord in its
reasonable discretion may deem desirable, including, but not limited to, the
requirement that Tenant utilize for such purposes only contractors, materials,
suppliers, mechanics and materialmen approved by Landlord (which shall not be
unreasonably withheld, conditioned, or delayed); provided, however, Landlord may
impose such requirements as Landlord may determine, in its sole and absolute
discretion, with respect to any work affecting the structural components of the
Building, Systems, Roof and/or Equipment (including designating specific
contractors to perform such work). Tenant shall construct such Alterations and
perform such repairs in conformance with any and all applicable rules and
regulations of any federal, state, county or municipal code or ordinance and
pursuant to a valid building permit, mechanical permit, electrical permit and
all other permits (as applicable), issued by the city in which the Building is
located, and in conformance with Landlord's reasonable construction rules and
regulations. Landlord's approval of the plans, specifications and working
drawings for Tenant's Alterations shall create no responsibility or liability on
the part of Landlord for their completeness, design sufficiency, or compliance
with all laws, rules and regulations of governmental or quasi-governmental
agencies or authorities. All work with respect to any Alterations must be done
in a good and workmanlike manner and diligently prosecuted to completion to the
end that the Premises shall at all times be a complete unit except during the
period of work. In performing the work of any such Alterations, Tenant shall
have the work performed in such manner as not to obstruct or materially impair
access to the Building or the Common Areas for any other tenant of the Building,
and as not to obstruct the business of Landlord or other tenants in the
Building, or interfere with the labor force working in the Building. If Tenant
makes any Alterations, Tenant agrees to carry "Builder's All Risk" insurance in
an amount reasonably approved by Landlord covering the construction and
completion of such Alterations, and such other insurance as Landlord may
require, it being understood and agreed that all of such Alterations shall be
insured by Tenant pursuant to Article 10 of this Lease immediately upon
completion thereof. In addition, Landlord may, in its discretion, require Tenant
to obtain a lien and completion bond or some alternate form of security
satisfactory to Landlord in an amount sufficient to ensure the lien-free
completion of such Alterations the cost of which exceed $100,000 and naming
Landlord as a co-obligee. Upon completion of any Alterations, Tenant shall (i)
cause a Notice of Completion to be recorded in the office of the Recorder of the
county in which the Building is located in accordance with Section 3093 of the
Civil Code of the State of California or any successor statute, (ii) deliver to
the Building management office a reproducible copy of the "as built" drawings of
the Alterations, (iii) deliver to Landlord a true and complete copy of the
recorded Notice of Completion, and (iv) deliver to Landlord evidence of payment,
contractors' affidavits and full and final waivers of all liens for labor,
services or materials.
8
8.2.2 Any
Alterations that require any penetration of the Roof shall only be permitted to
the extent permitted by the City of Alameda and all agencies and governmental
authorities having jurisdiction thereof. The location and size of any roof-top
equipment shall be subject to Landlord's approval, not to unreasonably withheld,
and which best promotes the safety, aesthetics and efficiency of any roof-top
equipment; provided, all of the roof-top equipment and any modifications thereto
or placement thereof shall be (i) at Tenant's sole cost and expense, (ii)
contained visually within the roof screen, (iii) installed and operated to
Landlord's reasonable specifications, and (iv) installed, maintained, operated
and removed in accordance with all Development Documents, Recorded Matters,
Rules and Regulations, applicable Laws, and the provisions of Section 10 of this
Lease. For purposes hereof, any such equipment shall be construed as part of the
Tenant's Property and shall be removed by Tenant at the expiration or earlier
termination of this Lease in accordance with the provisions of this Lease. All
modifications to the Building, including the Roof, if any, shall be reasonably
approved by Landlord prior to commencement of any work with respect to the
Equipment. Tenant shall restore the Roof and any other portion of the Building
affected by any roof-top equipment to its original condition, excepting ordinary
wear and tear and/or damage or destruction due to fire or other casualty not
caused directly or indirectly by Tenant, its agents, employees, contractors or
the Equipment or any part thereof. Notwithstanding anything to the contrary
contained herein, Tenant may not assign, lease, rent, sublet or otherwise
transfer any of its interest in the Roof or any roof-top equipment except
together with the remainder of all of the Premises as more particularly set
forth in Section 14. Each of the other provisions of this Lease shall be
applicable to any roof-top equipment and the use of the Roof by Tenant,
including without limitation, Sections 11 and 12 of this Lease. Any roof-top
equipment shall comply with all rules and regulations of any agencies having
jurisdiction thereof. In addition, Tenant shall be solely responsible for
insuring any roof-top equipment, and Landlord shall have no responsibility
therefor. Tenant shall indemnify, defend (by counsel reasonably acceptable to
Landlord) and hold harmless Landlord and the other Indemnitees from and against
any and all claims, demands, liabilities, damages, judgments, losses, penalties,
costs and expenses (including reasonable attorneys' fees) Landlord may suffer or
incur arising out of or related to the installation, use, operation,
maintenance, replacement and/or removal of any roof-top equipment or any portion
thereof, including without limitation, the cost of repairs and replacements to
the roof of the Building occasioned by the installation, maintenance, repairs
and removal of any roof-top equipment.
8.3
LANDLORD'S PROPERTY. All Alterations, improvements, fixtures (other than
Tenant's trade fixtures) and/or equipment which may be installed or placed in or
about the Premises, and all signs installed in, on or about the Premises, from
time to time, shall be at the sole cost of Tenant and shall, upon expiration or
earlier termination of this Lease, become the property of Landlord. Furthermore,
Landlord may require that Tenant remove any sign, equipment, trade fixture,
improvement or Alteration upon the expiration or early termination of the Lease
Term, and repair any damage to the Premises and Building caused by such removal.
If Tenant fails to complete such removal and/or to repair any damage caused by
the removal of any sign, equipment, trade fixture, improvement or Alteration,
Landlord may do so and may charge the cost thereof to Tenant.
ARTICLE
9 - COVENANT AGAINST LIENS
Tenant
has no authority or power to cause or permit any lien or encumbrance of any kind
whatsoever, whether created by act of Tenant, operation of law or otherwise, to
attach to or be placed upon the Real Property, Complex, Building or Premises,
and any and all liens and encumbrances created by Tenant shall attach to
Tenant's interest only. Landlord shall have the right at all times to post and
keep posted on the Premises any notice which it deems necessary for protection
from such liens. Tenant covenants and agrees not to suffer or permit any lien of
suppliers, mechanics or materialmen or others to be placed against the Real
Property, the Complex, the Building or the Premises with respect to work or
services claimed to have been performed for or materials claimed to have been
furnished to Tenant or the Premises, and, in case of any such lien attaching or
notice of any lien, Tenant covenants and agrees to cause it to be immediately
released and removed of record. Notwithstanding anything to the contrary set
forth in this Lease, if any such lien is not released and removed on or before
fifteen (15) days following the date notice of such lien is delivered by
Landlord to Tenant, Landlord, at its sole option, may immediately take all
action necessary to release and remove such lien, without any duty to
investigate the validity thereof, and all sums, costs and expenses, including
reasonable attorneys' fees and costs, incurred by Landlord in connection with
such lien shall be deemed Additional Rent under this Lease and shall immediately
be due and payable by Tenant.
ARTICLE
10 - INDEMNIFICATION AND INSURANCE
10.1
INDEMNIFICATION AND WAIVER. Tenant's obligations pursuant to this Article 10
shall apply, throughout the Lease Term, to both the Initial Premises and the
Remaining Premises. Unless due to Landlord's gross negligence, willful
misconduct or a breach by Landlord hereunder, Tenant hereby assumes all risk of
damage to property and injury to persons, in, on, or about the Premises from any
cause whatsoever and agrees that Landlord, and its members, submembers, partners
and subpartners, and their respective officers, agents, property managers,
employees, and independent contractors (collectively, "Landlord Parties") shall
not be liable for, and are hereby released from any responsibility for, any
damage to property or injury to persons or resulting from the loss of use
thereof, which damage or injury is sustained by Tenant or by other persons
claiming through Tenant. Tenant shall, and hereby agrees to, indemnify, defend,
protect, and hold harmless the Landlord Parties from and against all
liabilities, damages, claims, losses, judgments, charges and expenses (including
reasonable attorneys' fees, costs of court and expenses necessary in the
prosecution or defense of any litigation including the enforcement of this
provision) arising from or in any way related to, directly or indirectly, (i)
the use of the Premises, Building, Complex and/or Real Property by Tenant or by
the contractors, agents, employees, licensees, invitees, subtenants, and assigns
of Tenant or any such person (collectively, the "Tenant's Representatives"),
(ii) the conduct of Tenant's business, (iii) from any activity, work or thing
done, permitted or suffered by Tenant in or about the Premises, (iv) in any way
connected with the Premises or with the installation, placement and removal of
Alterations, improvements, fixtures, personal property and/or equipment in, on
or about the Premises, including, but not limited to, any liability for injury
to person or property of Tenant, Tenant's Representatives, or third party
persons, and/or (v) Tenant's failure to perform any covenant or obligation of
Tenant under this Lease; provided, however, the terms of the foregoing indemnity
shall not apply to the gross negligence, willful misconduct, or breach of this
Lease of Landlord. The provisions of this Section 10.1 shall survive the
expiration or sooner termination of this Lease.
9
10.2
TENANT'S COMPLIANCE WITH LANDLORD'S FIRE AND CASUALTY INSURANCE. Tenant shall,
at Tenant's expense, comply as to the Premises with all insurance company
requirements pertaining to the use of the Premises. If Tenant's conduct or use
of the Premises causes any increase in the premium for such insurance policies,
then Tenant shall reimburse Landlord for any such increase. Tenant, at Tenant's
expense, shall comply with all rules, orders, regulations or requirements of the
American Insurance Association (formerly the National Board of Fire
Underwriters) and with any similar body relating specifically to Tenant's use or
occupancy.
10.3
TENANT'S INSURANCE. Tenant shall maintain the following coverages in the
following amounts.
10.3.1
Commercial General Liability Insurance covering the insured against claims of
bodily injury, personal injury and property damage arising out of Tenant's
operations, assumed liabilities or use of the Premises, including a Broad Form
Commercial General Liability endorsement covering the insuring provisions of
this Lease and the performance by Tenant of the indemnity agreements set forth
in Section 10.1 of this Lease, for limits of liability not less
than:
|
$3,000,000
each occurrence;
|
|
|
Damage
Liability
|
$3,000,000
annual aggregate
|
|
Personal
Injury Liability
|
$3,000,000
each occurrence;
|
|
$3,000,000
annual aggregate
|
10.3.2
Physical Damage Insurance covering (i) all office furniture, trade fixtures,
office equipment, merchandise and all other items of Tenant's property on the
Premises installed by, for, or at the expense of Tenant, (ii) Tenant's
Alterations, including any Alterations which Landlord permits to be installed
above the ceiling of the Premises or below the floor of the Premises, and (iii)
all other improvements, alterations and additions to the Premises, including any
improvements, alterations or additions installed at Tenant's request above the
ceiling of the Premises or below the floor of the Premises. Such insurance shall
be written on an "all risk" or "special form" of physical loss or damage basis,
for the full replacement cost value new without deduction for depreciation of
the covered items and in amounts that meet any co-insurance clauses of the
policies of insurance and shall include a vandalism and malicious mischief
endorsement, sprinkler leakage coverage and earthquake sprinkler leakage
coverage.
10.3.3
FORM OF POLICIES. The minimum limits of policies of insurance required of Tenant
under this Lease shall in no event limit the liability of Tenant under this
Lease. Such insurance shall (i) name Landlord, and any other party it so
specifies, as an additional insured; (ii) specifically cover the liability
assumed by Tenant under this Lease, including, but not limited to, Tenant's
obligations under Section 10.1 of this Lease; (iii) be issued by an insurance
company having a rating of not less than A-:X in A.M. Best's Rating Guide or
which is otherwise acceptable to Landlord, licensed to do business in the state
in which the Building is located, and domiciled in the United States; (iv) be
primary insurance as to all claims thereunder and provide that any insurance
carried by Landlord is excess and is non-contributing with any insurance
required of Tenant; (v) provide that said insurance shall not be canceled or
coverage changed unless thirty (30) days' prior written notice shall have been
given to Landlord and any mortgagee or ground or underlying lessor of Landlord;
and (vi) contain a cross-liability endorsement or severability of interest
clause acceptable to Landlord. Tenant shall deliver said policy or policies or
certificates thereof to Landlord on or before the Lease Commencement Date and at
least thirty (30) days before the expiration dates thereof. If Tenant shall fail
to procure such insurance, or to deliver such policies or certificate, within
such time periods, Landlord may, at its option, in addition to all of its other
rights and remedies under this Lease, and without regard to any notice and cure
periods set forth in Section 19.1, procure such policies for the account of
Tenant, and the cost thereof shall be paid to Landlord as Additional Rent within
ten (10) days after delivery of bills therefor.
10.4
SUBROGATION. Landlord and Tenant agree to have their respective insurance
companies issuing property damage insurance waive any rights of subrogation that
such companies may have against Landlord or Tenant, as the case may be, so long
as the insurance carried by Landlord and Tenant, respectively, is not
invalidated thereby. As long as such waivers of subrogation are contained in
their respective insurance policies, Landlord and Tenant hereby waive any right
that either may have against the other on account of any loss or damage to their
respective property to the extent such loss or damage is insured under policies
of insurance for fire and all risk coverage, theft, public liability, or other
similar insurance.
10.5
ADDITIONAL INSURANCE OBLIGATIONS. Tenant shall carry and maintain during the
entire Lease Term, at Tenant's sole cost and expense, increased amounts of the
insurance required to be carried by Tenant pursuant to this Article 10, and such
other reasonable types of insurance coverage and in such reasonable amounts
covering the Premises and Tenant's operations therein, as may be reasonably
requested by Landlord from time to time.
ARTICLE
11 - DAMAGE AND DESTRUCTION
11.1
REPAIR OF DAMAGE TO PREMISES BY LANDLORD. Tenant shall promptly notify Landlord
of any damage to the Premises resulting from fire or any other casualty. If the
Premises or any Common Areas of the Building serving or providing access to the
Premises shall be damaged by fire or other casualty, Landlord shall promptly and
diligently, subject to reasonable delays for insurance adjustment or other
matters beyond Landlord's reasonable control, and subject to all other
provisions of this Article 11, restore the Base, Shell, and Core of the Premises
and such Common Areas. Such restoration shall be to substantially the same
condition of the Base, Shell, and Core of the Premises and Common Areas prior to
the casualty, except for modifications required by zoning and building codes and
other laws or by the holder of a mortgage on the Building, or the lessor of a
ground or underlying lease with respect to the Real Property, the Complex and/or
the Building, or any other modifications to the Common Areas deemed desirable by
Landlord, provided access to the Premises and any common restrooms serving the
Premises shall not be materially impaired. Notwithstanding any other provision
of this Lease, upon the occurrence of any damage to the Premises, Tenant shall
assign to Landlord (or to any party designated by Landlord) all insurance
proceeds payable to Tenant under Tenant's insurance required under Section 10.3
of this Lease, and Landlord shall repair any injury or damage to the alterations
installed in the Premises (to the extent of insurance proceeds therefor actually
collected by Landlord) and shall return such alterations to their original
condition; provided that if the cost of such repair by Landlord exceeds the
amount of insurance proceeds received by Landlord from Tenant's insurance
carrier, as assigned by Tenant, the cost of such repairs shall be paid by Tenant
to Landlord prior to Landlord's repair of the damage. In connection with such
repairs and replacements, Tenant shall, prior to the commencement of
construction, submit to Landlord, for Landlord's review and approval, all plans,
specifications and working drawings relating thereto, and Landlord shall select
the contractors to perform such improvement work. Landlord shall not be liable
for any inconvenience or annoyance to Tenant or its visitors, or injury to
Tenant's business resulting in any way from such damage or the repair thereof;
provided, however, if such fire or other casualty shall have damaged the
Premises or Common Areas necessary to Tenant's occupancy, and if such damage is
not the result of the negligence (active or passive) or willful misconduct of
Tenant or any of Tenant's Representatives, Landlord shall allow Tenant a
proportionate abatement of Base Rent and Tenant's Share of Direct Expenses to
the extent Landlord is reimbursed from the proceeds of rental interruption
insurance purchased by Landlord as part of Operating Expenses, during the time
and to the extent the Premises are unfit for occupancy for the purposes
permitted under this Lease, and not occupied by Tenant as a result
thereof.
