Lease - General Electric Capital Corp. and Applied Molecular Evolution Inc.
MASTER LEASE AGREEMENT
dated as of SEPTEMBER 24, 2003 ("AGREEMENT")
THIS AGREEMENT is between GENERAL ELECTRIC CAPITAL CORPORATION
(together with its successors and assigns, if any, "LESSOR") and APPLIED
MOLECULAR EVOLUTION, INC. ("LESSEE"). Lessor has an office at 401 Merritt 7,
Suite 23, Norwalk, CT 06851-1177. Lessee is a corporation organized and existing
under the laws of the state of Delaware. Lessee's mailing address and chief
place of business is 3520 Dunhill Street, San Diego, CA 92121. This Agreement
contains the general terms that apply to the leasing of Equipment from Lessor to
Lessee. Additional terms that apply to the Equipment (term, rent, options, etc.)
shall be contained on a schedule ("SCHEDULE").
1. LEASING:
(a) Lessor agrees to lease to Lessee, and Lessee agrees to lease from
Lessor, the equipment and the property ("EQUIPMENT") described in any Schedule
delivered in connection with this Agreement up to an maximum amount, in
aggregate for all such Schedules of $4,000,000 in total Capitalized Lessor's
Cost.
(b) Lessor shall purchase Equipment from the manufacturer or supplier
("SUPPLIER") and lease it to Lessee if on or before the Last Delivery Date
Lessor receives (i) a Schedule for the Equipment, (ii) evidence of insurance
which complies with the requirements of Section 9, and (iii) such other
documents as Lessor may reasonably request. Each of the documents required above
must be in form and substance satisfactory to Lessor. Lessor hereby appoints
Lessee its agent for inspection and acceptance of the Equipment from the
Supplier. Once the Schedule is signed, the Lessee may not cancel the Schedule.
2. TERM, RENT AND PAYMENT:
(a) The rent payable for the Equipment and Lessee's right to use the
Equipment shall begin on the earlier of (i) the date when the Lessee signs the
Schedule and accepts the Equipment or (ii) when Lessee has accepted the
Equipment under a Certificate of Acceptance ("LEASE COMMENCEMENT DATE"). The
term of this Agreement shall be the period specified in the applicable Schedule.
The word "term" shall include all basic and any renewal terms.
(b) Lessee shall pay rent to Lessor at its address stated above, except
as otherwise directed by Lessor. Rent payments shall be in the amount set forth
in, and due as stated in the applicable Schedule. If any Advance Rent (as stated
in the Schedule) is payable, it shall be due when the Lessee signs the Schedule.
Advance Rent shall be applied to the first rent payment and the balance, if any,
to the final rent payment(s) under such Schedule. In no event shall any Advance
Rent or any other rent payments be refunded to Lessee. If rent is not paid
within ten (10) days of its due date, Lessee agrees to pay a late charge of five
cents ($.05) per dollar on, and in addition to, the amount of such rent but not
exceeding the lawful maximum, if any.
3. RENT ADJUSTMENT: INTENTIONALLY OMITTED
4. TAXES:
(a) If permitted by law, Lessee shall report and pay promptly all
taxes, fees and assessments due, imposed, assessed or levied against any
Equipment (or purchase, ownership, delivery, leasing, possession, use or
operation thereof), this Agreement (or any rents or receipts hereunder), any
Schedule, Lessor or Lessee by any governmental entity or taxing authority during
or related to the term of this Agreement, including, without limitation, all
license and registration fees, and all sales, use, personal property, excise,
gross receipts, franchise, stamp or other taxes, imposts, duties and charges,
together with any penalties, fines or interest thereon (collectively "TAXES").
Lessee shall have no liability for Taxes imposed by the United States of
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America or any state or political subdivision thereof which are on or measured
by the net income of Lessor except as provided in Sections 3 and 14(c). Lessee
shall promptly reimburse Lessor (on an after tax basis) for any Taxes charged to
or assessed against Lessor. Lessee shall show Lessor as the owner of the
Equipment on all tax reports or returns, and send Lessor a copy of each report
or return and evidence of Lessee's payment of Taxes upon request.
(b) Lessee's obligations, and Lessor's rights and privileges, contained
in this Section 4 shall survive the expiration or other termination of this
Agreement.
5. REPORTS:
(a) If any tax or other lien shall attach to any Equipment, Lessee will
notify Lessor in writing, within ten (10) days after Lessee becomes aware of the
tax or lien. The notice shall include the full particulars of the tax or lien
and the location of such Equipment on the date of the notice.
