Exhibit 10.3
SUBLEASE CONSENT
This Sublease Consent (the "CONSENT") is made as of May 6, 2004 by and
among THE BOARD OF TRUSTEES OF THE ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ JUNIOR UNIVERSITY, a body
having corporate powers under the laws of the State of California ("LANDLORD"),
INCYTE CORPORATION, a Delaware corporation, formerly known as Incyte
Pharmaceuticals, Inc. ("TENANT"), and CONNETICS CORPORATION, a Delaware
corporation ("SUBTENANT"), in the following factual context:
A. Landlord and Tenant are the parties to that certain Lease dated as of
June 19, 1997, as amended by (i) Notice of Commencement Date dated October 28,
1998, (ii) Notice of Base Rent and Rentable Area dated November 24, 1998, (iii)
Notice of Rent Commencement Date and Expiration Date dated November 24, 1998,
and (iv) First Amendment to Lease dated as of May 6, 2004 (as so amended, the
"LEASE"), under which Tenant leases from Landlord a two-story building commonly
known as ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ in Palo Alto, California (the "PREMISES"), as more
particularly described in the Lease.
B. Tenant now desires to sublease the entire Premises to Subtenant
pursuant to a sublease in the form attached as EXHIBIT A (the "SUBLEASE").
C. Landlord is willing to consent to the Sublease, subject to the terms
and conditions set forth in this Consent.
NOW THEREFORE, the parties agree as follows:
1. CONSENT. Landlord hereby (a) consents to the execution and delivery of the
Sublease, and to the subletting of the Premises from Tenant to
Subtenant in accordance with the terms of the Sublease, and (b)
acknowledges and agrees that Subtenant's proposed use of the Premises
is permitted under the Lease.
2. TERMS OF CONSENT. The Sublease is and shall remain at all times subject and
subordinate in all respect to the Lease. This Consent shall not
operate as a consent to or approval or ratification by Landlord of any
specific provisions of the Sublease, and shall not modify or be deemed
to modify or amend the Lease in any way, or to impose on Landlord any
obligation to provide notice to, or obtain consent from, Subtenant
with respect to amendments, defaults, waivers or any other matters
pertaining to the Lease or the Premises. This Consent shall not be nor
be deemed to be a consent to any future sublease requiring Landlord's
consent under the Lease.
3. RELEASE REGARDING HAZARDOUS SUBSTANCES. Subtenant represents to Landlord
that Subtenant is aware that detectable amounts of hazardous
substances and groundwater contaminants may have come to be located
beneath and/or in the vicinity of the Premises, and is aware of
Landlord's responsibility for such hazardous substances and
groundwater contaminants under the terms of the Lease. Subtenant has
made such investigations and inquiries (including, without limitation,
indoor air quality
tests) as it deems appropriate to ascertain the effects, if any, of
such substances and contaminants on its operations and persons using
the Premises. Landlord makes no representation or warranty with regard
to the environmental condition of the Premises. Subject to Section 8.4
of the Lease, Subtenant, on behalf of itself and its affiliated
entities and their respective partners, employees, successors and
assigns (collectively, "RELEASORS"), hereby covenants and agrees not
to ▇▇▇ and forever releases and discharges Landlord, and its trustees,
officers, directors, agents and employees for and from any and all
claims, losses, damages, causes of action and liabilities, arising out
of hazardous substances or groundwater contamination presently
existing on, under, or emanating from or to the Premises. Subject to
Section 8.4 of the Lease, Releasors understand and expressly waive any
rights or benefits available under Section 1542 of the Civil Code of
California or any similar provision in any other jurisdiction. Section
1542 provides substantially as follows: "A general release does not
extend to claims which the creditor does not know or suspect to exist
in his favor at the time of executing the release, which if known by
him must have materially affected his settlement with the debtor."
4. USE OF NAME. Subtenant shall not use any name, trademark or service ▇▇▇▇ of
Stanford University without the prior written consent of Landlord,
which consent may be given or withheld in Landlord's sole discretion.