10
11.2
LANDLORD'S OPTION TO REPAIR. Notwithstanding the provisions of Section
11.1 of this Lease, Landlord may elect not to rebuild and/or restore the
Premises and/or Building and instead terminate this Lease by notifying Tenant in
writing of such termination within ninety (90) 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 Building shall be
damaged by fire or other casualty or cause, whether or not the Premises are
affected, and one or more of the following conditions is present: (i) 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 Building or ground or
underlying lessor with respect to the Real Property, the Complex and/or the
Building shall require that the insurance proceeds or any portion thereof be
used to retire the mortgage debt, or shall terminate the ground or underlying
lease, as the case may be; or (iii) the damage is not fully covered, except for
deductible amounts, by Landlord's insurance policies. In addition, if the
Premises or the Building is destroyed or damaged to any substantial extent
during the last twelve (12) months of the Lease Term, then notwithstanding
anything contained in this Article 11, Landlord shall have the option to
terminate this Lease by giving written notice to Tenant of the exercise of such
option within ninety (90) days after such damage or destruction, in which event
this Lease shall cease and terminate as of the date of such notice.
Notwithstanding anything to the contrary contained herein: (i) if Tenant's use
of the Premises is substantially impaired for a period of more than one hundred
eighty (180) days after the date of a casualty, or during the last six (6)
months of the Term, then Tenant shall have the right to terminate this Lease by
written notice to Landlord at any time thereafter up until the completion of the
restoration, and (ii) if this Lease is terminated by either Landlord or Tenant
due to a casualty, then Tenant shall not be required to pay for any insurance
deductibles as part of Landlord's insurance cost or otherwise. Upon any such
termination of this Lease pursuant to this Section 11.2, Tenant shall pay the
Base Rent and Additional Rent, properly apportioned up to such date of
termination, and both parties hereto shall thereafter be freed and discharged of
all further obligations hereunder, except as provided for in the provisions of
this Lease which by their terms survive the expiration or earlier termination of
the Lease Term.
11.3
WAIVER OF STATUTORY PROVISIONS. The provisions of this Lease, including this
Article 11, constitute an express agreement between Landlord and Tenant with
respect to any and all damage to, or destruction of, all or any part of the
Premises, the Building, the Complex or any other portion of the Real Property,
and any statute or regulation of the state in which the Building is located,
including, without limitation, Sections 1932(2) and 1933(4) of the California
Civil Code (or under any similar law, statute, or ordinance now or hereafter in
effect), with respect to any rights or obligations concerning damage or
destruction in the absence of an express agreement between the parties, and any
other statute or regulation, now or hereafter in effect, shall have no
application to this Lease or any damage or destruction to all or any part of the
Premises, the Building, the Complex or any other portion of the Real
Property.
ARTICLE
12 - CONDEMNATION
12.1
PERMANENT TAKING. If the whole or any part of the Premises or Building shall be
taken by power of eminent domain or condemned by any competent authority for any
public or quasi-public use or purpose, or if any adjacent property or street
shall be so taken or condemned, or reconfigured or vacated by such authority in
such manner as to require the use, reconstruction or remodeling of any part of
the Premises or Building, or if Landlord shall grant a deed or other instrument
in lieu of such taking by eminent domain or condemnation, Landlord shall have
the option to terminate this Lease upon ninety (90) days' notice, provided such
notice is given no later than one hundred eighty (180) days after the date of
such taking, condemnation, reconfiguration, vacation, deed or other instrument.
If more than twenty-five percent (25%) of the rentable square feet of the
Premises is taken, or if access to the Premises is substantially impaired,
Tenant shall have the option to terminate this Lease upon ninety (90) days'
notice, provided such notice is given no later than one hundred eighty (180)
days after the date of such taking. Landlord shall be entitled to receive the
entire award or payment in connection therewith, except that Tenant shall have
the right to file any separate claim available to Tenant for any taking of
Tenant's personal property and fixtures belonging to Tenant and removable by
Tenant upon expiration of the Lease Term pursuant to the terms of this Lease,
and for moving expenses or loss of business by reason of such condemnation so
long as such claim does not diminish the award available to Landlord, its ground
lessor with respect to the Real Property or its mortgagee, and such claim is
payable separately to Tenant. All Rent shall be apportioned as of the date of
such termination, or the date of such taking, whichever shall first occur. If
any part of the Premises shall be taken, and this Lease shall not be so
terminated, the Rent shall be proportionately abated. If neither party elects to
terminate this Lease, Landlord shall, if necessary, promptly proceed to restore
the Premises or the Building to substantially its same condition prior to such
partial condemnation, allowing for the reasonable effects of such condemnation,
and a proportionate allowance shall be made to Tenant, as solely determined by
Landlord, for the Rent corresponding to the time during which, and to the part
of the Premises of which, Tenant is deprived on account of such partial
condemnation and restoration. Landlord shall not be required to spend funds for
restoration in excess of the amount received by Landlord as compensation
awarded. Tenant hereby waives any and all rights it might otherwise have
pursuant to Section 1265.130 of the California Code of Civil Procedure (or under
any similar law, statute, or ordinance now or hereafter in
effect).
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12.2
TEMPORARY TAKING. Notwithstanding anything to the contrary contained in this
Article 12, in the event of a temporary taking of all or any portion of the
Premises for a period of one hundred and eighty (180) days or less, then this
Lease shall not terminate but the Base Rent and the Additional Rent shall be
abated for the period of such taking in proportion to the ratio that the amount
of rentable square feet of the Premises taken bears to the total rentable square
feet of the Premises. Landlord shall be entitled to receive the entire award
made in connection with any such temporary taking.
ARTICLE
13 - COVENANT OF QUIET ENJOYMENT
Landlord
covenants that Tenant, on paying the Rent, charges for services and other
payments herein reserved and on keeping, observing and performing all the other
terms, covenants, conditions, provisions and agreements herein contained on the
part of Tenant to be kept, observed and performed, shall, during the Lease Term,
peaceably and quietly have, hold and enjoy the Premises subject to the terms,
covenants, conditions, provisions and agreements hereof without interference by
Landlord or any successor or assign of Landlord. The foregoing covenant is in
lieu of any other covenant express or implied.
ARTICLE
14 - ASSIGNMENT AND SUBLETTING
14.1
TRANSFERS. Tenant shall not, without the prior written consent of Landlord,
assign, mortgage, pledge, hypothecate, encumber, or permit any lien to attach
to, or otherwise transfer, this Lease or any interest hereunder, permit any
assignment or other such foregoing transfer of this Lease or any interest
hereunder by operation of law, sublet the Premises or any part thereof, or
permit the use of the Premises by any persons other than Tenant and its
employees (all of the foregoing are hereinafter sometimes referred to
collectively as "Transfers" and any person to whom any Transfer is made or
sought to be made is hereinafter sometimes referred to as a "Transferee"). If
Tenant shall desire Landlord's consent to any Transfer, Tenant shall notify
Landlord in writing, which notice (the "Transfer Notice") shall include (i) the
proposed effective date of the Transfer, which shall not be less than thirty
(30) days nor more than one hundred eighty (180) days after the date of delivery
of the Transfer Notice, (ii) a description of the portion of the Premises to be
transferred (the "Subject Space"), (iii) all of the terms of the proposed
Transfer, the name and address of the proposed Transferee, and a copy of all
existing and/or proposed documentation pertaining to the proposed Transfer,
including all existing operative documents to be executed to evidence such
Transfer or the agreements incidental or related to such Transfer, (iv) current
financial statements of the proposed Transferee certified by an officer, member,
partner or owner thereof, and (v) such other information as Landlord may
reasonably require. Any Transfer made without Landlord's prior written consent
shall, at Landlord's option, be null, void and of no effect, and if not cured
within ten (10) days following notice, shall, at Landlord's option, constitute a
default by Tenant under this Lease. Whether or not Landlord shall grant consent,
Tenant shall pay, as additional rent hereunder, a fee in the amount of Five
Hundred Dollars ($500.00) plus Landlord's reasonable legal fees incurred by
Landlord, within thirty (30) days after written request by
Landlord.
14.2
LANDLORD'S CONSENT. Landlord shall not unreasonably withhold its consent to any
proposed Transfer of the Subject Space to the Transferee on the terms specified
in the Transfer Notice. The parties hereby agree that it shall be reasonable
under this Lease and under any applicable law for Landlord to withhold consent
to any proposed Transfer where one or more of the following apply, without
limitation as to other reasonable grounds for withholding consent:
14.2.1
The Transferee is of a character or reputation or engaged in a business which is
not consistent with the quality of the Building;
14.2.2
The Transferee intends to use the Subject Space for purposes which are not
permitted under this Lease;
14.2.3
The Transferee is either a governmental agency or instrumentality
thereof;
14.2.4
The Transfer will result in more than a reasonable and safe number of occupants
per floor within the Subject Space;
14.2.5
The Transferee is not a party of reasonable financial worth and/or financial
stability in light of the responsibilities involved under the Transfer on the
date consent is requested;
14.2.6
The proposed Transfer would cause Landlord to be in violation of another lease
or agreement to which Landlord is a party, or would give an occupant of the
Building a right to cancel its lease;
14.2.7
The terms of the proposed Transfer will allow the Transferee to exercise a right
of renewal, right of expansion, right of first offer, or other similar right
held by Tenant;
14.2.8
Either the proposed Transferee, or any person or entity which directly or
indirectly, controls, is controlled by, or is under common control with, the
proposed Transferee, (i) occupies space in the Building at the time of the
request for consent, (ii) is negotiating with Landlord to lease space in the
Building at such time, or (iii) has negotiated with Landlord during the twelve
(12)-month period immediately preceding the Transfer Notice; or
14.2.9
The Transfer occurs during the period from the Lease Commencement Date until the
date of at least ninety-five percent (95%) of the rentable square feet of the
Building is leased, and the rent charged by Tenant to such Transferee during the
term of such Transfer, calculated using a present value analysis, is less than
ninety-five percent (95%) of the rent being quoted by Landlord, at the time of
such Transfer, for comparable space in the Building for a comparable term,
calculated using a present value system.
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If
Landlord consents to any Transfer pursuant to the terms of this Section 14.2
(and does not exercise any recapture rights Landlord may have under Section 14.4
of this Lease), Tenant may within three (3) months after Landlord's consent, but
not later than the expiration of said three-month period, enter into such
Transfer of the Premises or portion thereof, upon substantially the same terms
and conditions as are set forth in the Transfer Notice furnished by Tenant to
Landlord pursuant to Section 14.1 of this Lease, provided that if there are any
changes in the terms and conditions from those specified in the Transfer Notice
(i) such that Landlord would initially have been entitled to refuse its consent
to such Transfer under this Section 14.2, or (ii) which would cause the proposed
Transfer to be more favorable to the Transferee than the terms set forth in
Tenant's original Transfer Notice, Tenant shall again submit the Transfer to
Landlord for its approval and other action under this Article 14 (including
Landlord's right of recapture, if any, under Section 14.4 of this
Lease).
14.3
TRANSFER PREMIUM. If Landlord consents to a Transfer, as a condition thereto
which the parties hereby agree is reasonable, Tenant shall pay to Landlord any
"Transfer Premium," as that term is defined in this Section 14.3, received by
Tenant from such Transferee. "Transfer Premium" shall mean seventy-five percent
(75%) of all rent, additional rent or other consideration payable by such
Transferee in excess of the Rent and Additional Rent payable by Tenant under
this Lease on a per rentable square foot basis if less than all of the Premises
is transferred, after deducting the reasonable expenses incurred by Tenant in
connection with the Transfer (the "Subleasing Costs"). "Transfer Premium" shall
also include, but not be limited to, key money and bonus money paid by
Transferee to Tenant in connection with such Transfer, and any payment in excess
of fair market value for services rendered by Tenant to Transferee or for
assets, fixtures, inventory, equipment, or furniture transferred by Tenant to
Transferee in connection with such Transfer.
14.4
LANDLORD'S OPTION AS TO SUBJECT SPACE. Notwithstanding anything to the contrary
contained in this Article 14, if the Subject Space shall comprise all or
substantially all of a full floor of the Premises, or more, and if the proposed
Transfer would commence at any time on or after November 1, 2003, Landlord shall
have the option, by giving written notice to Tenant within thirty
(30) days
after receipt of any Transfer Notice, to recapture the Subject Space. Such
recapture notice shall cancel and terminate this Lease with respect to the
Subject Space as of the date stated in the Transfer Notice as the effective date
of the proposed Transfer. If this Lease shall be canceled with respect to less
than the entire Premises, the Rent reserved herein shall be prorated on the
basis of the number of rentable square feet retained by Tenant in proportion to
the number of rentable square feet contained in the Premises, and this Lease as
so amended shall continue thereafter in full force and effect, and upon request
of either party, the parties shall execute written confirmation of the same. If
Landlord declines, or fails to elect in a timely manner to recapture the Subject
Space under this Section 14.4, then, provided Landlord has consented to the
proposed Transfer, Tenant shall be entitled to proceed to transfer the Subject
Space to the proposed Transferee, subject to the provisions of the last
paragraph of Section 14.2 of this Lease.
14.5
EFFECT OF TRANSFER. If Landlord consents to a Transfer, (i) the terms and
conditions of this Lease shall in no way be deemed to have been waived or
modified, (ii) such consent shall not be deemed consent to any further Transfer
by either Tenant or a Transferee, (iii) Tenant shall deliver to Landlord,
promptly after execution, an original executed copy of all documentation
pertaining to the Transfer in form reasonably acceptable to Landlord, and (iv)
no Transfer relating to this Lease or agreement entered into with respect
thereto, whether with or without Landlord's consent, shall relieve Tenant or any
guarantor of the Lease from liability under this Lease. Landlord or its
authorized representatives shall have the right at all reasonable times to audit
the books, records and papers of Tenant relating to any Transfer, and shall have
the right to make copies thereof. If the Transfer Premium respecting any
Transfer shall be found understated, Tenant shall, within thirty (30) days after
demand, pay the deficiency and Landlord's costs of such audit. No assignment or
subletting shall affect the continuing primary liability of Tenant (which,
following assignment, shall be joint and several with the assignee), and Tenant
shall not be released from performing any of the terms, covenants and conditions
of this Lease. Any and all options, first rights of refusal, tenant improvement
allowances and other similar rights granted to Tenant in this Lease, if any,
shall only be assignable by Tenant as part of this Lease.
14.6
ADDITIONAL TRANSFERS. For purposes of this Lease, the term "Transfer" shall also
include (i) if Tenant is a partnership or limited liability company, the
withdrawal or change, voluntary, involuntary or by operation of law, of fifty
percent (50%) or more of the partners or members, or transfer of twenty-five
percent (25%) or more of partnership or members interests, within a twelve
(12)-month period, or the dissolution of the partnership or limited liability
company without immediate reconstitution thereof, and (ii) if Tenant is a
closely held corporation (i.e., whose stock is not publicly held and not traded
through an exchange or over the counter), (A) the dissolution, merger,
consolidation or other reorganization of Tenant, (B) the sale or other transfer
of more than an aggregate of fifty percent (50%) of the voting shares of Tenant
(other than to immediate family members by reason of gift or death), within a
twelve (12)-month period, or (C) the sale, mortgage, hypothecation or pledge of
more than an aggregate of fifty percent (50%) of the value of the unencumbered
assets of Tenant within a twelve (12) month period.
