Form 10-Q Brooklyn ImmunoTherapeut For: Jun 30
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended June 30, 2022
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from _________ to _____________
Commission file number: 001-11460
(Exact name of registrant as specified in its charter)
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(State of incorporation)
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(I.R.S. Employer Identification No.)
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(Address of principal executive offices)
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(Zip Code)
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(212 ) 582-1199
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading symbol
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Name of each exchange on which registered
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every interactive data file required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See
definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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☐ |
Accelerated filer
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☐
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Smaller reporting company
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 10, 2022, the registrant had outstanding 58,825,739 shares of common stock, $0.005 par value per share.
TABLE OF CONTENTS
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Page
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PART I – FINANCIAL INFORMATION
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Item 1.
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Financial Statements (unaudited)
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1
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2
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3
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5
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6
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Item 2.
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26
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Item 3.
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36
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Item 4.
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36
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PART II – OTHER INFORMATION
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Item 1.
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37
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Item 1A.
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37
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Item 2.
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37
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Item 3.
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38
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Item 4.
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38
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Item 5.
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38
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Item 6.
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38
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39
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act
of 1995 (“PSLRA”), Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements related to future
events, results, performance, prospects and opportunities, including statements related to our strategic plans and targets, revenue generation, product availability and offerings, capital needs, capital expenditures, industry trends and our financial
position. Forward-looking statements are based on information currently available to us, on our current expectations, estimates, forecasts, and projections about the industries in which we operate and on the beliefs and assumptions of management.
Forward looking statements often contain words such as “expects,” “anticipates,” “could,” “targets,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “will,” “would,” and similar expressions. In addition, any statements that
refer to projections of our future financial performance, our anticipated growth and trends in our business, and other characterizations of future events or circumstances, are forward-looking statements. Forward-looking statements by their nature
address matters that are, to different degrees, subject to risks and uncertainties that could cause actual results to differ materially and adversely from those expressed in any forward-looking statements. For us, particular factors that might cause
or contribute to such differences include those risks and uncertainties described in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K/A for the year ended December 31, 2021 and described in other documents we file from time to time
with the Securities and Exchange Commission, or SEC.
Readers are urged not to place undue reliance on the forward-looking statements in this Quarterly Report on Form 10-Q, which speak only as of the
date of this Quarterly Report on Form 10-Q. We are including this cautionary note to make applicable, and take advantage of, the safe harbor provisions of the PSLRA. Except as required by law, we do not undertake, and expressly disclaim any
obligation, to disseminate, after the date hereof, any updates or revisions to any such forward-looking statements to reflect any change in expectations or events, conditions or circumstances on which any such statements are based.
We believe that the expectations reflected in forward-looking statements in this Quarterly Report on Form 10-Q are based upon reasonable assumptions
at the time made. However, given the risks and uncertainties, you should not rely on any forward- looking statements as a prediction of actual results, developments or other outcomes. You should read these forward-looking statements with the
understanding that we may be unable to achieve projected results, developments or other outcomes and that actual results, developments or other outcomes may be materially different from what we expect.
Unless stated otherwise or the context otherwise requires, all references in this Quarterly Report on Form 10-Q to “Brooklyn” refer to Brooklyn
ImmunoTherapeutics, Inc., references to “Brooklyn LLC” refer to Brooklyn ImmunoTherapeutics LLC, a wholly owned subsidiary of Brooklyn, and references to the “Company,” “we,” “us” or “our” refer to Brooklyn. and its subsidiaries, including Brooklyn
LLC, Novellus, Inc. and Novellus Therapeutics Limited.
PART I. FINANCIAL
INFORMATION
| Item 1. |
Financial Statements
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BROOKLYN IMMUNOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED
BALANCE SHEETS
(In thousands, except par value amount)
(unaudited)
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June 30,
2022
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December 31,
2021
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ASSETS
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Current assets:
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Cash
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$
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$
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Other receivable
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Prepaid expenses and other current assets
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Total current assets
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Property and equipment, net
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Right-of-use assets - operating leases
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Goodwill
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In-process research and development
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Investment in non-controlling interest
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Security deposits and other assets
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Total assets
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$
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$
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Current liabilities:
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Accounts payable
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$
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$
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Accrued expenses
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Operating lease liabilities, current
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| Other current liabilities | ||||||||
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Total current liabilities
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Warrant liabilities
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Operating lease liabilities, non-current
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Other liabilities
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Total liabilities
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Stockholders’ equity:
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Preferred stock, $
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Common stock, $
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Additional paid-in capital
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Accumulated deficit
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(
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)
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(
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)
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Total stockholders’ equity
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Total liabilities and stockholders’ equity
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$
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$
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The accompanying notes are an integral part of these condensed consolidated financial statements.
BROOKLYN IMMUNOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
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Operating expenses:
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Research and development
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$
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$
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$
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$
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General and administrative
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Impairment of in-process research and development
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Transaction costs
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Total operating expenses
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Loss from operations
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(
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)
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(
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(
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(
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Other income (expense), net:
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Loss on sale of NTN assets
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(
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(
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Change in fair value of warrant liabilities
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Loss on non-controlling investment
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( |
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Other expense, net
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(
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(
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(
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(
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Total other income (expense), net
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(
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(
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Net loss
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(
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(
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(
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(
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Series A preferred stock dividend
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( |
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Net loss attributable to common stockholders
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$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
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Net loss per common share - basic and diluted
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$
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(
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)
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$
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(
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$
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(
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$
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(
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Weighted average shares outstanding - basic and diluted
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The accompanying notes are an integral part of these condensed consolidated financial statements.
BROOKLYN IMMUNOTHERAPEUTICS, INC.
For the three and six months ended June 30, 2022 and 2021 (unaudited)
(in thousands)
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Common Stock
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Series A Preferred
Stock
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Additional
Paid-in
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Accumulated | ||||||||||||||||||||||||
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Shares
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Amount
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Shares
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Amount
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Capital
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Deficit
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Total
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Balances at April 1, 2022
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$ | $ | $ | $ | ( |
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Issuance of common stock from vested restricted stock units
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( |
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Stock-based compensation
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- | - | ||||||||||||||||||||||||||
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Cash dividends to Series A preferred stockholders
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( |
) | ( |
) | ||||||||||||||||||||||||
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Net loss
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- | - | ( |
) | ( |
) | ||||||||||||||||||||||
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Balances at June 30, 2022
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$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||
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Balances at January 1, 2022
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$
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$
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$
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$
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(
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)
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$
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Issuance of common stock in connection with private offering
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(
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)
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Forfeiture of unvested restricted stock
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(
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Issuance of common stock from vested restricted stock units
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( |
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) | ||||||||||||||||||||||||
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Stock-based compensation
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-
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-
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Cash dividends to Series A preferred stockholders
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( |
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Net loss
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-
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-
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(
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)
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(
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)
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|||||||||||||||||||
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Balances at June 30, 2022
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$
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$
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$
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$
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(
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)
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$
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The accompanying notes are an integral part of these condensed consolidated financial statements.
| Membership Equity | Common Stock |
Series A Preferred
Stock
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Additional
Paid-in
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Accumulated | ||||||||||||||||||||||||||||||||||||||||
| Class A | Class B |
Class C |
Common | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||||||||
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Balances at April 1, 2021
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$ | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||||||||||||||
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Common stock to be retained by NTN stockholders
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Issuance of common stock from the exercise of stock options
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Issuance of common stock related to stock purchase agreement with Lincoln Park Capital Fund, LLC, net
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Issuance of common stock in lieu of cash dividend to Series A preferred stockholders
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( |
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Forfeiture of unvested restricted stock
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( |
) | ||||||||||||||||||||||||||||||||||||||||||
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Stock-based compensation
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- | - | ||||||||||||||||||||||||||||||||||||||||||
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Net loss
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- | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||
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Balances at June 30, 2021
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$ | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||||||||||||||
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Balances at January 1, 2021
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$
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$
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$
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$
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$
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$
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$
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$
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(
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)
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$
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Brooklyn rights offerings membership units
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-
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-
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Elimination of Brooklyn’s historical members’ equity
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(
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)
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(
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)
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(
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)
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(
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)
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-
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-
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Issuance of common stock for business combination
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Series A preferred stock retained in business combination
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(
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Issuance of common stock to Brooklyn members
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(
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Issuance of common stock to Financial Advisor upon consummation of merger
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Issuance of common stock from the exercise of stock options
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Issuance of common stock related to stock purchase agreement with Lincoln Park Capital Fund, LLC, net
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Issuance of common stock in lieu of cash dividend to Series A preferred stockholders
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( |
) | ||||||||||||||||||||||||||||||||||||||||||
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Forfeiture of unvested restricted stock
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( |
) | ||||||||||||||||||||||||||||||||||||||||||
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Stock-based compensation
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- | - | ||||||||||||||||||||||||||||||||||||||||||
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Net loss
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-
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-
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( |
) |
(
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)
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|||||||||||||||||||||||||||||||
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Balances at June 30, 2021
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$
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$
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$
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$
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$
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$
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$
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$
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(
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)
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$
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The accompanying notes are an integral part of these condensed consolidated financial statements.
BROOKLYN IMMUNOTHERAPEUTICS, INC.
(in thousands)
(unaudited)
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For the six months ended
June 30,
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|||||||
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2022
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2021
|
||||||
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Cash flows used in operating activities:
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Net loss
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$
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(
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)
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$
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(
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)
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||
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Adjustments to reconcile net loss to net cash used in operating activities:
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Depreciation and amortization
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Stock-based compensation
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Amortization of right-of-use asset
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Impairment of right-of-use asset
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Impairment of in-process research and development
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Transaction costs - shares to Financial Advisor
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Loss on sale of NTN assets
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Loss on disposal of fixed assets
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Gain on lease termination
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( |
) | ||||||
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Gain on warrant liabilities
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( |
) | ||||||
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Loss on non-controlling investment
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|
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Changes in operating assets and liabilities:
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Other receivable
|
(
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)
|
|
|||||
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Prepaid expenses and other current assets
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(
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)
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(
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)
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Security deposits and other non-current assets
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(
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)
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|||||
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Accounts payable and accrued expenses
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Operating lease liability
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(
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)
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(
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)
|
||||
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Other liabilities
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||||||
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Net cash used in operating activities
|
(
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)
|
(
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)
|
||||
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Cash flows (used in) provided by investing activities:
|
||||||||
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Purchase of property and equipment
|
(
|
)
|
|
|||||
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Proceeds from the sales of fixed assets
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||||||||
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Purchase of NTN, net of cash acquired
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Proceeds from the sale of NTN assets, net of cash disposed
|
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|
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Net cash (used in) provided by investing activities
|
(
|
)
|
|
|||||
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Cash flows provided by financing activities:
|
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Proceeds from issuance of common stock and warrants in connection with private offering
|
||||||||
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Payroll tax remitted on net share settlement of equity awards
|
( |
) | ||||||
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Dividends paid to Series A preferred stockholders
|
( |
) | ||||||
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Proceeds from issuance of common stock to Lincoln Park
|
||||||||
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Fees incurred in connection with the common stock issued to Lincoln Park
|
( |
) | ||||||
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Proceeds from sale of members’ equity
|
|
|
||||||
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Proceeds from the exercise of stock options
|
||||||||
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Repayment of NTN’s PPP loan
|
|
(
|
)
|
|||||
|
Net cash provided by financing activities
|
|
|
||||||
| Net increase in cash and cash equivalents |
|
|
||||||
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Cash and cash equivalents at beginning of period
|
|
|
||||||
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Cash and cash equivalents at end of period
|
$
|
|
$
|
|
||||
|
|
||||||||
|
Supplemental disclosures of cash flow information:
|
||||||||
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Cash paid during the period for:
|
||||||||
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Interest
|
$
|
|
$
|
|
||||
|
Income taxes
|
$ | $ | ||||||
|
|
||||||||
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Supplemental disclosure of non-cash investing and financing activities:
|
||||||||
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Issuance of common stock for business combination
|
$
|
|
$
|
|
||||
|
Series A preferred stock retained in business combination
|
$ | $ | ||||||
|
Initial measurement of ROU assets and liabilities
|
$ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
BROOKLYN IMMUNOTHERAPEUTICS, INC.
(Unaudited)
| 1) |
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
|
Description of Business
Brooklyn ImmunoTherapeutics Inc., a Delaware corporation (“Brooklyn” or the “Company”), together with its subsidiaries including Brooklyn
ImmunoTherapeutics LLC (“Brooklyn LLC”), Novellus, Inc. (“Novellus”) and Novellus Therapeutics, Ltd. (“Novellus, Ltd.”), is a biopharmaceutical company utilizing its mRNA technology platform, including mRNA-based cell reprogramming and gene
editing technologies, to create next generation mRNA, gene editing and cell therapies, including iPSC therapies for multiple therapeutic indications. As used herein, the “Company” refers collectively to Brooklyn and its subsidiaries.
On August 12, 2020, Brooklyn (then known as “NTN Buzztime, Inc.”), Brooklyn LLC and BIT Merger Sub, Inc., a wholly owned subsidiary of
Brooklyn (the “Merger Sub”), entered into an agreement and plan of merger and reorganization (the “Merger Agreement”) pursuant to which, among other matters, Merger Sub merged with and into Brooklyn LLC, with Brooklyn LLC continuing as a
wholly owned subsidiary of Brooklyn and as the surviving company of the merger (the “Merger”). The Merger closed on March 25, 2021. After the Merger, Brooklyn changed its name from “NTN Buzztime, Inc.” to “Brooklyn ImmunoTherapeutics, Inc.”
The Merger was accounted for as a reverse acquisition, in which Brooklyn LLC was deemed the acquiring company for accounting purposes.
On March 26, 2021, Brooklyn sold (the “Disposition”) its rights, title and interest in and to the assets relating to the business operated
under the name “NTN Buzztime, Inc.” prior to the Merger to eGames.com Holdings LLC (“eGames.com”) in accordance with the terms of an asset purchase agreement dated September 18, 2020, as amended, between Brooklyn and eGames.com (the “Asset
Purchase Agreement”).
On July 16, 2021, Brooklyn and its newly formed, wholly owned subsidiary Brooklyn Acquisition Sub, Inc. entered into an
agreement and plan of acquisition (the “Acquisition Agreement”) with (a) Novellus LLC, (b) Novellus (the sole equity holder of Novellus, Ltd. and, prior to the closing under the Acquisition Agreement, a subsidiary of Novellus, LLC), and (c) a
seller representative (the “Acquisition”), pursuant to which Brooklyn acquired Novellus and its subsidiary, Novellus, Ltd. As part of the Acquisition, Brooklyn also acquired 25.0 % of the total outstanding equity interests of NoveCite, Inc. (“NoveCite”), a corporation focused on developing an allogeneic mesenchymal stem cell product for patients with acute
respiratory distress syndrome, including from COVID-19.
Basis of Presentation
The
accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial statements and with the instructions to
Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited financial statements include all the
normal recurring adjustments that are necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented.
These
condensed consolidated financial statements should be read together with the audited consolidated financial statements and notes thereto contained in Brooklyn’s Annual Report on Form 10-K/A for the year ended December 31, 2021 filed with the
Securities and Exchange Commission (the “SEC”) on June 30, 2022 (the “10-K/A”). The accompanying condensed consolidated balance sheet as of December 31, 2021 has been derived from the audited financial statements contained in the 10-K/A but does
not include all of the information and footnotes required by GAAP for complete financial statements. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be anticipated for
the entire year ending December 31, 2022, or any other period.
Reclassifications
Certain reclassifications have been made
to Brooklyn’s prior years’ financial statements to conform to the current year presentation. These reclassifications had no effect on Brooklyn’s previously reported results of operations or accumulated deficit.
| 2) |
LIQUIDITY AND CAPITAL RESOURCES
|
The Company has incurred significant operating losses and has an accumulated deficit as a result of ongoing efforts to develop product candidates, including conducting clinical trials and providing general and
administrative support for operations. As of June 30, 2022, the Company had a cash balance of approximately $19.4 million and an
accumulated deficit of approximately $153.5 million. For the three and six months ended June 30, 2022, the Company incurred a net
loss of $3.4 million and $12.8
million, respectively, and the Company used cash in operating activities of $9.4 million.
In connection with preparing the accompanying condensed consolidated financial statements as of and for the three months ended June 30, 2022, the Company’s management concluded that there is substantial doubt regarding the Company’s
ability to continue as a going concern because it does not expect to have sufficient cash or working capital resources to fund operations for the twelve-month period subsequent to the issuance date of these financial statements. The Company
will need to raise additional capital, which could be through the remaining availability under an equity line purchase agreement with Lincoln Park Capital Fund, LLC (the “Second Purchase Agreement”) (to the extent the Company is permitted to
use such agreement) (see Note 11), public or private equity offerings, debt financings, corporate collaborations or other means. The Company may also seek governmental grants to support its clinical trials and preclinical trials. The Company
currently has no arrangements for such capital and no assurances can be given that it will be able to raise such capital when needed, on acceptable terms, or at all.
The accompanying condensed
consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The accompanying condensed consolidated
financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from uncertainty related to the
Company’s ability to continue as a going concern.
|
3)
|
MERGER, DISPOSITION AND ACQUISITION TRANSACTIONS
|
Merger
On August 12, 2020, Brooklyn, Brooklyn LLC and the Merger Sub
entered into the Merger Agreement, and the Merger closed on March 25, 2021. The Merger was accounted for as a reverse acquisition, in which Brooklyn LLC was deemed the acquiring company for accounting purposes. Brooklyn LLC, as the accounting
acquirer, recorded the assets acquired and liabilities assumed of Brooklyn in the Merger at their fair values as of the acquisition date.
Brooklyn LLC was determined to be the accounting acquirer
based upon the terms of the Merger and other factors including that (i) Brooklyn LLC members, received common stock in the Merger that represented 96.35 %
of Brooklyn’s outstanding common stock on a fully diluted basis, (ii) all of the directors of Brooklyn immediately after the Merger were designated by Brooklyn LLC under the terms of the Merger Agreement and (iii) existing members of Brooklyn
LLC’s management became the management of Brooklyn immediately after the Merger.