5. ALTERATIONS. Landlord hereby agrees that to the extent Landlord's prior
written consent is required under the Lease for any Alterations to the
Premises by Subtenant during the Early Access Period or the Sublease
Term (as such terms are defined in the Sublease), (a) provided that
Subtenant delivers its plans and specifications for such Alterations
simultaneously to Landlord and to Tenant, Landlord shall undertake its
review of such plans and specifications simultaneously with Tenant,
(b) Landlord's consent to such Alterations, which shall not be
unreasonably withheld, shall be given or denied in writing within ten
(10) business days after Landlord's receipt of such plans and
specifications, and (c) Landlord shall notify Tenant and Subtenant in
writing at the time of Landlord's consent to such Alterations whether
such Alterations will be required to be removed upon the expiration or
earlier termination of the Lease.
6. ADDITIONAL SECURITY DEPOSIT. In consideration of and as a further condition
to Landlord's consent to the Sublease, on or before the Commencement
Date of the Sublease (as defined in the Sublease), Tenant shall
deliver to Landlord an irrevocable stand-by letter of credit in the
amount of Two Million Five Hundred Seventy Five Thousand and 00/100
Dollars ($2,575,000.00) (the "LETTER OF CREDIT") as credit enhancement
for Tenant's continued performance under the Lease and not as a
security deposit, as more particularly described in this Section 6.
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(a) The Letter of Credit shall be in form and substance and issued by
a bank that is reasonably satisfactory to Landlord. The Letter of
Credit shall: (i) name Landlord as beneficiary; (ii) allow Landlord to
make partial and multiple draws thereunder up to the face amount only
for the purposes permitted under this Section 6, (iii) require the
issuing bank to pay to Landlord the amount of a draw upon receipt by
such bank of a sight draft signed by Landlord and presented to the
issuing bank, accompanied by Landlord's statement that said draw is
being made in accordance with the terms of this Section 6; and (iv)
provide that Landlord can freely transfer it upon an assignment or
other transfer of its interest in the Lease to the assignee or
transferee without having to obtain the consent of Tenant or the
issuing bank, provided that the assignee or transferee has agreed to
be bound by Landlord's obligations under the Lease and this Section 6.
Landlord shall be entitled to draw upon the Letter of Credit in
accordance with this Section 6, or at any time within thirty (30) days
prior to the expiration date of the Letter of Credit unless Tenant
shall have delivered to Landlord a replacement Letter of Credit
meeting the requirements of this Section 6 and with an expiration date
not less than twelve (12) months after the date of delivery. The
Letter of Credit (or a replacement thereof satisfactory to Landlord)
shall remain in effect until the expiration (i.e., March 31, 2011) or
the sooner termination of the Lease, howsoever arising.
(b) Landlord shall have the right (but shall not be obligated to)
draw under the Letter of Credit for the following purposes only: (i)
to remedy any monetary Event of Default by Tenant in the performance
of its obligations under the Lease; and (ii) to compensate Landlord
for any losses, costs, liabilities or damages incurred by Landlord as
a result of Tenant's failure to perform its monetary obligations under
the Lease (collectively, "Losses"); or (iii) in the event Landlord
reasonably determines that there is a material impairment of Tenant's
ability to meet its ongoing monetary obligations under the Lease. In
the event Landlord draws under the Letter of Credit pursuant to
subsections (b)(i) and (ii) above, Landlord shall use or apply the
proceeds of such draw solely to, and only in such amount necessary to,
remedy the monetary Event of Default by Tenant under the Lease and to
compensate Landlord for Losses. In the event Landlord draws under the
Letter of Credit pursuant to subsection (b)(iii) above, Landlord shall
first apply the proceeds from the Letter of Credit to any rental
obligations then due and unpaid under the Lease, and thereafter may
apply the proceeds from the Letter of Credit to future, unpaid rental
obligations due through the expiration date of the Lease, whether or
not the Lease is terminated prior to such date. If, despite the intent
of the parties that the Letter of Credit not be considered a security
deposit, a court of competent jurisdiction determines that the Letter
of Credit is in fact a security deposit, then Tenant hereby waives to
the extent inconsistent with the foregoing any restriction on the uses
to which the proceeds of a draw under the Letter of Credit may be
applied as contained in Section 1950.7(c) of the California Civil Code
and/or any successor statute, if applicable. If Landlord so uses or
applies the proceeds of a draw under the Letter of Credit pursuant to
this Section 6, Tenant shall, within ten (10) business days after
demand therefor, deposit cash or other collateral with the issuing
bank and as required by the issuing bank in an amount sufficient to
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restore the Letter of Credit to the amount thereof in effect
immediately prior to such draw, and Tenant's failure to do so shall,
at Landlord's option, be an Event of Default under the Lease. In the
event Landlord has drawn the entire Letter of Credit pursuant to
subsection (b)(iii) above, and if Tenant subsequently provides
adequate assurance, in Landlord's reasonable judgment, that Tenant
will continue to perform its monetary obligations under the Lease,
then upon Tenant's delivery of a replacement Letter of Credit for the
full amount thereof in effect immediately prior to such draw, Landlord
shall refund to Tenant that portion of the Letter of Credit proceeds
not already applied to rent that has previously become due.