14.7
PERMITTED TRANSFERS. Notwithstanding anything to the contrary contained in this
Lease, Tenant may assign this Lease or sublet the Premises, or any portion
thereof, without Landlord's consent, to any entity which controls, is controlled
by, or is under common control with Tenant; to any entity which results from a
merger of, reorganization of, or consolidation with Tenant; to any entity
engaged in a joint venture with Tenant; or to any entity which acquires
substantially all of the stock or assets of Tenant, as a going concern, with
respect to the business that is being conducted in the Premises (hereinafter
each a "Permitted Transfer"). In addition, a sale or transfer of the capital
stock of Tenant shall be deemed a Permitted Transfer if (1) such sale or
transfer occurs in connection with any bona fide financing or capitalization for
the benefit of Tenant, or (2) Tenant is or becomes a publicly traded
corporation. Landlord shall have no right to terminate the Lease in connection
with, and shall have no right to any sums or other economic consideration
resulting from any Permitted Transfer. Additionally, any rights that are
personal to Tenant shall also accrue to any Permitted Transferee.
ARTICLE
15 - SURRENDER; OWNERSHIP AND REMOVAL OF TRADE FIXTURES
15.1
SURRENDER OF PREMISES. No act or thing done by Landlord or any agent or employee
of Landlord during the Lease Term shall be deemed to constitute an acceptance by
Landlord of a surrender of the Premises unless such intent is specifically
acknowledged in a writing signed by Landlord. The delivery of keys to the
Premises to Landlord or any agent or employee of Landlord shall not constitute a
surrender of the Premises or effect a termination of this Lease, whether or not
the keys are thereafter retained by Landlord, and notwithstanding such delivery
Tenant shall be entitled to the return of such keys at any reasonable time upon
request until this Lease shall have been properly terminated. The voluntary or
other surrender of this Lease by Tenant, whether accepted by Landlord or not, or
a mutual termination hereof, shall not work a merger, and at the option of
Landlord shall operate as an assignment to Landlord of all subleases or
subtenancies affecting the Premises.
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15.2
REMOVAL OF TENANT PROPERTY BY TENANT. Upon the expiration of the Lease Term, or
upon any earlier termination of this Lease, Tenant shall, subject to the
provisions of this Article 15, quit and surrender possession of the Premises to
Landlord in as good order and condition as when Tenant took possession and as
thereafter improved by Landlord and/or Tenant, reasonable wear and tear and
repairs which are specifically made the responsibility of Landlord hereunder
excepted. Upon such expiration or termination, Tenant shall, without expense to
Landlord, remove or cause to be removed from the Premises all debris and
rubbish, and such items of furniture, equipment, free-standing cabinet work, and
other articles of personal property owned by Tenant or installed or placed by
Tenant at its expense in the Premises, and such similar articles of any other
persons claiming under Tenant, as Landlord may, in its sole discretion, require
to be removed, and Tenant shall repair at its own expense all damage to the
Premises and Building resulting from such removal.
ARTICLE
16 - HOLDING OVER
If Tenant
holds over after the expiration of the Lease Term hereof, with or without the
express or implied consent of Landlord, such tenancy shall be from
month-to-month only, and shall not constitute a renewal hereof or an extension
for any further term, and in such case Base Rent shall be payable at a monthly
rate equal to (a) one hundred twenty-five percent (125%) for the first two full
months of any such holding over, and after that (b) two hundred percent (200%),
in each case of the (i) the greater of Base Rent applicable during the last
rental period of the Lease Term under this Lease (ii) the fair market rental
rate of the Premises as of the commencement of such holdover period. Such
month-to-month tenancy shall be subject to every other term, covenant and
agreement contained herein. Landlord hereby expressly reserves the right to
require Tenant to surrender possession of the Premises to Landlord as provided
in this Lease upon the expiration or other termination of this Lease. The
provisions of this Article 16 shall not be deemed to limit or constitute a
waiver of any other rights or remedies of Landlord provided herein or at law. If
Tenant fails to surrender the Premises upon the termination or expiration of
this Lease, in addition to any other liabilities to Landlord accruing therefrom,
Tenant shall protect, defend, indemnify and hold Landlord harmless from all
loss, costs (including reasonable attorneys' fees) and liability resulting from
such failure, including, without limiting the generality of the foregoing, any
claims made by any succeeding tenant founded upon such failure to surrender, and
any lost profits to Landlord resulting therefrom.
ARTICLE
17 - ESTOPPEL CERTIFICATES
Within
ten (10) days following a request in writing by Landlord, Tenant shall execute
and deliver to Landlord an estoppel certificate, which, as submitted by
Landlord, shall be substantially in the form of Exhibit E, attached hereto (or
such other form as may be required by any prospective mortgagee or purchaser of
the Building, Complex or Real Property, or any portion thereof), indicating
therein any exceptions thereto that may exist at that time, and shall also
contain any other information reasonably requested by Landlord, Landlord's
mortgagee or prospective mortgagee, or a prospective purchaser. Tenant shall
execute and deliver whatever other instruments may be reasonably required for
such purposes. Failure of Tenant to timely execute and deliver such estoppel
certificate or other instruments shall constitute an acceptance of the Premises
and an acknowledgment by Tenant that statements included in the estoppel
certificate are true and correct, without exception.
ARTICLE
18 - SUBORDINATION
This
Lease is subject and subordinate to all present and future ground or underlying
leases of the Real Property and to the lien of any mortgages or trust deeds, now
or hereafter in force against the Real Property, the Complex and the Building,
if any, and to all renewals, extensions, modifications, consolidations and
replacements thereof, and to all advances made or hereafter to be made upon the
security of such mortgages or trust deeds, unless the holders of such mortgages
or trust deeds, or the lessors under such ground lease or underlying leases,
require in writing that this Lease be superior thereto. Tenant covenants and
agrees in the event any proceedings are brought for the foreclosure of any such
mortgage, or if any ground or underlying lease is terminated, to attorn, without
any deductions or set-offs whatsoever, to the purchaser upon any such
foreclosure sale, or to the lessor of such ground or underlying lease, as the
case may be, if so requested to do so by such purchaser or lessor, and to
recognize such purchaser or lessor as the lessor under this Lease. Tenant shall,
within five (5) days of request by Landlord, execute such further instruments or
assurances as Landlord may reasonably deem necessary to evidence or confirm the
subordination or superiority of this Lease to any such mortgages, trust deeds,
ground leases or underlying leases; provided, such mortgagee, ground lessor or
similar parties agree therein not to disturb Tenant's use, occupancy or quiet
enjoyment of the Premises so long as Tenant is not in default (beyond applicable
notice and cure periods, if any) of the terms and provisions of this Lease.
Tenant hereby irrevocably authorizes Landlord to execute and deliver in the name
of Tenant any such instrument or instruments if Tenant fails to do so, provided
that such authorization shall in no way relieve Tenant from the obligation of
executing such instruments of subordination or superiority. Tenant waives the
provisions of any current or future statute, rule or law which may give or
purport to give Tenant any right or election to terminate or otherwise adversely
affect this Lease and the obligations of the Tenant hereunder in the event of
any foreclosure proceeding or sale.
ARTICLE
19 - TENANT'S DEFAULTS; LANDLORD'S REMEDIES
19.1
EVENTS OF DEFAULT BY TENANT. All covenants and agreements to be kept or
performed by Tenant under this Lease shall be performed by Tenant at Tenant's
sole cost and expense and without any reduction of Rent. The occurrence of any
of the following shall constitute a material default of this Lease by
Tenant:
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19.1.1
Any failure by Tenant to pay any Rent or any other charge required to be paid
under this Lease, or any part thereof, provided, however, that for only the
first two instances in any 12-month period, any such failure shall not be a
default until such failure shall have continued for a period in excess of two
(2) business days; or
19.1.2
Any failure by Tenant to observe or perform any other provision, covenant or
condition of this Lease to be observed or performed by Tenant where such failure
continues for fifteen (15) days after written notice thereof from Landlord to
Tenant; provided however, that any such notice shall be in lieu of, and not in
addition to, any notice required under California Code of Civil Procedure
Section 1161 or any similar or successor law; and provided further that if the
nature of such default is such that the same cannot reasonably be cured within a
fifteen (15)-day period, Tenant shall not be deemed to be in default if it
diligently commences such cure within such period and thereafter diligently
proceeds to rectify and completely cure said default as soon as possible but in
all events within ninety (90) days of Landlord's delivery to Tenant of written
notice of such default; or
19.1.3
Abandonment of the Premises by Tenant. Abandonment is herein defined to include,
but is not limited to, any absence by Tenant from the Premises for five (5)
business days or longer while in default of any provision of this Lease;
or
19.1.4
The making of a general assignment by Tenant for the benefit of creditors, the
filing of a voluntary petition by Tenant or the filing of an involuntary
petition by any of Tenant's creditors seeking the rehabilitation, liquidation,
or reorganization of Tenant under any law relating to bankruptcy, insolvency or
other relief of debtors and, in the case of an involuntary action, the failure
to remove or discharge the same within sixty
(60) days
of such filing, the appointment of a receiver or other custodian to take
possession of substantially all of Tenant's assets or this leasehold, Tenant's
insolvency or inability to pay Tenant's debts or failure generally to pay
Tenant's debts when due, any court entering a decree or order directing the
winding up or liquidation of Tenant or of substantially all of Tenant's assets,
Tenant taking any action toward the dissolution or winding up of Tenant's
affairs, the cessation or suspension of Tenant's use of the Premises, or the
attachment, execution or other judicial seizure of substantially all of Tenant's
assets or this leasehold; or
19.1.5
The making of any material misrepresentation or omission by Tenant in any
materials delivered by or on behalf of Tenant to Landlord pursuant to this
Lease.
19.2
Landlord's Remedies Upon Default. Upon the occurrence of any such default by
Tenant, Landlord shall have, in addition to any other remedies available to
Landlord at law or in equity, the option to pursue any one or more of the
following remedies, each and all of which shall be cumulative and nonexclusive,
without any notice or demand whatsoever.
19.2.1
Terminate this Lease, in which event Tenant shall immediately surrender the
Premises to Landlord, and if Tenant fails to do so, Landlord may, without
prejudice to any other remedy which it may have for possession or arrearages in
rent, enter upon and take possession of the Premises and expel or remove Tenant
and any other person who may be occupying the Premises or any part thereof,
without being liable for prosecution or any claim or damages therefor; and
Landlord may recover from Tenant the following:
(i) The
worth at the time of award of any unpaid rent which has been earned at the time
of such termination; plus
(ii) The
worth at the time of award of the amount by which the unpaid rent which would
have been earned after termination until the time of award exceeds the amount of
such rental loss that Tenant proves could have been reasonably avoided;
plus
(iii) The
worth at the time of award of the amount by which the unpaid rent for the
balance of the Lease Term after the time of award exceeds the amount of such
rental loss that Tenant proves could have been reasonably avoided;
plus
(iv) Any
other amount necessary to compensate Landlord for all the detriment proximately
caused by Tenant's failure to perform its obligations under this Lease or which
in the ordinary course of things would be likely to result therefrom,
specifically including but not limited to, brokerage commissions and advertising
expenses incurred, expenses of remodeling the Premises or any portion thereof
for a new tenant, whether for the same or a different use, and any special
concessions made to obtain a new tenant; and
(v) At
Landlord's election, such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to time by applicable law.
The term
"rent" as used in this Section 19.2 shall be deemed to be and to mean all sums
of every nature required to be paid by Tenant pursuant to the terms of this
Lease, whether to Landlord or to others. As used in Paragraphs 19.2.1(i) and
(ii), above, the "worth at the time of award" shall be computed by allowing
interest at the Interest Rate set forth in Section 4.6 of this Lease. As used in
Paragraph 19.2.1(iii) above, the "worth at the time of award" shall be computed
by discounting such amount at the discount rate of the Federal Reserve Bank of
San Francisco at the time of award plus one percent (1%).
19.2.2
Landlord shall have the remedy described in California Civil Code Section 1951.4
(lessor may continue lease in effect after lessee's breach and abandonment and
recover rent as it becomes due, if lessee has the right to sublet or assign,
subject only to reasonable limitations). Accordingly, if Landlord does not elect
to terminate this Lease on account of any default by Tenant, Landlord may, from
time to time, without terminating this Lease, enforce all of its rights and
remedies under this Lease, including the right to recover all rent as it becomes
due.
19.2.3
Landlord may, but shall not be obligated to, make any such payment or perform or
otherwise cure any such obligation, provision, covenant or condition on Tenant's
part to be observed or performed (and may enter the Premises for such purposes).
In the event of Tenant's failure to perform any of its obligations or covenants
under this Lease, and such failure to perform poses a material risk of injury or
harm to persons or damage to or loss of property, then Landlord shall have the
right to cure or otherwise perform such covenant or obligation at any time after
such failure to perform by Tenant, whether or not any such notice or cure period
set forth in Section 19.1 above has expired. Any such actions undertaken by
Landlord pursuant to the foregoing provisions of this Section 19.2.3 shall not
be deemed a waiver of Landlord's rights and remedies as a result of Tenant's
failure to perform and shall not release Tenant from any of its obligations
under this Lease. Tenant waives redemption or relief from forfeiture under
California Code of Civil Procedure Sections 1174 and 1179, or under any other
present or future law, in the event Tenant is evicted or Landlord takes
possession of the Premises by reason of any default of Tenant
hereunder.
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19.3
PAYMENT BY TENANT. Tenant shall pay to Landlord, within fifteen
(15) days
after delivery by Landlord to Tenant of statements therefor: (i) sums equal to
expenditures reasonably made and obligations incurred by Landlord in connection
with Landlord's performance or cure of any of Tenant's obligations pursuant to
the provisions of Section 19.2.3 above; and (ii) sums equal to all expenditures
made and obligations incurred by Landlord in collecting or attempting to collect
the Rent or in enforcing or attempting to enforce any rights of Landlord under
this Lease or pursuant to law, including, without limitation, all legal fees and
other amounts so expended. Tenant's obligations under this Section 19.3 shall
survive the expiration or sooner termination of the Lease Term.
19.4
SUBLESSEES OF TENANT. Whether or not Landlord elects to terminate this Lease on
account of any default by Tenant, as set forth in this Article 19, Landlord
shall have the right to terminate any and all subleases, licenses, concessions
or other consensual arrangements for possession entered into by Tenant and
affecting the Premises or may, in Landlord's sole discretion, succeed to
Tenant's interest in such subleases, licenses, concessions or arrangements. In
the event of Landlord's election to succeed to Tenant's interest in any such
subleases, licenses, concessions or arrangements, Tenant shall, as of the date
of notice by Landlord of such election, have no further right to or interest in
the rent or other consideration receivable thereunder.
19.5
WAIVER OF DEFAULT. No waiver by Landlord of any violation or breach by Tenant of
any of the terms, provisions and covenants herein contained shall be deemed or
construed to constitute a waiver of any other or later violation or breach by
Tenant of the same or any other of the terms, provisions, and covenants herein
contained. Forbearance by Landlord in enforcement of one or more of the remedies
herein provided upon a default by Tenant shall not be deemed or construed to
constitute a waiver of such default. The acceptance of any Rent hereunder by
Landlord following the occurrence of any default, whether or not known to
Landlord, shall not be deemed a waiver of any such default, except only a
default in the payment of the Rent so accepted.
19.6
EFFORTS TO RELET. For the purposes of this Article 19, Tenant's right to
possession shall not be deemed to have been terminated by efforts of Landlord to
relet the Premises, by its acts of maintenance or preservation with respect to
the Premises, or by appointment of a receiver to protect Landlord's interests
hereunder. The foregoing enumeration is not exhaustive, but merely illustrative
of acts which may be performed by Landlord without terminating Tenant's right to
possession.