(b) Lessor shall marshal Lessee's financial statements and other
securities filings by accessing Lessee's website on the world wide web or by
access to the Securities and Exchange Commission's EDGAR filing web site. In the
event Lessor is unable to access such documents promptly upon the filing dates
thereof, Lessee will deliver to Lessor financial statements as follows: Upon
Lessor's request, Lessee agrees to provide quarterly unaudited statements and
annual audited statements, certified by a recognized firm of certified public
accountants, in an electronic format by electronic mail or in hard copies by
courier at Lessee's discretion, within 10 days of request by Lessor but in any
event no sooner that such statements are due to be filed by Lessee with the
Securities and Exchange Commission.. All such statements are to be prepared
using generally accepted accounting principles ("GAAP") and are to be in
compliance with SEC requirements.
(c) Lessor may inspect any Equipment during normal business hours after
giving Lessee reasonable prior notice.
(d) Lessee will keep the Equipment at the Equipment Location(s)
(specified in the applicable Schedule) and will give Lessor prior notice of any
relocation of Equipment. If Lessor asks, Lessee will promptly notify Lessor in
writing of the location of any Equipment.
(e) If any Equipment is lost or damaged (where the estimated repair
costs would exceed the greater of ten percent (10%) of the original Equipment
cost or one hundred thousand and 00/100 dollars ($100,000)), or is otherwise
involved in an accident causing personal injury or property damage, Lessee will
promptly and fully report the event to Lessor in writing.
(f) Lessee will furnish a certificate of an authorized officer of
Lessee stating that he has reviewed the activities of Lessee and that, to the
best of his knowledge, there exists no default or event which with notice or
lapse of time (or both) would become such a default within thirty (30) days
after any request by Lessor.
(g) Lessee will promptly notify Lessor of any change in Lessee's state
of incorporation or organization.
6. DELIVERY, USE AND OPERATION:
(a) All Equipment shall be shipped directly from the Supplier to
Lessee.
(b) Lessee agrees that the Equipment will be used by Lessee solely in
the conduct of its business and in a manner complying with all applicable laws,
regulations and insurance policies and Lessee shall not abandon the Equipment.
(c) Lessee will not move any equipment from the location(s) specified
on the Schedule, without the prior written consent of Lessor.
(d) Lessee will keep the Equipment free and clear of all liens and
encumbrances other than those which result from acts of Lessor.
(e) Lessor shall not disturb Lessee's quiet enjoyment of the Equipment
during the term of the Agreement unless a default has occurred and is continuing
under this Agreement.
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7. MAINTENANCE:
(a) Lessee will, at its sole expense, maintain each unit of Equipment
in good operating order and repair, normal wear and tear excepted. The Lessee
shall also maintain the Equipment in accordance with manufacturer's
recommendations. Lessee shall make all alterations or modifications required to
comply with any applicable law, rule or regulation during the term of this
Agreement. If Lessor requests, Lessee shall affix plates, tags or other
identifying labels showing ownership thereof by Lessor. The tags or labels shall
be placed in a prominent position on each unit of Equipment.
(b) Lessee will not attach or install anything on any Equipment that
will impair the originally intended function or use of such Equipment without
the prior written consent of Lessor. All additions, parts, supplies,
accessories, and equipment ("ADDITIONS") furnished or attached to any Equipment
that are not readily removable shall become the property of Lessor. All
Additions shall be made only in compliance with applicable law. Lessee will not
attach or install any Equipment to or in any other personal or real property
without the prior written consent of Lessor.
8. STIPULATED LOSS VALUE: If for any reason any unit of Equipment becomes
worn out, lost, stolen,destroyed, irreparably damaged or unusable ("CASUALTY
OCCURRENCES") Lessee shall promptly and fully notify Lessor in writing. Lessee
shall pay Lessor the sum of (i) the Stipulated Loss Value (see Schedule) of the
affected unit determined as of the rent payment date prior to the Casualty
Occurrence; and (ii) all rent and other amounts which are then due under this
Agreement on the Payment Date (defined below) for the affected unit. The Payment
Date shall be the next rent payment date after the Casualty Occurrence.
Upon Payment of all sums due hereunder, the term of this lease as to such unit
shall terminate.
9. INSURANCE:
(a) Lessee shall bear the entire risk of any loss, theft, damage to, or
destruction of, any unit of Equipment from any cause whatsoever from the time
the Equipment is shipped to Lessee.
(b) Lessee agrees, at its own expense, to keep all Equipment insured
for such amounts and against such hazards as Lessor as set forth on the attached
[insurance rider]. All such policies shall be with companies, and on terms,
reasonably satisfactory to Lessor. The insurance shall include coverage for
damage to or loss of the Equipment, liability for personal injuries, death or
property damage. Lessor shall be named as additional insured with a loss payable
clause in favor of Lessor, as its interest may appear, irrespective of any
breach of warranty or other act or omission of Lessee. [See rider.] The
casualty/property damage coverage shall be in an amount at least equal to the
Stipulated Loss Value. No insurance shall be subject to any co-insurance clause.
The insurance policies shall provide that the insurance may not be altered or
canceled by the insurer until after thirty (30) days written notice to Lessor.
