Construction Loan Agreement

Exhibit 10.157

CONSTRUCTION LOAN AGREEMENT

This CONSTRUCTION LOAN AGREEMENT (" Agreement ") is made and entered into as of June 21, 2001 by and between AXYS 468 LITTLEFIELD LLC , a California limited liability company (" Borrower "), and CUPERTINO NATIONAL BANK , a California banking corporation (" Lender ").

RECITALS

A. Borrower, as successor in interest to Guarantor (as defined below), owns the leasehold estate created by that certain Ground Lease (as defined below) of the real property (" Land ") described in the attached Exhibit A , incorporated by this reference.

B. Borrower proposes to construct on the Land the Improvements (as defined below) in accordance with the Plans and Specifications (as defined below).

C. Borrower wishes to borrow from Lender up to the sum of Eleven Million and 00/100 Dollars ($11,000,000.00) (the "Loan") to be used by Borrower for construction of the Improvements, subject to the terms of this Agreement.

D. The Loan is to be evidenced by the Term Note Secured by Construction Leasehold Deed of Trust (the " Note ") in the original principal amount of Eleven Million and 00/100 Dollars ($11,000,000.00) dated the date hereof made by Borrower payable to the order of Lender, repayment of which is to be secured by the Construction Leasehold Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filingdated the date hereof covering the Land and the Improvements (the " Deed of Trust ") executed by Borrower in favor of GREATER BAY BANCORP , a Delaware corporation (" Trustee "), in trust for the benefit of Lender, and any further security that Lender now or from time to time may require.

E. Repayment of the Loan and completion of the Improvements are to be guaranteed by Guarantor pursuant to the Guaranty Agreement dated as of the date hereof executed by Guarantor in favor of Lender (the " Guaranty ").

AGREEMENT

NOW, THEREFORE , for good and valuable consideration the receipt and adequacy of which are acknowledged, the parties agree as follows:


DEFINED TERMS

Definitions . All capitalized terms not defined herein shall have the meanings set forth in the Deed of Trust. As used in this Agreement, the following terms shall have the following meanings:

" Agreement " means this Construction Loan Agreement, and all exhibits and addendums attached hereto as all of the foregoing may be amended, supplemented, or modified from time to time.

" Business Day " means any day excluding Saturday, Sunday, and any day which is a legal holiday under the laws of the State of California, or is a day on which banking institutions located in the State of California are closed.

" Cash Collateral Account Agreement " means the Cash Collateral Account Agreement dated the date hereof by and between Borrower and Lender.

" Change " has the meaning set forth in Section 3.2.

" Commitment Date " means the date Lender issued its commitment to fund the loan.

" Completion Date " means the earlier to occur of: (a) Loan Maturity Date; or (b) the last day of the month in which Completion of the Improvements occurs.

" Completion of the Improvements " means that, in Lender's sole judgment: (a) the Improvements will have been constructed in a good and workmanlike manner in accordance with: (i) the Plans and Specifications, (ii) construction progress schedule; and (iii) the current Direct and Indirect Cost Breakdowns as furnished to Lender by Borrower, approved in writing by Lender, without substantial deviation, unless approved by Lender; (b) all notices of completion with respect to the Improvements will have been filed, all statutory lien periods will have expired, and all endorsements, including but not limited to endorsement nos. 100, 101.2, 102.5, and 116 to Lender's title policy shall have been delivered to Lender; (c) all costs of constructing the Improvements will have been paid, including, without limitation, interest on the Note prior to the Completion Date; (d) all materials and fixtures usually furnished and installed at this stage of construction shall have been fully furnished and installed; and (e) all of the conditions specified in Section 4.9 will have been satisfied.

" Default Rate " means a rate of interest three percentage points (3%) over the interest rate as stated in the Note.

" Direct Cost Breakdown " means the direct cost breakdown as set forth in the Disbursement Schedule.