ARTICLE
20 - SECURITY DEPOSIT AND LETTER OF CREDIT
20.1
SECURITY DEPOSIT. Concurrent with Tenant's execution of this Lease, Tenant shall
deposit with Landlord a security deposit (the "Security Deposit") in the amount
set forth in Section 10 of the Summary. The Security Deposit shall be held by
Landlord as security for the faithful performance by Tenant of all the terms,
covenants, and conditions of this Lease to be kept and performed by Tenant
during the Lease Term. If Tenant defaults with respect to any provisions of this
Lease, including, but not limited to, the provisions relating to the payment of
Rent, 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 for the payment of any amount that Landlord may spend or become
obligated to spend by reason of Tenant's default, or to compensate Landlord for
any other loss or damage that Landlord may suffer by reason of Tenant's default.
If any portion of the Security Deposit is so used or applied, Tenant shall,
within five (5) days after written demand therefor, deposit cash with Landlord
in an amount sufficient to restore the Security Deposit to its original amount,
and Tenant's failure to do so shall be a default under this Lease. If Tenant
shall fully and faithfully perform every provision of this Lease to be performed
by it, the Security Deposit, or any balance thereof, shall be returned to
Tenant, or, at Landlord's option, to the last assignee of Tenant's interest
hereunder, as soon as practicable following the expiration of the Lease Term.
Landlord shall not be required to keep the Security Deposit separate from other
funds, and, unless otherwise required by law, Tenant shall not be entitled to
any interest on the Security Deposit. In no event or circumstance shall Tenant
have the right to any use of the Security Deposit and, specifically, Tenant may
not use the Security Deposit as a credit or to otherwise offset any payments
required hereunder, including, but not limited to, Rent or any portion
thereof.
20.2
LETTER OF CREDIT. Simultaneously with Tenant's delivery to Landlord of this
Lease and the first month's Base Rent in accordance with the provisions of
Section 3 above, Tenant shall deliver to Landlord, as collateral for the full
and faithful performance by Tenant of all of its obligations under this Lease
and for all losses and damages Landlord may suffer as a result of any default by
Tenant under this Lease, an irrevocable and unconditional negotiable letter of
credit, in the form and containing the terms required herein, payable in the
City of Alameda, California running in favor of Landlord issued by a solvent
nationally recognized bank with a long term rating of BBB or higher, under the
supervision of the Superintendent of Banks of the State of California, or a
National Banking Association, in the amount of One Million Five Hundred Thousand
Dollars ($1,500,000.00) ("Initial Letter of Credit"). Upon the RP Commencement
Date, the face amount of the Letter of Credit shall be increased to be Two
Million Dollars ($2,000,000.00). The Letter of Credit shall be (a) at sight and
irrevocable and unconditional, (b) maintained in effect, whether through
replacement, renewal or extension, for the entire Lease Term (the "Letter of
Credit Expiration Date") and Tenant shall deliver a new Letter of Credit or
certificate of renewal or extension to Landlord at least thirty (30) days prior
to the expiration of the Letter of Credit, without any action whatsoever on the
part of Landlord, (c) subject to the International Standby Practices (1998-Rev)
International Chamber of Commerce Publication #590, (d) acceptable to Landlord
in its sole, but reasonable, discretion, and (e) fully assignable by Landlord
and permit partial draws. In addition to the foregoing, the form and terms of
the Letter of Credit (and the bank issuing the same) shall be acceptable to
Landlord, in Landlord's sole, but reasonable, discretion, and shall provide,
among other things, in effect that: (1) Landlord, or its then managing agent,
shall have the right to draw down an amount up to the face amount of the Letter
of Credit upon the presentation to the issuing bank of Landlord's (or Landlord's
then managing agent's) statement that such amount is due to Landlord under the
terms and conditions of this Lease, it being understood that if Landlord or its
managing agent be a limited liability company, corporation, partnership or other
entity, then such statement shall be signed by a managing member (if a limited
liability company) an officer (if a corporation), a general partner (if a
partnership), or any authorized party (if another entity); (2) the Letter of
Credit will be honored by the issuing bank without inquiry as to the accuracy
thereof and regardless of whether the Tenant disputes the content of such
statement; and (3) in the event of a transfer of Landlord's interest in the
Building, Landlord shall transfer the Letter of Credit, in whole or in part (or
cause a substitute letter of credit to be delivered, as applicable), to the
transferee and thereupon the Landlord shall, without any further agreement
between the parties, be released by Tenant from all liability therefor, and it
is agreed that the provisions hereof shall apply to every transfer or assignment
of the whole or any portion of said Letter of Credit to a new Landlord. Tenant
hereby acknowledges and agrees that Landlord is entering into this Lease in
material reliance upon the ability of Landlord to draw upon the Letter of Credit
upon the occurrence of any default on the part of Tenant hereunder which
continues beyond any applicable notice and cure periods. Tenant further
acknowledges and agrees that if Landlord cannot draw upon the Letter of Credit
within the times and in the manner as anticipated by Landlord herein, Landlord
shall suffer irreparable damage, harm and injury. From time to time during the
Term of this Lease it is anticipated by the parties that the Letter of Credit
will need to be amended, modified and, possibly reissued. Landlord and Tenant
hereby covenant and agree to cooperate with one another to promptly effectuate
any such amendments, modifications and new issuances, including without
limitation, executing and submitting to the Issuer any and all documents or
instruments as may be reasonably required to effectuate same. Each and every
time during the Term of this Lease there is a change in the identity or address
of the parties, including without limitation, any change in the identity of
Landlord due to the sale, transfer or other conveyance by Landlord of its rights
and interests in, to and under this Lease to any other party, person or entity,
the Letter of Credit shall immediately be amended or reissued to reflect such
changes and the parties hereby agree to execute and submit to the Issuer such
further applications, documents and instruments as may be necessary to
effectuate same. It is the intention of the parties that each and every
successor and assign of both Landlord and Tenant be bound by and subject to the
terms and provisions of this Section 20.2. Landlord may, at any time and without
notice to Tenant and without first obtaining Tenant's consent thereto, assign
all or any portion of its interest in and to the Letter of Credit to another
party, person or entity, regardless of whether or not such assignment is
separate from or as a part of the assignment by Landlord of its rights and
interests in and to this Lease. If, as a result of any such application of all
or any part of the Letter of Credit, the amount of the Letter of Credit shall be
less than One Million Five Hundred Thousand Dollars ($1,500,000.00) or Two
Million Dollars ($2,000,000.00), as applicable, Tenant shall within five (5)
days thereafter provide Landlord with additional letter(s) of credit in an
amount equal to the deficiency (or a replacement letter of credit in the total
amount of One Million Five Hundred Thousand Dollars ($1,500,000.00) or Two
Million Dollars ($2,000,000.00), as applicable, and each such additional (or
replacement) letter of credit shall comply with all of the provisions of
this
16
Section
20.2, and if Tenant fails to do so, notwithstanding anything to the contrary
contained in Article 19 hereof, the same shall constitute an incurable default
by Tenant. Tenant further covenants and warrants that it will neither assign nor
encumber the Letter of Credit or any part thereof and that neither Landlord nor
its successors or assigns will be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance. Without limiting the generality
of the foregoing, if the Letter of Credit expires earlier than the Letter of
Credit Expiration Date, Landlord will accept a renewal thereof or substitute
letter of credit (such renewal or substitute letter of credit to be in effect
not later than thirty (30) days prior to the expiration thereof), which shall be
irrevocable and automatically renewable as above provided through the Letter of
Credit Expiration Date upon the same terms as the expiring letter of credit or
such other terms as may be acceptable to Landlord in its sole, but reasonable,
discretion. However, if the Letter of Credit is not timely renewed or a
substitute letter of credit is not timely received, or if Tenant fails to
maintain the Letter of Credit in the amount and terms set forth in this Section
20.2, Landlord shall have the right to present such Letter of Credit to the bank
in accordance with the terms of this Section 20.2, and the entire sum evidenced
thereby shall be paid to and held by Landlord as collateral for performance of
all of Tenant's obligations under this Lease and for all losses and damages
Landlord may suffer as a result of any default by Tenant under this Lease. If
there shall occur a default under this Lease as set forth in Article 19 hereof,
Landlord may, but without obligation to do so, draw upon the Letter of Credit,
in part or in whole, in such amount as is reasonably necessary to cure any
default of Tenant and/or to compensate Landlord for any and all damages of any
kind or nature sustained or which may be sustained by Landlord resulting from
Tenant's default. Tenant agrees not to interfere in any way with payment to
Landlord of the proceeds of the Letter of Credit, either prior to or following a
"draw" by Landlord of any portion of the Letter of Credit, regardless of whether
any dispute exists between Tenant and Landlord as to Landlord's right to draw
from the Letter of Credit. No condition or term of this Lease shall be deemed to
render the Letter of Credit conditional to justify the issuer of the Letter of
Credit in failing to honor a drawing upon such Letter of Credit in a timely
manner. Landlord and Tenant acknowledge and agree that in no event or
circumstance shall the Letter of Credit or any renewal thereof or substitute
therefor be (i) deemed to be or treated as a "security deposit" within the
meaning of California Civil Code Section 1950.7 (as supplemented, amended,
replaced and substituted from time to time), (ii) subject to the terms of
such
Section
1950.7 (as supplemented, amended, replaced and substituted from time to time),
or (iii) intended to serve as a "security deposit" within the meaning of such
Section 1950.7 (as supplemented, amended, replaced and substituted from time to
time). The parties hereto recite that with respect to the Letter of Credit, (x)
the Letter of Credit is not intended to serve as a security deposit and such
Section 1950.7 (as supplemented, amended, replaced and substituted from time to
time), and any and all other laws, rules and regulations applicable to security
deposits in the commercial context ("Security Deposit Laws") shall have no
applicability or relevancy to the Letter of Credit and (y) Tenant waives any and
all rights, duties and obligations it may now or, in the future, will have
relating to or arising from the Security Deposit Laws.
Notwithstanding
the foregoing, if, after the first five (5) years of the Lease Term have
elapsed, Tenant is not in default in the terms of this Lease and Tenant has
completed four (4) consecutive quarters of positive "EBITDA" (earnings before
interest expense, income taxes, depreciation and amortization expense, as
certified to Landlord by Tenant's independent certified public accounting firm),
Tenant may then, and at six month intervals thereafter reduce the amount of the
Letter of Credit by equal amounts such that at the expiration of the Term, the
Letter of Credit would be reduced to zero. Notwithstanding the foregoing, if at
any time after the Letter of Credit has been reduced pursuant to the foregoing,
Tenant has two consecutive quarters in which EBITDA is negative, then the Letter
of Credit shall remain as is then in effect and shall not be further reduced
until such time as Tenant has four (4) consecutive quarters of positive EBITDA,
at which time the reductions shall resume in the semi-annual amounts previously
calculated. In the event that Tenant is entitled to have the Letter of Credit
reduced, Landlord shall cooperate with Tenant by exchanging with Tenant the
existing Letter of Credit for the new Letter of Credit in the reduced
amount.
17
ARTICLE
21 - COMPLIANCE WITH LAW
Tenant
shall not do anything or suffer anything to be done in or about the Premises
which will in any way conflict with any law, statute, ordinance or other
governmental or quasi-governmental rule, regulation or requirement now in force
or which may hereafter be enacted or promulgated. At its sole cost and expense,
Tenant shall promptly comply with all such governmental measures, other than the
making of structural changes or changes to the Building's life safety system or
are required to correct violations of law that existed as of the Commencement
Date (collectively the "Excluded Changes") except to the extent such Excluded
Changes are required due to Tenant's alterations, improvements, modifications or
additions to or Tenant's specific manner of use of the Premises. In addition,
Tenant shall fully comply with all present or future programs intended to manage
parking, transportation or traffic in and around the Building, and in connection
therewith, Tenant shall take responsible action for the transportation planning
and management of all employees located at the Premises by working directly with
Landlord, any governmental transportation management organization or any other
transportation-related committees or entities. The judgment of any court of
competent jurisdiction or the admission of Tenant in any judicial action,
regardless of whether Landlord is a party thereto, that Tenant has violated any
of said governmental measures, shall be conclusive of that fact as between
Landlord and Tenant.
ARTICLE
22 - ENTRY BY LANDLORD
Landlord
reserves the right at all reasonable times and upon 24 hours' prior notice
(except in the case of emergency) to Tenant to enter the Premises to (i) inspect
them; (ii) show the Premises to prospective purchasers, mortgagees or tenants,
or to the ground or underlying lessors; (iii) to post notices of
non-responsibility; (iv) alter, improve or repair the Premises or the Building
if necessary to comply with current building codes or other applicable laws, any
recorded covenants, conditions and restrictions ("CC&Rs"), or for structural
alterations, repairs or improvements to the Building, or as Landlord may
otherwise reasonably desire or deem necessary; or (v) perform and take actions
necessary to comply with the requirements and/or restrictions set forth in any
CC&Rs. Notwithstanding anything to the contrary contained in this Article
22, Landlord may enter the Premises at any time, without notice to Tenant, to
perform janitorial or other services required of Landlord pursuant to this
Lease. Any such entries shall be subject to Tenant's reasonable security
requirements and shall be without the abatement of Rent and shall include the
right to take such reasonable steps as required to accomplish the stated
purposes, provided that Landlord shall use its best efforts to minimize any
disruption to the business being carried on in the Premises during any such
entry. Tenant hereby waives any claims for damages or for any injuries or
inconvenience to or interference with Tenant's business, lost profits, any loss
of occupancy or quiet enjoyment of the Premises, and any other loss occasioned
thereby, unless due to Landlord's gross negligence, willful misconduct or a
breach of this Lease. For each of the above purposes, Landlord shall at all
times have a key with which to unlock all the doors in the Premises, excluding
Tenant's vaults, safes and special security areas designated in advance by
Tenant. In an emergency, Landlord shall have the right to use any means that
Landlord may deem proper to open the doors in and to the Premises. Any entry
into the Premises in the manner hereinbefore described shall not be deemed to be
a forcible or unlawful entry into, or a detainer of, the Premises, or an actual
or constructive eviction of Tenant from any portion of the
Premises.
ARTICLE
23 - TENANT PARKING
Tenant
shall have the right to use, free from charge, up to the number of undesignated,
unreserved parking spaces set forth in Section 11 of the Summary for parking in
the Building Parking Facility. From and after the earlier to occur of the RP
Commencement Date, the number of undesignated, unreserved parking spaces
available to Tenant shall be increased to 223. Landlord shall not be required to
enforce Tenant's right to use such parking spaces. Tenant shall abide, and cause
its employees, representatives and visitors who utilize the Building Parking
Facility to abide, by all parking rules and regulations for parking in the
Building Parking Facility, as may be adopted and/or modified by Landlord and/or
Landlord's parking operator from time to time.
ARTICLE
24 - MISCELLANEOUS PROVISIONS
24.1
TERMS; CAPTIONS. The necessary grammatical changes required to make the
provisions hereof apply either to corporations or partnerships or individuals,
men or women, as the case may require, shall in all cases be assumed as though
in each case fully expressed. The captions of Articles and Sections are for
convenience only and shall not be deemed to limit, construe, affect or alter the
meaning of such Articles and Sections.
24.2
BINDING EFFECT. Each of the provisions of this Lease shall extend to and shall,
as the case may require, bind or inure to the benefit not only of Landlord and
of Tenant, but also of their respective successors or assigns, provided this
clause shall not permit any assignment by Tenant contrary to the provisions of
Article 14 of this Lease.