Lessee agrees to deliver to Lessor evidence of insurance reasonably satisfactory
to Lessor.
(c) Lessee hereby appoints Lessor as Lessee's attorney-in-fact to make
proof of loss and claim for insurance, and to make adjustments with insurers and
to receive payment of and execute or endorse all documents, checks or drafts in
connection with insurance payments. Lessor shall not act as Lessee's
attorney-in-fact unless Lessee is in default. Lessee shall pay any reasonable
expenses of Lessor in adjusting or collecting insurance. Lessee will not make
adjustments with insurers except with respect to claims for damage to any unit
of Equipment where the repair costs are less than the lesser of ten percent
(10%) of the original Equipment cost or one hundred thousand and 00/100 dollars
($100,000). Lessor may, at its option, apply proceeds of insurance, in whole or
in part, to (i) repair or replace Equipment or any portion thereof, or (ii)
satisfy any obligation of Lessee to Lessor under this Agreement.
10. RETURN OF EQUIPMENT:
(a) At the expiration or termination of this Agreement or any Schedule,
Lessee shall make the Equipment available at its premises for Lessor's
possession in good working order for the original intended purpose of the
Equipment. If required the units of Equipment shall be deinstalled, disassembled
and crated by an authorized manufacturer's representative or such other service
person as is reasonably satisfactory to Lessor. Lessee shall remove installed
markings that are not necessary for the operation, maintenance or repair of the
Equipment. All Equipment will be in a reasonable condition as to be installed
into use in a similar environment for which the Equipment was originally
intended to be used. All waste material and fluid must be removed from the
Equipment and disposed of in accordance with then current waste disposal laws.
Lessee shall return the units of Equipment to a location within the continental
United States as Lessor shall direct. Lessee shall obtain and pay for a policy
of transit insurance for the redelivery period in an amount equal to the
replacement value of the Equipment. The transit insurance must name Lessor as
the loss payee. The Lessee shall pay for all costs to comply with this section
(a).
(b) Until Lessee has fully complied with the requirements of Section
10(a) above, Lessee's rent payment obligation and all other obligations under
this Agreement shall continue from month to month notwithstanding any expiration
or termination of the lease term. Lessor may terminate the Lessee's right to use
the Equipment upon ten (10) days notice to Lessee.
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(c) Lessee shall provide to Lessor a detailed inventory of all
components of the Equipment including model and serial numbers. Lessee shall
also provide an up-to-date copy of all other documentation pertaining to the
Equipment. All service manuals, blue prints, process flow diagrams, operating
manuals, inventory and maintenance records shall be given to Lessor at least
ninety (90) days and not more than one hundred twenty (120) days prior to lease
termination.
(d) At the expiration or termination of this Agreement or any Schedule
Lessee shall make the Equipment available for on-site operational inspections by
potential purchasers at least one hundred twenty (120) days prior to and
continuing up to lease termination. Lessor shall provide Lessee with reasonable
notice prior to any inspection. Lessee shall provide personnel, power and other
requirements necessary to demonstrate electrical, hydraulic and mechanical
systems for each item of Equipment.
11. DEFAULT AND REMEDIES:
(a) Lessor may in writing declare this Agreement in default if: (i)
Lessee breaches its obligation to pay rent or any other sum when due and fails
to cure the breach within ten (10) days after notice of such breach by Secured
Party; (ii) Lessee breaches any of its insurance obligations under Section 9
other than those that can be cured without any material adverse effect and
within a reasonable time;; (iii) Lessee breaches any of its other material
obligations and fails to cure that breach within thirty (30) days after written
notice from Lessor; (iv) any representation or warranty made by Lessee in
connection with this Agreement shall be false or misleading in any material
respect; (v) Lessee or any guarantor or other obligor for the Lessee's
obligations hereunder ("GUARANTOR") becomes insolvent or ceases to do business
as a going concern; (vi) any Equipment is illegally used; (vii) if Lessee or any
Guarantor is a natural person, any death or incompetency of Lessee or such
Guarantor; (viii) a petition is filed by or against Lessee or any Guarantor
under any bankruptcy or insolvency laws and in the event of an involuntary
petition, the petition is not dismissed within forty-five (45) days of the
filing date; (ix) Lessee defaults under any other material obligation in excess
of $100,000, individually, for (A) borrowed money, (B) the deferred purchase
price of property, or (C) payments due under lease agreements; (x) at any time
during the term of this Agreement Lessee sells all or substantially all of its
assets. The default declaration shall apply to all Schedules unless specifically
excepted by Lessor.