" Disbursement Schedule " has the meaning set forth in Section 4.1

" Environmental Indemnity " means the Environmental Indemnity dated the date hereof executed by Borrower in favor of Lender.

" Extended Maturity Date " has the meaning set forth in Section 2.3.

" Event of Default " has the meaning set forth in Section 6.1.

" Financial Statements " means the financial statements of Borrower and any other Persons as may be required by Lender from time to time, including operating statements, balance sheets, and any other financial reports and information that Lender may require.

" Fixtures " means all fixtures located on or within the Improvements or now or later installed in or used in connection with any of the Improvements, including, but not limited to, all partitions, screens, awnings, motors, engines, boilers, furnaces, pipes, plumbing, elevators, cleaning and sprinkler systems, fire extinguishing apparatus and equipment, water tanks, heating, ventilating, air conditioning and air cooling equipment, built-in refrigerators, and gas and electric machinery, appurtenances, and equipment, whether permanently affixed to the Land or the Improvements.

" GAAP " means generally accepted accounting principles as in effect from time to time in the United States of America, applied on a consistent basis over the time period in question as to classification of items and amounts.

" General Contractor " means O'Neill Construction or any other general contractor designated by Borrower as general contractor and approved by Lender.

" Governmental Authority " means (a) the United States of America; (b) the State of California; (c) the County of San Mateo, California; or (d) the City of South San Francisco, California, or other political subdivision, agency, department, commission, board, bureau, or instrumentality of any of them.

" Governmental Requirement " means any law, ordinance, order, rule, regulation, or requirement of a Governmental Authority.

" Ground Lease " means that certain Ground Lease dated October 30, 1998 by and between Lessor and Borrower, as successor in interest to Guarantor, as amended from time to time.

" Guarantor " means AXYS Pharmaceuticals, Inc., a Delaware corporation.

" Impositions " means all real estate and personal property taxes and other taxes and assessments, water and sewer rates and charges, and all other governmental charges and any interest or costs or penalties with respect to them, ground rent and charges for any easement or agreement maintained for the benefit of the Property, general and special, ordinary and extraordinary, foreseen or unforeseen, of any kind that at any time may be assessed, levied, imposed, or become a lien on the Property or the rent or income received from the Property, or any use or occupancy of the Property; and any charges, expenses, payments, or assessments of any nature that are or may become a lien on the Property or the rent or income received from it.

" Improvements " means all buildings, improvements, Fixtures and appurtenances on the Land, and all improvements, additions, and replacements, and other buildings and improvements, at any time later constructed or placed on the Land.

" Indirect Cost Breakdown " means the indirect cost breakdown as set forth in the Disbursement Schedule.

" Inspector " has the meaning set forth in Section 3.5.

" Lessor " means Littlefield Associates, a California general partnership.

" Letter of Credit " has the meaning set forth in Section 2.4.1.

" Loan Documents " means the Note, this Agreement, the Security Documents, and all other documents executed by Borrower or Guarantor (including guaranties) evidencing, securing, or relating to the Loan, except the Environmental Indemnity.

" Loan Extension Notice " has the meaning set forth in Section 2.3.

" Loan Fee " has the meaning set forth in Section 8.21.1.

" Loan Maturity Date " means the Maturity Date as defined in the Note.

" Loan Proceeds " means funds disbursed by Lender pursuant to this Agreement to finance the construction of the Improvements.

" Materials " has the meaning set forth in Section 4.5.

" Person " means any natural person, corporation, firm, partnership, association, trust, government, governmental agency, or any other entity, whether acting in an individual, fiduciary, or other capacity.

" Plans and Specifications " means the final set of architectural, structural, mechanical, electrical, grading, sewer, water, street, and utility plans and specifications for the Improvements, including all supplements, amendments, and modifications.

" Potential Default " means an event that would constitute an Event of Default but for any requirement of notice to be given or period of grace or time to elapse.

" Project Architect " has the meaning set forth in Section 3.10.