24.3 NO
WAIVER. No waiver of any provision of this Lease shall be implied by any failure
of a party to enforce any remedy on account of the violation of such provision,
even if such violation shall continue or be repeated subsequently, any waiver by
a party of any provision of this Lease may only be in writing, and no express
waiver shall affect any provision other than the one specified in such waiver
and that one only for the time and in the manner specifically stated. No receipt
of monies by Landlord from Tenant after the termination of this Lease shall in
any way alter the length of the Lease Term or of Tenant's right of possession
hereunder or after the giving of any notice shall reinstate, continue or extend
the Lease Term or affect any notice given Tenant prior to the receipt of such
monies, it being agreed that after the service of notice or the commencement of
a suit or after final judgment for possession of the Premises, Landlord may
receive and collect any Rent due, and the payment of said Rent shall not waive
or affect said notice, suit or judgment.
24.4
MODIFICATION OF LEASE. Should any current or prospective mortgagee or ground
lessor for the Building require a modification or modifications of this Lease,
which modification or modifications will not cause an increased cost or expense
to Tenant or in any other way materially and adversely change the rights or
obligations of Tenant hereunder, then and in such event, Tenant agrees that this
Lease may be so modified and agrees to execute whatever documents are required
therefor and deliver the same to Landlord within ten (10) days following the
request therefor. Should Landlord or any such current or prospective mortgagee
or ground lessor require execution of a short form of Lease for recording,
containing, among other customary provisions, the names of the parties, a
description of the Premises and the Lease Term, Tenant agrees to execute such
short form of Lease and to deliver the same to Landlord within ten (10) days
following the request therefor.
18
24.5
TRANSFER OF LANDLORD'S INTEREST. Tenant acknowledges that Landlord has the right
to transfer all or any portion of its interest in the Real Property and Building
and in this Lease, and Tenant agrees that in the event of any such transfer,
Landlord shall automatically be released from all further liability under this
Lease and Tenant agrees to look solely to such transferee for the performance of
Landlord's obligations hereunder after the date of transfer. The liability of
Landlord under this Lease is limited to its actual period of ownership of title
to the Building. The liability of any transferee of Landlord shall be limited to
the interest of such transferee in the Real Property, Complex and Building and
such transferee shall be without personal liability under this Lease, and Tenant
hereby expressly waives and releases such personal liability on behalf of itself
and all persons claiming by, through or under Tenant. Tenant further
acknowledges that Landlord may assign its interest in this Lease to a mortgage
lender as additional security and agrees that such an assignment shall not
release Landlord from its obligations hereunder and that Tenant shall continue
to look to Landlord for the performance of its obligations
hereunder.
24.6
PROHIBITION AGAINST RECORDING. Except as provided in Section 24.4 of this Lease,
neither this Lease, nor any memorandum, affidavit or other writing with respect
thereto, shall be recorded by Tenant or by anyone acting through, under or on
behalf of Tenant, and the recording thereof in violation of this provision shall
make this Lease null and void at Landlord's election.
24.7
LANDLORD'S TITLE; AIR RIGHTS. Landlord's title is and always shall be paramount
to the title of Tenant. Nothing herein contained shall empower Tenant to do any
act which can, shall or may encumber the title of Landlord. No rights to any
view or to light or air over any property, whether belonging to Landlord or any
other person, are granted to Tenant by this Lease.
24.8
TENANT'S SIGNS. Tenant shall be entitled, at its sole cost and expense, to one
(1) identification sign outside of the Premises on the floor on which the
Premises are located. The location, quality, design, style, lighting and size of
such sign shall be consistent with the Landlord's Building standard signage
program and shall be subject to Landlord's prior written approval, in its
reasonable discretion. Subject to final agreement with the Existing Tenant,
Tenant shall have rights to one-half (1/2) of the monument sign currently used
by the Existing Tenant. Upon the earlier to occur of the RP Commencement Date,
Tenant shall have exclusive rights to the entire monument sign. Upon the
expiration or earlier termination of this Lease, Tenant shall be responsible, at
its sole cost and expense, for the removal of such signage and the repair of all
damage to the Building caused by such removal. Except for such identification
sign, Tenant may not install any signs on the exterior or roof of the Building
or the Common Areas of the Building, the Complex or the Real Property. Any
signs, window coverings, or blinds (even if the same are located behind the
Landlord approved window coverings for the Building), or other items visible
from the exterior of the Premises or Building are subject to the prior approval
of Landlord, in its sole and absolute discretion.
24.9
RELATIONSHIP OF PARTIES. Nothing contained in this Lease shall be deemed or
construed by the parties hereto or by any third party to create the relationship
of principal and agent, partnership, joint venturer or any association between
Landlord and Tenant, it being expressly understood and agreed that neither the
method of computation of Rent nor any act of the parties hereto shall be deemed
to create any relationship between Landlord and Tenant other than the
relationship of landlord and tenant.
24.10
APPLICATION OF PAYMENTS. Landlord shall have the right to apply payments
received from Tenant pursuant to this Lease, regardless of Tenant's designation
of such payments, to satisfy any obligations of Tenant hereunder, in such order
and amounts as Landlord, in its sole discretion, may elect.
24.11
TIME OF ESSENCE. Time is of the essence of this Lease and each of its
provisions.
24.12
PARTIAL INVALIDITY. If any term, provision or condition contained in this Lease
shall, to any extent, be invalid or unenforceable, the remainder of this Lease,
or the application of such term, provision or condition to persons or
circumstances other than those with respect to which it is invalid or
unenforceable, shall not be affected thereby, and each and every other term,
provision and condition of this Lease shall be valid and enforceable to the
fullest extent possible permitted by law.
24.13 NO
WARRANTY. In executing and delivering this Lease, Tenant has not relied on any
representation, including, but not limited to, any representation whatsoever as
to the amount of any item comprising Additional Rent or the amount of the
Additional Rent in the aggregate or that Landlord is furnishing the same
services to other tenants, at all, on the same level or on the same basis, or
any warranty or any statement of Landlord which is not set forth herein or in
one or more of the Exhibits attached hereto.
24.14
LANDLORD EXCULPATION. It is expressly understood and agreed that notwithstanding
anything in this Lease to the contrary, and notwithstanding any applicable law
to the contrary, the liability of Landlord and the Landlord Parties hereunder
(including any successor landlord) and any recourse by Tenant against Landlord
or the Landlord Parties shall be limited solely and exclusively to an amount
which is equal to the interest of Landlord in the Building, and neither
Landlord, nor any of the Landlord Parties shall have any personal liability
therefor, and Tenant hereby expressly waives and releases such personal
liability on behalf of itself and all persons claiming by, through or under
Tenant.
24.15
ENTIRE AGREEMENT. It is understood and acknowledged that there are no oral
agreements between the parties hereto affecting this Lease and this Lease
supersedes and cancels any and all previous negotiations, arrangements,
brochures, agreements and understandings, if any, between the parties hereto or
displayed by Landlord to Tenant with respect to the subject matter thereof, and
none thereof shall be used to interpret or construe this Lease. This Lease and
any side letter or separate agreement executed by Landlord and Tenant in
connection with this Lease and dated of even date herewith contain all of the
terms, covenants, conditions, warranties and agreements of the parties relating
in any manner to the rental, use and occupancy of the Premises, shall be
considered to be the only agreement between the parties hereto and their
representatives and agents, and none of the terms, covenants, conditions or
provisions of this Lease can be modified, deleted or added to except in writing
signed by the parties hereto. All negotiations and oral agreements acceptable to
both parties have been merged into and are included herein. There are no other
representations or warranties between the parties, and all reliance with respect
to representations is based totally upon the representations and agreements
contained in this Lease.
19
24.16
RIGHT TO LEASE. Landlord reserves the absolute right to effect such other
tenancies in the Building as Landlord in the exercise of its sole business
judgment shall determine to best promote the interests of the Building. Tenant
does not rely on the fact, nor does Landlord represent, that any specific tenant
or type or number of tenants shall, during the Lease Term, occupy any space in
the Building.
24.17
FORCE MAJEURE. Any prevention, delay or stoppage due to strikes, lockouts, labor
disputes, acts of God, inability to obtain services, labor, or materials or
reasonable substitutes therefor, governmental actions, civil commotions, fire or
other casualty, and other causes beyond the reasonable control of the party
obligated to perform, except with respect to the obligations imposed with regard
to Rent and other charges to be paid by Tenant pursuant to this Lease
(collectively, the "Force Majeure"), notwithstanding anything to the contrary
contained in this Lease, shall excuse the performance of such party for a period
equal to any such prevention, delay or stoppage and, therefore, if this Lease
specifies a time period for performance of an obligation of either party, that
time period shall be extended by the period of any delay in such party's
performance caused by a Force Majeure.
24.18
WAIVER OF REDEMPTION BY TENANT. Tenant hereby waives for Tenant and for all
those claiming under Tenant all right now or hereafter existing to redeem by
order or judgment of any court or by any legal process or writ, Tenant's right
of occupancy of the Premises after any termination of this Lease.
24.19
NOTICES. All notices, demands, statements or communications (collectively,
"Notices") given or required to be given by either party to the other hereunder
shall be in writing, shall be sent by United States certified or registered
mail, postage prepaid, return receipt requested, or delivered personally (i) to
Tenant at the appropriate address set forth in Section 5 of the Summary, or to
such other place as Tenant may from time to time designate in a Notice to
Landlord; or (ii) to Landlord at the addresses of Landlord's agent set forth in
Section 3 of the Summary, or to such other firm or to such other place as
Landlord may from time to time designate in a Notice to Tenant. Any Notice will
be deemed given on the date it is mailed as provided in this Section 24.19 or
upon the date personal delivery is made. If Tenant is notified of the identity
and address of Landlord's mortgagee or ground or underlying lessor, Tenant shall
give to such mortgagee or ground or underlying lessor written notice of any
default by Landlord under the terms of this Lease by registered or certified
mail, and such mortgagee or ground or underlying lessor shall be given a
reasonable opportunity to cure such default prior to Tenant's exercising any
remedy available to Tenant.
24.20
JOINT AND SEVERAL. If there is more than one Tenant, the obligations imposed
upon Tenant under this Lease shall be joint and several.
24.21
AUTHORITY. If Tenant is a corporation, limited liability company or partnership,
each individual executing this Lease on behalf of Tenant hereby represents and
warrants that Tenant is a duly formed and existing entity qualified to do
business in the state in which the Building is located and that Tenant has full
right and authority to execute and deliver this Lease and that each person
signing on behalf of Tenant is authorized to do so and to bind Tenant
hereunder.
24.22
JURY TRIAL; ATTORNEYS' FEES. IF EITHER PARTY COMMENCES LITIGATION AGAINST THE
OTHER FOR THE SPECIFIC PERFORMANCE OF THIS LEASE, FOR DAMAGES FOR THE BREACH
HEREOF OR OTHERWISE FOR ENFORCEMENT, PROTECTION OR ESTABLISHMENT OF ANY RIGHT OR
REMEDY HEREUNDER, THE PARTIES HERETO AGREE TO AND HEREBY DO WAIVE ANY RIGHT TO A
TRIAL BY JURY. In the event of any such commencement of litigation, the
prevailing party shall be entitled to recover from the other party such costs
and reasonable attorneys' fees as may have been incurred, including any and all
costs incurred in enforcing, perfecting and executing such
judgment.
24.23
GOVERNING LAW. This Lease shall be construed and enforced in accordance with the
laws of the state in which the Building is located.
24.24
SUBMISSION OF LEASE. Submission of this instrument for examination or signature
by Tenant does not constitute a reservation of or an option for lease, and it is
not effective as a lease or otherwise until execution and delivery by both
Landlord and Tenant.
24.25
BROKERS. Landlord and Tenant hereby warrant to each other that they have had no
dealings with any real estate broker or agent in connection with the negotiation
of this Lease, excepting only the real estate brokers or agents specified in
Section 12 of the Summary (the "Brokers"), and that they know of no other real
estate broker or agent who is entitled to a commission in connection with this
Lease. Each party shall indemnify and hold harmless the other from and against
any and all liabilities or expenses arising out of claims made for a fee or
commission by any real estate broker, agent or finder in connection with the
Premises and this Lease other than Brokers, if any, and the payment of the
Brokers by Landlord (which payment is Landlord's sole responsibility) resulting
from the actions of the indemnifying party. Any real estate brokerage commission
or finder's fee payable to the Brokers in connection with this Lease shall only
be payable and applicable to the extent of the initial term of the Lease, be
paid by Landlord and shall be payable 50% upon mutual lease execution and
delivery, 25% upon occupancy of the Initial Premises, and 25% upon occupancy of
the Remaining Premises. Unless expressly agreed to in writing by Landlord and
Brokers, no real estate brokerage commission or finder's fee shall be owed to,
or otherwise payable to, the Brokers for any renewals or other extensions of the
initial term of this Lease or for any additional space leased by Tenant other
than the Premises as same exists as of the date on which Tenant executes this
Lease. Tenant further represents and warrants to Landlord that Tenant will not
receive (i) any portion of any brokerage commission or finder's fee payable to
the Broker(s) in connection with this Lease or (ii) any other form of
compensation or incentive from the Broker(s) with respect to this
Lease.
24.26
INDEPENDENT COVENANTS. This Lease shall be construed as though the covenants
herein between Landlord and Tenant are independent and not dependent and Tenant
hereby expressly waives the benefit of any statute to the contrary and agrees
that if Landlord fails to perform its obligations set forth herein, Tenant shall
not be entitled to make any repairs or perform any acts hereunder at Landlord's
expense or to any setoff of the Rent or other amounts owing hereunder against
Landlord; provided, however, that the foregoing shall in no way impair the right
of Tenant to commence a separate action against Landlord for any violation by
Landlord of the provisions hereof so long as notice is first given to Landlord
and any holder of a mortgage or deed of trust covering the Building, Complex,
Real Property or any portion thereof, of whose address Tenant has theretofore
been notified, and an opportunity is granted to Landlord and such holder to
correct such violations as provided above. Each provision to be performed by
Tenant hereunder shall be deemed to be both a covenant and a
condition.
20
24.27
BUILDING NAME AND SIGNAGE. Landlord shall have the right at any time to change
the name of the Building and to install, affix and maintain any and all signs on
the exterior and on the interior of the Building as Landlord may, in Landlord's
sole discretion, desire. Tenant shall not use the name of the Building or use
pictures or illustrations of the Building in advertising or other publicity,
without the prior written consent of Landlord. Landlord shall not use the name
of the Tenant in advertising or other publicity, without the prior written
consent of Tenant, except in connection with the proposed sale, financing, joint
venture or other investment in the Building, Complex or Real
Property.
24.28
BUILDING DIRECTORY. As of the Commencement Date Tenant shall be entitled to one
(1) line on the Building directory to display Tenant's name and location in the
Building. Tenant shall be entitled to the entire Building directory as of the RP
Commencement Date.
24.29
CONFIDENTIALITY. Tenant acknowledges that the content of this Lease and any
related documents are confidential information. Tenant shall keep such
confidential information strictly confidential and shall not disclose such
confidential information to any person or entity other than Tenant's financial,
legal, and space planning consultants, or as may be required by
law.
24.30
LANDLORD RENOVATIONS. It is specifically understood and agreed that Landlord has
no obligation and has made no promises to alter, remodel, improve, renovate,
repair or decorate the Premises, Building, Complex, Real Property, or any part
thereof and that no representations or warranties respecting the condition of
the Premises, the Building, the Complex or the Real Property have been made by
Landlord to Tenant, except as specifically set forth in this Lease.
