Lease Termination Agreement
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Lease Termination Agreement
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LEASE TERMINATION AGREEMENT
This LEASE TERMINATION AGREEMENT (this “ Agreement ”) is entered into as of the 7 th day of August, 2009, by and between TPSC IX, LLC, a Delaware limited liability company (“ Landlord ”), and LIGAND PHARMACEUTICALS, INCORPORATED, a Delaware corporation (“ Tenant ”).
R E C I T A L S :
A. Landlord and Tenant entered into that Lease dated November 9, 2006 (the “ Lease ”), whereby Landlord leased to Tenant, and Tenant leased from Landlord those certain premises (collectively, the “ Premises ”) consisting of (i) that certain real property (“ Land ”) legally described as Parcel 2 of Parcel Map 17826, in the City of San Diego, County of San Diego, State of California, according to Map thereof, filed in the Office of the County Recorder of San Diego County, February 18, 1997, (ii) the two (2)-story building located on the Land (the “ Building ”), and (iii) all landscaping, drainage, irrigation, lighting, parking facilities, walkways, driveways and other improvements and appurtenances related thereto, including, but not limited to, ingress and egress to the public right-of-way. The first floor portion of the Premises may be referred to herein as the “ First Floor Premises ,” the second (2 nd ) floor portion of the Building may be referred to herein as the “ Second Floor Premises ,” the basement portion of the Premises may be referred to herein as the “ Basement Premises ,” and certain areas adjacent to but outside the Building may be referred to herein as the “ Building Exterior Space ” all as more particularly set forth on Exhibit A-1 attached hereto.
B. Tenant and Landlord desire to enter into this Agreement in order to terminate the Lease on the terms and conditions set forth herein.
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing recitals and the conditions and the covenants hereinafter contained, and for other consideration hereinafter set forth, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows.
1. Defined Terms . All terms defined in the Lease when used herein shall have the same meaning as is given such terms in the Lease unless expressly superseded by the terms of this Agreement.
2. Effectiveness of this Agreement . Landlord, Tenant, Takeda San Diego, Inc., a Delaware corporation (“ Takeda ”), and HCP TPSP, LLC, a Delaware limited liability company (“ HCP TPSP ”), intend to simultaneously enter into three (3) agreements (collectively, “ Contracts ”) identified as follows: (i) this Agreement; (ii) a lease agreement between Landlord and Takeda (“ Takeda Lease ”) for Takeda’s lease of the First Floor Premises following the Initial Termination Date (as defined in Section 3 , below), which
Takeda Lease shall be acceptable to Landlord in its sole discretion; and (iii) a lease agreement between HCP TPSP and Tenant (“ New Lease ”) for Tenant’s lease of space located at 11085 North Torrey Pines Road, San Diego, California, which New Lease shall be acceptable to each of HCP TPSP and Tenant in their reasonable discretion, respectively. Neither Landlord nor Tenant shall have any liability whatsoever to the other party hereto relating to or arising from the inability or failure to cause all of the Contracts to be executed. Except as set forth herein, the Lease shall remain unmodified and in full force and effect unless and until such time as this Agreement (and all the Contracts) are executed and Landlord receives the full amount of the Initial Payment, as more particularly set forth in Section 5.1 , below.
3. Termination of the Lease . Subject to the terms and conditions set forth in Section 2 , above, Landlord and Tenant hereby agree that the Lease shall terminate and be of no further force or effect (i) with respect to those certain portions of the First Floor Premises, Second Floor Premises, Basement Premises, and Building Exterior Space more particularly identified on Exhibit A-2 attached hereto (the “ Initial Surrender Premises ”), as of the date of the full execution and delivery of this Agreement by Landlord and Tenant (the “ Initial Termination Date ”) and (ii) with respect to the remaining portions of the Premises (which shall include, without limitation, the remainder of the Basement Premises, the remainder of the First Floor Premises, the remainder of the Building Exterior Space, and the remainder of the Second Floor Premises), as of the date (the “ Lease Termination Date ”) on which Tenant shall have completed the de-commissioning of such portions the Premises under the license described in Section 33.5(d) of the Lease and completed the other requirements set forth in Section 33.7 of the Lease, and vacated and surrendered exclusive possession of such portions of the Premises to Landlord, provided that in no event shall the Lease Termination Date be after March 31, 2010. Notwithstanding the foregoing, Tenant shall use commercially reasonable efforts to cause the Lease Termination Date to occur on or before December 31, 2009.
3.1 Lot 14 . Notwithstanding the Initial Termination Date and the corresponding termination of the Lease with respect to the Initial Surrender Premises, Landlord and Tenant acknowledge that Tenant’s “Access Right” with respect to Lot 14 (as more particularly set forth in Section 36 of the Lease) shall not terminate upon the Initial Termination Date, but shall terminate coterminously with the Lease upon the Lease Termination Date.
