Agreement For Newtown Office Lease Dated, 2001

EXHIBIT 10.3


AGREEMENT OF LEASE


between


NEWTOWN OFFICE DEVELOPMENT III, L.P


("Landlord")


and


3-DIMENSIONAL PHARMACEUTICALS, INC.


("Tenant")


Version Date: August 8, 2001


TABLE OF CONTENTS


1. PREMISES, TERM AND PURPOSE................................................2 2. RENT......................................................................3 3. OPERATING EXPENSES........................................................4 4. COMPLETION OF IMPROVEMENTS AND COMMENCEMENT OF RENT.......................9 5. TENANT COVENANTS AS TO CONDITION OF PREMISES, AND
COMPLIANCE WITH LAWS; LANDLORD COVENANTS.................................10 6. TENANT IMPROVEMENTS, ALTERATIONS AND INSTALLATIONS.......................11 7. VARIOUS NEGATIVE COVENANTS BY TENANT.....................................12 8. VARIOUS AFFIRMATIVE COVENANTS OF TENANT AND LANDLORD.....................13 9. BUILDING DIRECTORY AND SIGNAGE...........................................13 10. CASUALTY AND INSURANCE...................................................13 11. INDEMNIFICATION..........................................................16 12. NON-LIABILITY OF LANDLORD................................................16 13. REMEDIES AND TERMINATION UPON TENANT DEFAULT.............................16 14. REMEDIES CUMULATIVE; NON-WAIVER BY LANDLORD..............................19 15. SERVICES; ELECTRIC ENERGY AND GAS........................................19 16. SUBORDINATION............................................................23 17. LANDLORD'S CURE OF TENANT'S DEFAULT......................................23 18. NOTICES..................................................................24 19. QUIET ENJOYMENT..........................................................24 20. SECURITY DEPOSIT.........................................................24 21. ACCESS TO PREMISES.......................................................24 22. BROKERAGE................................................................25 23. PARKING..................................................................25 24. LANDLORD'S INABILITY TO PERFORM..........................................25 25. CONDEMNATION.............................................................25 26. ASSIGNMENT AND SUBLETTING................................................26 28. ENVIRONMENTAL MATTERS....................................................29 29. PARTIES BOUND............................................................30 30. MISCELLANEOUS............................................................31 31. RIGHT OF FIRST OFFER.....................................................32 32. CONDOMINIUM DOCUMENTS....................................................33


Exhibit A Floor Plan of Demised Premises Exhibit A-1 Site Plan Exhibit B Tenant Improvement Work Exhibit B-1 Preliminary Outline Specification Exhibit C Rules and Regulations Exhibit D Building Holidays Exhibit E Cleaning Specifications Exhibit F Janssen Pharmaceutical Space


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LEASE AGREEMENT DATED August 8, 2001, BETWEEN NEWTOWN OFFICE DEVELOPMENT III, L.P., a Pennsylvania limited partnership ("Landlord"), having an office at GSB Building, Suite 401, One Belmont Avenue, Bala Cynwyd, PA 19004 and 3-DIMENSIONAL PHARMACEUTICALS, INC., ("Tenant"), a Delaware corporation, having an address at Eagleview Corporate Center, Suite 104, 665 Stockton Drive, Exton, PA 19341 ("Lease").


PREAMBLE
--------


DEFINITIONS.


In addition to other terms elsewhere defined in this Lease, the following terms whenever used in this Lease should have only the meanings set forth in this Preamble, unless such meanings are expressly modified, limited or expanded elsewhere herein.


1. Premises or Demised Premises: Outlined on the floor plan annexed hereto
---------------------------- and made a part hereof as Exhibit A consisting of approximately 20,509 square feet of Gross Rentable Area on the third floor, together with all fixtures, equipment, improvements and installations attached thereto, in the building, known as Building Three having approximately 59,628 square feet of Gross Rentable Area (the "Building") in the Lower Makefield Corporate Center ("Park") located at Interstate I-95 and Route 332, Lower Makefield Township, Pennsylvania. As per the Condominium Documents (defined in Section 32 below) governing the Park, the Building is Unit 7 of the Park.