However,
Tenant acknowledges that Landlord may from time to time, at Landlord's sole
option, renovate, improve, alter, or modify (collectively, the "Renovations")
the Building, Premises, Complex and/or Real Property, including without
limitation the Building Parking Facility, Common Areas, systems and equipment,
roof, and structural portions of the same, which Renovations may include,
without limitation, (i) modifying the Common Areas and tenant spaces to comply
with applicable laws and regulations, including regulations relating to the
physically disabled, seismic conditions, and building safety and security, and
(ii) installing new carpeting, lighting, and wall coverings in the Building
Common Areas, and in connection with such Renovations, Landlord may, among other
things, erect scaffolding or other necessary structures in the Building, limit
or eliminate access to portions of the Complex and/or Real Property, including
portions of the Common Areas, or perform work in the Building, which work may
create noise, dust or leave debris in the Building. Tenant hereby agrees that
such Renovations and Landlord's actions in connection with such Renovations
shall in no way constitute a constructive eviction of Tenant nor entitle Tenant
to any abatement of Rent. Landlord shall have no responsibility or for any
reason be liable to Tenant for any direct or indirect injury to or interference
with Tenant's business arising from the Renovations, nor shall Tenant be
entitled to any compensation or damages from Landlord for loss of the use of the
whole or any part of the Premises or of Tenant's personal property or
improvements resulting from the Renovations or Landlord's actions in connection
with such Renovations, or for any inconvenience or annoyance occasioned by such
Renovations or Landlord's actions in connection with such Renovations.
Landlord's right pursuant to this paragraph 24.30 shall be subject to the
condition that exercise of any of such rights shall not unreasonably interfere
with Tenant's use of the Premises, or decrease the number of Tenant's parking
spaces below the number required to be provided hereunder.
24.31
[OMITTED]
24.32
MERGER. The voluntary or other surrender of this Lease by Tenant, the mutual
termination or cancellation hereof by Landlord and Tenant, or a termination of
this Lease by Landlord for a material default by Tenant hereunder, shall not
work a merger, and, at the sole option of Landlord, (i) shall terminate all or
any existing subleases or subtenancies, or (ii) may operate as an assignment to
Landlord of any or all of such subleases or subtenancies. Landlord's election of
either or both of the foregoing options shall be exercised by delivery by
Landlord of written notice thereof to Tenant and all known subtenants under any
sublease.
ARTICLE
25 - MORTGAGEE PROTECTION
Upon any
default on the part of Landlord, Tenant will give written notice by registered
or certified mail to any beneficiary of a deed of trust or mortgagee of a
mortgage covering the Premises who has provided Tenant with notice of their
interest together with an address for receiving notice, and shall offer such
beneficiary or mortgagee a reasonable opportunity to cure the default (which, in
no event shall be less than ninety (90) days), including time to obtain
possession of the Premises by power of sale or a judicial foreclosure, if such
should prove necessary to effect a cure. If such default cannot be cured within
such time period, then such additional time as may be necessary will be given to
such beneficiary or mortgagee to effect such cure so long as such beneficiary or
mortgagee has commenced the cure within the original time period and thereafter
diligently pursues such cure to completion, in which event this Lease shall not
be terminated while such cure is being diligently pursued. Tenant agrees that
each lender to whom this Lease has been assigned by Landlord is an express third
party beneficiary hereof. Tenant shall not make any prepayment of Rent more than
one (1) month in advance without the prior written consent of each such lender,
except if Tenant is required to make quarterly payments of Rent in advance
pursuant to the provisions of this Lease. Tenant waives the collection of any
deposit from such lender(s) or any purchaser at a foreclosure sale of such
lender(s)' deed of trust unless the lender(s) or such purchaser shall have
actually received and not refunded the deposit. Tenant agrees to make all
payments under this Lease to the lender with the most senior encumbrance upon
receiving a direction, in writing, to pay said amounts to such lender. Tenant
shall comply with such written direction to pay without determining whether an
event of default exists under such lender's loan to Landlord.
21
ARTICLE
26 - AMERICANS WITH DISABILITIES ACT
Landlord
and Tenant hereby agree and acknowledge that the Premises, the Building, the
Complex and/or the Real Property may be subject to the requirements of the
Americans with Disabilities Act, a federal law codified at 42 U.S.C. 12101 et
seq., including, but not limited to Title III thereof, all regulations and
guidelines related thereto, together with any and all laws, rules, regulations,
ordinances, codes and statutes now or hereafter enacted by local or state
agencies having jurisdiction thereof, including all requirements of Title 24 of
the State of California, as the same may be in effect on the date of this Lease
and may be hereafter modified, amended or supplemented (collectively, the
"ADA"). Any Alterations to be constructed hereunder shall be in compliance with
the requirements of the ADA, and all costs incurred for purposes of compliance
therewith shall be a part of and included in the costs of the Alterations.
Tenant shall be solely responsible for conducting its own independent
investigation of this matter and for ensuring that the design of all Alterations
strictly comply with all requirements of the ADA. Subject to reimbursement as
part of Operating Expenses, if any barrier removal work or other work is
required to the Building, the Common Areas, or the Complex under the ADA, then
such work shall be the responsibility of Landlord; provided, if such work is
required under the ADA as a result of Tenant's particular use of the Premises or
any work or alteration made to the Premises by or on behalf of Tenant, then such
work shall be performed by Landlord at the sole cost and expense of Tenant.
Except as otherwise expressly provided in this Article 26, Tenant shall be
responsible at its sole cost and expense for fully and faithfully complying with
all applicable requirements of the ADA, including without limitation, not
discriminating against any disabled persons in the operation of Tenant's
business in or about the Premises, and offering or otherwise providing auxiliary
aids and services as, and when, required by the ADA. Within ten (10) days after
receipt, Landlord and Tenant shall advise the other party in writing, and
provide the other with copies of (as applicable), any notices alleging violation
of the ADA relating to any portion of the Premises or the Building; any claims
made or threatened in writing regarding noncompliance with the ADA and relating
to any portion of the Premises or the Building; or any governmental or
regulatory actions or investigations instituted or threatened regarding
noncompliance with the ADA and relating to any portion of the Premises or the
Building. Tenant shall and hereby agrees to protect, defend (with counsel
acceptable to Landlord) and hold Landlord and the other Indemnitees harmless and
indemnify the Indemnitees from and against all liabilities, damages, claims,
losses, penalties, judgments, charges and expenses (including reasonable
attorneys' fees, costs of court and expenses necessary in the prosecution or
defense of any litigation including the enforcement of this provision) arising
from or in any way related to, directly or indirectly, Tenant's or Tenant's
Representatives' violation or alleged violation of the ADA. Tenant agrees that
the indemnity obligations of Tenant herein accruing during the Term hereof shall
survive the expiration or earlier termination of this Lease.
ARTICLE
27 - HAZARDOUS MATERIALS
27.1
DEFINITION OF HAZARDOUS MATERIALS. As used in this Lease, the term Hazardous
Materials shall mean and include (a) any hazardous or toxic wastes, materials or
substances, and other pollutants or contaminants, which are or become regulated
by any Environmental Laws; (b) petroleum, petroleum by products, gasoline,
diesel fuel, crude oil or any fraction thereof; (c) asbestos and asbestos
containing material, in any form, whether friable or non-friable;
(d)
polychlorinated biphenyls; (e) radioactive materials; (f) lead and
lead-containing materials; (g) any other material, waste or substance displaying
toxic, reactive, ignitable or corrosive characteristics, as all such terms are
used in their broadest sense, and are defined or become defined by any
Environmental Law (defined below); or (h) any materials which cause or threatens
to cause a nuisance upon or waste to any portion of the Premises, the Building,
the Real Property, the Complex or any surrounding property; or poses or
threatens to pose a hazard to the health and safety of persons on the Premises
or any surrounding property.
27.2
PROHIBITION; ENVIRONMENTAL LAWS. Except for nominal amounts of ordinary
household cleaners, office supplies and janitorial supplies which are not
regulated by any Environmental Laws, Tenant shall not use nor store any
Hazardous Materials on, in, or about any portion of the Premises, the Building,
the Complex, the Real Property without, in each instance, obtaining Landlord's
prior written consent thereto. In all events any usage or storage of any
Hazardous Materials by Tenant shall be in full compliance with any and all
local, state and federal environmental, health and/or safety-related laws,
statutes, orders, standards, courts' decisions, ordinances, rules and
regulations (as interpreted by judicial and administrative decisions), decrees,
directives, guidelines, permits or permit conditions, currently existing and as
amended, enacted, issued or adopted in the future which are or become applicable
to Tenant or all or any portion of the Premises (collectively, the
"Environmental Laws"). Landlord shall have the right at all times during the
Lease Term following no less than 24 hours' notice (except in case of
emergency), and subject to Tenant's reasonable security requirements to (i)
inspect the Premises, (ii) conduct tests and investigations to determine whether
Tenant is in compliance with the provisions of this Article 27, and (iii)
request lists of all Hazardous Materials used, stored or otherwise located in,
on or about any portion of the Premises. The cost of all such inspections, tests
and investigations shall be borne solely by Tenant, if Landlord reasonably
determines that Tenant or any of Tenant's Representatives are directly or
indirectly responsible in any manner for any contamination revealed by such
inspections, tests and investigations. The aforementioned rights granted herein
to Landlord and its representatives shall not create (a) a duty on Landlord's
part to inspect, test, investigate, monitor or otherwise observe the Premises or
the activities of Tenant and Tenant's Representatives with respect to Hazardous
Materials, including without limitation, Tenant's operation, use and any
remediation related thereto, or (b) liability on the part of Landlord and its
representatives for Tenant's use, storage, disposal or remediation of Hazardous
Materials, it being understood that Tenant shall be solely responsible for all
liability in connection therewith.
27.3
TENANT'S ENVIRONMENTAL OBLIGATIONS. Tenant, at its sole cost and expense,
covenants and warrants to promptly investigate, clean up, remove, restore and
otherwise remediate (including, without limitation, preparation of any
feasibility studies or reports and the performance of any and all closures) any
spill, release, discharge, disposal, emission, migration or transportation of
Hazardous Materials arising from or related to the intentional or negligent acts
or omissions of Tenant or any of Tenant's Representatives such that the affected
portions of the Premises, Building, Complex, Real Property and any adjacent
property are returned to the condition existing prior to the appearance of such
Hazardous Materials. Any such investigation, clean up, removal, restoration and
other remediation shall only be performed after Tenant has obtained Landlord's
prior written consent, which consent shall not be unreasonably withheld so long
as such actions would not potentially have a material adverse long-term or
short-term effect on any portion of the Premises, the Building, the Real
Property or the Complex. Notwithstanding the foregoing, Tenant shall be entitled
to respond immediately to an emergency without first obtaining Landlord's prior
written consent. Tenant, at its sole cost and expense, shall conduct and
perform, or cause to be conducted and performed, all closures as required by any
Environmental Laws or any agencies or other governmental authorities having
jurisdiction thereof. If Tenant fails to so promptly investigate, clean up,
remove, restore, provide closure or otherwise so remediate, Landlord may, but
without obligation to do so, take any and all steps necessary to rectify the
same and Tenant shall promptly reimburse Landlord, upon demand, for all costs
and expenses to Landlord of performing investigation, clean up, removal,
restoration, closure and remediation work. All such work undertaken by Tenant,
as required herein, shall be performed in such a manner so as to enable Landlord
to make full economic use of the Premises, the Building, the Real Property and
the Complex after the satisfactory completion of such work.
22
27.4
ENVIRONMENTAL INDEMNITY. In addition to Tenant's obligations as set forth
hereinabove, Tenant shall, protect, indemnify, defend (with counsel reasonably
acceptable to Landlord) and hold Landlord and the other Indemnitees harmless
from and against any and all claims, judgments, damages, penalties, fines,
liabilities, losses (including, without limitation, diminution in value of any
portion of the Premises, the Building, the Real Property or the Complex, damages
for the loss of or restriction on the use of rentable or usable space, and from
any adverse impact of Landlord's marketing of any space within the Building
and/or Complex), suits, administrative proceedings and costs (including,
but not limited to, attorneys' and consultant fees and court costs) arising at
any time during or after the Lease Term in connection with or related to,
directly or indirectly, the use, presence, transportation, storage, disposal,
migration, removal, spill, release or discharge of Hazardous Materials on, in or
about any portion of the Premises, the Common Areas, the Building, the Real
Property or the Complex as a result (directly or indirectly) of the intentional
or negligent acts or omissions of Tenant or any of Tenant's Representatives.
Neither the written consent of Landlord to the presence, use or storage of
Hazardous Materials in, on, under or about any portion of the Premises, the
Building, the Real Property and/or the Complex, nor the strict compliance by
Tenant with all Environmental Laws shall excuse Tenant from its obligations of
indemnification pursuant hereto. Tenant shall not be relieved of its
indemnification obligations under the provisions of this Section 27.4 due to
Landlord's status as either an "owner" or "operator" under any Environmental
Laws.
27.5
SURVIVAL. Tenant's obligations and liabilities pursuant to the provisions of
this Article 27 shall survive the expiration or earlier termination of this
Lease. If it is determined by Landlord's consultants that the condition of all
or any portion of the Premises, the Building, the Real Property and/or the
Complex is not in compliance with the provisions of this Lease with respect to
Hazardous Materials, including without limitation, all Environmental Laws at the
expiration or earlier termination of this Lease, then in Landlord's sole
discretion, Landlord may require Tenant to hold over possession of the Premises
until Tenant can surrender the Premises to Landlord in the condition in which
the Premises existed as of the Lease Commencement Date and prior to the
appearance of such Hazardous Materials except for reasonable wear and tear,
including without limitation, the conduct or performance of any closures as
required by any Environmental Laws. The burden of proof hereunder shall be upon
Tenant. For purposes hereof, the term "reasonable wear and tear" shall not
include any deterioration in the condition or diminution of the value of any
portion of the Premises, the Building, the Real Property and/or the Complex in
any manner whatsoever related to directly, or indirectly, Hazardous Materials.
Any such holdover by Tenant will be with Landlord's consent and will not be
terminable by Tenant in any event or circumstance.
27.6
EXCULPATION OF TENANT: Tenant shall not be liable to Landlord for or otherwise
obligated to Landlord under any provision of the Lease with respect to the
following: (i) any claim, remediation, obligation, investigation, obligation,
liability, cause of action, attorney's fees, consultants' cost, expense or
damage resulting from any Hazardous Materials present in, on or about the
Premises, the Building, the Real Property or the Complex to the extent not
caused nor otherwise permitted, directly or indirectly, by Tenant or Tenant's
Representatives; or (ii) the removal, investigation, monitoring or remediation
of any Hazardous Material present in, on or about the Premises, the Building,
the Real Property or the Complex directly caused by any source, including third
parties, other than Tenant or Tenant's Representatives; provided, however,
Tenant shall be fully liable for and otherwise obligated to Landlord under the
provisions of this Lease for all liabilities, costs, damages, penalties, claims,
judgments, expenses (including without limitation, attorneys' and experts' fees
and costs) and losses to the extent (a) Tenant or any of Tenant's
Representatives contributes to the presence of such Hazardous Materials, or
Tenant and/or any of Tenant's Representatives exacerbates the conditions caused
by such Hazardous Materials, or (b) Tenant and/or Tenant's Representatives
allows or permits persons over which Tenant or any of Tenant's Representatives
has control, and/or for which Tenant or any of Tenant's Representatives are
legally responsible for, to cause such Hazardous Materials to be present in, on,
under, through or about any portion of the Premises, the Common Areas, the
Building, the Real Property or the Complex, or (c) Tenant and/or any of Tenant's
Representatives does not take all reasonably appropriate actions to prevent such
persons over which Tenant or any of Tenant's Representatives has control and/or
for which Tenant or any of Tenant's Representatives are legally responsible from
causing the presence of Hazardous Materials in, on, under, through or about any
portion of the Premises, the Common Areas, the Building, the Real Property or
the Complex.