" Property " means Borrower's ground leasehold interest in the Land, the Improvements, and the Fixtures, together with: (a) all rights, privileges, tenements, hereditaments, rights-of-way, easements, and appurtenances of the Land or the Improvements now or later belonging to the Property and all right, title, and interest of Borrower in any streets, ways, alleys, strips, or gores of land adjoining the Land; and (b) all of Borrower's right, title, and interest in the Land, the Improvements, and the Fixtures, including any award for any change of grade of streets affecting the Land, the Improvements, or the Fixtures.

" Security Documents " means the Deed of Trust and Cash Collateral Account Agreement, together with all other documents or instruments entered into between Borrower and Lender or by Borrower in favor of, or for the benefit of, Lender that recite that they are to secure the Loan.

" Take Out Lender " means a lender, that pays in full the outstanding principal, plus all accrued and unpaid interest, plus all costs and fees due and payable under the Note.

" Title Company " means First American Title Company.

" Title Policy " means the ALTA Loan Policy issued by Title Company.

" Work " means the construction of the Improvements.

Accounting Terms. Unless otherwise indicated in this Agreement or any other Loan Document, all accounting terms used in this Agreement or any other Loan Document shall be construed, and all accounting and financial computations hereunder or thereunder shall be computed, in accordance with GAAP. If GAAP changes during the term of this Agreement such that any covenants contained herein would then be calculated in a different manner or with different components, Borrower and Lender agree to negotiate in good faith to amend this Agreement in such respects as are necessary to conform those covenants as criteria for evaluating Borrower's financial condition to substantially the same criteria as were effective prior to such change in GAAP; provided, however, that, until Borrower and Lender so amend this Agreement, all such covenants shall be calculated in accordance with GAAP as in effect immediately prior to such change.

Headings. Headings in this Agreement and each of the other Loan Documents are for convenience of reference only and are not part of the substance hereof or thereof.

Plural Terms. All terms defined in this Agreement or any other Loan Document in the singular form shall have comparable meanings when used in the plural form and vice versa.

Other Interpretive Provisions. References in this Agreement to "Recitals," "Sections," "Exhibits" and "Schedules" are to recitals, sections, exhibits and schedules herein and hereto unless otherwise indicated. References in this Agreement and each of the other Loan Documents to any document, instrument or agreement (a) shall include all exhibits, schedules and other attachments thereto, (b) shall include all documents, instruments or agreements issued or executed in replacement thereof, and (c) shall mean such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified and supplemented from time to time and in effect at any given time. The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement or any other Loan Document shall refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Loan Document, as the case may be. The words "include" and "including" and words of similar import when used in this Agreement or any other Loan Document shall not be construed to be limiting or exclusive.


LOAN AND LETTER OF CREDIT

Loan. Lender agrees to lend to Borrower, and Borrower agrees to borrow from Lender, up to Eleven Million and 00/100 Dollars ($11,000,000.00), to finance the construction of the Improvements and for other purposes specified in the Loan Documents, subject to the terms, conditions, representations, warranties, and covenants in this Agreement.

Disbursements. Lender agrees to disburse the Loan Proceeds in the manner and subject to the limitations in this Agreement. Interest will accrue on disbursed Loan Proceeds at the applicable rate specified in the Note with respect to each disbursement from the date on which the disbursement is made until repaid. All Loan Proceeds will be evidenced by the Note and will be secured by the Deed of Trust and other applicable Security Documents.

Extension of the Loan Maturity Date . Subject to the terms and conditions of the Cash Collateral Security Agreement, Lender agrees to extend the Loan Maturity Date set forth in the Note, subject to Lender receiving from Borrower, at least thirty (30) days before the Loan Maturity Date, written notice requesting an extension (the " Loan Extension Notice ") for an additional term up to three (3) months (the " Extended Maturity Date ") subject, however, to satisfaction of all of the following conditions no later than the Loan Maturity Date:

All covenants and obligations of Borrower and Guarantor under the Loan Documents and the Environmental Indemnity shall have been performed and all representations and warranties contained herein shall be true and correct as of the Loan Maturity Date.