At the closing of the Merger, all the outstanding membership
interests of Brooklyn LLC converted into the right to receive an aggregate of approximately 39,992,000 shares of common stock, of
which 1,068,000 shares were issued as compensation to Maxim Group LLC, Brooklyn LLC’s financial advisor (the “Financial Advisor”) for
its services to Brooklyn LLC in connection with the Merger.
The purchase price of $8.2 million, which represents the consideration transferred in the Merger to stockholders of Brooklyn immediately before the Merger, was calculated
based on the closing price of $5.40 per share for approximately 1,514,000 shares common stock that those stockholders owned on March 25, 2021 immediately prior to the Merger because that represented a more reliable measure of the fair value of
consideration transferred in the Merger.
Under the acquisition method of accounting, the total
purchase price has been allocated to the acquired tangible and intangible assets and assumed liabilities of Brooklyn based on their estimated fair values as of March 25, 2021, the Merger closing date. Because the consideration paid by Brooklyn
LLC in the Merger is more than the estimated fair values of Brooklyn’s net assets deemed to be acquired, goodwill is equal to the difference of approximately $8.6 million, which has been calculated using the fair values of the net assets of Brooklyn as of March 25, 2021.
The allocation of the purchase price to the tangible and
intangible assets acquired and liabilities deemed to be assumed from Brooklyn, based on their estimated fair values as of March 25, 2021, is as follows (in thousands):
|
|
Historical
Balance
Sheet of
Brooklyn at
March 25, 2021
|
Fair Value
Adjustment
to Brooklyn
Pre-Merger
Assets
|
Purchase
Price
Allocation
|
|||||||||
|
Cash and cash equivalents
|
$
|
|
$
|
|
$
|
|
||||||
|
Accounts receivable
|
|
|
|
|||||||||
|
Prepaid expense and other current assets
|
|
|
|
|||||||||
|
Property and equipment, net
|
|
|
|
|||||||||
|
Software development costs
|
|
(
|
)
|
|
||||||||
|
Customers
|
|
|
|
|||||||||
|
Trade name
|
|
|
|
|||||||||
|
Accounts payable, accrued liabilities and other current
|
||||||||||||
|
liabilities
|
(
|
)
|
|
(
|
)
|
|||||||
|
Net assets acquired, excluding goodwill
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
||||
|
Total consideration
|
$
|
|
||||||||||
|
Net assets acquired, excluding goodwill
|
(
|
)
|
||||||||||
|
Goodwill
|
$
|
|
||||||||||
Brooklyn LLC was obligated under the Merger Agreement to have
$10.0 million in cash and cash equivalents on its balance sheet at the effective time of the Merger. To ensure Brooklyn LLC had the
required funds, certain beneficial holders of Brooklyn LLC’s Class A membership interests entered into contractual commitments to invest $10.0
million into Brooklyn LLC immediately prior to the closing of the Merger. During March 2021, Brooklyn offered its Class A unit holders an additional 5 %
rights offering for an additional $0.5 million to be raised by a rights offering. Brooklyn received funds from the rights offering
between February 17, 2021 and April 5, 2021.
Disposition
On March 26, 2021, Brooklyn sold its rights, title and
interest in and to the assets relating to the business it operated (under the name NTN Buzztime, Inc.) prior to the Merger to eGames.com in exchange for a purchase price of $2.0 million and assumption of specified liabilities relating to that business. The sale was completed in accordance with the terms of the Asset Purchase Agreement. Details of the
Disposition are as follows (in thousands):
|
Proceeds from sale:
|
||||
| Cash | $ | |||
|
Escrow
|
|
|||
|
Assume advance/loans
|
|
|||
|
Interest on advance/loans
|
|
|||
|
Carrying value of assets sold:
|
||||
|
Cash and cash equivalents
|
(
|
)
|
||
|
Accounts receivable
|
(
|
)
|
||
|
Prepaids and other current assets
|
(
|
)
|
||
|
Property and equipment, net
|
(
|
)
|
||
|
Software development costs
|
(
|
)
|
||
|
Customers
|
(
|
)
|
||
|
Trade name
|
(
|
)
|
||
|
Goodwill
|
(
|
)
|
||
|
Other assets
|
(
|
)
|
||
|
Liabilities transferred upon sale:
|
||||
|
Accounts payable and accrued expenses
|
|
|||
|
Obligations under finance leases
|
|
|||
|
Lease liability
|
|
|||
|
Deferred revenue
|
|
|||
|
Other current liabilities
|
|
|||
|
Transaction costs
|
(
|
)
|
||
|
Total loss on sale of assets
|
$
|
(
|
)
|
|
Acquisition
On July 16, 2021, Brooklyn and Brooklyn Acquisition Sub, Inc.
entered into the Acquisition Agreement. The Acquisition closed contemporaneously with the execution and delivery of the Acquisition Agreement. At the closing:
|
•
|
Brooklyn acquired all of the outstanding equity interests of Novellus, Inc. as the result of the merger of Brooklyn Acquisition Sub, Inc. with and into Novellus, Inc., following which, Novellus, Inc., as
the surviving corporation, became Brooklyn’s wholly owned subsidiary and Novellus Ltd. became Brooklyn’s indirectly owned subsidiary; and
|
|
•
|
Brooklyn acquired
|
As consideration for the Acquisition, Brooklyn paid $22.9 million in cash and delivered approximately 7,022,000
shares of common stock, which under the terms of the Acquisition Agreement, were valued at a total of $102.0 million based on an agreed
upon price of $14.5253 per share. At the date of issuance, the fair value of the shares was approximately $58.6 million.
The Acquisition Agreement contained customary
representations, warranties and certain indemnification provisions. Approximately 741,000 of the shares issued as consideration were
placed in escrow for a period of up to 12 months in order to secure indemnification obligations to Brooklyn under the Acquisition
Agreement. The Acquisition Agreement also contains certain non-competition and non-solicitation provisions pursuant to which Novellus LLC agreed not to engage in certain competitive activities for a period of five years following the closing, including customary restrictions relating to employees. No employees of Novellus Ltd. or Novellus, Inc. prior to the
Acquisition continued their employment, or were otherwise engaged by Brooklyn, following the Acquisition.
In connection with the Acquisition, the co-founders of
Novellus, Inc. entered into lock-up agreements with respect to approximately 3,378,000 of the shares of common stock received in the
Acquisition, and Brooklyn’s Chairman of the Board of Directors (the “Board”) and its former Chief Executive Officer and President entered into identical lock-up agreements with respect to their current holdings of Brooklyn stock. Each lock-up
agreement extends for a period of three years , provided that up to 75 % of the shares of common stock subject to the lock-up agreement may be released from the lock-up restrictions earlier if the price of common stock on the Nasdaq exceeds specified
thresholds. The lock-up agreements include customary exceptions for transfers during the applicable lock-up period.
The Company expects the Acquisition will advance its
evolution into a platform company with a pipeline of next generation mRNA cellular and gene editing programs. In addition, the acquisition of Novellus, Ltd. builds on the License Agreement. (See Note 9). The completion of the acquisition of
Novellus, Ltd. relieved Brooklyn LLC from potential obligations to pay Novellus, Ltd. certain upfront fees, clinical development milestone fees and post-registration royalties under the License Agreement. The agreement with Factor Bioscience
Limited (“Factor”) under the License Agreement, which grants Brooklyn LLC exclusive rights to develop certain next-generation mRNA gene editing and cell therapy products, remained unchanged.
Although Brooklyn acquired all of the outstanding equity
interests of Novellus, Inc., the Company accounted for the Acquisition as an asset acquisition (as the assets acquired did not constitute a business as defined in Accounting Standards Codification (“ASC”) Topic 805, Business Combinations), and was measured by the amount of cash paid and by the fair value of the shares of common stock issued. As a result, substantially all of the value acquired was attributed to in-process research and
development (IPR&D), with the exception of the cash paid for the investment in NoveCite, which is being accounted for as an investment in equity securities, as discussed further below.
Brooklyn paid $22.9 million in cash, net of cash acquired, as part of the consideration for the Acquisition, of which $1.0 million was paid in cash for the investment in NoveCite. Brooklyn also issued approximately 7,022,000 shares of the Company’s common stock, of which approximately 3,644,000 shares are unrestricted and 3,378,000
shares are subject to the three-year lockup. The unrestricted shares were valued at $10.05 per share, which was the closing price of Brooklyn’s common stock on July 16, 2021. The fair value of the restricted shares was discounted by approximately 35 % to $6.53 per restricted share,
which was derived from the average discount rate between the Black Scholes and Finnerty valuation models. The resulting fair value of the asset acquired is as follows (in thousands):
|
|
Fair Value of
Consideration
|
|||
|
Cash paid
|
$
|
|
||
|
Cash acquired
|
(
|
)
|
||
|
Unrestricted shares
|
|
|||
|
Restricted shares
|
|
|||
|
Total fair value of consideration paid
|
|
|||
|
Less amount of cash paid for NoveCite investment
|
(
|
)
|
||
|
Fair value of IPR&D acquired
|
$
|
|
||
IPR&D that is acquired through an asset purchase that has
no alternative future uses and no separate economic values from its original intended purpose is expensed in the period the cost is incurred. Accordingly, the Company expensed the fair value of the IPR&D during the third quarter of 2021 in
the amount of $80.5 million.
Investment in NoveCite
As a result of the Acquisition, Brooklyn acquired and
currently owns 25 % of NoveCite and Citius Pharmaceuticals, Inc. (“Citius”) owns the remaining 75 %. A member of the Company’s management holds one of three
board seats on NoveCite’s board of directors. Citius’ s officers and directors hold the other two board seats. The Company is accounting for its interest in NoveCite under ASC Topic 323, Investments – Equity
Method and Joint Ventures. The investment was recorded at cost, which was $1.0 million and is adjusted for the Company’s share
of NoveCite’s earnings or losses, which are reflected in the accompanying condensed consolidated statement of operations. The investment may also reflect an equity loss in the event that circumstances indicate an other-than-temporary impairment.
For the three and six months ended June 30, 2022, the Company recorded $0.3 million and $0.9 million, respectively, in losses from its investment in NoveCite, and of the $0.9
million loss for the six months ended June 30, 2022, $0.5 million related to NoveCite’s year ended December 31, 2021.
| 4) |
FAIR VALUE OF FINANCIAL INSTRUMENTS
|
Fair
value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. A fair value hierarchy has been established for valuation inputs that gives the highest
priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:
|
•
|
Level
1 Inputs – Valued based on quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
|
|
•
|
Level
2 Inputs – Valued based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in
active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities,
prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.
|
|
•
|
Level
3 Inputs – Valued based on inputs for which there is little or no market value, which require the reporting entity to develop its own assumptions.
|
The following tables summarize the liabilities that are measured at fair value as of June 30, 2022 (in thousands). There were no liabilities measured at fair value as of December 31, 2021:
|
|
As of June 30,
2022
|
|||||||||||
|
Description
|
Level 1
|
Level 2
|
Level 3
|
|||||||||
|
Liabilities:
|
||||||||||||
|
Warrant liabilities - Pre-Funded Warrants
|
$
|
|
$
|
|
$
|
|
||||||
|
Warrant liabilities - Common Warrants
|
|
|
|
|||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
||||||
On
March 9, 2022, the Company issued pre-funded warrants exercisable for approximately 1,357,000 shares of common stock (the “Pre-Funded
Warrants”) and warrants exercisable for approximately 6,857,000 shares of common stock (the “Common Warrants”) in connection with the
PIPE Transaction (as defined below). See Note 11 for more information related to the PIPE Transaction.
The Common Warrants and Pre-Funded Warrants were accounted for as liabilities under ASC
815-40, Derivatives and Hedging, Contracts in Entity’s Own Equity (“ASC 815-40”), as these warrants provide for a cashless settlement provision that does not meet the requirements of the indexation guidance under ASC 815-40. These warrant
liabilities were measured at fair value at inception and are then subsequently measured on a recurring basis, with changes in fair value presented within the Company’s statement of operations.
The Company uses a Black-Scholes option pricing model to estimate the fair value of the Common
Warrants, which is considered a Level 3 fair value measurement. Certain inputs used in this Black-Scholes pricing model may fluctuate in future periods based upon factors that are outside of the Company’s control. A significant change in
one or more of these inputs used in the calculation of the fair value may cause a significant change to the fair value of the Company’s warrant liabilities, which could also result in material non-cash gains or losses being reported in the
Company’s consolidated statement of operations.
The estimated fair value of the Pre-Funded Warrants was deemed a Level 2 measurement as of June 30, 2022, as all significant inputs to the valuation model used to estimate the fair value of the Pre-Funded Warrants
were directly observable from the Company’s publicly-traded common stock.
The fair values of the Common Warrants and the Pre-Funded Warrants at the issuance date totaled $12.6 million in the aggregate, which was $0.6 million more
than the $12.0 million proceeds received in the PIPE Transaction. The excess $0.6 million represents an inducement to the purchaser to enter into the PIPE Transaction and was recorded in warrant liabilities expense in the accompanying consolidated statement of
operations. Given the Company’s capital requirements and market conditions, the Company consummated this financing on market terms available at the time of the transaction.
The Company remeasured the fair value of the warrant liabilities as of June 30, 2022, and the following table presents the changes in the
warrant liabilities from the issuance date (in thousands):
|
|
Pre-Funded
Warrants
(Level 2)
|
Common
Warrants
(Level 3) |
Total Warrant
Liabilities |
|||||||||
|
Fair value at January 1, 2022
|
$
|
|
$
|
|
$
|
|
||||||
|
Fair value at March 9, 2022 (issuance date)
|
|
|
|
|||||||||
|
Change in fair value of warrant liabilities
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Fair value at June 30, 2022
|
$
|
|
$
|
|
$
|
|
||||||
| 5) |
LEASES
|
The Company has operating leases for office and laboratory space in the borough of
Manhattan in New York, New York and in Cambridge, Massachusetts, which expire in 2026 and 2028, respectively. On March 31, 2022, the Company entered into the Torrey Pines Science Center Lease in San Diego, California (the “San Diego Lease”) with Torrey Pines Science Center Limited Partnership for approximately 5,200
square feet of lab and office space. The term of the San Diego Lease is 62 months and the lease commencement date was April 19, 2022.
The San Diego Lease will expire in June 2027.
Base rent for the San Diego Lease is $6.35
per square foot in the first year of the San Diego Lease, with a rent abatement for the second and third full months of the first year. The base rent will increase by approximately 3 % on each anniversary of the lease commencement date. The Company is also required to pay its share of operating expenses and property taxes. The San Diego Lease provides for a one-time
option to extend the lease term for an additional five years at the then fair rental value. The Company recorded a $1.7 million right-of-use (“ROU”) asset and $1.7 million lease liabilities
for the San Diego Lease.
During the second quarter of 2022, the Company made the decision to consolidate its research and
development efforts in Cambridge, Massachusetts, and the Company intends to sublease the San Diego lab and office space. As a result, the Company recognized an impairment charge of approximately $0.8 million on the San Diego Lease ROU asset.
On March 5, 2022, the Company entered into an Agreement to Assign Space Lease with Regen Lab USA LLC (“Regen”) pursuant to which the Company
agreed to assign its Brooklyn, New York lease (the “Brooklyn Lease”) to Regen. The effective date of the assignment was contingent upon, among other things, a consent from BioBat, Inc. (the “Landlord”) to assign the Brooklyn Lease. Additionally,
Regen agreed to purchase certain equipment from the Company for $50,000 , partly reimburse the Company $50,000 toward certain existing unamortized leasehold improvements, and to reimburse the Company for the existing security deposit the Company had
under the Brooklyn Lease of approximately $63,000 .
On March 25, 2022, the Company entered into an Assignment and Assumption of Lease Agreement (the
“Assignment Agreement”) with Regen, the consent of which was provided by the Landlord in the Assignment Agreement. The effective date of the assignment was March 28, 2022. Under the Assignment Agreement, Regen (i) accepts the assignment of
the Brooklyn Lease; (ii) assumes all of the obligations, liabilities, covenants and conditions of the Company’s as tenant under the Brooklyn Lease; (iii) assumes and agrees to perform and observe all of the obligations, terms, requirements,
covenants and conditions to be performed or observed by the Company under the Brooklyn Lease; and (iv) makes all of the representations and warranties binding under the Brooklyn Lease with the same force and effect as if Regens had executed
the Brooklyn Lease originally as the tenant.
Notwithstanding the above assumptions by Regen, the Company shall be and remain liable and
responsible for the due keeping, and full performance and observance, of all the provisions of the Brooklyn Lease on the part of the tenant to be kept, performed and observed. As a result of the Assignment Agreement, the Company wrote off
the remaining ROU asset balance and the corresponding lease liability.
The Company accounts for leases under ASC 842, Leases. Operating leases are included in
“Right-of use assets - operating leases” within the Company’s balance sheets and represent the Company’s right to use an underlying asset for the lease term. The Company’s related obligation to make lease payments are included in “Operating lease
liabilities, non-current” and “Operating lease liabilities, current” within the Company’s balance sheets. ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Because the
rate implicit in the lease is not readily determinable, the Company uses its incremental borrowing rates based on the information available at the lease commencement date in determining the present value of lease payments. Lease expense for lease
payments is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet and are recognized as lease expense on a straight-line basis over the lease term.
Some leasing arrangements require variable payments that are dependent on usage or may vary for other reasons, such as
payments for insurance, tax payments and other miscellaneous costs. The variable portion of lease payments is not included in the ROU assets or lease liabilities. Rather, variable payments, other than those dependent upon an index or rate, are
expensed when the obligation for those payments is incurred and are included in lease expenses. Accordingly, all expenses associated with a lease contract are accounted for as lease expenses.