(b) After a default, at the request of Lessor, Lessee shall comply with
the provisions of Section 10(a). Lessee hereby authorizes Lessor to peacefully
enter any premises where any Equipment may be and take possession of the
Equipment. Lessee shall immediately pay to Lessor without further demand as
liquidated damages for loss of a bargain and not as a penalty, the Stipulated
Loss Value of the Equipment (calculated as of the rent payment date prior to the
declaration of default), and all rents and other sums then due under this
Agreement and all Schedules. Lessor may terminate this Agreement as to any or
all of the Equipment. A termination shall occur only upon written notice by
Lessor to Lessee and only as to the units of Equipment specified in any such
notice. Lessor may, but shall not be required to, sell Equipment at private or
public sale, in bulk or in parcels, with or without notice, and without having
the Equipment present at the place of sale. Lessor may also, but shall not be
required to, lease, otherwise dispose of or keep idle all or part of the
Equipment. Lessor may use Lessee's premises for a reasonable period of time for
any or all of the purposes stated above without liability for rent, costs,
damages or otherwise. The proceeds of sale, lease or other disposition, if any,
shall be applied in the following order of priorities: (i) to pay all of
Lessor's costs, charges and expenses incurred in taking, removing, holding,
repairing and selling, leasing or otherwise disposing of Equipment; then, (ii)
to the extent not previously paid by Lessee, to pay Lessor all sums due from
Lessee under this Agreement; then (iii) to reimburse to Lessee any sums
previously paid by Lessee as liquidated damages; and (iv) any surplus shall be
retained by Lessor. Lessee shall immediately pay any deficiency in (i) and (ii)
above.
(c) The foregoing remedies are cumulative, and any or all thereof may
be exercised instead of or in addition to each other or any remedies at law, in
equity, or under statute. Lessee waives notice of sale or other disposition (and
the time and place thereof), and the manner and place of any advertising. Lessee
shall pay Lessor's actual attorney's fees incurred in connection with the
enforcement, assertion, defense or preservation of Lessor's rights and remedies
under this Agreement, or if prohibited by law, such lesser sum as may be
permitted. Waiver of any default shall not be a waiver of any other or
subsequent default.
(d) Any default under the terms of this or any other agreement between
Lessor and Lessee may be declared by Lessor a default under this and any such
other agreement.
12. ASSIGNMENT: LESSEE SHALL NOT SELL, TRANSFER, ASSIGN, ENCUMBER OR SUBLET
ANY EQUIPMENT OR THE INTEREST OF LESSEE IN THE EQUIPMENT WITHOUT THE PRIOR
WRITTEN CONSENT OF LESSOR. Lessor may, without the consent of Lessee, assign
this Agreement, any Schedule or the right to enter into a Schedule. Lessee
agrees that if Lessee receives written notice of an assignment from Lessor,
Lessee will pay all rent and all other amounts payable under any assigned
Schedule to such assignee or as instructed by Lessor. Lessee also agrees to
confirm in writing receipt of the notice of assignment as may be reasonably
requested by assignee. Lessee hereby waives and agrees not to assert against any
such assignee any defense, set-off, recoupment claim or counterclaim which
Lessee has or may at any time have against Lessor for any reason whatsoever.
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13. NET LEASE: Lessee is unconditionally obligated to pay all rent and
other amounts due for the entire lease term no matter what happens, even if the
Equipment is damaged or destroyed, if it is defective or if Lessee no longer can
use it. Lessee is not entitled to reduce or set-off against rent or other
amounts due to Lessor or to anyone to whom Lessor assigns this Agreement or any
Schedule whether Lessee's claim arises out of this Agreement, any Schedule, any
statement by Lessor, Lessor's liability or any manufacturer's liability, strict
liability, negligence or otherwise.
14. INDEMNIFICATION:
(a) Lessee hereby agrees to indemnify Lessor, its agents, employees,
successors and assigns (on an after tax basis) from and against any and all
losses, damages, penalties, injuries, claims, actions and suits, including legal
expenses, of whatsoever kind and nature arising out of or relating to the
Equipment or this Agreement, except to the extent the losses, damages,
penalties, injuries, claims, actions, suits or expenses result from Lessor's
gross negligence or willful misconduct ("CLAIMS"). This indemnity shall include,
but is not limited to, Lessor's strict liability in tort and Claims, arising out
of (i) the selection, manufacture, purchase, acceptance or rejection of
Equipment, the ownership of Equipment during the term of this Agreement, and the
delivery, lease, possession, maintenance, uses, condition, return or operation
of Equipment (including, without limitation, latent and other defects, whether
or not discoverable by Lessor or Lessee and any claim for patent, trademark or
copyright infringement or environmental damage) or (ii) the condition of
Equipment sold or disposed of after use by Lessee, any sublessee or employees of
Lessee. Lessee shall, upon request, defend any actions based on, or arising out
of, any of the foregoing.