2. Initial Term: Five (5) years, two months from the Commencement Date
------------


3. Commencement Date: The date that rent commences in accordance with
----------------- Exhibit B of the Lease


4. INTENTIONALLY DELETED


5. Fixed Rent Commencement Date: The Commencement Date.
----------------------------


6. Expiration Date: November 30, 2006.
---------------


7. Permitted Use: General office use.
-------------


8. Fixed Rent: $522,979.50 per year payable in consecutive, equal monthly
---------- installments of $43,581.62 during the first twelve (12) months after the Fixed Rent Commencement Date. During the Initial Term the Fixed Rent shall be increased each year thereafter by $0.50 per rentable square foot commencing on the first anniversary of the Fixed Commencement Date.


9. Late Charge: Four percent (4%) of the amount of the payment due.
-----------


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10. Tenant's Proportionate Share: Thirty four and thirty nine one
---------------------------- hundredths percent (34.39%) which Landlord and Tenant agree is the proportion which the rentable area of the Premises bears to the total rentable area of the Building.


11. Base Year Expense Stop: $5.10 per square foot of Rentable Area.
----------------------


12. Tenant Electric Amount: $1.25 per square foot of rentable area per
---------------------- annum until adjusted as provided in Section 15 of the Lease.


13. Base Building Gas and Electric Amount: $1.00 per rentable square foot
------------------------------------- per annum, until adjusted as provided in Section 15 of the Lease.


14. Security Deposit: $130,744.86.
----------------


15. Designated Brokers: Aegis Property Group and The Staubach Company.
------------------


16. Tenant Improvement Work: as set forth in and in accordance with
----------------------- Exhibit B attached hereto and made a part hereof.


17. Term: The Initial Term and Renewal Term as to which Tenant has
---- exercised its rights pursuant to section 1(b) below.


NOW, THEREFORE, for good and valuable consideration, the adequacy and receipt of which are hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:


1. Premises, Term and Purpose.
--------------------------


(a) Landlord does hereby lease to Tenant, and Tenant does hereby lease from Landlord, the Demised Premises located in the Building for the Term commencing on the Commencement Date and ending on the Expiration Date, or such earlier date upon which the Term may expire or be terminated pursuant to the provisions of this Lease or pursuant to Law.


(b) Provided no Event of Default by Tenant shall exist and this Lease shall be in effect, Tenant shall have the right to extend the Term hereof for one (1) five (5) year renewal term (the "Renewal Term"). In order to exercise its right to the Renewal Term, Tenant shall give Landlord written notice of exercise ("Renewal Notice") no later than nine (9) months prior to the end of the Term. During the exercised Renewal Term, all of the terms and conditions of the Lease shall continue in full force and effect, except for provisions which, by their nature, relate only to the Initial Term and except that the Fixed Rent shall be the Fair Market Rent (herein defined), as determined herein. Fair Market Rent shall be such base rental as would be agreed upon by willing and knowledgeable parties, neither of whom were acting under compulsion, taking into account marketing expenses, brokerage commissions and tenant improvement costs that Landlord will not have to pay in connection with the Renewal Term.


Within 30 days following Landlord's receipt of Tenant's Renewal Notice, Landlord shall advise Tenant in writing of Landlord's determination of the Fair Market Rent (the "Initial Determination"). The Initial Determination shall be the Fair Market Rent unless Tenant


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shall within 15 days of Tenant's receipt of the Initial Determination reject the Initial Determination by written notice to Landlord. Tenant shall, together with its notice of rejection, either (i) terminate the Lease as of the end of the Term, or (ii) elect that Landlord and Tenant shall each, within 15 days of Landlord's receipt of Tenant's rejection, designate an independent certified appraiser to act on their respective behalf and shall jointly select a third independent certified appraiser to act as arbiter. If Landlord and Tenant are unable to agree upon an arbiter within such 15-day period, the two designated appraisers shall agree upon an arbiter within 15 days following the date the last one of the two was appointed. Within 30 days of their appointment, each designated appraiser shall establish a Fair Market Rent and within 15 days thereafter, the arbiter shall select one of the two determinations and the determination so selected shall be the Fair Market Rent for the Renewal Term. In the event a final determination of the Fair Market Rent has not been established as of the commencement of the Renewal Term, the Initial Determination shall be deemed to be the Fair Market Rent until the Fair Market Rent is determined, subject to retroactive adjustment upon receipt of the arbiter's determination.


(c) The Demised Premises shall be used by Tenant for the Permitted Use and for no other use or purpose. Tenant shall not use or occupy the Demised Premises or any part thereof, for any purpose deemed unlawful, or extra-hazardous on account of fire or other casualty, or for any purposes which shall impair the character of the Building. Except for those Landlord is obligated to obtain as specifically set forth herein, Tenant, at its sole cost and expense shall obtain any consents, licenses, permits or approvals required to conduct its business at the Demised Premises.