During the three and six months ended June 30, 2022 and 2021, the net operating lease expenses were as follows (in thousands):
| Three months ended June 30, |
||||||||
|
2022
|
2021 |
|||||||
|
Operating lease expense
|
$
|
|
$
|
|
||||
|
Sublease income
|
(
|
)
|
(
|
)
|
||||
|
Variable lease expense
|
|
|
||||||
|
Total lease expense
|
$
|
|
$
|
|
||||
| Six months ended June 30, | ||||||||
| 2022 | 2021 |
|||||||
|
Operating lease expense
|
$
|
|
$
|
|
||||
|
Sublease income
|
(
|
)
|
(
|
)
|
||||
|
Variable lease expense
|
|
|
||||||
|
Total lease expense
|
$
|
|
$
|
|
||||
The tables below show the beginning
balances of the operating ROU assets and lease liabilities as of January 1, 2022 and the ending balances as of June 30, 2022, including the changes during the period (in thousands).
|
Operating Lease
ROU Assets
|
||||
|
Operating lease ROU assets at
January 1, 2022
|
$
|
|
||
| Initial measurement of operating lease ROU assets | ||||
|
Amortization of operating lease
ROU assets
|
(
|
)
|
||
| Impairment of ROU assets | ( |
) | ||
|
Write off of ROU asset due to lease termination
|
(
|
)
|
||
|
Operating lease ROU assets at
June 30, 2022
|
$
|
|
||
|
Operating Lease
Liabilities
|
||||
|
Operating lease liabilities at
January 1, 2022
|
$
|
|
||
| Initial measurement of operating lease liabilities | ||||
|
Principal payments on operating
lease liabilities
|
(
|
)
|
||
|
Write off of operating lease liability due to lease termination
|
(
|
)
|
||
|
Operating lease liabilities at
June 30, 2022
|
|
|||
|
Less non-current portion
|
|
|||
|
Current portion at June 30, 2022
|
$
|
|
||
As of June 30, 2022, the Company’s operating leases had a weighted-average remaining
life of 5.2 years with a weighted-average discount rate of 8.97 %. The maturities of the operating lease liabilities are as follows (in thousands):
|
As of
June 30, 2022
|
||||
|
2022
|
$
|
|
||
|
2023
|
|
|||
|
2024
|
|
|||
|
2025
|
|
|||
|
2026
|
|
|||
|
Thereafter
|
|
|||
| Total payments | |
|
||
| Less imputed interest | ( |
) | ||
| Total operating lease liabilities | $ | |||
| 6) |
IN-PROCESS RESEARCH & DEVELOPMENT AND GOODWILL
|
In 2018, the Company acquired IRX Therapeutics (“IRX”), which was accounted for as a business combination. The Company recorded IPR&D in the
amount of $6.0 million, which represents the fair value assigned to technologies that were acquired in connection with the IRX
acquisition and which have not reached technological feasibility and have no alternative future use. IPR&D assets acquired in a business combination are considered to be indefinite lived until the completion or abandonment of the associated
research and development projects. If and when development is complete, which generally occurs upon regulatory approval, and the Company is able to commercialize products associated with the IPR&D assets, these assets are then deemed
definite-lived and are amortized based on their estimated useful lives beginning at that point in time. If development is terminated or abandoned, the Company may have a full or partial impairment charge related to the IPR&D assets,
calculated as the excess of carrying value of the IPR&D assets over fair value
The Company also recorded goodwill in the amount of $2.0
million related to the IRX acquisition. Goodwill and indefinite-lived IPR&D assets are not amortized but are tested for impairment annually, or more frequently if the Company becomes aware of any events occurring or changes in circumstances
that indicate that the fair value of the entity is less than its carrying values.
As of June 30, 2022, the Company performed a qualitative assessment to determine whether it is more likely than not that the fair value of the
entity is less than its carrying value. Such qualitative factors include macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and other relevant events.
In June 2022, the Company received results from the INSPIRE phase 2 trial of IRX-2, a multi-cytokine biologic immunotherapy, in patients with newly diagnosed stage II, III or IVA squamous cell carcinoma of the oral
cavity. The IRX-2 multi-cytokine biologic immunotherapy represents substantially all the fair value assigned to the technologies of IRX that the Company acquired. Despite outcomes that favored IRX-2 in certain predefined subgroups, the INSPIRE
trial did not meet the primary endpoint of Event-Free Survival (at two years of follow up. Significant additional clinical development work would be required to advance IRX-2 in the form of additional Phase 2 and 3 studies to further evaluate
the treatment effect of IRX-2 in patient subgroups and in combination with checkpoint inhibitor therapies. The INSPIRE trial is the only Company-sponsored study of IRX-2. IRX-2 has been studied externally in other clinical settings outside of
head and neck cancer in the form of investigator sponsored trials, which have either ended or are not currently active. Based on the totality of available information, the Company currently does not have plans to further develop the IRX-2
product candidate. As such, the Company determined that the carrying value of the IPR&D asset was impaired and recognized a non-cash impairment charge of approximately $6.0 zero .
The Company also determined that there were qualitative indications of a goodwill impairment, namely the Company’s stock price declined from $2.05 per share as of March 31, 2022 to $0.52 per share as of June 30,
2022. Accordingly, the Company proceeded to the first step in the quantitative assessment of impairment and determined that the fair value of the reporting unit exceeded the carrying amount of the reporting unit, and therefore, the goodwill
was no t impaired as of June 30, 2022.
|
7)
|
CEO SEPARATION AGREEMENT
|
On May 24, 2022, Dr. Howard J. Federoff resigned as the Company’s Chief Executive
Officer and President effective May 26, 2022. In connection with Dr. Federoff’s resignation, the Company entered into a Separation Agreement and General Release with Dr. Federoff (the “Separation Agreement”),
pursuant to which Dr. Federoff resigned from his positions as Chief Executive Officer and as an officer, director and employee of the Company and all subsidiaries. Dr. Federoff’s resignation from the Board was not due to any disagreement with
the Company on any matter relating to the Company’s operations, policies or practices. In consideration for Dr. Federoff’s execution of the Separation Agreement and non-revocation of a waiver and release of claims relating thereto, Dr. Federoff
will receive following benefits under the Separation Agreement:
| • |
a lump sum cash severance benefit in the amount of $
|
| • |
payment of Dr. Federoff’s annual base salary for a period of twelve months after the expiration of the applicable revocation period (the “Separation Period”), for a total gross amount equal to $
|
| • |
payment of Dr. Federoff’s premiums for continued health benefits provided under COBRA for the Separation Period;
|
| • |
full acceleration of the vesting of all outstanding options (with the exception of the Milestone Grant (as defined below) options) that would have vested during the Separation Period, and such options,
together with outstanding options that vested prior to the separation date, representing collectively approximately
|
| • |
acceleration and vesting of 25/36th of the Milestone Grant options, representing collectively approximately
|
| • |
a lump sum cash severance benefit in the amount of $
|
The Separation Agreement also includes certain other customary representations,
warranties and covenants of Dr. Federoff, and provides for reimbursement of certain expenses incurred by Dr Federoff. The Separation Agreement supersedes all other agreements or arrangements between Dr. Federoff and the Company regarding the
subject matter of the agreement, including those with respect to severance payments and benefits.
|
8)
|
ACCRUED EXPENSES
|
Accrued expenses consisted of the following (in thousands):
|
June 30,
2022
|
December 31,
2021
|
|||||||
|
Accrued compensation
|
$
|
|
$
|
|
||||
|
Accrued research and development expenses
|
|
|
||||||
|
Accrued general and administrative expenses
|
|
|
||||||
|
Total accrued expenses
|
$
|
|
$
|
|
||||
Accrued compensation includes $1.0 million of severance, of which, approximately $0.5
million relates to severance for Dr. Federoff pursuant to the Separation Agreement discussed above. Accrued general and administration expenses includes $1.2 million for legal-related matters.
| 9) |
COMMITMENTS AND CONTINGENCIES
|
Legal Matters
The Company is involved in litigation and arbitrations from time to time in the ordinary course of business. Legal fees and other costs
associated with such actions are expensed as incurred. In addition, the Company assesses the need to record a liability for litigation and contingencies. The Company reserves for costs relating to these matters when a loss is probable, and the
amount can be reasonably estimated.
Dhesh Govender v. Brooklyn
Immunotherapeutics, LLC, et al., Index No. 650847/2021 (N.Y. Sup. Ct. N.Y. Cty. 2021)
On or about February 5, 2021, Dhesh Govender, a former short-term consultant of Brooklyn LLC, filed a complaint against Brooklyn LLC and certain individuals that plaintiff alleges were directors of Brooklyn LLC. The complaint is
captioned, Dhesh Govender v. Brooklyn Immunotherapeutics, LLC, et al., Index No. 650847/2021 (N.Y. Sup. Ct. N.Y. Cty. 2021). Plaintiff alleges that Brooklyn LLC and certain of its officers and directors (“defendants”) engaged in unlawful and
discriminatory conduct based on race, national origin and hostile work environment. Plaintiff also asserts various breach of contract, fraud and quantum meruit claims based on an alleged oral agreement pursuant to which he alleges Brooklyn
LLC agreed to hire him as an executive once the Merger was completed. In particular, plaintiff alleges that, in exchange for transferring an opportunity to obtain an agreement to acquire a license from Novellus for its mRNA-based gene editing
and cell reprogramming technology to Brooklyn LLC, he was promised a $0.5 million salary and 7 % of the equity of Brooklyn LLC. Based on these and other allegations, plaintiff seeks damages of not less than $10 million. By Order dated November 10, 2021, the Court granted defendants’ motion to compel Govender to arbitrate all of his claims against them, based on the arbitration clause
of his consulting agreement with Brooklyn LLC. Govender thereafter filed his Statement of Claim (the “Demand”) with the American Arbitration Association (“AAA”), Case No. 01-21-0017-9417, on December 15, 2021 against the same defendants,
and served it on defendants’ counsel on February 3, 2022. In his Demand, Govender continues to assert statutory discrimination claims against all defendants, claims against Brooklyn LLC premised on the breach of an alleged oral promise to
issue Govender 7 % of the equity of Brooklyn LLC and to employ Govender at a $0.5 million annual salary in exchange for allegedly arranging and negotiating the Novellus license, common law fraud claims against Brooklyn LLC and Cherington based on
the breach of these same promises and a claim for quantum meruit against the Brooklyn LLC. In his Demand, Govender now claims that the fair and reasonable value of his services on the quantum meruit claim exceeded $100 million and is seeking damages in an amount to be determined at the hearing. Defendants filed an answering statement to the Demand on
February 28, 2022 and the parties have selected a three -member arbitration panel. The
arbitration is scheduled to begin December 5, 2022. Defendants intend to vigorously defend themselves against these claims. At this stage in the litigation, the Company is not able to predict the probability of a favorable
or unfavorable outcome.
Emerald Private Equity Fund, LLC Matter
By a letter dated July 7, 2021, Emerald Private Equity Fund, LLC (“Emerald”), a stockholder of Brooklyn, made a demand pursuant
to 8 Del. C. 220 to inspect certain books and records of Brooklyn. The stated purpose of the demand was to investigate possible wrongdoing by persons responsible for the implementation of the Merger and the issuance of paper
stock certificates, including investigating whether: (i) Brooklyn’s stock certificates were issued in accordance with the Merger Agreement; (ii) certain restrictions on the sale of Brooklyn common stock following the Merger were
proper and applied without favor; (iii) anyone received priority in post-Merger issuances of Brooklyn’s stock certificates that allowed them to benefit from an increase in the trading price of Brooklyn’s common stock; and (iv)
it should pursue
remedial measures and/or report alleged misconduct to the SEC. Brooklyn responded to the demand letter and produced certain information to Emerald in connection with the demand, which is subject to the terms of a
confidentiality agreement entered into among the parties, including certain additional stockholders who subsequently joined as parties to such agreement. In October 2021, Emerald requested that Brooklyn produce additional
information related to the authority, purpose and justification for the restriction imposed on the sale of Brooklyn common stock following the Merger and the timing of share delivery to Brooklyn stockholders, following which
request Brooklyn agreed to produce certain additional information and emails relating to these topics.
On March 30, 2022, counsel to Emerald advised the Company that it was prepared to file suit against the Company, certain current and former directors of the
Company, and the Company’s financial advisor in connection with the Merger, on behalf of Emerald and a class of similarly situated stockholders with respect to some or all of the foregoing matters, alleging claims for breach
of fiduciary duty, conversion and aiding and abetting breach of fiduciary duty. Emerald’s counsel expressed a willingness to engage in private pre-suit early resolution discussions with the Company and its financial advisor
on behalf of individual stockholders whom counsel represents in addition to Emerald (collectively, the “Emerald Plaintiffs”); and the Company engaged in such discussions in lieu of incurring the legal costs anticipated in
respect of litigating the Emerald Plaintiffs’ claims, all of which the Company disputes. Following such discussions, with no admission of wrongdoing, the Company and the Emerald Plaintiffs entered into a
confidential settlement agreement, pursuant to which the Company agreed to pay $1.2 million in full settlement of
all of the Emerald Plaintiffs’ purported claims, including a release by the Emerald Plaintiffs in favor of the Company in respect of any and all such claims. The Company
subsequently made such payment.
John Westman v. Novellus, Inc., Christopher Rohde, and Matthew Angel, Civil Action No. 2181CV01949
(Middlesex County (Massachusetts) Superior Court)
On or about September 7, 2021, John Westman, a former employee of Novellus, Inc. filed a Complaint in Middlesex
County (Massachusetts) Superior Court against Novellus, Inc. and the company’s founders and former executives, Dr. Christopher Rohde and Dr. Matthew Angel (collectively, “Defendants”). The case includes allegations that
Novellus, Inc. violated the Massachusetts Wage Act.. Brooklyn acquired Novellus, Inc. on July 16, 2021. Mr. Westman’s claims relate to alleged conduct that took place before Brooklyn acquired Novellus, Inc. Defense and
liability in association with any Wage Act claims have been assumed by Dr. Rohde and Dr. Angel. On December 24, 2021, Westman dismissed the case without prejudice so the parties could mediate the matter. The parties’
February 2022 mediation was unsuccessful and the dispute is currently pending in arbitration.
Novellus, Inc. v. Sowyrda et al., C.A. No.
2184CV02436-BLS2
On October 25, 2021 Novellus, Inc. filed a complaint in the Superior Court of
Massachusetts, Suffolk County, against former Novellus, Inc. employees Paul Sowyrda and John Westman and certain other former investors in Novellus LLC (Novellus, Inc.’s former parent company prior to the Company’s
acquisition of Novellus, Inc.), alleging breach of fiduciary duty, breach of contract and civil conspiracy. Brooklyn acquired Novellus, Inc. on July 16, 2021. On May 27, 2022 Novellus, Inc. amended the complaint to withdraw
all claims against all defendants except Paul Sowyrda and John Westman. On July 1, 2022, Westman filed a motion to compel arbitration or in the alternative, to stay the litigation pending the disposition of certain
litigations in the Court of Chancery for the State of Delaware filed by Mr. Sowyrda against Novellus LLC, Dr. Christopher Rohde, Dr. Matthew Angel, Leonard Mazur and Factor Bioscience, Inc. captioned Zelickson et al., v. Angel et al., C.A. 2021-1014-JRS and by Westman against Novellus LLC captioned Westman v. Novellus LLC, C.A. No. 2021-0882-NAC (the “Delaware
Actions”). On July 1, 2022, Sowyrda answered the complaint and asserted counterclaims against Novellus, Inc, and third-party defendants Dr. Matthew Angel and Dr. Christopher Rohde alleging violations of the Massachusetts
Wage Act, Massachusetts Minimum Fair Wage Law, the Fair Labor Standards Act, breach of contract, unjust enrichment and quantum meruit. Sowyrda also joined in Westman’s motion to stay the case pending the Delaware Actions.
Novellus, Inc.’s claims and Mr. Sowyrda’s counterclaims relate to alleged conduct that took place before Brooklyn acquired Novellus, Inc. Defense and liability in association with any Wage Act claims have been assumed by Dr.
Rohde and Dr. Angel. The Company believes that the plaintiffs’ claims in the foregoing matters are without merit, and the Company intends to defend against them vigorously.
Under applicable Delaware law and Novellus Inc.’s organizational documents, the Company may be required to advance or reimburse certain legal
expenses incurred by former officers and directors of Novellus, Inc. in connection with the foregoing Westman and Sowyrda matters.
Licensing Agreements
USF
Brooklyn LLC has license agreements with University
of South Florida Research Association, Inc. (“USF”), granting Brooklyn LLC the right to sell, market, and distribute IRX-2, subject to a 7 %
royalty payable to USF based on a percentage of gross product sales. Under the license agreement with USF, Brooklyn LLC is obligated to repay patent prosecution expenses incurred by USF. To date, Brooklyn LLC has not recorded any product
sales, or obligations related to USF patent prosecution expenses. The license agreement terminates upon the expiration of the IRX-2 patents.
Novellus, Ltd. and Factor
In December 2020, Brooklyn LLC entered into option agreements (the
“Option Agreements”) with Novellus, Ltd. and Factor (together, the “Licensors”) to obtain the right to exclusively license the Licensors’ intellectual property and mRNA cell reprogramming and gene editing technology for use in the
development of certain cell-based therapies to be evaluated and developed for treating human diseases, including certain types of cancer, sickle cell disease, and beta thalassemia (the “Licensed Technology”). The option was exercisable
before February 28, 2021 (or April 30, 2021 if the Merger had not closed by that date) and required Brooklyn LLC to pay a non-refundable option fee of $0.5 million and then an initial license fee of $4.0 million (including the non-refundable fee of $0.5 million) in order to exercise the option.
In April 2021, Brooklyn LLC and the Licensors amended the Option Agreements to extend the exercise period to May 21, 2021 and to require Brooklyn, LLC to pay a
total $1.0 million of the $4.0
million initial license fees to the Licensors by April 15, 2021.