(b) Lessee hereby represents, warrants and covenants that, to the best
of its knowledge (i) on the Lease Commencement Date for any unit of Equipment,
such unit will qualify for all of the items of deduction and credit specified in
Section C of the applicable Schedule ("TAX BENEFITS") in the hands of Lessor,
and (ii) at no time during the term of this Agreement will Lessee take or omit
to take, nor will it permit any sublessee or assignee to take or omit to take,
any action (whether or not such act or omission is otherwise permitted by Lessor
or by this Agreement), which will result in the disqualification of any
Equipment for, or recapture of, all or any portion of such Tax Benefits.
(c) If as a result of a breach of any representation, warranty or
covenant of the Lessee contained in this Agreement or any Schedule (i) tax
counsel of Lessor shall determine that Lessor is not entitled to claim on its
Federal income tax return all or any portion of the Tax Benefits with respect to
any Equipment, or (ii) any Tax Benefit claimed on the Federal income tax return
of Lessor is disallowed or adjusted by the Internal Revenue Service, or (iii)
any Tax Benefit is recalculated or recaptured (any determination, disallowance,
adjustment, recalculation or recapture being a "LOSS"), then Lessee shall pay to
Lessor, as an indemnity and as additional rent, an amount that shall, in the
reasonable opinion of Lessor, cause Lessor's after-tax economic yields and cash
flows to equal the Net Economic Return that would have been realized by Lessor
if such Loss had not occurred. Such amount shall be payable upon demand
accompanied by a statement describing in reasonable detail such Loss and the
computation of such amount. The economic yields and cash flows shall be computed
on the same assumptions, including tax rates as were used by Lessor in
originally evaluating the transaction ("NET ECONOMIC RETURN"). If an adjustment
has been made under Section 3 then the Effective Rate used in the next preceding
adjustment shall be substituted.
(d) All references to Lessor in this Section 14 include Lessor and the
consolidated taxpayer group of which Lessor is a member. All of Lessor's rights,
privileges and indemnities contained in this Section 14 shall survive the
expiration or other termination of this Agreement. The rights, privileges and
indemnities contained herein are expressly made for the benefit of, and shall be
enforceable by Lessor, its successors and assigns.
15. DISCLAIMER: LESSEE ACKNOWLEDGES THAT IT HAS SELECTED THE EQUIPMENT
WITHOUT ANY ASSISTANCE FROM LESSOR, ITS AGENTS OR EMPLOYEES. LESSOR DOES NOT
MAKE, HAS NOT MADE, NOR SHALL BE DEEMED TO MAKE OR HAVE MADE, ANY WARRANTY OR
REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO THE
EQUIPMENT LEASED UNDER THIS AGREEMENT OR ANY COMPONENT THEREOF, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTY AS TO DESIGN, COMPLIANCE WITH SPECIFICATIONS,
QUALITY OF MATERIALS OR WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE,
USE OR OPERATION, SAFETY, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, OR TITLE.
All such risks, as between Lessor and Lessee, are to be borne by Lessee. Without
limiting the foregoing, Lessor shall have no responsibility or liability to
Lessee or any other person with respect to any of the following; (i) any
liability, loss or damage caused or alleged to be caused directly or indirectly
by any Equipment, any inadequacy thereof, any deficiency or defect (latent or
otherwise) of the Equipment, or any other circumstance in connection with the
Equipment; (ii) the use, operation or performance of any Equipment or any risks
relating to it; (iii) any interruption of service, loss of business or
anticipated profits or consequential damages; or (iv) the delivery, operation,
servicing, maintenance, repair, improvement or replacement of any Equipment. If,
and so long as, no default exists under this Agreement, Lessee shall be, and
hereby is, authorized during the term of this Agreement to assert and enforce
whatever claims and rights Lessor may have against any Supplier of the Equipment
at Lessee's sole cost and expense, in the name of and for the account of Lessor
and/or Lessee, as their interests may appear.
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16. REPRESENTATIONS AND WARRANTIES OF LESSEE: Lessee makes each of the
following representations and warranties to Lessor on the date hereof and on the
date of execution of each Schedule except as set forth on the attached Schedule
of Exceptions (as the same may be supplemented by Lessee at the time of the
execution of any Schedule).
(a) Lessee has adequate power and capacity to enter into, and perform
under, this Agreement and all related documents (together, the "DOCUMENTS").
Lessee is duly qualified to do business wherever necessary to carry on its
present business and operations, including the jurisdiction(s) where the
Equipment is or is to be located.
(b) The Documents have been duly authorized, executed and delivered by
Lessee and constitute valid, legal and binding agreements, enforceable in
accordance with their terms, except to the extent that the enforcement of
remedies may be limited under applicable bankruptcy and insolvency laws.
(c) No approval, consent or withholding of objections is required from
any governmental authority or entity with respect to the entry into or
performance by Lessee of the Documents except such as have already been
obtained.
(d) The entry into and performance by Lessee of the Documents will not:
(i) violate any judgment, order, law or regulation applicable to Lessee or any
provision of Lessee's Certificate of Incorporation or bylaws; or (ii) result in
any breach of, constitute a default under or result in the creation of any lien,
charge, security interest or other encumbrance upon any Equipment pursuant to
any indenture, mortgage, deed of trust, bank loan or credit agreement or other
instrument (other than this Agreement) to which Lessee is a party.