(d) The "Common Areas" of the Building shall be those parts of the Building and other improvements designated by Landlord from time to time for the common use of all tenants, including among other facilities, halls, lobbies, delivery passages, drinking fountains, public toilets, and the like, and the "Common Areas of the Park" shall be all parking lots, service buildings or similar improvements operated, owned or maintained, in whole or in part, by Landlord or by the condominium association of the Park of which Landlord is a part ("Condominium Association"), and all parkways, drives, greenspaces, parks, fountains or other facilities owned, operated or maintained, in whole or in part, by Landlord or the Condominium Association, or otherwise made available by Landlord or the Condominium Association for use by all tenants of the Building or Park, whether used in conjunction with the use of such space by the occupants of other buildings in the Park or used exclusively by tenants of the Building, all of which facilities shall be subject to Landlord's reasonable management and control and shall be operated and maintained for the benefit of all tenants in a first class manner in compliance with all applicable governmental requirements. Tenant, and its employees and invitees, shall have the non-exclusive right to use the Common Areas of the Building and Park, such use to be in common with Landlord, other tenants of the Building and Park and other persons entitled to use the same.


2. Rent.
----
(a) Intentionally deleted.


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(b) The Rent reserved under this Lease for the Term hereof shall be and consist of (a) the Fixed Rent payable in equal monthly installments in advance to be paid on the first day of each and every calendar month from and after the Fixed Rent Commencement Date (except that Tenant shall pay the first monthly installment of Fixed Rent upon signing this Lease), plus (b) such additional rent ("Additional Rent") in an amount equal to Tenant's Proportionate Share of Excess Expenses (as such terms are defined in Paragraph 3 of this Lease) and all separate charges for services and utilities expressly provided in Paragraph 15 hereof, and any other charges as shall become due and payable hereunder, which Additional Rent shall be payable as hereinafter provided, all to be paid to Landlord at its office stated above, or such other place as Landlord may designate, in lawful money of the United States of America; provided, however, that if the Fixed Rent Commencement Date shall occur on a date other than the first calendar day of a month, the rent for the partial month commencing on the Fixed Rent Commencement Date shall be appropriately pro-rated on the basis of the monthly rent payable during the first year of the Term.


(c) Tenant does hereby covenant and agree promptly to pay the Fixed Rent, Additional Rent and any other charges herein reserved as and when the same shall become due and payable, without demand therefor, and without any set-off or deduction whatsoever. All Additional Rent and other charges payable hereunder, which are not due and payable on a monthly basis during the Term, unless otherwise specified herein, shall be due and payable within twenty (20) days of delivery by Landlord to Tenant of notice to pay the same.


(d) In the event that any payment of Fixed Rent, Additional Rent or any other charges shall not be paid within ten (10) days after the due date for same provided herein, Tenant shall pay, together with such payment, the Late Charge. In addition, such unpaid amount shall bear interest until paid beginning on the tenth day after the due date at the prime rate established by First Union Bank plus three percent (3%), per annum.


3. Operating Expenses.
------------------


(a) For purposes of this Section, the following definitions shall apply:


(i) "Base Year Expenses" shall mean the Base Year Expense Stop
------------------ multiplied by the square feet of Rentable Area held for lease in the Building.


(ii) "Lease Year" shall mean each twelve month period from the
---------- Commencement Date occurring during the Term.


(iii) "Real Estate Taxes" shall mean all taxes, assessments,
----------------- general and special, ordinary as well as extraordinary, charges (including, but not limited to, water and sewer rents and charges), levies, impositions and payments wholly or partly in lieu thereof however denominated, now or hereafter in effect, which are or may be imposed upon or made liens upon the Building or the land appurtenant thereto. Real Estate Taxes shall not include net income, excess profit, excise, franchise, estate, succession or inheritance taxes, provided however that if, due to a change in the method of taxation or assessment, any franchise, income, profit, gross receipts or other tax, however designated, shall be substituted by the applicable taxing authority


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in whole or in part, for the Real Estate Taxes now or hereafter imposed on the Building or the land appurtenant thereto, such franchise, income, profit, gross receipts or other tax shall be deemed to be included in the term "Real Estate Taxes". If any assessments are permitted by the assessing authority to be paid in installments, Landlord shall do so and only the applicable annual installment shall be included in Real Estate Taxes for a given year. Real Estate Taxes shall be reduced by the amount of any real estate tax refund or credit received by Landlord. Provided Tenant has timely paid its share, Real Estate Taxes shall not include any interest or penalties imposed as a result of Landlord's lateness or failure to pay taxes and assessments when due or any realty transfer or similar taxes imposed on Landlord.