ARTICLE
28 - FINANCIAL STATEMENTS
Tenant,
for the reliance of Landlord, any lender holding or anticipated to acquire a
lien upon the Premises, the Building, the Real Property or the Complex or any
portion thereof, or any prospective purchaser of the Building, the Real Property
or the Complex or any portion thereof, within ten (10) days after Landlord's
request therefor, but not more often than once annually so long as Tenant is not
in default of this Lease, shall deliver to Landlord the then current audited
financial statements of Tenant (including interim periods following the end of
the last fiscal year for which annual statements are available) which statements
shall be prepared or compiled by a certified public accountant and shall present
fairly the financial condition of Tenant at such dates and the result of its
operations and changes in its financial positions for the periods ended on such
dates. If an audited financial statement has not been prepared, Tenant shall
provide Landlord with an unaudited financial statement and/or such other
information, the type and form of which are acceptable to Landlord in Landlord's
reasonable discretion, which reflects the financial condition of Tenant. If
Landlord so requests, Tenant shall deliver to Landlord an opinion of a certified
public accountant, including a balance sheet and profit and loss statement for
the most recent prior year, all prepared in accordance with generally accepted
accounting principles consistently applied.
IN
WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed the
day and date first above written
23
TENANT:
AVIGEN,
INC.,
a
Delaware corporation
|
By:
|
/s/ JOHN MONAHAN
|
||
|
Name:
|
John Monahan
|
||
|
Title:
|
President & CEO
|
||
|
By:
|
/s/ THOMAS J. PAULSON
|
||
|
Name:
|
Thomas J. Paulson
|
||
|
Title:
|
VP-Finance, CFO
|
||
|
Date:
|
11/3/00
|
LANDLORD:
LINCOLN-RECP
EMPIRE OPCO, LLC,
a
Delaware limited liability company
By:
LEGACY PARTNERS COMMERCIAL, INC.,
as
manager and agent for Lincoln-RECP Empire OPCO, LLC
| By: |
/s/
ROBERT F. PHIPPS
|
||
|
Senior
Vice President
|
|||
|
Date:
|
|||
24
EXHIBIT
A
OUTLINE
OF FLOOR PLAN OF PREMISES
A-1
EXHIBIT
B
[INTENTIONALLY
OMITTED]
B-1
EXHIBIT
C
AMENDMENT
TO LEASE
This
AMENDMENT TO LEASE ("Amendment") is made and entered into effective as of
November 2, 2000, by and between LINCOLN-RECP EMPIRE OPCO, LLC, a Delaware
limited liability company ("Landlord"), and AVIGEN, INC., a Delaware corporation
("Tenant"), with reference to the following facts.
RECITALS:
A.
Landlord and Tenant entered into that certain Office Lease dated as of
_____________________ (the "Lease") pursuant to which Landlord leased to Tenant
and Tenant leased from Landlord certain "Premises", as described in the Lease,
known as Suite ____ of the Building located at 1301 Harbor Bay Parkway, Alameda,
California 94502.
B. Except
as otherwise set forth herein, all capitalized terms used in this Amendment
shall have the same meaning given such terms in the Lease.
C.
Landlord and Tenant desire to amend the Lease to confirm the commencement and
expiration dates of the term, as hereinafter provided.
NOW,
THEREFORE, in consideration of the foregoing Recitals and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1.
CONFIRMATION OF DATES. The parties hereby confirm that (a) the Premises are
Substantially Complete, (b) the term of the Lease commenced as of
____________________ (the "Lease Commencement Date") for a term of
_________________________ ending on _______________________ (the "Lease
Expiration Date") (unless sooner terminated as provided in the Lease and (c) in
accordance with the Lease, Rent commenced to accrue on
_______________________________.
2. NO
FURTHER MODIFICATION. Except as set forth in this Amendment, all of the terms
and provisions of the Lease shall remain unmodified and in full force and
effect.
IN
WITNESS WHEREOF, this Amendment to Lease has been executed as of the day and
year first above written.
TENANT:
AVIGEN,
INC.,
a
Delaware corporation
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
Date:
|
LANDLORD:
LINCOLN-RECP
EMPIRE OPCO, LLC,
a
Delaware limited liability company
By:
LEGACY PARTNERS COMMERCIAL, INC.,
as
manager and agent for Lincoln-RECP Empire OPCO, LLC
|
By:
|
|
|
Senior
Vice President
|
|
|
Date:
|
C-1
EXHIBIT
D
RULES
AND REGULATIONS
Tenant
shall faithfully observe and comply with the following Rules and Regulations.
Landlord shall not be responsible to Tenant for the nonperformance of any of
said Rules and Regulations by or otherwise with respect to the acts or omissions
of any other tenants or occupants of the Building. Notwithstanding anything to
the contrary contained in this section, if any rule or regulation is in conflict
with any term, covenant or condition of this Lease, this Lease shall prevail. In
addition, no such rule or regulation, or any subsequent amendment thereto
adopted by Landlord, shall in any way materially alter, reduce or adversely
affect any of Tenant's rights or enlarge Tenant's obligations under this
Lease.
1. Tenant
shall not alter any lock or install any new or additional locks or bolts on any
doors or windows of the Premises without obtaining Landlord's prior written
consent. Tenant shall bear the cost of any lock changes or repairs required by
Tenant. Two keys will be furnished by Landlord for the Premises, and any
additional keys required by Tenant must be obtained from Landlord at a
reasonable cost to be established by Landlord.
2. All
doors opening to public corridors shall be kept closed at all times except for
normal ingress and egress to the Premises, unless electrical hold backs have
been installed.
3.
Landlord reserves the right to close and keep locked all entrance and exit doors
of the Building during such hours as are customary for comparable buildings in
the vicinity of the Building. Tenant, its employees and agents must be sure that
the doors to the Building are securely closed and locked when leaving the
Premises if it is after the normal hours of business for the Building. Any
tenant, its employees, agents or any other persons entering or leaving the
Building at any time when it is so locked, or any time when it is considered to
be after normal business hours for the Building, may be required to sign the
Building register when so doing. Access to the Building may be refused unless
the person seeking access has proper identification or has a previously arranged
pass for access to the Building. The Landlord and his agents shall in no case be
liable for damages for any error with regard to the admission to or exclusion
from the Building of any person. In case of invasion, mob, riot, public
excitement, or other commotion, Landlord reserves the right to prevent access to
the Building during the continuance of same by any means it deems appropriate
for the safety and protection of life and property.
4.
Landlord shall have the right to prescribe the weight, size and position of all
safes and other heavy property brought into the Building. Safes and other heavy
objects shall, if considered necessary by Landlord, stand on supports of such
thickness as is necessary to properly distribute the weight. Landlord will not
be responsible for loss of or damage to any such safe or property in any case.
All damage done to any part of the Building, its contents, occupants or visitors
by moving or maintaining any such safe or other property shall be the sole
responsibility of Tenant and any expense of said damage or injury shall be borne
by Tenant.
5. No
oversize or overweight furniture, freight, packages, supplies, equipment or
merchandise will be brought into or removed from the Building or carried up or
down in the elevators, except upon prior notice to Landlord, and in such manner,
in such specific elevator, and between such hours as shall be designated by
Landlord. Tenant shall provide Landlord with not less than 24 hours prior notice
of the need to utilize an elevator for any such purpose, so as to provide
Landlord with a reasonable period to schedule such use and to install such
padding or take such other actions or prescribe such procedures as are
appropriate to protect against damage to the elevators or other parts of the
Building.
6.
Landlord shall have the right to control and operate the public portions of the
Building, the public facilities, the heating and air conditioning, and any other
facilities furnished for the common use of tenants, in such manner as is
customary for comparable buildings in the vicinity of the
Building.
7. The
requirements of Tenant will be attended to only upon application at the
management office of the Building or at such office location designated by
Landlord. Employees of Landlord shall not perform any work or do anything
outside their regular duties unless under special instructions from
Landlord.
8. Tenant
shall not disturb, solicit, or canvass any occupant of the Building and shall
cooperate with Landlord or Landlord's agents to prevent same.
9. The
toilet rooms, urinals, wash bowls and other apparatus shall not be used for any
purpose other than that for which they were constructed, and no foreign
substance of any kind whatsoever shall be thrown therein. The expense of any
breakage, stoppage or damage resulting from the violation of this rule shall be
borne by the tenant who, or whose employees or agents, shall have caused
it.
10.
Tenant shall not overload the floor of the Premises, nor mark, drive nails or
screws, or drill into the partitions, woodwork or plaster or in any way deface
the Premises or any part thereof without Landlord's consent first had and
obtained. Notwithstanding the foregoing, a tenant may decorate the interior of
such tenant's premises at such tenant's sole discretion provided such
decorations do not impact the structural integrity of the Building and cannot be
seen from the exterior of the Building or from any Common Areas of the
Building.
11.
Except for vending machines intended for the sole use of Tenant's employees and
invitees, no vending machine or machines of any description other than
fractional horsepower office machines shall be installed, maintained or operated
upon the Premises without the written consent of Landlord.
12.
Tenant shall not use any method of heating or air conditioning other than that
which may be supplied by Landlord, without the prior written consent of
Landlord.
13.
Tenant shall not use or keep in or on the Premises or the Building any kerosene,
gasoline or other inflammable or combustible fluid or material. Tenant shall not
use, keep or permit to be used or kept, any foul or noxious gas or substance in
or on the Premises, or permit or allow the Premises to be occupied or used in a
manner offensive or objectionable to Landlord or other occupants of the Building
by reason of noise, odors, or vibrations, or interfere in any way with other
Tenants or those having business therein.
14.
Tenant shall not bring into or keep within the Building or the Premises any
animals, birds, bicycles or other vehicles.
D-1
15. No
cooking shall be done or permitted by any tenant on the Premises, nor shall the
Premises be used for the storage of merchandise, for lodging or for any
improper, objectionable or immoral purposes. Notwithstanding the foregoing,
Underwriters' laboratory-approved equipment and microwave ovens may be used in
the Premises for heating food and brewing coffee, tea, hot chocolate and similar
beverages, provided that such use is in accordance with all applicable federal,
state and city laws, codes, ordinances, rules and regulations, and does not
cause odors which are objectionable to Landlord and other Tenants.
16.
Landlord will approve where and how telephone and telegraph wires are to be
introduced to the Premises. No boring or cutting for wires shall be allowed
without the consent of Landlord. The location of telephone, call boxes and other
office equipment affixed to the Premises shall be subject to the approval of
Landlord.
17.
Landlord reserves the right to exclude or expel from the Building any person
who, in the judgment of Landlord, is intoxicated or under the influence of
liquor or drugs, or who shall in any manner do any act in violation of any of
these Rules and Regulations.
18.
Tenant, its employees and agents shall not loiter in the entrances or corridors,
nor in any way obstruct the sidewalks, lobby, halls, stairways or elevators, and
shall use the same only as a means of ingress and egress for the
Premises.
19.
Tenant shall not waste electricity, water or air conditioning and agrees to
cooperate fully with Landlord to ensure the most effective operation of the
Building's heating and air conditioning system, and shall refrain from
attempting to adjust any controls.
20.
Tenant shall store all its trash and garbage within the interior of the
Premises. No material shall be placed in the trash boxes or receptacles if such
material is of such nature that it may not be disposed of in the ordinary and
customary manner of removing and disposing of trash and garbage in the city in
which the Building is located without violation of any law or ordinance
governing such disposal. All trash, garbage and refuse disposal shall be made
only through entry-ways and elevators provided for such purposes at such times
as Landlord shall designate.
21.
Tenant shall comply with all safety, fire protection and evacuation procedures
and regulations established by Landlord or any governmental agency.
22.
Tenant shall assume any and all responsibility for protecting the Premises from
theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed, when the Premises are not
occupied.
23. No
awnings or other projection shall be attached to the outside walls of the
Building without the prior written consent of Landlord. 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 without the prior written consent of
Landlord. The sashes, sash doors, skylights, windows, and doors that reflect or
admit light and air into the halls, passageways or other public places in the
Building shall not be covered or obstructed by Tenant, nor shall any bottles,
parcels or other articles be placed on the windowsills. All electrical ceiling
fixtures hung in offices or spaces along the perimeter of the Building must be
fluorescent and/or of a quality, type, design and bulb color approved by
Landlord.
24. The
washing and/or detailing of or, the installation of windshields, radios,
telephones in or general work on, automobiles shall not be allowed on the Real
Property.
25. Food
vendors shall be allowed in the Building upon receipt of a written request from
the Tenant. The food vendor shall service only the tenants that have a written
request on file in the Building's management office. Under no circumstance shall
the food vendor display their products in a public or common area including
corridors and elevator lobbies. Any failure to comply with this rule shall
result in immediate permanent withdrawal of the vendor from the
Building.
26.
Tenant must comply with requests by the Landlord concerning the informing of
their employees of items of importance to the Landlord.
27.
Tenant shall comply with any non-smoking ordinance adopted by any applicable
governmental authority.
28.
Landlord may waive any one or more of these Rules and Regulations for the
benefit of any particular tenant or tenants, but no such waiver by Landlord
shall be construed as a waiver of such Rules and Regulations in favor of any
other tenant or tenants, nor prevent Landlord from thereafter enforcing any such
Rules or Regulations against any or all tenants of the Building. Landlord
reserves the right at any time to change or rescind any one or more of these
Rules and Regulations, or to make such other and further reasonable Rules and
Regulations as in Landlord's judgment may from time to time be necessary for the
management, safety, care and cleanliness of the Premises and Building, and for
the preservation of good order therein, as well as for the convenience of other
occupants and tenants therein. Landlord shall not be responsible to Tenant or to
any other person for the nonobservance of the Rules and Regulations by another
tenant or other person. Tenant shall be deemed to have read these Rules and
Regulations and to have agreed to abide by them as a condition of its occupancy
of the Premises.
PARKING
RULES AND REGULATIONS
1. Tenant
and employees of Tenant (hereinafter referred to as "Tenant") shall not park
vehicles in any parking areas designated by Landlord as areas for parking by
visitors to the Building. Tenant shall not leave vehicles in the Building
parking areas overnight nor park any vehicles in the Building parking areas
other than automobiles, motorcycles, motor driven or non-motor drive bicycles or
four-wheeled trucks. Landlord may, in its sole discretion, designate separate
areas for bicycles and motorcycles.
2. Cars
must be parked entirely within the stall lines painted on the floor of the
parking areas.
3. All
directional signs and arrows must be observed.
D-2
4. The
speed limit shall be 5 miles per hour.
5.
Parking is prohibited, unless a floor parking attendant approved by Landlord
directs otherwise:
a. In
areas not striped for parking;
b. In
aisles;
c. Where
"No Parking" or "Handicap" signs are posted;
d. On
ramps;
e. In
crosshatched areas; or
f. In
such other areas as may be designated by Landlord or its authorized
agents.
6.
Parking stickers or any other device or form of identification which may be
supplied by Landlord shall remain the property of Landlord. Such parking
identification device must be displayed as requested and may not be mutilated in
any manner.
7. Every
Tenant is requested to park and lock his/her own car. All responsibility for
damage to cars to be repaired is hereby assumed by Tenant. Tenant shall repair
or cause to be repaired at its sole cost and expense any and all damage to the
Building Parking Facility or any part thereof caused by Tenant or any of
Tenant's Representatives or resulting from vehicles of Tenant or any of Tenant's
Representatives.
8. Loss
or theft of parking identification devices from automobiles must be reported to
Landlord immediately. Any parking identification devices found on any
unauthorized car will be confiscated and the illegal holder will be subject to
prosecution. Lost or stolen devices previously reported and then found must be
reported found to the Landlord immediately.
9. Spaces
are for the express purpose of one automobile per space unless approved by
Landlord or Landlord directs otherwise. Washing, waxing, cleaning or servicing
of any vehicle by Tenant and/or any of Tenant's Representatives is prohibited.
Storage of vehicles for periods exceeding one week is prohibited and said
vehicles shall be subject to towing.