(e) There are no suits or proceedings pending or threatened in court or
before any commission, board or other administrative agency against or affecting
Lessee, which if decided against Lessee will have a material adverse effect on
the ability of Lessee to fulfill its obligations under this Agreement.
(f) The Equipment accepted under any Certificate of Acceptance is and
will remain tangible personal property.
(g) All financial statements filed by Debtor with the Securities and
Exchange Commission as part of any form 10Q or 10K filings therewith have been
prepared in accordance with generally accepted accounting principles, and since
the date of the most recent financial statements filed therewith, there has been
no material adverse change in Debtors financial condition.
(h) Lessee's exact legal name is as set forth in the first sentence of
this Agreement and Lessee is and will be at all times validly existing and in
good standing under the laws of the State of its incorporation or organization
(specified in the first sentence of this Agreement).
(i) The Equipment will at all times be used for commercial or business
purposes.
(j) Lessee is and will remain in full compliance with all laws and
regulations applicable to it including compliance with all applicable Bank
Secrecy Act ("BSA") laws, regulations and government guidance on BSA compliance
and on the prevention and detection of money laundering violations.
17. EARLY TERMINATION:
(a) On or after the First Termination Date (specified in the applicable
Schedule), Lessee may, so long as no default exists hereunder, terminate this
Agreement as to all (but not less than all) of the Equipment on such Schedule as
of a rent payment date ("TERMINATION DATE"). Lessee must give Lessor at least
ninety (90) days prior written notice of the termination.
(b) Lessee shall, and Lessor may, solicit cash bids for the Equipment
on an AS IS, WHERE IS BASIS without recourse to or warranty from Lessor, express
or implied ("AS IS BASIS"). Prior to the Termination Date, Lessee shall (i)
certify to Lessor any bids received by Lessee and (ii) pay to Lessor (A) the
Termination Value (calculated as of the rent due on the Termination Date) for
the Equipment, and (B) all rent and other sums due and unpaid as of the
Termination Date.
(c) If all amounts due hereunder have been paid on the Termination
Date, Lessor shall (i) sell the Equipment on an AS IS BASIS for cash to the
highest bidder and (ii) refund the proceeds of such sale (net of any related
expenses) to Lessee up to the amount of the Termination Value. If such sale is
not consummated, no termination shall occur and Lessor shall refund the
Termination Value (less any expenses incurred by Lessor) to Lessee.
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(d) Notwithstanding the foregoing, Lessor may elect by written notice,
at any time prior to the Termination Date, not to sell the Equipment. In that
event, on the Termination Date Lessee shall (i) return the Equipment (in
accordance with Section 10) and (ii) pay to Lessor all amounts required under
Section 17(b) less the amount of the highest bid certified by Lessee to Lessor.
18. PURCHASE OPTION:
(a) Lessee may at lease expiration purchase, if Lessee has not
exercised its early termination option in the forty-third month of each schedule
for the early termination purchase price as shown in the Biotech Equipment
Schedule, all (but not less than all) of the Equipment in any Schedule on an AS
IS BASIS for cash equal to its then Fair Market Value (plus all applicable sales
taxes). Lessee must notify Lessor of its intent to purchase the Equipment in
writing at least one hundred eighty (180) days in advance. If Lessee is in
default or if the Lease has already been terminated Lessee may not purchase the
Equipment.
(b) "Fair Market Value" shall mean the price that a willing buyer (who
is neither a lessee in possession nor a used equipment dealer) would pay for the
Equipment in an arm's-length transaction to a willing seller under no compulsion
to sell. In determining the Fair Market Value the Equipment shall be assumed to
be in the condition in which it is required to be maintained and returned under
this Agreement. If the Equipment is installed it shall be valued on an installed
basis. The costs of removal from current location shall not be a deduction from
the value of the Equipment. If Lessor and Lessee are unable to agree on the Fair
Market Value at least one hundred thirty-five (135) days before lease
expiration, Lessor shall appoint an independent appraiser (reasonably acceptable
to Lessee) to determine Fair Market Value. The independent appraiser's
determination shall be final, binding and conclusive. Lessee shall bear all
costs associated with any such appraisal.
(c) Lessee shall be deemed to have waived this option unless it
provides Lessor with written notice of its irrevocable election to exercise the
same within fifteen (15) days after Fair Market Value is told to Lessee.