(iv) "Building Expenses" shall mean (i) Real Estate Taxes and
----------------- (ii) the total of all the actual costs and expenses paid or incurred by Landlord with respect to the management, operation, maintenance, and repair of the Building and the services provided tenants therein, (excepting electrical energy and gas expenses paid directly by tenants (including Tenant) as Base Building Gas and Electric Amounts and Tenant's Proportionate Share of Building Gas and Electric pursuant to Section 15 of this Lease and equivalent provisions of other leases) including, but not limited to, the cost and expenses incurred for and with respect to: all utilities, including without limitation, water, common area lighting, sewer and waste disposal; air conditioning, ventilation and heating (subject to the deduction hereinafter described); lobby maintenance and cleaning; elevators; protection and security (to the extent provided by Landlord without any obligation to do so); interior landscape and lobby decoration; all repairs, replacements and improvements (except in tenant spaces) which are appropriate for the continued operation of the Building in a first-class manner; maintenance and painting or other floor and wall covering of non-tenant areas; fire, all risk coverage, boiler and machinery, sprinkler, apparatus, public liability and property damages, rental and plate glass insurance and any insurance required by a mortgagee; supplies; wages, salaries, disability benefits, pensions, hospitalization, retirement plans, group insurance, and other employee benefits respecting employees of the Landlord and/or its management company located at the Building for the time period spent at the Building up to and including the Building manager; expenses imposed on the Landlord and/or its management company pursuant to law or to any collective bargaining agreement with respect to such employees; workmen's compensation insurance, payroll, social security, unemployment and other similar taxes with respect to such employees; professional and consulting fees; legal and auditing fees; the expenses, including payments to attorneys and appraisers, incurred by Landlord in connection with any application or proceeding wherein Landlord obtains or seeks to obtain reduction or refund of the Real Estate Taxes payable or paid upon or against the Project; costs incurred by Landlord of compliance with any governmental law, rule or regulation enacted after the date of this Lease, management fees of the Building (not to exceed 5% of Rent) and any other expenses of any other kind whatsoever reasonably incurred in managing, operating, maintaining and repairing the Building and the Project. If the Building is less than ninety-five percent (95%) occupied at any time during any calendar year (or portion thereof), such expenses shall be adjusted to the extent necessary to reflect ninety-five percent (95%) occupancy throughout such twelve (12) month period (provided, however, that such adjustment shall not result in Landlord collecting more from Tenant for any item than would be collected for such item if the Building were 95% occupied).


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(v) "Park Expenses" shall mean the Landlord's Share of the
------------- total of all costs and expenses paid or incurred with respect to the management, operation, maintenance, and repair of the Common Areas of the Park and the services provided tenants therein, including without limitation, exterior landscape and garden maintenance and cleaning; snow and ice removal, parking lot maintenance, repair and repaving and lighting of the parking lot and costs of maintaining easements areas granted to governmental bodies. For purposes of this Section 3, Landlord's Share of Park Expenses shall be allocated among the buildings comprising the Park, prorata based upon the square footage of each building in relation to the total square footage constructed, or such other equitable means as Landlord may reasonably determine.


It is agreed, however, that the Building Expenses and Park Expenses shall exclude or have deducted from them, as the case may be and as shall be appropriate:


a. leasing commissions;


b. salaries, benefits and other compensation and taxes for executives above the grade of Building manager;


c. Building start-up or opening expenses;


d. expenditures for capital improvements except those which under generally applied real estate practice are expensed or regarded as deferred expenses and except for capital expenditures required by law (unless required to correct non-compliance with legal requirements in effect when this Lease is executed) in any of which cases the cost thereof shall be included in Expenses for the calendar year in which the costs are incurred and subsequent calendar years, on a straight line basis amortized over an appropriate period not exceeding ten years, with an interest factor equal to the prime commercial lending rate publicly announced by First Union Bank or its successor, as its "prime rate" (hereinafter referred to as the "Prime Rate"), at the time of Landlord's having actually incurred said expenditure;


e. amounts received by Landlord through proceeds of insurance to the extent the proceeds are compensation for expenses which were previously included or would currently be included in expenses hereunder;


f. cost of repairs or replacements incurred by reason of fire or other casualty, to the extent which Landlord is compensated therefor through proceeds of insurance or should have been compensated if Landlord had purchased the insurance required hereunder, or caused by the exercise of the right of eminent domain;


g. advertising, and promotional expenditures and other such expenditures associated with obtaining tenants;


h. legal fees for disputes and negotiations with tenants and legal and auditing fees, other than legal and auditing fees reasonably incurred in connection with the preparation of statements required pursuant to additional rent or lease escalation provisions;