3.2 Rent for the Premises . Except as set forth in this Agreement, Tenant shall continue to remain fully liable for all obligations of Tenant under the Lease arising or accruing prior to (A) the Initial Termination Date with respect to the Initial Surrender Premises, and (B) the Lease Termination Date with respect to all portions of the Premises which are not the Initial Surrender Premises, including, without limitation, the payment of all Basic Annual Rent, Operating Expenses, Taxes and Assessments, and other Additional Rent due under the terms of the Lease; provided, however, except with respect to the holdover identified below, in no event shall Tenant be obligated to pay any amounts of Basic Annual Rent, Operating Expenses, or Taxes and Assessments with respect any portion of the Premises on and after the earlier to occur of the October 1, 2009 (subject to the full execution and delivery of the New Lease by HCP TPSP and Tenant) and the Lease Termination Date. Notwithstanding the termination of the Lease with respect to the Initial Surrender Premises (but subject to the terms of the immediately foregoing sentence), the Basic Annual Rent payable by Tenant under the Lease shall not be reduced, and Tenant shall continue to pay Basic Annual Rent as if Tenant continued
to lease the entire Premises, through and until the Lease Termination Date; provided, however, effective as of the Initial Termination Date, Tenant shall have no further obligation to pay the cost of any electricity, water, gas or other utilities consumed in the Premises (it being acknowledged that Takeda shall pay all such utility costs pursuant to the terms of the Takeda Lease) Tenant shall additionally continue to be obligated to pay to Landlord Operating Expenses, Taxes and Assessments, and other Additional Rent (other than the utility cost as set forth above), which would otherwise be due under the terms of the Lease with respect to the Initial Surrender Premises during this period, provided that any such amounts paid by the Takeda with respect to the Initial Surrender Premises shall be credited against the amounts payable by Tenant under the Lease with respect thereto. The “ Termination Date ” shall mean, individually or collectively, as the context may require, the Initial Termination Date, and/or the Lease Termination Date. In the event that the Lease Termination Date does not occur by October 1, 2009, for any reason other than Tenant’s failure to execute the New Lease, then notwithstanding any contrary provision in this Agreement or in the Lease, Tenant shall have no obligation to pay Basic Annual Rent and Additional Rent for the Premises on and after October 1, 2009, it being acknowledged that Tenant’s obligation to pay rent under the terms of the New Lease shall commence October 1, 2009. If, however, Tenant holds over in all or any portion of the Initial Surrender Premises after the Initial Termination Date, any holdover rent payable by Tenant with respect to the Initial Surrender Premises, as more particularly set forth in Section 7 below, shall be calculated based on the rent payable by Tenant under the terms of the Lease for the period of time immediately prior to the date of the full execution and delivery of this Agreement by Landlord and Tenant. If Tenant holds over in all or any portion of the remaining Premises after March 31, 2010 (except to the extent such hold over is directly attributable to HCP TPSP’s failure to deliver to Tenant the premises under the terms of the New Lease which is not due to a delay caused by Tenant), and Landlord is required to provide Takeda with a credit against the rent that Takeda would otherwise pay under the terms of the Takeda Lease (the “ Takeda Credit Amount ”), Tenant shall be liable to pay “holdover rent,” as more particularly set forth in Section 7 below, in an amount equal to the amount of such Takeda Credit Amount (but in no event in excess of $30,000 per month), prorated on a daily basis until Tenant has vacated and surrendered such remaining Premises.