19. MISCELLANEOUS:
(a) LESSEE AND LESSOR UNCONDITIONALLY WAIVE THEIR RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN LESSEE AND LESSOR
RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS,
AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN LESSEE AND LESSOR. THE
SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES
THAT MAY BE FILED IN ANY COURT. THIS WAIVER IS IRREVOCABLE. THIS WAIVER MAY NOT
BE MODIFIED EITHER ORALLY OR IN WRITING. THE WAIVER ALSO SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT,
ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS
TRANSACTION OR ANY RELATED TRANSACTION. THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
(b) The Equipment shall remain Lessor's property unless Lessee
purchases the Equipment from Lessor and until such time Lessee shall only have
the right to use the Equipment as a lessee. Any cancellation or termination by
Lessor of this Agreement, any Schedule, supplement or amendment hereto, or the
lease of any Equipment hereunder shall not release Lessee from any then
outstanding obligations to Lessor hereunder. All Equipment shall at all times
remain personal property of Lessor even though it may be attached to real
property. The Equipment shall not become part of any other property by reason of
any installation in, or attachment to, other real or personal property.
(c) Lessor's failure at any time to require strict performance by
Lessee of any of the provisions hereof shall not waive or diminish Lessor's
right at any other time to demand strict compliance with this Agreement. Lessee
agrees, upon Lessor's request, to execute, or otherwise authenticate, any
document, record or instrument necessary or expedient for filing, recording or
perfecting the interest of Lessor or to carry out the intent of this Agreement.
In addition, Lessee hereby authorizes Lessor to file a financing statement and
amendments thereto describing the Equipment described in any and all Schedules
now and hereafter executed pursuant hereto and containing any other information
required by the applicable Uniform Commercial Code. Upon a default under Section
11 hereof, Lessee irrevocably grants to Lessor the power to sign Lessee's name
and generally to act on behalf of Lessee to execute and file financing
statements and other documents pertaining to any or all of the Equipment. Lessee
hereby ratifies its prior authorization for Lessor to file financing statements
and amendments thereto describing the Equipment and containing any other
information required by any applicable law (including without limitation the
Uniform Commercial Code) if filed prior to the date hereof. All notices required
to be given hereunder shall be deemed adequately given if sent by registered or
certified mail to the addressee at its address stated herein, or at such other
place as such addressee may have specified in writing. This Agreement and any
Schedule and Annexes thereto constitute the entire agreement of the parties with
respect to the subject matter hereof. NO VARIATION OR MODIFICATION OF THIS
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AGREEMENT OR ANY WAIVER OF ANY OF ITS PROVISIONS OR CONDITIONS SHALL BE VALID
UNLESS IN WRITING AND SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE PARTIES
HERETO.
(d) If Lessee does not comply with any provision of this Agreement and
such non-compliance is a default under Section 11 hereof, Lessor shall have the
right, but shall not be obligated, to effect such compliance, in whole or in
part. All reasonable amounts spent and obligations incurred or assumed by Lessor
in effecting such compliance shall constitute additional rent due to Lessor.
Lessee shall pay the additional rent within five days after the date Lessor
sends notice to Lessee requesting payment. Lessor's effecting such compliance
shall not be a waiver of Lessee's default.
(e) Any rent or other amount not paid to Lessor when due shall bear
interest, from the due date until paid, at the lesser of eighteen percent (18%)
per annum or the maximum rate allowed by law. Any provisions in this Agreement
and any Schedule that are in conflict with any statute, law or applicable rule
shall be deemed omitted, modified or altered to conform thereto.
(f) This Agreement and any Schedules hereto shall constitute the entire
agreement between the parties with respect to the subject matter of this
Agreement and supersede all prior understandings (whether written, verbal or
implied) with respect to such subject matter.
(g) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF CONNECTICUT (WITHOUT REGARD TO THE CONFLICT OF
LAWS PRINCIPLES OF SUCH STATE), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE, REGARDLESS OF THE LOCATION OF THE EQUIPMENT.
(h) Any cancellation or termination by Lessor, pursuant to the
provisions of this Agreement, any Schedule, supplement or amendment hereto, of
the lease of any Equipment hereunder, shall not release Lessee from any then
outstanding obligations to Lessor hereunder.
(i) To the extent that any Schedule would constitute chattel paper, as
such term is defined in the Uniform Commercial Code as in effect in any
applicable jurisdiction, no security interest therein may be created through the
transfer or possession of this Agreement in and of itself without the transfer
or possession of the original of a Schedule executed pursuant to this Agreement
and incorporating this Agreement by reference; and no security interest in this
Agreement and a Schedule may be created by the transfer or possession of any
counterpart of the Schedule other than the original thereof, which shall be
identified as the document marked "Original" and all other counterparts shall be
marked "Duplicate".