In April 2021, Brooklyn LLC and the Licensors entered into an exclusive license agreement (the “License Agreement”) pursuant to which Brooklyn LLC acquired an exclusive worldwide license to the Licensed Technology for
use in the development of certain mRNA, gene-editing, and cellular therapies to be evaluated and developed for treating human diseases, including certain types of cancer, sickle cell disease, and beta thalassemia. Under the
terms of the License Agreement, Brooklyn LLC is obligated to pay the Licensors a total of $4.0 million in connection with
the execution of the License Agreement, all of which was paid as of June 2021.
The completion of the acquisition of Novellus, Ltd. relieved Brooklyn LLC from potential obligations to pay Novellus, Ltd. certain upfront fees, clinical
development milestone fees and post-registration royalties under the License Agreement. The agreement with Factor under the License Agreement, which grants Brooklyn LLC exclusive rights to develop certain next-generation mRNA gene
editing and cell therapy products, remained unchanged. Accordingly, Brooklyn LLC is obligated to pay to Factor a fee of $3.5
million in October 2022, which will be in addition to a fee of $2.5 million paid to Factor in October 2021.
Brooklyn
LLC is also required to use commercially reasonably efforts to achieve certain delineated milestones, including specified clinical development and regulatory milestones and specified commercialization milestones. In general, upon its
achievement of these milestones, Brooklyn LLC will be obligated to pay, in the case of development and regulatory milestones, milestone payments to the Licensors in specified amounts and, in the case of commercialization milestones,
specified royalties with respect to product sales, sublicense fees or sales of pediatric review vouchers. In the event Brooklyn LLC fails to timely achieve certain delineated milestones, the Licensors will have the right to terminate
Brooklyn LLC’s rights under provisions of the License Agreement relating to those milestones.
Novellus, Ltd. also has a license agreement with Factor, which was entered into in February 2015, amended in June 2018 and March 2020, and then amended and restated
in November 2020. This license agreement provides for Novellus, Ltd. to use certain technology owned by Factor for the development of certain cellular therapies to be evaluation and developed for treating diseases.
Novellus, Ltd. is required to use commercially reasonably efforts to achieve certain delineated milestones, including specified clinical development and regulatory
milestones and specified commercialization milestones. In general, upon its achievement of these milestones, Novellus, Ltd. will be obligated, in the case of development and regulatory milestones, to make milestone payments of up to $51.0 million in aggregate to Factor and, in the case of commercialization milestones, specified royalties with respect to product sales,
sublicense fees or sales of pediatric review vouchers. In the event Novellus, Ltd. fails to timely achieve certain delineated milestones, Factor may have the right to terminate Novellus, Ltd.’s rights under provisions of the License
Agreement relating to those milestones.
NoveCite
In October 2020, Novellus, Ltd. (as
sublicensor) and NoveCite (as sublicensee) entered into an exclusive license agreement (the “Sublicense”) to license novel cellular therapy for acute respiratory distress syndrome, which NoveCite is licensing from Factor. Under
the sublicense agreement, NoveCite is required to use commercially reasonably efforts to achieve certain delineated milestones, including specified clinical development and regulatory milestones and specified commercialization
milestones. In general, upon its achievement of these milestones, NoveCite will be obligated, in the case of development and regulatory milestones, to make milestone payments to the Novellus, Ltd. in specified amounts and, in
the case of commercialization milestones, specified royalties with respect to product sales, sublicense fees or sales of pediatric review vouchers.
Under the terms of the Sublicense, in the
event that Novellus, Ltd. receives any revenue involving the original cell line included in the licensed technology, then Novellus, Ltd. shall remit to NoveCite 50 % of such revenue.
Royalty Agreements
Collaborator Royalty Agreement
Effective June 22, 2018, IRX terminated its Research,
Development and Option Facilitation Agreement and its Options Agreement (the “RDO and Options Agreements”) with a collaborative partner (the “Collaborator”), pursuant to a termination agreement (the “Termination Agreement”). The Termination Agreement was assigned to Brooklyn, LLC in November 2018 when Brooklyn LLC acquired the assets of IRX. In
connection with the Termination Agreement, all of the rights granted to the Collaborator under the RDO and Options Agreements were terminated, and Brooklyn LLC has no obligation to refund any payments received from the Collaborator. As
consideration for entering into the Termination Agreement, the Collaborator will receive a royalty equal to 6 % of revenues from the
sale of IRX-2, for the period of time beginning with the first sale of IRX-2 through the later of (i) the twelfth anniversary of the first sale of IRX-2 or (ii) the expiration of the last IRX patent, or other exclusivity of IRX-2.
Royalty Agreement with certain former IRX Therapeutics Investors
On May 1, 2012, IRX Therapeutics entered into a royalty agreement (the “IRX Investor Royalty Agreement”)
with certain investors who participated in a financing transaction. The IRX Investor Royalty Agreement was assigned to Brooklyn LLC in November 2018 when Brooklyn LLC acquired the assets of IRX. Pursuant to the IRX Investor Royalty Agreement,
when Brooklyn LLC becomes obligated to pay royalties to USF under the agreement described above under “Licensing Agreements-USF,” it will pay an additional royalty of 1 % of gross sales to an entity organized by the investors who participated in such financing transaction. There are no termination provisions in the IRX Investor Royalty
Agreement. Brooklyn LLC has not recognized any revenues to date, and no royalties are due pursuant to any of the above-mentioned royalty agreements.
Investor Royalty Agreement
On
March 22, 2021, Brooklyn LLC restated its royalty agreement with certain beneficial holders of Brooklyn ImmunoTherapeutics Investors GP LLC and Brooklyn ImmunoTherapeutics Investors LP, whereby such beneficial holders will continue to receive,
on an annual basis, royalties in an aggregate amount equal to 4 % of the net revenues of IRX-2, a cytokine-based therapy being
developed by Brooklyn LLC to treat patients with cancer.
| 10) |
STOCK-BASED COMPENSATION
|
Stock Options
During the three and six months ended June 30, 2022 and 2021, the Company granted the
following stock options (in thousands):
|
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
|
|
2022
|
2021
|
2022
|
2021
|
||||||||||||
|
Stock options granted
|
|
|
|
|
||||||||||||
The following weighted-average assumptions were used for stock options granted during the three and six months ended June
30, 2022 and 2021:
| Three months ended June 30, | ||||||||
|
|
2022
|
2021
|
||||||
|
Weighted average risk-free rate
|
|
|
|
|
||||
|
Weighted average volatility
|
|
|
|
|
||||
|
Dividend yield
|
|
|
|
|
||||
|
Expected term
|
|
|
||||||
|
Six months ended June 30,
|
||||||||
|
2022
|
2021
|
|||||||
|
Weighted average risk-free rate
|
|
|
|
|
||||
|
Weighted average volatility
|
|
|
|
|
||||
|
Dividend yield
|
|
|
|
|
||||
|
Expected term
|
|
|
||||||
Of the 1,981 ,000 stock options granted during the six months ended June 30, 2022, approximately 414,000 stock
options were granted in March 2022 to Dr. Howard J. Federoff, who served as the Company’s Chief Executive Officer and President until May 26, 2022 (the “March 2022 Stock Option Grant”). The March 2022 Stock Option Grant vests in 36 substantially equal monthly installments from the grant date and had an exercise price equal to the closing price of the Company’s common stock on the
grant date.
Of the 3,366 ,000 stock options granted during the six months ended June 30, 2021, approximately 3,225,000 stock
options were granted to Dr. Federoff upon his appointment as Chief Executive Officer and President in April 2021. 2,628,000 stock options
were under a time-based grant (the “Time-Based Grant”) and 597,000 were under a performance-based grant (the “Milestone Grant”). The
Time-Based Grant vests over four years , with 25 %
vesting on the one-year anniversary of the grant date and the remaining options vesting in 36 substantially equal monthly installments
thereafter. The Milestone Grant vests upon the first concurrence by the U.S. Food and Drug Administration that a proposed investigation may proceed following review of a Company filed investigational new drug application in connection with that the
License Agreement. Both the Time-Based Grant and the Milestone Grant had an exercise price equal to the closing price of the Company’s common stock on the grant date.
Vesting of all stock options grants is subject to continuous service with the Company
through such vesting dates.
As discussed above, pursuant to the Separation Agreement that the Company entered into
with Dr. Federoff, the Company accelerated the vesting of approximately 138,000 stock options under the
March 2022 Stock Option Grant and approximately 657,000 stock options under the Time-Based Grant. The Company also waived the
performance condition under the Milestone Grant and accelerated the vesting of approximately 415,000 stock options under the Milestone
Grant. Lastly, the Company extended the post-termination exercise period from 90 days to 36 months immediately following the Separation Date for all options that were vested after such accelerations.
The above modifications to Dr. Federoff’s stock options grants resulted in modification accounting under ASC 718, Compensation – Stock Compensation. As a result, the Company immediately recognized approximately $0.1 million for the incremental fair value of stock options that were vested prior to the modification by calculating the difference between
the fair value of the modified award and the fair value of the original award immediately before it was modified. For stock options that were not vested prior to the modification but then vested as a result of the acceleration, the Company
reversed any stock compensation expense previously recognized, remeasured the fair value of the modified award and immediately recognized approximately $0.1
million of stock compensation expense in full since there was no future service period required to be provided.
During the three and six months ended June 30, 2021, there were 1,300 10,202 57,212 no
As of June 30, 2022, there were approximately 3,750,000 stock options outstanding.
Restricted Stock Units
During the three and six months ended June 30, 2022 and 2021, the Company granted the
following restricted stock units (“RSUs”) (in thousands):
|
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
|
|
2022
|
2021
|
2022
|
2021
|
||||||||||||
|
RSUs Granted
|
|
|
|
|
||||||||||||
The Company recognizes the fair value of RSUs granted as expense on
a straight-line basis over the requisite service period. For performance based RSUs, the Company begins recognizing the expense once the achievement of the related performance goal is determined to be probable.
Outstanding RSUs are settled in an equal number of shares of common
stock on the vesting date of the award. An RSU award is settled only to the extent vested. Vesting generally requires the continued employment or service by the award recipient through the respective vesting date. Because RSUs are settled in an equal
number of shares of common stock without any offsetting payment by the recipient, the measurement of cost is based on the quoted market price of the stock at the measurement date, which is the grant date.
In lieu of paying cash to satisfy withholding taxes due upon the
settlement of vested RSUs, at the Company’s discretion, an employee may elect to have shares of common stock withheld that would otherwise be issued at settlement, the value of which is equal to the amount of withholding taxes payable. The following table shows the number of RSUs that vested and were settled during the three and six months ended
June 30, 2022, as well as the number of shares of common stock withheld to cover the withholding taxes and the net shares issued upon settlement (in thousands):
|
|
Three months ended
|
Six months ended
|
||||||
|
|
June 30, 2022
|
June 30, 2022
|
||||||
|
RSUs vested
|
|
|
||||||
|
Common stock withheld to cover
taxes
|
(
|
)
|
(
|
)
|
||||
|
Common stock issued
|
|
|
||||||
The 1,101,000 RSUs granted during the six months ended June 30, 2022 are performance-based RSUs (the “2022 PSUs”), of which approximately 414,000 were awarded to Dr. Federoff. The 2022 PSUs are subject to the achievement of four performance goals, which are weighted equally. Once a performance goal is achieved, the tranche of shares allocated to that performance goal will be earned and will begin to vest over a three-year annual basis beginning on the date the performance goal was achieved. If a performance goal is not achieved, the tranche of shares allocated
to that performance goal will be unearned and forfeited. As of June 30, 2022, one of the performance goals was not achieved by its due
date, and as a result, approximately 275,000 2022 PSUs were cancelled and any previously recognized stock compensation expense was
reversed.
Pursuant to Dr. Federoff’s Separation Agreement, Dr. Federoff’s 414,000 2022 PSUs were canceled in full (a portion of which included the PSUs allocated to the performance goal that was not achieved timely), and a lump sum cash severance benefit in the amount of $0.1 million was paid to Dr. Federoff, which represents
the value Dr. Federoff would have received if he were entitled to receive a settlement of a pro rata portion of his 2022 PSUs through the expiration of the Separation Period, assuming the performance metrics were waived and assuming a per share
value of $0.81 . Any stock compensation expense previously recognized on Dr. Federoff’s 2022 PSUs was reversed and approximately $0.1 million was recognized as compensation expense.
As of June 30, 2022, there were approximately 587,000 RSUs outstanding.
Restricted Stock
Pursuant to the Merger, Brooklyn LLC’s approximately 3,000 outstanding restricted common units were exchanged for approximately 630,000 shares of Brooklyn’s restricted common stock. There were no changes to any conditions and requirements of the restricted common stock. The shares vested quarterly beginning on March
31, 2021 and were to continue through December 31, 2022, contingent on continued service. Due to the modification of the restricted common units, the fair value of the restricted common stock immediately after the Merger was compared to the fair
value of the restricted common units immediately prior to the Merger, and the change in fair value of $0.3 million was recognized in the
statement of operations during the six months ended June 30, 2021. The Company recognizes the fair value of restricted common stock as an expense on a straight-line basis over the requisite service period. During the six months ended June 30, 2022,
approximately 78,000 shares of unvested restricted common stock were forfeited due to the holders of such shares no longer providing
services to the Company. As of June 30, 2022, there were no shares of unvested restricted stock outstanding.
Stock-Based Compensation Expense
For the three and six months ended June 30, 2022 and 2021, the
Company recognized stock-based compensation expense as follows, which includes the expense related to Dr. Federoff’s modified awards discussed above (in thousands):
|
|
Three months ended June 30,
|
Six months ended June 30,
|
||||||||||||||
|
|
2022
|
2021
|
2022
|
2021
|
||||||||||||
|
Research and development
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
General and administrative
|
|
|
|
|
||||||||||||
|
Total
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
| 11) |
STOCKHOLDERS’ EQUITY
|
Private Placement of
Equity
On March 6, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an investor (the “PIPE Investor”)
providing for the private placement (the “PIPE Transaction”) to the PIPE Investor of approximately 6,857,000 units
(collectively, the “Units”), each Unit consisting of (i) one share of the Company’s common stock (or, in lieu thereof, one
Pre-Funded Warrant to purchase one share of common stock) and (ii) one warrant (the “Common Warrants”) to purchase one share of
common stock, for an aggregate gross purchase price of approximately $12.0 million (the “Subscription Amount”). The PIPE
Transaction closed on March 9, 2022. Pursuant to the Purchase Agreement, the Company is prohibited from issuing equity in variable rate transactions for a period of one-year following consummation of the PIPE Transaction, including issuing equity under the Second Purchase Agreement.
Each Pre-Funded Warrant has an exercise price of $0.005 per share of common stock, was immediately exercisable, may be
exercised at any time, has no expiration date and is subject to customary adjustments. The Pre-Funded Warrants may not be exercised if the aggregate number of shares of common stock beneficially owned by the holder thereof would exceed 9.99 % immediately after exercise thereof. Upon the closing of the PIPE Transaction, the Company issued 5,500,000 shares of common stock and issued Pre-Funded Warrants representing approximately 1,357,000 shares of common stock.
Each Common Warrant has an exercise price of $1.91 per share, becomes exercisable six months following the closing of the PIPE Transaction, expires years from the date of issuance and is subject to customary adjustments. The Common Warrants may not be exercised if the aggregate number of shares of common stock beneficially owned by the holder thereof would exceed 4.99 % immediately after exercise thereof, subject to increase to 9.99 % at the option of the holder.
As of June 30, 2022, the Company had 6,857,000
Common Warrants outstanding with a weighted average exercise price of $1.91 per share and a weighted average contractual life of 5.2 years. As of June 30, 2022, the Company had 1,357,000
Pre-Funded Warrants outstanding with a weighted average exercise price of $0.005 per share. The Pre-Funded Warrants do not expire.
The
Common Warrants and Pre-Funded Warrants were accounted for as liabilities under ASC 815-40, as these warrants provide for a cashless settlement provision that does not meet the requirements of the indexation guidance under ASC 815-40. These
warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within the statement of operations.
The fair values of the Common Warrants and the Pre-Funded Warrants at the issuance date totaled $12.6 million in the aggregate, which was $0.6 million more
than the Subscription Amount. The excess $0.6 million represents an inducement to the PIPE Investor to enter into the PIPE
Transaction and was recorded in warrant liabilities expense in the accompanying consolidated statement of operations. Given the Company’s capital requirements and market conditions, the Company consummated this financing on market terms
available at the time of the transaction.
The Company incurred fees of approximately $1.0 million through June 30, 2022 related to the PIPE Transaction, which were allocated to the fair value of the Common Warrants and the Pre-Funded Warrants and recorded in other expense, net on the
accompanying condensed consolidated statement of operations.
In connection with the PIPE Transaction, the Company and the PIPE Investor also entered into a registration rights agreement, dated March 6,
2022, pursuant to which the Company agreed to prepare and file a registration statement with the SEC no later than 15 days following the filing date of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021
Annual Report”) to register the resale of the shares of common stock included in the Units and the shares of common stock issuable upon exercise of the Pre-Funded Warrants and the Common Warrants. The Company agreed to use its best efforts to
have such registration statement declared effective as promptly as possible after the filing thereof, subject to certain specified penalties if timely effectiveness is not achieved. The Company filed the 2021 Annual Report on April 15, 2022
and the registration statement on April 29, 2022. The resale registration statement became effective on May 11, 2022.
Pursuant to the registration rights agreement, the Company is obligated to pay the PIPE Investor liquidated damages equal to 2 % of the Subscription Amount per month, with a maximum aggregate payment of 12 % of the Subscription Amount, in the event the PIPE Investor is not permitted to use the registration statement to resell the securities registered for resale
thereunder for more than 10 consecutive calendar days or more than an aggregate of calendar days (which need not be consecutive calendar days) during any 12-month period.