No Event of Default shall have occurred.

Lender shall have determined, in Lender's sole discretion, that no conditions exist that might materially adversely affect: (a) the ability of Borrower or Guarantor to perform any of its obligations under the Loan Documents and Environmental Indemnity; (b) the business or financial condition of Borrower or Guarantor; (c) the business or financial condition, operations, or value of the Improvements or the Property; or (d) the priority of Lender's lien in the Improvements and the Property.

Borrower shall have executed and delivered to Lender a replacement note or such other documentation as Lender may require, in form and content satisfactory to Lender, specifying the Extended Maturity Date.

Borrower shall have delivered to Lender such other documents and assurances as Lender shall require, including, without limitation if requested by Lender, an endorsement to Lender's title insurance policy, at Borrower's expense, assuring Lender that the extension will not affect the priority of Lender's lien in the Improvements and the Property.

Borrower shall have paid to Lender concurrently with the delivery of the Loan Extension Notice a fee in the amount of Twenty Seven Thousand Five Hundred and 00/100 Dollars ($27,500.00).

Standby Letter of Credit.

Issuance . Subject to, and upon the terms and conditions contained herein, at the request of Borrower, Lender shall issue an irrevocable standby letter of credit (the " Letter of Credit ") for the account of Borrower and for the benefit of Take Out Lender, containing terms and conditions acceptable to Lender. Each draft paid by Lender under the Letter of Credit shall be repaid by Borrower in accordance with the terms of the Letter of Credit.

Cash Collateral. Borrower's reimbursement obligation under the Letter of Credit shall be cash secured as set forth in the Cash Collateral Account Agreement.

Amount of Letter of Credit . Except in Lender's discretion, the amount of the Letter of Credit shall not at any time exceed Two Million and 00/100 Dollars ($2,000,000.00). Notwithstanding the foregoing, if the balance of the Deposit Account (as defined in the Cash Collateral Agreement) is less than Two Million and 00/100 Dollars ($2,000,000.00), then the amount of the Letter of Credit shall be equal to the balance of the Deposit Account as of the date of issuance of the Letter of Credit.

Letter of Credit Agreement. The Letter of Credit shall be subject to the additional terms and conditions of the Letter of Credit Agreement and related documents, if any, required by Lender in connection with the issuance thereof (each, a " Letter of Credit Agreement ").

Subleases. Upon request of Lender, for purposes of facilitating a take out loan, Borrower shall enter into a sublease for the Property with Guarantor or its successor in interest, and on such terms that are reasonably acceptable to Lender.


CONSTRUCTION AND COMPLETION OF IMPROVEMENTS

Construction. Borrower will diligently proceed with construction of the Improvements in accordance with the Plans and Specifications as approved by Lender. Completion of the Improvements will occur on or before the Loan Maturity Date.

Extra Work; Changes in Plans and Specifications . Subject to Section 4.3, all requests for changes in the Plans and Specifications or construction contract (individually, a " Change ", and collectively, " Changes "), other than minor changes involving no extra cost, must be in writing, signed by Borrower and the Project Architect, and delivered to Lender for its approval, which approval shall not be unreasonably withheld. Borrower shall obtain any required permits or authorizations from any Governmental Authority having jurisdiction prior to approving or requesting any Change.