(j) Each party hereto agrees to keep confidential, the terms and
provisions of the Documents and the transactions contemplated hereby and thereby
(collectively, the "TRANSACTIONS"). Notwithstanding the foregoing, the
obligations of confidentiality contained herein, as they relate to the
Transactions, shall not apply to the federal tax structure or federal tax
treatment of the Transactions, and each party hereto (and any employee,
representative, or agent of any party hereto) may disclose to any and all
persons, without limitation of any kind, the federal tax structure and federal
tax treatment of the Transactions. The preceding sentence is intended to cause
each Transaction to be treated as not having been offered under conditions of
confidentiality for purposes of Section 1.6011-4(b)(3) (or any successor
provision) of the Treasury Regulations promulgated under Section 6011 of the
Internal Revenue Code of 1986, as amended, and shall be construed in a manner
consistent with such purpose. In addition, each party hereto acknowledges that
it has no proprietary or exclusive rights to the federal tax structure of the
Transactions or any federal tax matter or federal tax idea related to the
Transactions. Further, Lessee may disclose the terms and provisions of the
Transactions, as minimally required under the Securities and Exchange rules in
its public filings.
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IN WITNESS WHEREOF, Lessee and Lessor have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL CORPORATION APPLIED MOLECULAR EVOLUTION, INC.
By: /s/ John Edel By: /s/ William D. Huse
------------------------------- -----------------------------------
Name: John Edel Name: William D. Huse, M.D., Ph.D.
Title: SVP Title: CEO & President
<PAGE>
Schedule of Exceptions
To
Master Lease Agreement
The following facts and circumstances are exceptions to the representations and
warranties given in Section 16 of that certain Master Lease Agreement (the
"Agreement") dated as of September 24, 2003 by and between Applied Molecular
Evolution, Inc. and General Electric Capital Corporation. Capitalized terms used
but not defined herein shall have the same meanings ascribed to such terms in
the Agreement.
In connection with Section 16(e):
1. A wholly owned subsidiary of the Company, AME Torrey View LLC, owns
undeveloped real property located at 10750 West Ocean Air Drive, San Diego, CA
92130 (Lot 4, Torrey Hills, Unit 19). On July 25, 2002, a petition was filed in
the Superior Court of the State of California, County of San Diego, by the
Torrey Hills Community Coalition (the "Coalition"), et al. against the City of
San Diego, et al. seeking to compel the City of San Diego to revoke the approval
which was previously issued with respect to the development of our corporate
headquarters on that site. A petition was also filed by the Del Mar Union School
District on October 25, 2002, seeking a similar legal remedy. These petitions
assert that the City of San Diego failed to comply with or violated various
legal requirements in connection with its approval of that development, but they
do not seek monetary relief from the Company. The Company understands that the
City of San Diego believes that it has complied with all legal requirements for
this project and, therefore, intends to vigorously oppose these petitions. The
Company is named as a real party in interest in these petitions, and we also
intend to vigorously oppose these petitions and believe that they will not have
a material adverse effect on our business.
On June 18, 2003, following a hearing on the merits of the petition of Torrey
Hills Community Coalition, the Superior Court issued an order denying the
petition and ruled in favor of the City of San Diego and the Company. The
Superior Court entered judgment in favor of the City and the Company on August
7,2003. The Coalition has filed a motion for a new trial to be heard on October
24, 2003. The Company intends to oppose that motion and understands the city
will oppose the motion as well.
The School Board requested the Superior Court in San Diego County that it be
allowed to move its petition to the Superior Court in Riverside County and that
request was granted. The Company filed a demurrer seeking to have the School
Board's petition dismissed on the ground that it failed to name AME Torrey View,
LLC as a party. The court agreed that AME Torrey View, LLC was a necessary party
and sustained the Company's demurrer with leave for the School Board to amend
its petition to include AME Torrey View, LLC as a party. The Company believes
that the statute of limitations has expired for the School District to name AME
Torrey View, LLC as a party. If the School District attempts to name AME Torrey
View, LLC as a party, The Company expects that AME Torrey View, LLC and the
Company will demur and ask the court to dismiss the action. If the demurrer is
overruled, the Company intends to vigorously defend the action and understands
the City intends to do so as well.
2. The Company is the exclusive licensee of certain patents it refers to
as the Kauffman patents. On June 25, 2001, the Company filed a complaint against
MorphoSys AG and its wholly owned subsidiary MorphoSys USA, Inc., in the United
States District Court for the District of Massachusetts seeking
<PAGE>
injunctive relief and damages on behalf of the Company. The complaint alleges
that MorphoSys AG and MorphoSys USA, Inc. are willfully infringing the Kauffman
patent family.
On January 6, 2003, the Company announced a report and recommendation from the
magistrate judge in the United States District Court for the District of
Massachusetts to the district judge in our legal action against MorphoSys AG and
its wholly owned subsidiary MorphoSys USA, Inc. that MorphoSys' motion for
summary judgment of non-infringement be allowed and that the Company's motion
for partial summary judgment of infringement be denied and all other motions be
dismissed as moot. The Company has filed objections to the magistrate judge's
report and recommendation. The district judge may adopt, reject or modify the
magistrate judge's recommendation or instruct the magistrate judge to reconsider
the recommendation.