On May 24, 2022, the Company provided the PIPE Investor with notice that it was not able to resell the securities registered for resale under
the registration agreement because the Company had not timely filed its Quarterly Report on Form 10-Q (the “Q1 2022 10-Q”) with the SEC, and that the PIPE Investor could not use the registration statement to resell the related securities
until the Company filed the Q1 2022 10-Q. Because the PIPE Investor was unable to use the registration statement for at least 10
consecutive calendar days, the Company accrued $0.2 million during the first quarter of 2022 for the contingent loss the Company
incurred as liquidated damages as a result of the late Q1 2022 10Q filing, which is recorded in other expense, net for the six months ended June 30, 2022 in the accompanying condensed consolidated statements of operations. The Company paid
such $0.2 million liquidated damages payment in June 2022.
On June 30, 2022, the Company filed its Q1 2022 10-Q along with the 10-K/A, and on July 1, 2022, the Company provided its notice to the PIPE
Investor that it may resume use of the resale registration statement.
Merger
Under the terms of the Merger
Agreement (see Note 3), on March 25, 2021, Brooklyn issued shares of common stock to the equity holders of Brooklyn LLC. The 87,000
Class A units of Brooklyn LLC were converted into approximately 22,275,000 shares of common stock; the 15,000,000 Class B units were converted into approximately 2,515,000
shares of common stock; the 10,000,000 Class C units were converted into approximately 1,676,000 shares of common stock; approximately 630,000 shares of common units were
converted into approximately 630,000 shares of common stock, and 10,500,000 rights options were converted into approximately 11,828,000 shares of common stock.
Brooklyn also issued approximately 1,068,000 shares of common stock to the Financial Advisor pursuant to the Merger Agreement.
| 12) |
EARNINGS PER SHARE
|
Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period
including the weighted average effect of the Pre-Funded Warrants the Company issued in connection with the PIPE Transaction, the exercise of which requires little or no consideration for the delivery of shares of common stock. The Company
determined that the exercise of the Pre-Funded Warrants requires nominal consideration for the delivery of shares of common stock, and as such, has considered the 1,357,000 shares underlying the Pre-Funded Warrants to be outstanding effective on March 9, 2022 for the purposes of calculating basic EPS. Diluted net loss per share is calculated by dividing net loss by the
weighted-average number of common shares outstanding (including the weighted average effect of the Pre-Funded Warrants) plus dilutive securities. Stock options, RSUs, warrants and other convertible securities are considered potential common
shares and are included in the calculation of diluted net loss per share using the treasury method when their effect is dilutive. Diluted net loss per share is the same as basic net loss per share in periods where the effect of potentially
dilutive shares of common stock are antidilutive. The following table presents the amount of stock options, RSUs, warrants and convertible preferred stock that were excluded from the computation of diluted net loss per common share for three
and six months ended June 30, 2022 and 2021, as their effect was anti-dilutive:
|
Three and Six months ended June 30,
|
||||||||
|
2022
|
2021
|
|||||||
|
Stock options
|
|
|
||||||
|
RSUs
|
|
|
||||||
|
Warrants
|
|
|
||||||
|
Preferred stock converted into common stock
|
|
|
||||||
|
Total potential common shares excluded from computation
|
|
|
||||||
| 13) |
RECENT ACCOUNTING PRONOUNCEMENTS
|
In June 2022, the Financial Accounting Standard Board (the “FASB”) issued Accounting Standards Update
(“ASU”) No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”). The FASB issued ASU 2022-03 to (1) clarify the guidance in Topic 820, Fair Value
Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) to amend a related illustrative example, and (3) to introduce new disclosure requirements for
equity related securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security is not considered part of the
unit of account of the equity security and, therefore, is not considered in measuring fair value. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years with early adoption
permitted. The Company is evaluating when to adopt the amendments in ASU 2022-02. The Company does not expect a material impact as a result of adopting this amendment.
| 14) |
SUBSEQUENT EVENT
|
On
July 12, 2022, the PIPE Investor exercised its 1,357,000
Pre-Funded Warrants at an exercise price of $0.005
per share for an aggregate exercise price of $6,786 ,
in cash. The Company issued 1,357,000 shares of common stock to
the PIPE Investor on July 14, 2022 upon receipt of the cash proceeds. Subsequent to the exercise, no Pre-Funded Warrants
remained outstanding.
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
You should read this discussion together with the unaudited interim condensed consolidated financial statements, related notes, and other financial information
included elsewhere in this Quarterly Report on Form 10-Q together with our audited consolidated financial statements, related notes, and other information contained in the Form 10-K/A filed with the Securities
and Exchange Commission (the “SEC”) on June 30, 2022 (the “10-K/A”), as well as the information contained in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “Original 10-K”), filed
with the SEC on April 15, 2022, to the extent the information contained in the Original 10-K was not superseded by the information contained in the 10-K/A. The following discussion contains assumptions, estimates and other forward-looking
statements that involve a number of risks and uncertainties, including those discussed under “Risk Factors,” in Part I, Item 1A of the 10-K/A and as described from time to time in our other filings with the SEC. These risks could cause our actual
results to differ materially from those anticipated in these forward-looking statements.
Overview
We are a biopharmaceutical company utilizing our mRNA technology platform, including mRNA-based cell reprogramming and gene editing technologies, to create next generation mRNA, gene-editing and
cell therapies, including iPSC therapies for multiple therapeutic indications. Our mRNA technology platform, which includes novel lipid nanoparticles (“LNPs”) for mRNA delivery and targeted transgene insertion, was acquired through a license with
Factor Bioscience Limited, or Factor, and through our acquisition of Novellus, Inc. and Novellus, Ltd. in July 2021, which we refer to as the Acquisition.
Merger with NTN Buzztime, Inc.
On March 25, 2021, we completed the Merger with NTN Buzztime, Inc. In accordance with the Merger Agreement, on March 25, 2021, Brooklyn amended its restated certificate of incorporation in order to
effect:
• prior to the Merger, a reverse stock split of its common stock, par value $0.005 per share, at a ratio of one-for-two; and
• following the Merger, a change in its corporate name from “NTN Buzztime, Inc.” to “Brooklyn ImmunoTherapeutics, Inc.”
On March 26, 2021, we sold the rights, title and interest in and to the assets relating to the business operated under the name “NTN Buzztime, Inc.” prior to the Merger to eGames.com Holdings LLC,
or eGames.com, in exchange for eGames.com’s payment of a purchase price of $2.0 million and assumption of specified liabilities relating to such pre-Merger business. This transaction, which we refer to as the Disposition, was completed in
accordance with the terms of an asset purchase agreement dated September 18, 2020, as amended, between us and eGames.com.
The Merger has been accounted for as a reverse acquisition in accordance with U.S. generally accepted accounting principles, or GAAP. Under this method of accounting, Brooklyn LLC was deemed the
“acquiring” company and Brooklyn (then known as NTN Buzztime, Inc.) was treated as the “acquired” company for financial reporting purposes. Operations prior to the Merger are those of Brooklyn LLC, and the historical financial statements of
Brooklyn LLC became the historical financial statements of Brooklyn with respect to periods prior to the completion of the Merger.
Acquisition of Novellus
On July 16, 2021, we acquired Novellus, Inc. and Novellus, Inc.’s wholly owned subsidiary, Novellus, Ltd. Brooklyn also acquired 25.0% of the total outstanding equity interests of NoveCite, Inc.
As consideration for the Acquisition, we paid $22.9 million in cash and delivered 7,022,000 shares of common stock, which under the terms of the Acquisition Agreement, were valued at a total of $102.0 million based on an agreed upon price of
$14.5253 per share. At the date of issuance, the fair value of the shares was approximately $58.7 million.
mRNA, Gene-Editing, and Cellular Medicines
We are advancing the technology that we obtained through a license with Factor and through the Acquisition of Novellus, Inc. and Novellus, Ltd. in July 2021 to evaluate and develop mRNA,
gene-editing, and cellular medicines, with an initial focus on hematologic and solid tumors. We expect that the first-generation product candidates will include gene-editing mRNA for in vivo cell engineering and induced pluripotent stem cell
(“iPSC”)-derived cytotoxic lymphocytes (“iCLs”) and immune-modulating cells (“iIMCs”). We expect to begin preclinical development, including manufacturing process development, of iCLs and iIMCs for clinical indications including hematologic and
solid tumors, as well as other indications that require overcoming molecular cues of the tissue microenvironment. The prior work of Novellus and NoveCite shows evidence for preclinical efficacy of iPSC-derived cells in inflammatory conditions (for
example, acute respiratory distress syndrome, or ARDS). Interactions with the FDA provided guidance on Chemistry, Manufacturing and Controls (“CMC”), and manufacturing plans, which will be undertaken in a similar manner for additional applications.
We expect that second generation products will involve more complex gene editing, for which we anticipate using the stepwise addition of genes provided by the in-licensed Factor Bioscience gene editing machinery, NoveSlice, to efficiently place
genes and regulatory sequences into safe harbor locations. Development of processes to advance CMC and manufacturing will follow the experience from first generation products. We are also exploring opportunities to advance in vivo mRNA cell
engineering therapies for hematologic and solid tumors by combining the NoveSlice gene editing technology with ToRNAdoTM, the in-licensed LNP technology.
IRX-2
IRX-2 is a mixed, human-derived cytokine product with multiple active constituents including Interleukin-2, or IL2, and other key cytokines. Together, these cytokines are believed to signal,
enhance and restore immune function suppressed by the tumor, thus enabling the immune system to attack cancer cells, unlike many existing cancer therapies, which rely on targeting the cancer directly. IRX-2 is prepared from the supernatant of
pooled allogeneic peripheral blood mononuclear cells, known as PBMCs, that have been stimulated using a proprietary process employing a specific population of cells and a specific mitogen.
Unlike existing recombinant IL2 therapies, IRX-2 is derived from human blood cells. We believe this may promote better tolerance, broader targeting and a natural molecular conformation leading to
greater activity, and may permit low physiologic dosing, rather than the high doses needed in other existing IL2 therapies.
Results of the Phase 2b INSPIRE trial, or the INSPIRE trial, released in June 2022, showed outcomes favored IRX-2 in certain predefined subgroups but the INSPIRE trial did not meet the primary
endpoint of Event-Free Survival (“EFS”) at two years of follow up. One hundred and fifty patients were enrolled in the study. At two years of follow-up in the intention-to-treat (ITT, n=105) population the median EFS was 48.3 months and was not
reached in the control arm (Hazard Ratio 1.10 (95% Confidence Interval, 0.6-2.1; p value=0.62)). Subgroups favoring the IRX-2 arm included patients with later stage (III and IV) disease and those that did not receive chemotherapy. Trends in EFS
rates as defined by the Kaplan-Meier estimate at two years of follow-up in patients with later stage (III and IV) disease were 57.2 (40.3, 70.9) vs 49.4 (28.3, 67.4) in favor of IRX-2. In patients that did not receive chemotherapy (radiation only)
as part of adjuvant treatment, the EFS Kaplan-Meier estimate at two years of follow-up was 76.4 (52.2, 89.4) vs 60.6 (29.4, 81.4) in favor of IRX-2. There were no new safety signals observed with IRX-2. We currently do not have plans to further
develop the IRX-2 product candidate.
Impact of COVID-19 Pandemic
The development of our product candidates has been, and could continue to be, disrupted and materially adversely affected by past and continuing impacts of the COVID-19 pandemic. This is largely a
result of measures imposed by the governments and hospitals in affected regions, businesses and schools were suspended due to quarantines intended to contain this outbreak. The spread of COVID-19 from China to other countries resulted in the
Director General of the World Health Organization declaring COVID-19 a pandemic in March 2020. Despite progress in vaccination efforts, the longer-term impact of the COVID-19 pandemic on our development plans and on the ability to conduct our
clinical trials remains uncertain and cannot be predicted with confidence. COVID-19 could continue to disrupt production and cause delays in the supply and delivery of products used in our operations, may affect our operations, including the
conduct of clinical studies, or the ability of regulatory bodies to grant approvals or supervise our candidates and products, may further divert the attention and efforts of the medical community to coping with the COVID-19 and disrupt the
marketplace in which we operate and may have a material adverse effects on our operations. COVID-19 may also affect our employees and employees and operations at suppliers that may result in delays or disruptions in supply. In addition, a recession
or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock. Additionally, if the COVID-19 pandemic has a significant impact on our business and financial results for an extended
period of time, our liquidity and cash resources could be negatively impacted. The extent to which the COVID-19 pandemic and ongoing global efforts to contain its spread will impact our operations will depend on future developments, which are
highly uncertain, and include the duration, severity and scope of the pandemic and the actions taken to contain or treat the COVID-19 pandemic. Further, the specific clinical outcomes, or future pandemic related impacts of emerging COVID-19
variants cannot be reliably predicted.
Recent Developments
PIPE Transaction
On March 6, 2022, we entered into a Securities Purchase Agreement with an investor (the “PIPE Investor”) providing for the private placement (the “PIPE Transaction”) to the PIPE Investor of
approximately 6,857,000 units (the “Units”), each of which consisted of (i) one share of our common stock (or, in lieu thereof, one pre-funded warrant (the “Pre-Funded Warrants”) to purchase one share of common stock) and (ii) one warrant (the
“Common Warrants”) to purchase one share of common stock, for an aggregate purchase price of approximately $12.0 million (the “Subscription Amount”). The PIPE Transaction closed on March 9, 2022. We incurred fees of $1.0 million through June 30,
2022 related to the PIPE Transaction.
Each Pre-Funded Warrant has an exercise price of $0.005 per share of common stock, was immediately exercisable and may be exercised at any time and has no expiration date and is subject to
customary adjustments. The Pre-Funded Warrants may not be exercised if the aggregate number of shares of common stock beneficially owned by the holder thereof would exceed 9.99% immediately after exercise thereof.
Each Common Warrant has an exercise price of $1.91 per share, becomes exercisable six months following the closing of the PIPE Transaction, expires five-and-one-half years from the date of
issuance, and is subject to customary adjustments. The Common Warrants may not be exercised if the aggregate number of shares of common stock beneficially owned by the holder thereof would exceed 4.99% immediately after exercise thereof, subject
to increase to 9.99% at the option of the holder.
The Common Warrants and Pre-Funded Warrants were accounted for as liabilities under ASC 815-40, Derivatives and Hedging, Contracts in Entity’s Own Equity,
as these warrants provide for a cashless settlement provision that fails the requirement of the indexation guidance under ASC 815-40. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair
value presented within the statement of operations.
The fair values of the Common Warrants and the Pre-Funded Warrants at the issuance date totaled $12.6 million in the aggregate, which was $0.6 million more than the Subscription Amount. The
excess $0.6 million represents an inducement to the PIPE Investor to enter into the PIPE Transaction and was recorded in warrant liabilities expense in the accompanying consolidated statement of operations.
In connection with the PIPE Transaction, we and the PIPE Investor also entered into a registration rights agreement, dated March 6, 2022, pursuant to which we agreed to prepare and file a
registration statement with the Securities and Exchange Commission (the “SEC”) to register the resale of the shares of common stock included in the Units and the shares of common stock issuable upon exercise of the Pre-Funded Warrants and the
Common Warrants. We agreed to use our best efforts to have such registration statement declared effective as promptly as possible after the filing thereof, subject to certain specified penalties if timely effectiveness is not achieved. We filed
such registration statement on April 29, 2022, which became effective on May 11, 2022.
Pursuant to the registration rights agreement, we are obligated to pay the PIPE Investor liquidated damages equal to 2% of the Subscription Amount per month, with a maximum
aggregate payment of 12% of the Subscription Amount, in the event the PIPE Investor is not permitted to use the registration statement to resell the related securities for more than 10 consecutive calendar days or more than an aggregate of fifteen
calendar days (which need not be consecutive calendar days) during any 12-month period.
On May 24, 2022, we provided the PIPE Investor with notice that it was not able to resell the securities under the registration agreement because we did not timely file our
Quarterly Report on Form 10-Q (the “Q1 2022 10-Q”) with the SEC, and that the PIPE Investor could not use the registration statement to resell the related securities until we filed the Q1 2022 10-Q. Because the PIPE Investor was unable to use the
resale registration statement for at least 10 consecutive calendar days, we accrued $0.2 million during the first quarter of 2022 for the estimated contingent loss we expect to incur as a result of the late Q1 2022 10Q filing, which is recorded in
other expense, net for the six months ended June 30, 2022 in the accompanying condensed consolidated statements of operations. We paid the $0.2 million liquidated damages payment in June 2022.
On June 30, 2022, we filed the Q1 2022 10-Q along with the 10-K/A, and on July 1, 2022, we provided notice to the PIPE Investor that it may resume use of the resale
registration statement.
Basis of Presentation
Revenues
We are a development stage company and have had no revenues from product sales to date. We will not have revenues from product sales until such time as we receive regulatory approval of our product
candidates, successfully commercialize our products or enter into a licensing agreement which may include up-front licensing fees, of which there can be no assurance.
Research and Development Expenses
We expense our research and development costs as incurred. Our research and development expenses consist of costs incurred for company-sponsored research and development activities, as well as
support for selected investigator-sponsored research. Upfront payments and milestone payments for the licensing of technology are expensed as research and development in the period in which they are incurred if the technology is not expected to
have any alternative future uses other than the specific research and development project for which it was intended. In-Process Research and Development (“IPR&D”) that is acquired through an asset acquisition and has no alternative future uses
and, therefore, no separate economic values, is expensed to research and development costs at the time the costs are incurred.
The major components of research and development costs include preclinical study costs, clinical manufacturing costs, clinical study and trial expenses, insurance coverage for clinical trials,
expensed licensed technology, consulting, scientific advisors and other third-party costs, salaries and employee benefits, stock-based compensation expense, supplies and materials and allocations of various overhead costs related to our product
development efforts.
In the normal course of our business, we contract with third parties to perform various clinical study and trial activities in the on-going development and testing of potential products. The
financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Payments under the contracts depend on factors such as the achievement of certain events or milestones, the
successful enrollment of patients, the allocation of responsibilities among the parties to the agreement, and the completion of portions of the clinical study or trial or similar conditions. Preclinical and clinical study and trial associated
activities such as production and testing of clinical material require significant up-front expenditures. We anticipate paying significant portions of a study’s or trial’s cost before such begins and incurring additional expenditures as the study
or trial progresses and reaches certain milestones.