Contractors and Contracts . On demand by Lender, Borrower will furnish to Lender from time to time correct lists of all contractors and subcontractors employed in connection with the Work. Each list will show the name, address, and telephone number of each contractor or subcontractor, a general statement of the nature of the work to be done, the labor and materials to be supplied, the names of material suppliers, if known, and the approximate dollar value of the labor, work, and materials with respect to each. Lender may contact directly each contractor, subcontractor, and material supplier to verify the facts disclosed by the list or for any other purpose. All contracts let by Borrower or its contractors relating to the Work will require them to disclose to Lender information sufficient to make that verification. All estimated direct costs of the Work will be covered by firm contracts or orders with contractors, subcontractors, or material suppliers acceptable to Lender. All those contracts and orders will be subject to the approval of Lender, and no contract or order may be amended or altered without the prior written approval of Lender.

Purchase or Lease of Materials. No materials, equipment, furniture, fixtures, or any other part of the Improvements will be purchased or leased for or installed on the Property under any security agreement, lease, or other arrangement in which the seller or lessor reserves or purports to reserve any rights in them or any right to remove or repossess any of these items or to consider them personal property after their incorporation in the Work, unless specifically authorized by Lender in advance in writing.

Inspection . Lender, through its officers, agents, contractors, or employees, will have the right at any time, with notice to Borrower and without notice to Borrower upon an Event of Default, to enter on the Property and inspect the Improvements and the Work; and to examine the books, records, accounting data, plans, shop drawings, specifications, and other documents of Borrower pertaining to the Work and to make extracts or copies. All these documents will be made available to Lender, its officers, agents, contractors, and employees promptly on written demand. Lender may cause periodic inspections to be made by an inspector or inspectors (" Inspector ") consulting with Lender in connection with the Work. Borrower agrees to cooperate fully (and to cause the General Contractor to cooperate fully) with the Inspector and to permit all appropriate access to the Property and to all relevant books and records. The cost of that service will be borne by Borrower and will be paid within thirty (30) days of receipt of any invoice or paid from available Loan Proceeds.

Protection Against Lien Claims . Borrower agrees to pay and discharge promptly and fully all claims for labor done and materials and services furnished in connection with the Work, diligently to file or produce the filing of a valid Notice of Completion on completion of the Work, diligently to file or procure the filing of a Notice of Cessation in the event of a cessation of labor on the Work for a continuous period of (30) days or more, and to take all other reasonable steps to forestall the assertion of claims of lien against the Property or any part of it. Borrower will require the general contractor to obtain a lien waiver with respect to each payment by or to the general contractor and each of the various subcontractors and material suppliers (and the major subcontractors and submaterial suppliers under them), and Lender, at any time, at its option, may require that: (a) Borrower make any payments for which disbursements are made under this Agreement by joint check made payable to the general contractor and subcontractor or sub-subcontractor for whose account the payment is to be made, as joint payees; or (b) all contractors, material suppliers, and laborers employed in connection with the Work will be paid directly by disbursement on a form or order approved by Lender and countersigned by Borrower. Nothing here will require Borrower to pay any claims for labor, materials, or services that Borrower in good faith disputes and that Borrower, at its own expense, is currently and diligently contesting, provided that Borrower will, in that case and in each other case where a claim of lien has been filed, within ten (10) days after the filing of any claim of lien: (i) record in the office of the Recorder of the County where the Property is located a surety bond sufficient to release the claim of lien; (ii) make a deposit of cash in the amount of one hundred and fifty percent (150%) of the claim of lien with Lender; (iii) deliver to Lender a specific title insurance policy endorsement under which the Title Company insures Lender that the claim of lien is not valid; or (iv) deliver to Lender any other assurance as may be acceptable to Lender.

Performance and Payment Bonds . Borrower will procure and deliver to Lender, and will require General Contractor and all subcontractors to procure and deliver to Lender, dual obligee performance and labor and material payment bonds in form, substance, and amount satisfactory to Lender that Lender may require by notice to Borrower. Borrower will deliver to Lender an original of each bond for Lender's approval.

Security Instruments. From time to time Borrower will execute and deliver to Lender a security instrument naming Lender as secured party covering all contracts entered into in connection with the Work and all other property of any kind owned by Borrower and used, or to be used, in the use and enjoyment of the Property and concerning which Lender may have any doubt as to its being subject to the lien of the Security Documents.