4. Surrender of Premises .
4.1 In General . Tenant hereby agrees to vacate the applicable portion of the Premises and surrender and deliver exclusive possession of same to Landlord on or before the applicable Termination Date in good order, condition and repair and otherwise in accordance with the provisions of the Lease (including, without limitation, Section 17.7 and Article 28 of the Lease) (the “ Surrender Obligations ”), and Tenant shall deliver to Landlord all of the keys to the Premises and any other locked areas which are part of the Premises. Notwithstanding the foregoing, Sections 33.6 and 33.7 of the Lease shall apply only to the Lease Termination Date, and not the Initial Termination Date. In the event that there are any items of furniture, trade fixtures and equipment in the Premises (the “ FF&E ”) that Tenant desires to transfer to Takeda following the termination of the Lease as provided herein, Tenant shall coordinate the same directly with Takeda prior to such termination and Landlord shall have no obligation in connection therewith. Notwithstanding the foregoing, Landlord and Tenant agree that, concurrently with the payment of the “Initial Payment”, as defined in
Section 5 , below, Tenant shall pay $60,000.00 to Landlord, which payment shall be in lieu of Tenant’s obligations to complete any of the repairs and maintenance items recommended in that certain Equipment Survey for 10275 Science Center Drive dated June 16, 2009 prepared by Pacific Rim Mechanical, and that, upon such payment, Landlord shall release Tenant from any obligation to complete such repairs and maintenance. In addition, Tenant shall be solely responsible to obtain from the applicable governmental agencies the final decommissioning clearances as required by applicable law for the Premises. If the final decommissioning, and any associated governmental approvals, has not been completed (and copies of all applicable documentation related thereto delivered to Landlord) by the date which is twelve (12) months after the date of this Agreement, Tenant acknowledges that Landlord shall be obligated to reduce the amount of Takeda’s pro-rata share of “Operating Expenses” (as that term is defined in the Takeda Lease, and which includes operating expenses and real property taxes) by fifty percent (50%), and to reduce Takeda’s monthly base rental obligation by $60,000 per month, all of which shall be prorated on a daily basis until the date the final decommissioning (including any associated governmental approvals) has been completed (collectively, the “ Takeda Rental Reductions ”) . Tenant hereby agrees that to the extent that Landlord provides all or any portion of the Takeda Rental Reductions to Takeda, Tenant shall pay to Landlord the amount of the Takeda Rental Reductions provided to Takeda within thirty (30) days following Landlord written demand therefore. In addition, if the final decommissioning and any associated governmental approvals has not been completed by the date which is twenty-four (24) months after the date of this Agreement, Tenant acknowledges that Takeda shall have the right under the terms of the Takeda Lease to terminate the Takeda Lease, and in the event Takeda exercises such right of termination, Tenant shall indemnify Landlord from any and all costs, expenses and damages (including without limitation court costs and reasonable attorneys’ fees) incurred by Landlord and actually paid to Takeda or Landlord’s attorneys as a result of Tenant’s failure to cause the completion of such decommissioning by such date.
4.2 Landlord’s Right to Access Premises . Following the full execution and delivery of this Agreement by Landlord and Tenant, Landlord shall have reasonable access to the Premises for the purpose of performing alterations and constructing improvements in the Premises for Takeda under the Takeda Lease (the “ Takeda Improvements ”). All such access (except with respect to any ongoing work) shall be upon not less than twenty-four (24) hours prior notice to Tenant. Landlord shall use commercially reasonable efforts to schedule and to carry out all such Takeda Improvements, in a manner, and in such locations, as to minimize, to the extent reasonably practicable, any material disruption of the Tenant’s use of the portions of the Premises occupied by Tenant, and Tenant shall reasonably cooperate with Landlord in order to enable such Takeda Improvements to be performed in a timely manner in accordance with Landlord’s reasonable construction schedule. In order to facilitate the construction of such Takeda Improvements, Tenant agrees that Tenant shall not have access to the Premises in any areas where Landlord is performing the Takeda Improvements. The rights granted to Landlord in this Section 4.2 may be exercised by Landlord or the Takeda, and/or any of their respective agents, employees, and independent contractors. In no event shall the limitations on Tenant’s use of or access to the Initial Surrender Premises, or any portion thereof, as set forth in this Section 4.2 constitute a constructive eviction of Tenant or entitle Tenant to any abatement of Rent. Tenant hereby acknowledges that, notwithstanding Tenant’s occupancy of a portion of the Premises during the construction of the Takeda Improvements, Landlord shall be permitted to construct the Takeda Improvements during normal business hours, and Tenant shall, to the extent commercially reasonable and possible, upon request provide a clear working
area for such work (including, but not limited to, the moving of furniture, fixtures and Tenant’s property away from the area in which Landlord is constructing the Takeda Improvements). 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 Takeda Improvements, 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 construction of the Takeda Improvements, or for any inconvenience or annoyance occasioned by the construction of the Takeda Improvements; provided, however, notwithstanding the foregoing, Landlord shall be responsible and liable for any breach of the covenants, terms and conditions set forth in this Agreement, and Landlord agrees to indemnify Tenant (and Tenant’s Agents) in the same manner that Tenant indemnified Landlord in Section 20.1 of the Lease.