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i. costs and expenses of providing above-standard service to any tenant of the Building (e.g., overtime HVAC, supplemental and chilled water, extra cleaning) in excess of that required under this Lease to be provided to Tenant free of separate or additional charge;


j. any taxes and penalties in excess of those which would have been payable had they been paid on a timely basis; taxes or assessments and any related interest or penalties, other than sales taxes on amounts otherwise includable in Building Expenses or Park Expenses; ground lease rents; depreciation, amortization and debt service and other financing expenses;


k. any amount paid to any affiliate of Landlord or of any of its agents, in excess of the amount that would have been incurred on an open market basis in the absence of such affiliation; all general corporate overhead of Landlord or of any of its agents; provided however, nothing contained herein will affect or diminish Tenant's covenant to pay the management fee set forth above;


l. all costs and expenses relating to any retail space or to any dining, athletic or recreational facility, or any antenna or other equipment not serving Tenant;


m. all charitable or political contributions;


n. all costs and expenses relating to sculptures, paintings, fountains (except for the existing fountain located in the Common Areas of the Park) and other works of art;


(b) If Landlord shall purchase any item of capital equipment or make any capital expenditure designed to result in savings or reductions in Building Expenses then the costs for same shall be included in Building Expenses. The costs of such capital equipment or capital expenditures are to be included in Expenses for the calendar year in which the costs are incurred and subsequent calendar years, on a straight line basis amortized over such period of time as reasonably can be estimated as the time in which such savings or reductions in Expenses are expected to equal Landlord's costs for such capital equipment or capital expenditure, with an interest factor equal to the Prime Rate, at the time of Landlord's having actually incurred said costs. If Landlord shall lease any such item of capital equipment designed to result in savings or reductions in Building Expenses, then the rentals and other costs paid pursuant to leasing shall be included in Building Expenses for the calendar year in which they were incurred.


(c) If during all or part of any calendar year, Landlord shall not furnish any particular item(s) of work or service (which would constitute an Expense hereunder) to portions of the Building, due to the fact that construction of the Building is not completed, or such portions are not at least 95% occupied or leased or because such item of work or service is not required or desired by the tenant of such portion, or such tenant is itself obtaining and providing such item of work or service, or for other reasons, for the purposes of computing the Additional Rent payable under this Section 3, the amount of the Expenses for such item for such period shall be increased by an amount equal to the additional operating and maintenance expenses which


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would reasonably have been incurred during such period by Landlord if it had, at its own expense, furnished such item of work or service to such portion of the Building (provided however that no such increase shall result in Landlord collecting more for such item from Tenant than it would if Building were 95% occupied.)


(d) In the event that any facilities, services or utilities used in connection with the Building are provided from or together with another office building owned or operated by Landlord, or vice versa, the cost incurred by Landlord in connection with such facilities, services or utilities shall be allocated between the buildings on an equitable basis reasonably determined by Landlord.


(e) In the event (i) that the Commencement Date shall occur on a day other than the first day of a calendar year, (ii) that the date of the expiration or other termination of this Lease shall be a day other than the last day of a calendar year, or (iii) of any increase or decrease (as herein provided) in the Area of the Demised Premises or in the Gross Rentable Area of the Building, then in each such event in applying the provisions of this Section 3 with respect to any calendar year in which such event shall have occurred, appropriate adjustments shall be made to reflect the occurrence of such event on a basis consistent with the principles underlying the provisions of this Section 3, taking into consideration the portion of such calendar year which shall have elapsed prior to the Fixed Rent Commencement Date, the date of such expiration or other termination or the date of such increase or decrease.


(f) Tenant shall be responsible for Tenant's Proportionate Share of Projected Excess Expenses (as hereinafter defined) during the Term as herein provided and to the extent actual expenses exceed Pro ...