General and Administrative Expenses
Our general and administrative expenses consist primarily of salaries, benefits and other costs, including equity-based compensation, for our executive and administrative personnel, legal and other
professional fees, travel, insurance, and other corporate costs.
Results of Operations
Comparison of the Three and Six Months Ended June 30, 2022 and 2021
|
Three months ended June 30,
|
Change
|
Six months ended June 30,
|
Change
|
|||||||||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||||||||||
|
(in thousands)
|
||||||||||||||||||||||||
|
Operating expenses:
|
||||||||||||||||||||||||
|
Research and development
|
$
|
1,685
|
$
|
5,432
|
$ |
(3,747
|
)
|
$
|
3,467
|
$
|
6,965
|
$ |
(3,498
|
)
|
||||||||||
|
General and administrative
|
6,205
|
4,581
|
1,624
|
10,719
|
6,204
|
4,515
|
||||||||||||||||||
|
Impairment of in-process research and
|
5,990
|
-
|
5,990
|
5,990
|
-
|
5,990
|
||||||||||||||||||
|
Transaction costs
|
-
|
-
|
-
|
-
|
5,765
|
(5,765
|
)
|
|||||||||||||||||
|
Total operating expenses
|
13,880
|
10,013
|
3,867
|
20,176
|
18,934
|
1,242
|
||||||||||||||||||
|
Loss from operations
|
(13,880
|
)
|
(10,013
|
)
|
(3,867
|
)
|
(20,176
|
)
|
(18,934
|
)
|
(1,242
|
)
|
||||||||||||
|
Other income (expense), net:
|
||||||||||||||||||||||||
|
Loss on sale of NTN assets
|
-
|
(50
|
)
|
50
|
-
|
(9,648
|
)
|
9,648
|
||||||||||||||||
|
Change in fair value of warrant liabilities
|
10,792
|
-
|
10,792
|
9,470
|
-
|
9,470
|
||||||||||||||||||
|
Loss on non-controlling investment
|
(296
|
)
|
-
|
(296
|
)
|
(911
|
)
|
-
|
(911
|
)
|
||||||||||||||
|
Other expense, net
|
(14
|
)
|
(22
|
)
|
8
|
(1,156
|
)
|
(25
|
)
|
(1,131
|
)
|
|||||||||||||
|
Total other income (expense), net
|
10,482
|
(72
|
)
|
10,554
|
7,403
|
(9,673
|
)
|
17,076
|
||||||||||||||||
|
Net loss
|
$ |
(3,398
|
)
|
$ |
(10,085
|
)
|
$ |
6,687
|
$ |
(12,773
|
)
|
$ |
(28,607
|
)
|
$ |
15,834
|
||||||||
Research and Development Expenses
|
Three months ended June 30,
|
||||||||||||
|
2022
|
2021
|
Change
|
||||||||||
|
(in thousands)
|
||||||||||||
|
License fees
|
$
|
-
|
$
|
4,000
|
$
|
(4,000
|
)
|
|||||
|
Stock-based compensation
|
470
|
168
|
302
|
|||||||||
|
Payroll-related
|
639
|
593
|
46
|
|||||||||
|
Clinical trials
|
402
|
526
|
(124
|
)
|
||||||||
|
Professional fees
|
79
|
39
|
40
|
|||||||||
|
Other expenses, net
|
95
|
106
|
(11
|
)
|
||||||||
|
Total research and development expenses
|
$
|
1,685
|
$
|
5,432
|
$
|
(3,747
|
)
|
|||||
|
Six months ended June 30,
|
||||||||||||
|
2022
|
2021
|
Change
|
||||||||||
|
(in thousands)
|
||||||||||||
|
License fees
|
$
|
-
|
$
|
4,000
|
$
|
(4,000
|
)
|
|||||
|
Payroll-related
|
1,601
|
1,054
|
547
|
|||||||||
|
Stock-based compensation
|
891
|
571
|
320
|
|||||||||
|
Clinical trials
|
632
|
961
|
(329
|
)
|
||||||||
|
Professional fees
|
120
|
126
|
(6
|
)
|
||||||||
|
Other expenses, net
|
223
|
253
|
(30
|
)
|
||||||||
|
Total research and development expenses
|
$
|
3,467
|
$
|
6,965
|
$
|
(3,498
|
)
|
|||||
For the three and six months ended June 30, 2022, our research and development expenses decreased primarily due to a $4.0 million license fee paid in 2021 to Factor and Novellus, Ltd. (the
“Licensors”) under the exclusive license agreement with the Licensors, as well as due to a decrease in clinical trial and other miscellaneous expense, offset by increased stock compensation expense due to increased equity awards granted during
2022, as compared to equity awards granted in 2021, and increased payroll expense due to increased headcount, as well as increased severance expense when compared to the same periods in 2021.
In January 2022, we completed a reduction in our workforce involving eight research and development employees. As a result, we incurred approximately $0.5 million for severance and
termination-related costs, which we recorded during the first quarter of 2022. In June 2022, we made the decision to consolidated our research and development in Cambridge, Massachusetts, and as a result, we accrued approximately $0.1 million for
severance and termination-related costs for certain employees in the San Diego, California location.
General and Administrative Expenses
|
Three months ended June 30,
|
||||||||||||
|
2022
|
2021
|
Change
|
||||||||||
|
(in thousands)
|
||||||||||||
|
Payroll-related
|
$
|
1,533
|
$
|
142
|
$
|
1,391
|
||||||
|
Impairment of ROU asset
|
772
|
-
|
772
|
|||||||||
|
Professional fees
|
2,083
|
2,721
|
(638
|
)
|
||||||||
|
Stock-based compensation
|
409
|
986
|
(577
|
)
|
||||||||
|
Insurance
|
527
|
367
|
160
|
|||||||||
|
Occupancy expense
|
182
|
150
|
32
|
|||||||||
|
Other expenses, net
|
699
|
215
|
484
|
|||||||||
|
Total general and administrative expenses
|
$
|
6,205
|
$
|
4,581
|
$
|
1,624
|
||||||
|
Six months ended June 30,
|
||||||||||||
|
2022
|
2021
|
Change
|
||||||||||
|
(in thousands)
|
||||||||||||
|
Payroll-related
|
$
|
2,282
|
$
|
175
|
$
|
2,107
|
||||||
|
Impairment of ROU asset
|
772
|
-
|
772
|
|||||||||
|
Professional fees
|
3,404
|
4,040
|
(636
|
)
|
||||||||
|
Insurance
|
894
|
400
|
494
|
|||||||||
|
Stock-based compensation
|
1,170
|
1,003
|
167
|
|||||||||
|
Occupancy expense
|
382
|
301
|
81
|
|||||||||
|
Loss on disposal of fixed assets
|
274
|
-
|
274
|
|||||||||
|
Other expenses, net
|
1,541
|
285
|
1,256
|
|||||||||
|
Total general and administrative expenses
|
$
|
10,719
|
$
|
6,204
|
$
|
4,515
|
||||||
The increase in general and administrative expense for the three and six months ended June 30, 2022 was primarily related to increased headcount as well as severance expense for certain employees,
including our former Chief Executive Officer, who resigned effective May 26, 2022. We also recognized a non-cash impairment charge on our San Diego, California right-of-use (“ROU”) operating lease asset due to our intent to consolidate our
research and development activities in Cambridge, Massachusetts and to sublease the San Diego, California facility. Other increases include premiums for public company insurance policies, non-cash stock-based compensation expense due to increased
equity awards, increased other expenses, net, primarily due to legal-related matters, and losses on the disposal of fixed assets when compared to the same periods in 2021.
Impairment of In-Process Research and Development
As discussed above, in June 2022, we received the results from the INSPIRE phase 2 trial of IRX-2. The IRX-2 multi-cytokine biologic immunotherapy represents substantially all the fair value
assigned to the technologies of IRX that we acquired in 2018. Despite outcomes that favored IRX-2 in certain predefined subgroups, the INSPIRE trial did not meet the primary endpoint of Event-Free Survival (EFS) at two years of follow up.
Significant additional clinical development work will be required to advance IRX-2 in the form of additional Phase 2 and 3 studies to further evaluate the treatment effect of IRX-2 in patient subgroups and in combination with checkpoint inhibitor
therapies. The INSPIRE trial is the only company sponsored study of IRX-2. IRX-2 has been studied externally in other clinical settings outside of head and neck cancer in the form of investigator sponsored trials, which have either ended or are
not currently active. Based on the totality of available information, we currently do not have plans to further develop the IRX-2 product candidate. As such, we determined that the carrying value of the IPR&D asset was impaired and recognized a
non-cash impairment charge of approximately $6.0 million on the condensed consolidated balance sheet as of June 30, 2022, which reduced the value of this asset to zero.
Transaction Costs
The $5.8 million in transaction costs during the six months ended June 30, 2021 related to the issuance of common stock to Brooklyn LLC’s financial advisor upon consummation of the Merger, and
there were no comparable transaction costs for same periods in 2022.
Loss on Sales of NTN Assets
A $0.1 million and $9.6 million loss on the sale of NTN assets for the three and six months ended June 30, 2021, respectively, were incurred when we completed the Disposition, and there were no
comparable losses on sale for the three and six months ended June 30, 2022.
Warrant Liabilities Expense
For the three months ended June 30, 2022, we recognized a credit of $10.8 million for the change in the fair value of warrant liabilities due to a decrease in the market price of our common stock
during the quarter. For the six months ended June 30, 2022, we recognized a credit of $10.1 million for the change in the fair value of warrant liabilities, which was offset by $0.6 million in expense related to the excess fair value of the
Common Warrants and Pre-Funded Warrant issued in connection with the PIPE Transaction over the $12.0 million gross proceeds received. There were no comparable expenses for the three and six months ended June 30, 2021.
Loss on Non-Controlling Investment
During the three and six months ended June 30, 2022, we recognized $0.3 million and $0.9 million of loss on our 25% non-controlling investment in NoveCite, respectively. Of the $0.9 million loss
for the six months ended June 30, 2022, $0.5 million relates to the prior year. We account for our investment in NoveCite under the equity method. There were no comparable expenses for the three and six months ended June 30, 2021.
Other Expense, Net
|
Three months ended June 30,
|
||||||||||||
|
2022
|
2021
|
Change
|
||||||||||
|
(in thousands)
|
||||||||||||
|
PIPE transaction fees
|
$
|
(15
|
)
|
$
|
-
|
$
|
(15
|
)
|
||||
|
Interest expense, net
|
(13
|
)
|
(22
|
)
|
9
|
|||||||
|
Other (expense) income , net
|
14
|
-
|
14
|
|||||||||
|
Total other expense, net
|
$
|
(14
|
)
|
$
|
(22
|
)
|
$
|
8
|
||||
|
Six months ended June 30,
|
||||||||||||
|
2022
|
2021
|
Change
|
||||||||||
|
(in thousands)
|
||||||||||||
|
PIPE transaction fees
|
$
|
(1,007
|
)
|
$
|
-
|
$
|
(1,007
|
)
|
||||
|
Liquidated damages
|
(240
|
)
|
-
|
(240
|
)
|
|||||||
|
Interest expense, net
|
(14
|
)
|
(36
|
)
|
22
|
|||||||
|
Other (expense) income , net
|
105
|
11
|
94
|
|||||||||
|
Total other expense, net
|
$
|
(1,156
|
)
|
$
|
(25
|
)
|
$
|
(1,131
|
)
|
|||
For the three months ended June 30, 2022, we recognized an immaterial decrease in other expense, net when compared to the same period in 2021. During the six months ended June 30, 2022, our
increase in other expense, net was primarily due to fees related to the PIPE Transaction, which was allocated to the warrants issued in connection with the transaction. Additionally, we incurred a loss related to the liquidated damages we incurred
as a result of not timely filing the Q1 2022 10Q with the SEC. These increases in expense were offset by a decrease in interest expense and an increase in other income for the six months ended June 30, 2022 when compared to the same period in
2021.
Liquidity and Capital Resources
At June 30, 2022, we had cash and cash equivalents of approximately $19.4 million. On March 9, 2022, we issued 5,500,000 shares of common stock and Pre-Funded Warrants representing approximately
1,357,000 shares of common stock for net proceeds of approximately $11.0 million in connection with the PIPE Transaction. Pursuant to the purchase agreement entered into in respect of the PIPE Transaction, we are prohibited from issuing equity in
variable rate transactions for a period of one-year following consummation of the PIPE Transaction, including issuing equity under the Second Purchase Agreement.
We have to date incurred operating losses, and we expect these losses to continue in the future as we further develop our product development programs and operate as a publicly traded company.
Developing product candidates, conducting clinical trials and commercializing products are expensive, and we will need to raise substantial additional funds to achieve our strategic objectives. It will likely be some years before we obtain the
necessary regulatory approvals to commercialize one or more of our product candidates. Based on our current financial condition and forecasts of available cash, including as mentioned above, we believe we do not have sufficient funds to fund our
operations for the next twelve months from the filing of the financial statements contained in this Quarterly Report on Form 10-Q for the period ended June 30, 2022 (the “Q2 2022 10-Q”). There can be no assurance that we will ever be in a position
to commercialize IRX-2 or any other product candidate we may acquire, or that we will obtain any additional financing that we require in the future or, even if such financing is available, that it will be obtainable on terms acceptable to us.
In that regard, our future funding requirements will depend on many factors, including:
| • |
the terms and timing of any collaborative, licensing and other agreements that we may establish;
|
| • |
the cost and timing of regulatory approvals;
|
| • |
the cost and delays in product development as a result of any changes in regulatory oversight applicable to our products;
|
| • |
the cost and timing of establishing sales, marketing and distribution capabilities;
|
| • |
the effect of competition and market developments;
|
| • |
the cost of filing and potentially prosecuting, defending and enforcing any patent claims and other intellectual property rights;
|
| • |
the scope, rate of progress and cost of our clinical trials and other product development activities; and
|
| • |
future clinical trial results.
|
We plan to raise additional funds to support our product development activities and working capital requirements through the remaining availability under the Second Purchase Agreement (to the
extent we are permitted to use such agreement), public or private equity offerings, debt financings, corporate collaborations or other means. We may also seek governmental grants to support our clinical trials and preclinical trials. Further, we
may seek to raise capital to fund additional product development efforts even if we have sufficient funds for our planned operations. Any sale by us of additional equity or convertible debt securities could result in dilution to our stockholders.
There can be no assurance that any such required additional funding will be available to us at all or available on terms acceptable to us.
Further, to the extent that we raise additional funds through collaborative arrangements, it may be necessary to relinquish some rights to our technologies or grant sublicenses on terms that are
not favorable to us. If we are not able to secure additional funding when needed, we may have to delay the commercialize of our products, reduce the scope of or eliminate one or more research and development programs, which could have an adverse
effect on our business.
Cash Flows
Cash flows from operating, investing and financing activities, as reflected in the accompanying consolidated statements of cash flows, are summarized as follows:
|
For the six months ended
June 30,
|
||||||||||||
|
(in thousands)
|
2022
|
2021
|
Change
|
|||||||||
|
Cash provided by (used in):
|
||||||||||||
|
Operating activities
|
$
|
(9,425
|
)
|
$
|
(10,234
|
)
|
$
|
809
|
||||
|
Investing activities
|
(133
|
)
|
266
|
(399
|
)
|
|||||||
|
Financing activities
|
11,980
|
58,503
|
(46,523
|
)
|
||||||||
|
Net increase in cash and cash equivalents
|
$
|
2,422
|
$
|
48,535
|
$
|
(46,113
|
)
|
|||||
Net Cash Used in Operating Activities
The decrease in cash used in operating activities was due to a decrease in net loss of $0.6 million, after giving effect to adjustments made for non-cash transactions, offset by an
increase in cash provided by operating assets and liabilities of $1.4 million during the six months ended June 30, 2022 compared to the same period in 2021. The increase in cash provided by operating assets and liabilities was primarily driven by
increased accrued compensation due to higher headcount and severance as well as accrued costs for litigation matters, offset by a decrease in prepaid expenses and other current assets during the six months ended June 30, 2022 compared to the same
period in 2021.
Net Cash (Used in) Provided by Investing Activities
The increase in net cash used in investing activities was primarily due to purchases of capital equipment of $0.2 million offset by proceeds from the sale of fixed assets of $0.1 million during the
six months ended June 30, 2022 compared to the same period in 2021. Also, the six months ended June 30, 2021 included proceeds of approximately $0.3 million from the Merger and the Disposition transactions. There were no similar transactions
during the six months ended June 30, 2022.
Net Cash Provided by Financing Activities
The decrease in net cash provided by financing activities was primarily the result of a decrease in net proceeds from capital raises of approximately $47 million, net, offset by a
decrease in principal payments made for long-term debt arrangements of $0.5 million during the six months ended June 30, 2022 compared to the same period in 2021.
Critical Accounting Policies and Estimates
There were no significant changes in our critical accounting estimates during the three and six months ended June 30, 2022 from those described in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” section of the 10-K/A.
Recent Accounting Pronouncements
In June 2022, the Financial Accounting Standard Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”). The FASB issued ASU 2022-03 to (1) clarify the
guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) to amend a related illustrative example, and (3) to introduce
new disclosure requirements for equity related securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security
is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal
years with early adoption permitted. We are evaluating when to adopt the amendments in ASU 2022-02. We do not expect a material impact as a result of adopting this amendment.
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk.
|
Under the rules and regulations of the SEC, as a smaller reporting company we are not required to provide the information otherwise required by this item.
| Item 4. |
Controls and Procedures.
|
Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act, designed to ensure that information required to be disclosed in
our reports filed pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including
our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.