10. The
Landlord reserves the right to refuse the issuance of monthly stickers or other
parking identification devices to any Tenant or person and/or his agents or
representatives who willfully refuse to comply with the above Rules and
Regulations or any city, state or federal ordinance, rule, regulation, law or
agreement. Tenant shall not load or unload in areas other than those designated
by Landlord for such activities.
11. Tenants and any of Tenant's Representatives parked in prohibited
areas are subject to towing at their own expense.
D-3
EXHIBIT
E
FORM
OF TENANT'S ESTOPPEL CERTIFICATE
The
undersigned, as Tenant under that certain Office Lease (the "Lease") made and
entered into as of November 2, 2000 and between LINCOLN-RECP EMPIRE OPCO, LLC, a
Delaware limited liability company, as Landlord, and the undersigned as Tenant,
for Premises on the first (1st) and second (2nd) floor(s) of the Building
located at 1301 Harbor Bay Parkway, Alameda, California hereby certifies as
follows:
1.
Attached hereto as Exhibit A is a true and correct copy of the Lease and all
amendments and modifications thereto. The documents contained in Exhibit A
represent the entire agreement between the parties as to the
Premises.
2. The
undersigned has commenced occupancy of the Premises described in the Lease,
currently occupies the Premises, and the Lease Term commenced on
_________.
3. The
Lease is in full force and effect and has not been modified, supplemented or
amended in any way except as provided in Exhibit A.
4. Tenant
has not transferred, assigned, or sublet any portion of the Premises nor entered
into any license or concession agreements with respect thereto except as
follows:
5. Tenant
shall not modify the documents contained in Exhibit A or prepay any amounts
owing under the Lease to Landlord in excess of thirty (30) days without the
prior written consent of Landlord's mortgagee.
6. Base
Rent became payable on _______________.
7. The
Lease Term expires on _________________.
8. All
conditions of the Lease to be performed by Landlord necessary to the
enforceability of the Lease have been satisfied and Landlord is not in default
thereunder.
9. No
rental has been paid in advance and no security has been deposited with Landlord
except as provided in the Lease. Tenant has no options to renew or otherwise
extend the term of the Lease nor any right or option to purchase all or any
portion of the Premises, except as follows:
10. As of
the date hereof, there are no existing defenses or offsets that the undersigned
has, which preclude enforcement of the Lease by Landlord.
11. All
monthly installments of Base Rent, all Additional Rent and all monthly
installments of estimated Additional Rent have been paid when due through
_________________. The current monthly installment of Base Rent is
$__________.
12. The
undersigned acknowledges that this Estoppel certificate may be delivered to
Landlord's prospective mortgagee, or a prospective purchaser, and acknowledges
that it recognizes that if same is done, said mortgagee, prospective mortgagee,
or prospective purchaser will be relying upon the statements contained herein in
making the loan or acquiring the property of which the Premises are a part, and
in accepting an assignment of the Lease as collateral security, and that receipt
by it of this certificate is a condition of making of the loan or acquisition of
such property.
13. If
Tenant is a corporation, limited liability company or partnership, each
individual executing this Estoppel Certificate on behalf of Tenant hereby
represents and warrants that Tenant is a duly formed and existing entity
qualified to do business in the state in which the Building is located and that
Tenant has full right and authority to execute and deliver this Estoppel
Certificate and that each person signing on behalf of Tenant is authorized to do
so.
Executed
at __________________ on the _____ day of ______________, 20___.
TENANT:
AVIGEN,
INC.,
a
Delaware corporation
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By:
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Its:
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Date:
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By:
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Its:
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Date:
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E-1
FIRST
AMENDMENT TO LEASE AGREEMENT
This
First Amendment to Lease Agreement (the "Amendment") is made and entered into as
of December 1, 2000, by and between LINCOLN-RECP EMPIRE OPCO, LLC, a California
limited liability company ("Landlord") and AVIGEN, INC., a Delaware corporation
("Tenant"), with reference to the following facts.
RECITALS
A.
Landlord and Tenant have entered into that certain Lease Agreement dated as of
November 2, 2000 (the "Lease") for the leasing of certain premises consisting of
approximately 67,482 rentable square feet located at 1301 Harbor Bay Parkway,
Alameda, California (the "Premises") as such Premises are more fully described
in the Lease, for a term commencing on December 1, 2000, and expiring on
November 30, 2010.
B.
Pursuant to Article 2 of the Lease, the Premises on the second floor of the
Building comprising approximately 32,945 rentable square feet (the "Remaining
Premises") was anticipated to be delivered to Tenant on or about October 1, 2001
(the "RP Commencement Date").
C. Tenant
now wishes to, effective as of December 1, 2000, occupy approximately 22,945
rentable square feet of the Remaining Premises (the "A Remaining Premises"),
rather than waiting until the RP Commencement Date to occupy any of the
Remaining Premises, and wishes to occupy the entire Remaining Premises as of
March 1, 2001, rather than the RP Commencement Date, and Landlord is agreeable
to the same.
D.
Phoenix American, Inc., a California corporation, successor in interest to
Resource/Phoenix, Inc. ("Phoenix") currently occupies the balance of the
Remaining Premises (the "B Remaining Premises") comprising approximately 10,000
rentable square feet pursuant to a lease from Landlord.
E.
Landlord and Tenant now wish to amend the Lease upon and subject to each of the
terms, conditions and provisions set forth herein.
NOW,
THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
Landlord and Tenant agree as follows:
1.
RECITALS: Landlord and Tenant agree that the above recitals are true and correct
and are hereby incorporated herein as though set forth in full.
2.
MODIFICATIONS TO LEASE: Effective as of December 1, 2000 (the "Effective Date"),
the Lease is hereby modified as follows:
2.1
PREMISES. ARTICLE 2 - LEASE TERM of the Lease is hereby amended such that the
fifth (5th) and sixth (6th) sentences thereof shall read as
follows:
"Landlord
has delivered, and Tenant acknowledges having possession of, approximately
34,537 rentable square feet of the Premises on the ground floor of the Building
(the "Initial Premises") to Tenant on or about the Lease Commencement Date; and
Landlord anticipates delivering the balance of the Premises on the second floor
of the Building comprising approximately 32,945 rentable square feet (the
"Remaining Premises"), approximately 22,945 rentable square feet (the "A
Remaining Premises"), as shown on Exhibit A to this Amendment, is anticipated to
be delivered to Tenant on or about December 1, 2000 (the "RPA Commencement
Date"); and approximately 10,000 rentable square feet (the "B Remaining
Premises"), as shown on Exhibit A to this Amendment, is anticipated to be
delivered to Tenant on or about March 1, 2001 (the "RPB Commencement Date"). If
Landlord, for any reason, cannot deliver possession of the A Remaining Premises
to Tenant on the RPA Commencement Date (in the condition that exists on the day
after the Existing Tenant vacates the A Remaining Premises), or cannot deliver
possession of the B Remaining Premises to Tenant on the RPB Commencement Date
(in the condition that exists on the day after the Existing Tenant vacates the B
Remaining Premises), in either case without any improvements, alterations,
repairs, refurbishment or other modifications being made thereto (except as may
be necessary to satisfy the requirements of Section 1.2 above), Landlord shall
not be subject to any liability nor shall the validity of this Lease be
affected; provided that the RPA Commencement Date and/or the RPB Commencement
Date, as appropriate, shall be extended commensurately by the period of time
Landlord is delayed in so delivering possession of the A Remaining Premises
and/or the B Remaining Premises to Tenant without any improvements, alterations,
repairs, refurbishment or other modifications being made thereto. Tenant's
rights to use the A Remaining Premises and the B Remaining Premises shall be
subject and subordinate to the rights of Phoenix; and no use by Tenant may
unreasonably interfere with the rights of Phoenix to use and occupancy of
Phoenix's premises."
Throughout
the Lease, references to the "RP Commencement Date" shall be deemed to be
references to the "RPA Commencement Date" and/or the "RPB Commencement Date", as
appropriate.
2.2
RENT.
ARTICLE 3
- - BASE RENT of the Lease is hereby amended as follows:
Base Rent
for the A Remaining Premises is waived by the Landlord for the period from the
RPA Commencement Date through the RPB Commencement Date. From and after the RPB
Commencement Date, Tenant shall pay to Landlord Base Rent for both the RPA
Remaining Premises and the RPB Remaining Premises at the monthly rate of $1.52
per rentable square foot, or Fifty Thousand Seventy-six Dollars and Forty Cents
($50,076.40), through May 31, 2002; and thereafter Tenant shall pay to Landlord
Base Rent for both the RPA Remaining Premises and the RPB Remaining Premises at
the monthly rate of $1.59 per rentable square foot, or Fifty-two Thousand Three
Hundred Eighty-two Dollars and Fifty-five Cents ($52,382.55).
E-2
The
second table set forth in Section 8. Base Rent (Article 3) of the Summary of
Basic Lease Information in the Lease (for Base Rent for the "Remaining Premises"
from the "RP Commencement Date" through December 31, 2002), is hereby revised in
accordance with the following schedule:
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TERM
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REMAINING
PREMISES
SQUARE
FEET
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REMAINING
PREMISES
ANNUAL
RENTAL
RATE
PER
RENTABLE
SQUARE FOOT
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MONTHLY
INSTALLMENT
OF
BASE RENT
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3/1/01
- 5/31/02
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32,945 | $ | 18.24 | $ | 50,076.40 | |||||||
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6/1/02
- 12/31/02
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32,945 | $ | 19.08 | $ | 52,382.55 | |||||||
2.3
LETTER OF CREDIT.
Paragraph
20.2 LETTER OF CREDIT of the Lease is hereby amended as follows:
Upon the
RPB Commencement Date, the face amount of the Letter of Credit shall be
increased to be Two Million Dollars ($2,000,000.00).
3. EFFECT
OF AMENDMENT: Except as modified herein, the terms and conditions of the Lease
shall remain unmodified and continue in full force and effect. In the event of
any conflict between the terms and conditions of the Lease and this Amendment,
the terms and conditions of this Amendment shall prevail. Tenant hereby renews
its obligations to Landlord for the full, prompt and timely payment of all rents
and other sums required to be paid by Tenant during the term of the Lease as
herein modified, and for the full, prompt and timely performance of, compliance
with and observation of all the terms contained in the Lease as herein
modified.
4.
DEFINITIONS: Unless otherwise defined in this Amendment, all terms not defined
in this Amendment shall have the meaning set forth in the Lease.
5. NO
BROKER: Each party warrants and represents to the other that no real estate
broker, sales person, finder or other person has the right to payment of a
commission or fee in connection with this Amendment as a consequence of contacts
with such party. Each party shall indemnify, protect, defend and hold the other
harmless from any and all loss, cost, damage or expense (including attorneys'
fees and costs, including fees and costs on appeal, if any) arising out of or
related to claims for a real estate brokerage commission, finder's fee or
similar compensation, based upon allegations by the claimant that it is entitled
to a commission, fee or other compensation from the indemnified party as a
consequence of contacts with the indemnifying party.
6. ENTIRE
AGREEMENT: The Lease and this Amendment constitute the entire understanding
between the parties with respect to the Premises. No subsequent amendment will
be effective unless it is in writing and executed by the parties.
7.
COUNTERPARTS: This Amendment may be executed in counterparts, each of which when
executed and delivered shall be an original.
8.
AUTHORITY: Subject to the provisions of the Lease, this Amendment shall be
binding upon and inure to the benefit of the parties hereto, their respective
heirs, legal representatives, successors and assigns. Each party hereto and the
persons signing below warrant that the person signing below on such party's
behalf is authorized to do so and to bind such party to the terms of this
Amendment.
IN
WITNESS WHEREOF, the parties have executed this Amendment as of the date and
year first above written.
TENANT:
AVIGEN,
INC.,
a
Delaware corporation
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Date:
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12/13/00 |
By:
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/s/ JOHN MONAHAN
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Name:
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John Monahan
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Title:
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CEO
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Date:
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By:
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/s/ THOMAS J. PAULSON
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Name:
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Thomas J. Paulson
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Title:
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VP-Finance,
CFO
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E-3
LANDLORD:
LINCOLN-RECP
EMPIRE OPCO, LLC,
a
California limited liability company
By:
Legacy Partners Commercial, Inc.,
as
agent for LINCOLN-RECP EMPIRE OPCO, LLC,
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Date:
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By:
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/s/ ROBERT F. PHIPPS
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Name:
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Robert F. Phipps
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Title:
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Senior Vice
President
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E-4
Exhibit
B
Sublease
Premises and Sublease Common Areas
B-1
Exhibit
C
Furniture
and Equipment
D-1
Exhibit
23.1
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby
consent to the incorporation by reference in the Registration Statements on Form
S-2 (Nos. 333-109442 and 333-128083), Form S-3 (No. 333-99205) and Form S-8
(Nos. 33-56766, 33-88968, 333-101651, and 333-122844) of BioTime, Inc. of our
report dated April 11, 2008, relating to the financial statements for the year
ended December 31, 2007, which appears in this Form 10-KSB.
/s/
ROTHSTEIN KASS & COMPANY, P.C.
Roseland,
New Jersey
April 11,
2008
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CERTIFICATIONS
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Exhibit
31
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I,
Michael D. West, certify that:
1. I
have reviewed this annual report on Form 10-KSB of BioTime, Inc.;
2. Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the small business issuer as
of, and for, the periods presented in this report;
4. The
small business issuer’s other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rule 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
small business issuer and have:
(a) Designed
such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the small business issuer, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which the periodic reports are being prepared;
(b) Designed
such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles
(c) Evaluated
the effectiveness of the small business issuer’s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed
in this report any change in the small business issuer’s internal control over
financial reporting that occurred during the small business issuer’s most recent
(fourth) fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the small business issuer’s internal control over financial
reporting.
1
5. The
small business issuer's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
small business issuer's auditors and the audit committee of small business
issuer's board of directors (or persons performing the equivalent
functions):
(a) All
significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the small business issuer's ability to record, process,
summarize and report financial information; and
(b) Any
fraud, whether or not material, that involves management or other employees who
have a significant role in the small business issuer's internal control over
financial reporting.
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Date: April
11, 2008
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| /s/ Michael D. West | |
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Michael
D. West
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Chief
Executive Officer
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2
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CERTIFICATIONS
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Exhibit
31
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I, Steven
A. Seinberg, certify that:
1. I
have reviewed this annual report on Form 10-KSB of BioTime, Inc.;
2. Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the small business issuer as
of, and for, the periods presented in this report;
4. The
small business issuer’s other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rule 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
small business issuer and have:
(a) Designed
such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the small business issuer, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which the periodic reports are being prepared;
(b) Designed
such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles
(c) Evaluated
the effectiveness of the small business issuer’s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed
in this report any change in the small business issuer’s internal control over
financial reporting that occurred during the small business issuer’s most recent
(fourth) fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the small business issuer’s internal control over financial
reporting.
3
5. The
small business issuer's other certifying officers and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
small business issuer's auditors and the audit committee of small business
issuer's board of directors (or persons performing the equivalent
functions):
(a) All
significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the small business issuer's ability to record, process,
summarize and report financial information; and
(b) Any
fraud, whether or not material, that involves management or other employees who
have a significant role in the small business issuer's internal control over
financial reporting.
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Date: April
11, 2008
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| /s/ Steven A. Seinberg | |
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Steven
A. Seinberg
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Chief
Financial Officer
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4
Exhibit
32
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Annual Report on Form 10-KSB of BioTime, Inc. (the
“Company”) for the year ended December 31, 2007 as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), we, Michael D. West,
Chief Executive Officer, and Steven A. Seinberg, Chief Financial Officer of the
Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The
Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended; and
2. The
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
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Date: April
11, 2008
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| /s/ Michael D. West | |
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Michael
D. West
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Chief
Executive Officer
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| /s/ Steven A. Seinberg | |
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Steven
A. Seinberg
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Chief
Financial Officer
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