4.3 Shared Communal Areas . Following the termination of the Lease with respect to the Initial Surrender Premises, and the commencement of the Takeda Lease, Tenant acknowledges that both Tenant and Takeda will be occupying and using portions of the Building Exterior Space, Basement Premises, First Floor Premises and Second Floor Premises. However, since the Building Exterior Space, Basement Premises, First Floor Premises and Second Floor Premises are not separately demised for typical multi-tenant use (and Tenant hereby acknowledges and agrees that Landlord shall not be providing any such demising work), Tenant and Takeda shall each have shared access to portions of the remaining Premises and the area being leased by Takeda to the extent necessary for normal ingress and egress to each party’s respective premises, as well as the use of restrooms and other “common” facilities. All such areas shall be referred to as “Communal Areas” and are shown more particularly on Exhibit A-2 (pages 1 through 4) attached hereto. In no event shall any such Communal Areas be deemed “common areas” (whose repair, maintenance, insurance and other obligations would typically be that of a landlord), but that such Communal Areas shall remain a part of Tenant’s and Takeda’s respective premises, and Landlord shall not provide any services to such Communal Areas. Tenant acknowledges and agrees that each of Tenant and Takeda shall have the non-exclusive right to use such Communal Areas for the uses typically associated with such areas (for example, Communal Areas corridors shall only be used for ingress and egress, and not for office, laboratory, storage or other uses). In no event shall any such use by Takeda of any portion of Communal Area which is also a part of the remaining Premises constitute a constructive eviction of Tenant or entitle Tenant to any abatement of Rent. Tenant shall use commercially reasonable efforts to cooperate with Takeda in connection with Takeda’s use of any such Communal Areas. Tenant expressly acknowledges and agrees that Takeda is an intended third-party beneficiary of the provisions of this Section 4.3 .
4.4 Telecom Room Communal Area; Server Room . Promptly following the date of this Agreement, Tenant shall, at Tenant’s sole cost and expense, extend sufficient wiring from the second (2 nd ) floor server room (marked on Exhibit A-2 as room number 259) into the second (2 nd ) floor Communal Area telecom room (marked on Exhibit A-2 as room number 261) in order to allow Takeda to install and operate their computer server equipment in such telecom room. Tenant agrees that in the event that Takeda should reasonably require access to the server room in connection with the repair and/or maintenance of those items of Takeda’s server equipment/cabling which may be located in such server room, Takeda shall have the right to such access following reasonable prior notice to Tenant, and as a condition to any such entry, Tenant shall have the right to have a representative present during such entry.
5. Consideration to Landlord . In consideration for Landlord’s execution of this Agreement, Tenant shall pay to Landlord the total amount of Fourteen Million Three Hundred Thousand and No/100 Dollars ($14,300,000.00) (the “ Termination Fee ”), which Termination Fee shall be delivered to Landlord in three (3) separate payments as follows:
5.1 Within one (1) business day after Landlord and Tenant’s execution of this Agreement, Tenant shall deliver to Landlord, via wire transfer, the amount of Four Million Five Hundred Thousand and No/100 Dollars ($4,500,000.00) (the “ Initial Payment ”); provided, however, in no event shall this Agreement be effective prior to Landlord’s receipt of such Initial Payment.
5.2 On or before July 1, 2010, Tenant shall deliver to Landlord the amount of Four Million Five Hundred Thousand and No/100 Dollars ($4,500,000.00) (the “ Second Payment ”).
5.3 On or before April 1, 2011, Tenant shall deliver to Landlord the amount of Five Million Three Hundred Thousand and No/100 Dollars ($5,300,000.00) (the “ Third Payment ”).
In the event that Tenant fails to timely make the Second Payment or the Third Payment, such failure shall be deemed a default hereunder and entitle Landlord to exercise its right to draw down on the “L-C,” as that term is defined in Section 8 , below.
6. Representations .
6.1 Tenant represents and warrants to Landlord that (a) Tenant has not heretofore assigned or sublet all or any portion of its interest in the Lease; (b) no other person, firm or entity has any right, title or interest in the Lease; (c) Tenant has the full right, legal power and actual authority to enter into this Agreement and to terminate the Lease without the consent of any person, firm or entity; and (d) Tenant has the full right, legal power and actual authority to bind Tenant to the terms and conditions hereof. Tenant further represents and warrants to Landlord that as of the date hereof there are no, and as of the applicable Termination Date there shall not be any, mechanic’s liens or other liens encumbering all or any portion of the applicable portion of the Premises, by virtue of any act or omission on the part of Tenant, its predecessors, contractors, agents, employees, successors or assigns. Notwithstanding the termination of the Lease provided for herein, the representations and warranties set forth in this Section 6 shall survive the Termination Date and Tenant shall be liable to Landlord for any inaccuracy or any breach thereof.
6.2 Landlord represents and warrants to Tenant that (a) Landlord has the full right, legal power and actual authority to enter onto this Agreement and to terminate the Lease without the consent of any person, firm or entity; and (b) Landlord has the full right, legal power and actual authority to bond Landlord to the terms and conditions hereof. Notwithstanding the termination of the Lease as provided herein, the representations and warranties set forth in this Section 6.2 shall survive the Termination Date and Landlord shall be liable to Tenant for any inaccuracy or any breach thereof.