In designing and evaluating the disclosure controls and procedures, we recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance
of achieving the desired control objectives, and we were required to apply our judgment in evaluating the cost-benefit relationship of possible controls and procedures. We have carried out an evaluation as of the end of the period covered by this
Q2 2022 10-Q under the supervision, and with the participation, of our management, including our interim Chief Executive Officer and President (who serves as our principal executive officer) and our Chief Financial Officer (who serves as our
principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures.
Based on that evaluation, our interim Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the end of the period
covered by this Q2 2022 10-Q in providing reasonable assurance of achieving the desired control objectives due primarily to the material weaknesses discussed below.
Management’s Plan for Material Weaknesses in Internal Control over Financial Reporting
Upon completion of the Merger in March 2021 and the resulting change in our business model and strategy, we experienced a complete turnover of our employees, including all of the members of our
executive management team, which resulted in, among other things, our having insufficient accounting staff available to enable and ensure adequate segregation of duties and our lacking appropriate and complete documentation of policies and
procedures critical to the accomplishment of financial reporting objectives. The accounting personnel and documentation deficiencies each increase the risk that a material misstatement of our financial statements will not be prevented or detected
on a timely basis.
Additionally, we were unable to timely file our Q1 2022 10Q with the SEC due to identifying errors in our financial statements reported in the Original 10-K for the years ended December 31, 2021
and 2020 during our preparation of the financial statements for the quarter ended March 31, 2022. Management concluded that the errors were the result of accounting personnel’s’ lack of technical proficiency in complex matters. We filed an
amendment to our Annual Report on Form 10-K/A for the years ended December 31, 2021 and 2020 on June 30, 2022 to correct the errors in our financial statements for the years ended December 31, 2021 and 2020 and for the quarters ended June 30, 2020,
September 30, 2020, March 31, 2021, June 30, 2021 and September 30, 2021. See the Form 10-K/A for further detail on the restatement.
Management plans to implement measures designed to ensure that the deficiencies contributing to the ineffectiveness of our internal controls over financial reporting are promptly remediated, such
that the internal controls are designed, implemented and operating effectively. The remediation actions planned include:
| • |
hiring additional accounting personnel in a number, and with experience, to allow for proper segregation of duties and the accurate application of GAAP, including a chief financial officer, whom we hired in May of 2022;
|
| • |
developing and implementing, and then monitoring the effectiveness of, written policies and procedures required to achieve our financial reporting objectives in a timely manner, including policies and procedures relating to internal
control over financial reporting;
|
| • |
providing additional training to accounting personnel; and.
|
| • |
consulting with an accounting advisor for technical, complex and non-recurring matters, with whom we have engaged and begun consulting.
|
We are committed to developing a strong internal control environment, and we believe the remediation efforts that we have implemented and will implement will result in significant improvements in
our control environment. We hired our Vice President of Finance in the second quarter of 2021 to oversee all accounting and financial reporting matters, including implementing a framework for internal controls over financial reporting, and we hired
a full-time controller at the beginning of 2022. Also, during the fourth quarter of 2021, we engaged a third-party consulting firm with expertise in implementing the framework for internal controls over financial reporting, and we are making
progress on developing this framework, including identifying key controls, creating process narratives or flowcharts, developing test plans, and beginning the testing of the key controls to ensure the framework is complete and effective. Our
management will continue to monitor and evaluate the relevance of our risk-based approach and the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and
implementing additional enhancements or improvements, as necessary.
Changes in Internal Control over Financial Reporting
Other than described above, there was no change in our internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
PART II — OTHER INFORMATION
| Item 1. |
Legal Proceedings.
|
This information is set forth under “Note 9—Commitments and Contingencies—Legal Matters” to the condensed consolidated financial statements included in this Q2 2022 10-Q and is incorporated in this
Item 1 by reference.
From time to time we may become involved in legal proceedings arising in the ordinary course of business. Except as described above, we do not believe there is any litigation pending that could
have, individually or in the aggregate, a material adverse effect on our results of operations, financial condition or cash flows.
| Item 1A. |
Risk Factors.
|
During the reporting period covered by this Quarterly Report on Form 10-Q, there have been no material changes to our risk factors as set forth in the 10-K/A
and Q1 2022 10-Q.
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds.
|
None
| Item 3. |
Defaults Upon Senior Securities.
|
None.
| Item 4. |
Mine Safety Disclosures.
|
Not Applicable.
| Item 5. |
Other Information.
|
None.
| Item 6. |
Exhibits.
|
|
Exhibit
|
Description
|
Incorporated By
Reference
|
||
|
10.1*
|
Amended and Restated Executive Employment Agreement, dated as of May 10, 2022, by and between Brooklyn ImmunoTherapeutics, Inc. and Andrew Jackson.
|
Exhibit 10.1 to Form 8-K filed on May 31, 2022
|
||
|
10.2*#
|
Separation Agreement and General Release, dated May 25, 2022, by and between Brooklyn ImmunoTherapeutics, Inc. and Howard J. Federoff.
|
Exhibit 10.2 to Form 8-K filed on May 31, 2022
|
||
|
Torrey Pines Science Center Lease, dated March 31, 2022, between Brooklyn ImmunoTherapeutics, Inc. and Torrey Pines Science Center Limited Partnership..
|
Filed herewith
|
|||
|
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
Filed herewith
|
|||
|
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
Filed herewith
|
|||
|
Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
Furnished herewith
|
|||
|
Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
Furnished herewith
|
|||
|
101.INS
|
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
|
Filed herewith
|
||
|
101.SCH
|
Inline XBRL Taxonomy Extension Schema Document
|
Filed herewith
|
||
|
101.CAL
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document
|
Filed herewith
|
||
|
101.DEF
|
Inline XBRL Taxonomy Extension Definition Linkbase Document
|
Filed herewith
|
||
|
101.LAB
|
Inline XBRL Taxonomy Extension Label Linkbase Document
|
Filed herewith
|
||
|
101.PRE
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
Filed herewith
|
||
|
104
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
|
* Management contract or compensation plan or arrangement
# Pursuant to Item 601(a)(5) of Regulation S-K, schedules and similar attachments to this exhibit have been omitted because they do not contain information material to an investment or voting decision and
such information is not otherwise disclosed in such exhibit. The Company will supplementally provide a copy of any omitted schedule or similar attachment to the U.S. Securities and Exchange Commission or its staff upon request.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
BROOKLYN IMMUNOTHERAPEUTICS, INC.
|
||
|
Date: August 11, 2022
|
By:
|
/s/ Andrew Jackson
|
|
Andrew Jackson
|
||
|
Chief Financial Officer
|
||
|
(on behalf of the Registrant and as Principal Financial Officer)
|
||
39
Exhibit 10.3
TORREY PINES SCIENCE CENTER
LEASE
This Lease (the "Lease"), dated as of the date set forth in Section 1 of the Summary of Basic Lease Information (the "Summary"), below, is made by and between TORREY PINES SCIENCE CENTER LIMITED PARTNERSHIP, a Delaware limited partnership ("Landlord"), and BROOKLYN IMMUNOTHERAPEUTICS INC., a Delaware
corporation ("Tenant").
SUMMARY OF BASIC LEASE INFORMATION
|
TERMS OF LEASE
|
DESCRIPTION
|
||
| 1. |
Date:
|
March 31, 2022
|
|
| 2. |
Premises
(Article 1).
|
||
|
2.1
|
Building:
|
That certain two (2)-story building located at 10355 Science Center Drive, San Diego, California 92121, containing a total of 46,488 rentable square feet.
|
|
|
2.2
|
Premises:
|
Approximately 5,193 rentable square feet of space located on the first (1st) floor of the Building and commonly known as Suite 150, as further set forth in Exhibit A to
the Lease.
|
|
| 3. |
Lease Term
(Article 2).
|
||
|
3.1
|
Length of Term:
|
Five (5) years and two (2) months.
|
|
|
3.2
|
Lease Commencement Date:
|
The earlier to occur of (i) the date upon which Tenant first commences to conduct business in the Premises and (ii) the Possession Date (as that term is defined in Section 1.1.1 of this Lease), which
Possession Date is anticipated to be August 1, 2022 (or earlier if the current tenant’s lease of the Premises can be terminated early, but in no event prior to April 1, 2022).
|
|
|
3.3
|
Lease Expiration Date:
|
If the Lease Commencement Date shall be the first day of a calendar month, then the day immediately preceding the sixty-second (62nd) month anniversary of the Lease Commencement Date; or, if the Lease
Commencement Date shall be other than the first day of a calendar month, then the last day of the month in which the sixty-second (62nd) month anniversary of the Lease Commencement Date occurs.
|
|
|
4.
|
Base Rent (Article 3):
|
|
Lease Year
|
Annual
Base Rent
|
Monthly
Installment
of Base Rent
|
Approximate
Monthly Base
Rent per Rentable
Square Foot*
|
|||||||
|
1**
|
|
$395,706.60
|
$32,975.55
|
$6.35
|
||||||
|
2
|
$407,577.84
|
$33,964.82
|
$6.54
|
|||||||
|
3
|
$419,805.12
|
$34,983.76
|
$6.74
|
|||||||
|
4
|
$432,399.24
|
$36,033.27
|
$6.94
|
|||||||
|
5
|
$445,371.24
|
$37,114.27
|
$7.15
|
|||||||
|
6 (2 months)
|
$458,732.40
|
$38,227.70
|
$7.36
|
* The calculation of the Monthly Base Rent per Rentable Square Foot reflects an annual increase of 3%, rounded to the nearest cent, after the previous Lease Year.
** Tenant's obligation to pay Monthly Installment of Base Rent for the second (2nd) full calendar month and the third (3rd) full calendar month of the Lease Term shall be subject to the terms of Section 3.2 of the Lease.
|
5.
|
Tenant Improvement Allowance (Exhibit B):
|
None. Tenant Improvements to be constructed on a
turn-key basis pursuant to the Tenant Work Letter attached hereto as Exhibit B.
|
|
6.
|
Tenant's Share
(Article 4):
|
Eleven and 17/100 percent (11.17%).
|
|
7.
|
Permitted Use
(Article 5):
|
The Premises shall be used only for general office, research and development, engineering, laboratory, storage and/or warehouse uses, including, but not limited to, administrative offices and other lawful uses
reasonably related to or incidental to such specified uses, all (i) consistent with first class life sciences projects in the La Jolla area of San Diego, California ("First Class Life Sciences Projects"),
and (ii) in compliance with, and subject to, Applicable Laws as that term is defined in Article 24) and the terms of this Lease.
|
|
8.
|
Security Deposit
(Article 21):
|
$54,608.24
|
| 9. |
Parking
(Article 28):
|
Fourteen (14) unreserved parking spaces at no cost to Tenant (other than those costs which are included within Direct Expenses) during the Lease Term and any Option Term, subject to the terms of Article 28
of the Lease.
|
|
10.
|
Address of Tenant
(Section 29.18):
|
Brooklyn Immunotherapeutics Inc.
10531 4S Commons Dr, Suite 166-550
San Diego, CA 92127
(Prior to Lease Commencement Date)
|
|
and
|
||
|
Brooklyn Immunotherapeutics Inc.
10355 Science Center Drive, Suite 150
San Diego, CA 92121
(After Lease Commencement Date)
|
||
|
11.
|
Address of Landlord
(Section 29.18):
|
See Section 29.18 of the Lease.
|
|
12.
|
Broker(s)
(Section 29.24):
|
Tenant: Hughes Marino
|
|
Landlord: None.
|
|
1.
|
PREMISES, BUILDING, PROJECT, AND COMMON AREAS
|
|
1.1
|
Premises, Building, Project and Common Areas.
|
1.1.1 The Premises. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the premises set forth in Section 2.2 of the
Summary (the "Premises"). The outline of the Premises is set forth in Exhibit A attached hereto. The outline of the "Building" and the "Project," as those
terms are defined in Section 1.1.2 below, are further depicted on the Site Plan attached hereto as Exhibit A-1. The parties hereto agree that the lease of the Premises is upon and subject to
the terms, covenants and conditions herein set forth, and Tenant covenants as a material part of the consideration for this Lease to keep and perform each and all of such terms, covenants and conditions by it to be kept and performed and that this
Lease is made upon the condition of such performance. The parties hereto hereby acknowledge that the purpose of Exhibit A is to show the approximate location of the Premises only, and such Exhibit is
not meant to constitute an agreement, representation or warranty as to the construction of the Premises, the precise area thereof or the specific location of the "Common Areas," as that term is defined in Section 1.1.3, below, or the
elements thereof or of the accessways to the Premises or the "Project," as that term is defined in Section 1.1.2, below. Except as specifically set forth in this Lease and in the Tenant Work Letter attached hereto as Exhibit B (the "Tenant Work Letter"), Landlord shall tender possession of the Premises to Tenant in its existing, "as is" condition, and Landlord shall not be
obligated to provide or pay for any improvement work or services related to the improvement of the Premises. Landlord shall be deemed to have tendered possession of the Premises to Tenant upon the date the Premises is “Ready for Occupancy,” as such
term is defined in the Tenant Work Letter (the ""Possession Date"), and no action by Tenant shall be required therefor. If for any reason, Landlord is delayed in tendering possession of the Premises to Tenant
by any particular date, Landlord shall not be subject to any liability for such failure, and the validity of this Lease shall not be impaired. Neither Landlord nor any agent of Landlord has made any representation or warranty regarding the
condition of the Premises, the Building or the Project or with respect to the suitability of any of the foregoing for the conduct of Tenant's business, except as specifically set forth in this Lease and the Tenant Work Letter. Any process utilities
shall be provided without warranty, in their currently existing, "as-is" condition.
1.1.2 The Building and The Project. The Premises constitutes a portion of the building set forth in Section 2.1 of the Summary (the "Building"). The Building is part of an office/laboratory project currently known as "Torrey Pines Science Center." The term "Project," as used in this Lease, shall mean (i)
the Building and the Common Areas, (ii) the land (which is improved with landscaping, parking facilities and other improvements) upon which the Building and the Common Areas are located, and (iii) at Landlord's discretion, any additional real
property, areas, land, buildings or other improvements added thereto outside of the Project.
1.1.3 Common Areas. Tenant shall have the non-exclusive right to use in common with other tenants in the Project, and subject to the rules and
regulations referred to in Article 5 of this Lease, those portions of the Project which are provided, from time to time, for use in common by Landlord, Tenant and any other tenants of the Project (such areas, together with such other
portions of the Project designated by Landlord, in its discretion, are collectively referred to herein as the "Common Areas"). The manner in which the Common Areas are maintained and operated shall be at the
sole discretion of Landlord and the use thereof shall be subject to such rules, regulations and restrictions as Landlord may make from time to time. Landlord reserves the right to close temporarily, make alterations or additions to, or change the
location of elements of the Project and the Common Areas.
1.2 Rentable Square Feet of Premises. The rentable square footage of the Premises is hereby deemed to be as set forth in Section 2.2 of
the Summary, and shall not be subject to measurement or adjustment during the Lease Term.
| 2. |
LEASE TERM; OPTION TERM
|
2.1 Lease Term. The terms and provisions of this Lease shall be effective as of the date of this Lease. The term of this Lease (the "Lease Term") shall be as set forth in Section 3.1 of the Summary, shall commence on the date set forth in Section 3.2 of the Summary (the "Lease Commencement Date"),
and shall terminate on the date set forth in Section 3.3 of the Summary (the "Lease Expiration Date") unless this Lease is sooner terminated as hereinafter provided. For purposes of this Lease, the
term "Lease Year" shall mean each consecutive twelve (12) month period during the Lease Term. At any time during the Lease Term, Landlord may deliver to Tenant a notice in the form as set forth in Exhibit C, attached hereto, as a confirmation only of the information set forth therein, which Tenant shall execute and return to Landlord within ten (10) business days of receipt thereof.
2.2 Option Term.
2.2.1 Option Right. Landlord hereby grants to the originally named Tenant herein ("Original Tenant"), and
any assignee or Original Tenant’s entire interest in this Lease pursuant to the terms and condition of Section 14.8, below (a “Permitted Transferee Assignee”), one (1) option to extend the Lease Term for the
entire Premises for a period of five (5) years (the "Option Term"), which option shall be irrevocably exercised only by written notice delivered by Tenant to Landlord not earlier than twelve (12) months and not
later than nine (9) months prior to the expiration of the initial Lease Term, provided that the following conditions (the "Option Conditions") are satisfied: (i) as of
the date of delivery of such notice, Tenant is not in default under this Lease beyond any applicable notice and cure period expressly set forth in this Lease; (ii) Tenant is not in default under this Lease beyond any applicable notice and cure period
expressly set forth in this Lease at the time Landlord and Tenant execute an amendment to this Lease extending the Lease Term for the Option Term, and as of the end of the Lease Term, Tenant is not in default under this Lease beyond any applicable
notice and cure period expressly set forth in this Lease; (iii) Tenant has not previously been in default under this Lease, beyond applicable notice and cure periods expressly set forth in this Lease, more than once in the prior twelve (12) month
period; and (iv) the Lease then remains in full force and effect and Original Tenant occupies the entire Premises at the time the option to extend is exercised and as of the commencement of the Option Term. Landlord may, at Landlord's option,
exercised in Landlord's sole and absolute discretion, waive any of the Option Conditions in which case the option, if otherwise properly exercised by Tenant, shall remain in full force and effect. Upon the proper exercise of such option to extend,
and provided that Tenant satisfies all of the Option Conditions (except those, if any, which are waived by Landlord), the Lease Term, as it applies to the Premises, shall be extended for a period of five (5) years. The rights contained in this Section
2.2 shall be personal to Original Tenant and any Permitted Transferee Assignee and may be exercised by Original Tenant or a Permitted Transferee Assignee only (and not by any other assignee, sublessee or "Transferee," as that term is defined in
Section 14.1 of this Lease, of Tenant's interest in this Lease).