(c) The Letter of Credit, or so much thereof as has not theretofore
been applied by Landlord in accordance with this Section 6 or reduced
pursuant to the following provisions of this Section 6, shall be
returned, without payment of interest or other increment for their
use, to Tenant at the expiration (i.e., March 31, 2011) or sooner
termination of the Lease. No trust relationship is created herein
between Landlord and Tenant with respect to the Letter of Credit.
(d) Commencing on the second (2nd) month of the Sublease Term (as
defined in the Sublease), the amount of the Letter of Credit shall be
reduced by Thirty Four Thousand Seven Hundred Ninety Seven and 30/100
Dollars ($34,797.30) per month, such that the Letter of Credit shall
be reduced to a zero balance by the expiration of the Lease (i.e.,
March 31, 2011).
7. LANDLORD/SUBTENANT EXTENSION AGREEMENT. Concurrently herewith, Landlord and
Subtenant are entering into that certain Agreement Regarding Sublease
and Lease (the "EXTENSION AGREEMENT"), pursuant to which, among other
things, Landlord and Subtenant have agreed that (a) if the Lease is
terminated prior to the expiration of its term, Landlord shall
recognize the Sublease and Subtenant's occupancy of the Premises and
the Sublease shall become effective as a direct lease between Landlord
and Subtenant, and (b) upon the expiration of the Sublease, the Lease
shall be extended as a direct lease between Landlord and Subtenant,
all on the terms and conditions set forth in the Extension Agreement.
In light of the Extension Agreement, Landlord and Subtenant hereby
agree that (i) if for any reason the Sublease and/or the Lease becomes
effective as a direct lease between Landlord and Subtenant, Tenant
shall have no surrender obligations under the Lease (including without
limitation, under Section 40 of the Lease), and Subtenant shall be
solely responsible for satisfying any surrender obligations under the
Lease (or the Extension Agreement); and (ii) if for any reason the
Sublease and/or the Lease becomes effective as a direct lease between
Landlord and Subtenant, Tenant shall have no obligations under the
Sublease or the Lease, as applicable, arising from and after the date
the Sublease or
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the Lease, as applicable, becomes effective as a direct lease between
Landlord and Subtenant.
8. LIMITATION ON LANDLORD'S ACCEPTANCE OF OFFER. Notwithstanding anything to
the contrary in Section 6(c) of the Extension Agreement (which amends,
as between Landlord and Subtenant only, Section 18.4 of the Lease),
Landlord hereby agrees that it shall not accept any Offer (as such
term is defined in the amended Section 18.4 of the Lease) made by
Subtenant to Landlord during the Sublease term unless Landlord intends
to retain or occupy the portion of the Premises that is the subject of
the Offer for Landlord's own use and benefit (and does not intend to
further assign or sublease such space to a third party).
9. SUBTENANT'S INSURANCE. Landlord and Tenant acknowledge that they have each
reviewed the certificate of insurance that Subtenant proposes to
deliver in connection with the Sublease, and that subject to the
actual insurance policies being issued in conformance with Section
21.2 of the Lease, the certificate of insurance evidences the types
and levels of insurance coverage required by the Lease.
IN WITNESS WHEREOF, the parties have executed this Consent as of the date
first above written.
THE BOARD OF TRUSTEES OF THE
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ JUNIOR UNIVERSITY
By Stanford Management Company
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇, Managing Director
Stanford Research Park
INCYTE CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Its: EVP, CFO
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CONNETICS CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Its: CFO
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