Surveys . Upon request by Lender, and at Borrower's expense, Borrower will furnish to Lender, immediately on completion of the foundation work and immediately on completion of the Improvements, respectively, a survey of the Property by a registered surveyor approved by Lender, in form and substance satisfactory to Lender, bearing the surveyor's certificate addressed to Lender and Title Company that: (a) confirms the legal description and area of the Property; (b) shows the location of all improvements, roads, fences, easements, zoning setback lines, height restrictions, or other space limitations; (c) shows utility lines to point of connection with the public system; (d) shows adjoining public and private streets and the distance to and names of nearest intersecting streets; (e) shows all encroachments on the Property; (f) certifies that the Plans and Specifications provide that the foundations and the Improvements, respectively, will be, and to the extent constructed are, located entirely within the setback lines and the property lines, and will not, and to the extent constructed do not, encroach on any other property, easement, or public or private right-of- way, or breach or violate any covenant, condition, or restriction of record, or any building or zoning ordinance; and (g) shows any other details that Lender may reasonably request. The final survey will also enumerate and locate all parking spaces.

Project Architect . An architect approved in writing by Lender (" Project Architect ") will be retained by Borrower, at Borrower's expense, to furnish periodic reports on the progress of the Work, including an estimate of the time and cost required to complete the Work according to the Plans and Specifications.


LOAN DISBURSEMENT PROCEDURES

Application for Advances . Borrower shall apply for advances from the Loan according to the disbursement schedule attached hereto as Exhibit B (the " Disbursement Schedule "). Each application shall be stated on a standard AIA payment request form or other form approved by Lender, executed by Borrower, and supported by such evidence as Lender shall reasonably require. Borrower shall apply only for the disbursement with respect to Work actually done by the General Contractor and for materials and equipment actually incorporated into the Property. Each application for an advance shall be deemed a certification by Borrower that as of the date of such application, all representations and warranties contained in this Agreement are true and correct, and that Borrower is in compliance with all of the provisions of this Agreement.

Construction Account. As set forth in the Disbursement Schedule, and subject to Section 4.2, for accounting purposes only, Lender may, at Lender's sole discretion, deposit advances requested under Section 4.1 of this Agreement to deposit account no. 4107012 maintained with Lender.

Payments . At the sole option of Lender, advances may be paid in the joint names of Borrower and the General Contractor, subcontractor(s) or supplier(s) in payment of sums due under the construction contract. At Lender's sole option, Lender may directly pay the General Contractor and any subcontractors or other parties the sums due under the construction contract. Borrower appoints Lender as its attorney in fact to make such payments. This power shall be deemed to be coupled with an interest, shall be irrevocable, and shall survive an Event of Default under this Agreement.

Projected Cost Overruns . If at any time Lender determines (in Lender's sole judgment) that the amount of the undisbursed Loan proceeds is not sufficient to pay all of the costs to complete the construction of the Improvements and to satisfy the interest obligations, then Lender may require Borrower to deposit with Lender any additional funds that Lender determines are necessary to pay such costs and satisfy the interest obligations. Borrower shall deposit such funds within ten (10) days of Lender's request. Funds deposited with Lender pursuant to this Section 4.3 shall be disbursed prior to any Loan Proceeds in the same manner as disbursement of the Loan proceeds.

Inspections. Lender may make on-site inspections and review of construction to verify percentage of completion and certify disbursement requests. Loan Proceeds will not be advanced more frequently than once a month as construction progresses.

Advances for Materials . Lender will not be required to make any advances for building materials or furnishings (collectively " Materials ") that are located off the Property or are stored on the Property but not affixed to or incorporated in the Improvements unless Borrower will have submitted to Lender evidence satisfactory to Lender that: (a) all sums then due under the purchase contract for the Materials have been paid or that Borrower will cause the payment to be made promptly on the ma ...