2.2.2 Option Rent. The annual Rent payable by Tenant during the Option Term (the "Option Rent") shall be
equal to the "Fair Rental Value," as that term is defined below, for the Premises as of the commencement date of the Option Term; provided, however, that the base rent component of Fair Rental Value, shall not be lower than one hundred three percent
(103%) of the annual then existing "Base Rent," as that term is set forth in Section 3.1 of this Lease in effect immediately prior to the commencement of such Option Term (and the Option Rent shall increase by three percent (3%) per year
during the Option Term on each anniversary of the commencement of the Option Term). The "Fair Rental Value," as used in this Lease, shall be equal to the annual rent per rentable square foot (including
additional rent and considering any "base year" or "expense stop" applicable thereto), including all escalations, at which tenants (pursuant to leases consummated within the twelve (12) month period preceding the first day of the Option Term), are
leasing non-sublease, non-encumbered, non-equity space which is not significantly greater or smaller in size than the subject space, for a comparable lease term, in an arm's length transaction, which comparable space is located in the "Comparable
Buildings," as that term is defined in this Section 2.2.2, below (transactions satisfying the foregoing criteria shall be known as the "Comparable Transactions"), taking into consideration the following
concessions (the "Concessions"): (a) rental abatement concessions, if any, being granted such tenants in connection with such comparable space; (b) tenant improvements or allowances provided or to be provided
for such comparable space, and taking into account the value, if any, of the existing improvements in the subject space, such value to be based upon the age, condition, design, quality of finishes and layout of the improvements and the extent to
which the same can be utilized by a general office user other than Tenant; and (c) other reasonable monetary concessions being granted such tenants in connection with such comparable space; provided, however, that in calculating the Fair Rental
Value, no consideration shall be given to (i) the fact that Landlord is or is not required to pay a real estate brokerage commission in connection with Tenant's exercise of its right to extend the Lease Term, or the fact that landlords are or are not
paying real estate brokerage commissions in connection with such comparable space, and (ii) any period of rental abatement, if any, granted to tenants in comparable transactions in connection with the design, permitting and construction of tenant
improvements in such comparable spaces. The Fair Rental Value shall additionally include a determination as to whether, and if so to what extent, Tenant must provide Landlord with financial security, such as a letter of credit or guaranty, for
Tenant's Rent obligations in connection with Tenant's lease of the Premises during the Option Term. Such determination shall be made by reviewing the extent of financial security then generally being imposed in Comparable Transactions from tenants of
comparable financial condition and credit history to the then existing financial condition and credit history of Tenant (with appropriate adjustments to account for differences in the then-existing financial condition of Tenant and such other
tenants). The Concessions (A) shall be reflected in the effective rental rate (which effective rental rate shall take into consideration the total dollar value of such Concessions as amortized on a straight-line basis over the applicable term of the
Comparable Transaction (in which case such Concessions evidenced in the effective rental rate shall not be granted to Tenant)) payable by Tenant, or (B) at Landlord’s election, all such Concessions shall be granted to Tenant in kind. Notwithstanding
the foregoing, during the Option Term, the Option Rent shall increase by three percent (3%) per annum on each anniversary of the first (1st) day of the Option Term. The term "Comparable Buildings" shall mean
the Building and those other first-class institutionally-owned life sciences buildings located in the Torrey Pines market area of San Diego, California that are comparable in age (based on the date of original construction or the latest major
renovation) location, quality of construction, services and amenities.
2.2.3 Determination of Option Rent. In the event Tenant timely and appropriately exercises an option to extend the Lease Term, Landlord shall
notify Tenant of Landlord's determination of the Option Rent on or before the Lease Expiration Date. If Tenant, on or before the date which is thirty (30) days following the date upon which Tenant receives Landlord's determination of the Option Rent,
in good faith objects to Landlord's determination of the Option Rent, then Landlord and Tenant shall attempt to agree upon the Option Rent using their best good-faith efforts. If Landlord and Tenant fail to reach agreement on or before the
commencement of the Option Term (the "Outside Agreement Date"), then each party shall make a separate determination of the Option Rent, within five (5) days, and such determinations shall be submitted to
arbitration in accordance with Sections 2.2.3.1 through 2.2.3.7, below. If Tenant fails to object to Landlord's determination of the Option Rent within the time period set forth herein, then Tenant shall be deemed to have accepted
Landlord's determination of Option Rent.
2.2.3.1 Landlord and Tenant shall each appoint one arbitrator who shall be, at the option of the appointing party, a real estate broker, appraiser or attorney who shall have been active over the
five (5) year period ending on the date of such appointment in the leasing or appraisal, as the case may be, of comparable commercial life science buildings in the La Jolla area of San Diego, California. The determination of the arbitrators shall be
limited solely to the issue of whether Landlord's or Tenant's submitted Option Rent is the closest to the actual Option Rent, taking into account the requirements of Section 2.2.2 of this Lease, as determined by the arbitrators. Each such
arbitrator shall be appointed within fifteen (15) days after the Outside Agreement Date. Landlord and Tenant may consult with their selected arbitrators prior to appointment and may select an arbitrator who is favorable to their respective positions.
The arbitrators so selected by Landlord and Tenant shall be deemed "Advocate Arbitrators."
2.2.3.2 The two (2) Advocate Arbitrators so appointed shall be specifically required pursuant to an engagement letter within ten (10) days of the date of the appointment of the last appointed
Advocate Arbitrator to agree upon and appoint a third arbitrator ("Neutral Arbitrator") who shall be qualified under the same criteria set forth hereinabove for qualification of the two Advocate Arbitrators,
except that neither the Landlord or Tenant or either parties' Advocate Arbitrator may, directly or indirectly, consult with the Neutral Arbitrator prior or subsequent to his or her appearance. The Neutral Arbitrator shall be retained via an
engagement letter jointly prepared by Landlord's counsel and Tenant’s counsel.
2.2.3.3 The three arbitrators shall, within thirty (30) days of the appointment of the Neutral Arbitrator, reach a decision as to whether the parties shall use Landlord's or Tenant's submitted
Option Rent, and shall notify Landlord and Tenant thereof.
2.2.3.4 The decision of the majority of the three arbitrators shall be binding upon Landlord and Tenant.
2.2.3.5 If either Landlord or Tenant fails to appoint an Advocate Arbitrator within fifteen (15) days after the Outside Agreement Date, then either party may petition the presiding judge of the
Superior Court of San Diego County to appoint such Advocate Arbitrator subject to the criteria in Section 2.2.3.1 of this Lease, or if he or she refuses to act, either party may petition any judge having jurisdiction over the parties to
appoint such Advocate Arbitrator.
2.2.3.6 If the two (2) Advocate Arbitrators fail to agree upon and appoint the Neutral Arbitrator within ten (10) business days following the date of the appointment of the last appointed Advocate
Arbitrator, then either party may petition the presiding judge of the Superior Court of San Diego County to appoint the Neutral Arbitrator, subject to criteria in Section 2.2.3.2 of this Lease, or if he or she refuses to act, either party may
petition any judge having jurisdiction over the parties to appoint such arbitrator.
2.2.3.7 The cost of the arbitration shall be paid by Landlord and Tenant equally.
2.2.3.8 In the event that the Option Rent shall not have been determined pursuant to the terms hereof prior to the commencement of the Option Term, Tenant shall be required to pay the Option Rent
initially provided by Landlord to Tenant, and upon the final determination of the Option Rent, the payments made by Tenant shall be reconciled with the actual amounts of Option Rent due, and the appropriate party shall make any corresponding payment
to the other party.
|
3.
|
BASE RENT
|
3.1 Base Rent. Tenant shall pay, without prior notice or demand, to Landlord or Landlord's agent at the management office of the Project, or,
at Landlord's option, at such other place as Landlord may from time to time designate in writing, by a check for currency which, at the time of payment, is legal tender for private or public debts in the United States of America, base rent ("Base
Rent") as set forth in Section 4 of the Summary, payable in equal monthly installments as set forth in Section 4 of the Summary in advance on or before the first day of each and every calendar month during the Lease Term, without any setoff or
deduction whatsoever. The Base Rent and Tenant's Share of the estimated Direct Expenses (as those terms are defined in Sections 4.2.6 and 4.2.2 of this Lease) for the first full month of the Lease Term in an amount equal to $47,105.55
(i.e., $32,975.55 for the Base Rent and $14,130.00 for Tenant's Share of the estimated Direct Expenses for the first full month of the Lease Term) shall be paid at the time of Tenant's execution of this Lease. If any Rent payment date (including the
Lease Commencement Date) falls on a day of the month other than the first day of such month or if any payment of Rent is for a period which is shorter than one month, the Rent for any fractional month shall accrue on a daily basis for the period from
the date such payment is due to the end of such calendar month or to the end of the Lease Term at a rate per day which is equal to 1/365 of the applicable annual Rent. All other payments or adjustments required to be made under the terms of this
Lease that require proration on a time basis shall be prorated on the same basis.
3.2 Abated Base Rent. Provided that Tenant is not then in default of this Lease beyond any applicable notice and cure period expressly set
forth in this Lease, then during the second (2nd) full calendar month and third (3rd) full calendar month of the Lease Term (the “Rent Abatement Period”), Tenant shall not be obligated to pay any Base Rent
otherwise attributable to the Premises during such Rent Abatement Period (the “Rent Abatement”). Landlord and Tenant acknowledge that the aggregate amount of the Rent Abatement equals $65,951.10. Tenant
acknowledges and agrees that the foregoing Rent Abatement has been granted to Tenant as additional consideration for entering into this Lease, and for agreeing to pay the rental and performing the terms and conditions otherwise required under this
Lease. If Tenant shall be in default under this Lease, and shall fail to cure such default within the notice and cure period, if any, permitted for cure pursuant to the express terms and conditions of the Lease, then the dollar amount of the
unapplied portion of the Rent Abatement as of the date of such default shall be converted to a credit to be applied to the Base Rent applicable at the end of the Lease Term and Tenant shall immediately be obligated to begin paying Base Rent for the
Premises in full. In addition, if this Lease is terminated for any reason other than a default by Landlord, then for purposes of determining Landlord’s damages under Section 1951 of the California Civil Code, if any, the dollar amount of the
unapplied portion of the Rent Abatement as of the date of such termination shall be converted to a credit to be applied to the Base Rent applicable at the end of the Lease Term.
|
4.
|
ADDITIONAL RENT
|
4.1 General Terms.
4.1.1 Direct Expenses; Additional Rent. In addition to paying the Base Rent specified in Article 3 of this Lease, Tenant shall pay "Tenant's Share" of the annual "Direct Expenses," as those terms are defined in Sections 4.2.6 and 4.2.2 of this Lease, respectively. Such payments by Tenant, together
with any and all other amounts payable by Tenant to Landlord pursuant to the terms of this Lease, are hereinafter collectively referred to as the "Additional Rent", and the Base Rent and the Additional Rent are
herein collectively referred to as "Rent." All amounts due under this Article 4 as Additional Rent shall be payable for the same periods and in the same manner as the Base Rent. Without limitation on
other obligations of Tenant which survive the expiration of the Lease Term, the obligations of Tenant to pay the Additional Rent provided for in this Article 4 shall survive the expiration of the Lease Term.
4.1.2 Triple Net Lease. Landlord and Tenant acknowledge that, except as otherwise provided to the contrary in this Lease, it is their intent and
agreement that this Lease be a "TRIPLE NET" lease and that as such, the provisions contained in this Lease are intended to pass on to Tenant or reimburse Landlord for the costs and expenses reasonably
associated with this Lease, the Building and the Project, and Tenant's operation therefrom. To the extent such costs and expenses payable by Tenant cannot be charged directly to, and paid by, Tenant, such costs and expenses shall be paid by Landlord
but reimbursed by Tenant as Additional Rent.
4.2 Definitions of Key Terms Relating to Additional Rent. As used in this Article 4, the following terms shall have the meanings
hereinafter set forth:
4.2.1 Intentionally Deleted.
4.2.2 "Direct Expenses" shall mean "Operating Expenses" and "Tax Expenses."
4.2.3 "Expense Year" shall mean each calendar year in which any portion of the Lease Term falls, through and including the calendar year in which the
Lease Term expires, provided that Landlord, upon notice to Tenant, may change the Expense Year from time to time to any other twelve (12) consecutive month period, and, in the event of any such change, Tenant's Share of Direct Expenses shall be
equitably adjusted for any Expense Year involved in any such change.
4.2.4 "Operating Expenses" shall mean all expenses, costs and amounts of every kind and nature which Landlord pays or accrues during any Expense Year
because of or in connection with the ownership, management, maintenance, security, repair, replacement, restoration or operation of the Project, or any portion thereof. Without limiting the generality of the foregoing, Operating Expenses shall
specifically include any and all of the following: (i) the cost of supplying all utilities, the cost of operating, repairing, maintaining, and renovating the utility, telephone, mechanical, sanitary, storm drainage, and elevator systems, and the cost
of maintenance and service contracts in connection therewith; (ii) the cost of licenses, certificates, permits and inspections and the cost of contesting any governmental enactments which may affect Operating Expenses, and the costs incurred in
connection with a governmentally mandated transportation system management program or similar program; (iii) the cost of all insurance carried by Landlord in connection with the Project and Premises as reasonably determined by Landlord; (iv) the cost
of landscaping, relamping, and all supplies, tools, equipment and materials used in the operation, repair and maintenance of the Project, or any portion thereof; (v) the cost of parking area operation, repair, restoration, and maintenance; (vi) fees
and other costs, including management and/or incentive fees, consulting fees, legal fees and accounting fees, of all contractors and consultants in connection with the management, operation, maintenance and repair of the Project; (vii) payments under
any equipment rental agreements and the fair rental value of any management office space; (viii) subject to item (f), below, wages, salaries and other compensation and benefits, including taxes levied thereon, of all persons engaged in the operation,
maintenance and security of the Project; (ix) costs under any instrument pertaining to the sharing of costs by the Project; (x) operation, repair, maintenance and replacement of all systems and equipment and components thereof of the Project; (xi)
the cost of janitorial, alarm, security and other services, replacement of wall and floor coverings, ceiling tiles and fixtures in common areas, maintenance and replacement of curbs and walkways, repair to roofs and re-roofing; (xii) amortization
(including interest on the unamortized cost) over such period of time as Landlord shall reasonably determine, of the cost of acquiring or the rental expense of personal property used in the maintenance, operation and repair of the Project, or any
portion thereof; (xiii) the cost of capital improvements or other costs incurred in connection with the Project (A) which are intended to effect economies in the operation or maintenance of the Project, or any portion thereof, or to reduce current or
future Operating Expenses or to enhance the safety or security of the Project or its occupants, (B) that are required to comply with present or anticipated conservation programs, (C) which are replacements or modifications of nonstructural items
located in the Common Areas required to keep the Common Areas in good order or condition, (D) that are required under any governmental law or regulation, or (E) which are repairs, replacements or modifications to the Building Systems (as defined in Section
7.1, below); provided, however, that any capital expenditure shall be amortized (including interest on the amortized cost) over such period of time as Landlord shall reasonably determine; and (xiv) costs, fees, charges or assessments imposed
by, or resulting from any mandate imposed on Landlord by, any federal, state or local government for fire and police protection, trash removal, community services, or other services which do not constitute "Tax Expenses" as that term is defined in Section
4.2.5, below, (xv) cost of tenant relation programs reasonably established by Landlord, and (xvi) payments under any easement, license, operating agreement, declaration, restrictive covenant, or instrument pertaining to the sharing of costs by
the Building, including, without limitation, any covenants, conditions and restrictions affecting the property, and reciprocal easement agreements affecting the property, any parking licenses, and any agreements with transit agencies affecting the
Property (collectively, "Underlying Documents"). Notwithstanding the foregoing, for purposes of this Lease, Operating Expenses shall not, however, include:
(a) costs, including legal fees, space planners' fees, advertising and promotional expenses (except as otherwise set forth above), and brokerage fees incurred in connection with the original
construction or development, or original or future leasing of the Project, and costs, including permit, license and inspection costs, incurred with respect to the installation of tenant improvements made for new tenants initially occupying space in
the Project after the Lease Commencement Date or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space for tenants or other occupants of the Project (excluding, however, such costs relating to any common
areas of the Project or parking facilities);
(b) except as set forth in items (xii), (xiii), and (xiv) above, depreciation, interest and principal payments on mortgages and other debt costs, if any, penalties and interest;
(c) costs for which the Landlord is reimbursed by any tenant or occupant of the Project or by insurance by its carrier or any tenant's carrier or by anyone else, and electric power costs for
which any tenant directly contracts with the local public service company;
(d) any bad debt loss, rent loss, or reserves for bad debts or rent loss;
(e) costs associated with the operation of the business of the partnership or entity which constitutes the Landlord, as the same are distinguished from the costs of operation of the Project
(which shall specifically include, but not be limited to, accounting costs associated with the operation of the Project). Costs associated with the operation of the business of the partnership or entity which constitutes the Landlord include costs of
partnership accounting and legal matters, costs of defending any lawsuits with any mortgagee (except as the actions of the Tenant may be in issue), costs of selling, syndicating, financing, mortgaging or hypothecating any of the Landlord's interest
in the Project, and costs incurred in connection with any disputes between Landlord and its employees, between Landlord and Project management, or between Landlord and other tenants or occupants;
(f) the wages and benefits of any employee who does not devote substantially all of his or her employed time to the Project unless such wages and benefits are prorated to reflect time spent
on operating and managing the Project vis-a-vis time spent on matters unrelated to operating and managing the Project; provided, that in no event shall Operating Expenses for purposes of this Lease include wages and/or benefits attributable to
personnel above the level of Project manager;
(g) amount paid as ground rental for the Project by the Landlord;
(h) except for a Project management fee to the extent allowed pursuant to item (l) below, overhead and profit increment paid to the Landlord or to subsidiaries or affiliates of the Landlord
for services in the Project to the extent the same exceeds the costs of such services rendered by qualified, first-class unaffiliated third parties on a competitive basis;
(i) any compensation paid to clerks, attendants or other persons in commercial concessions operated by the Landlord, provided that any compensation paid to any concierge at the Project
shall be includable as an Operating Expense;
(j) rentals and other related expenses incurred in leasing air conditioning systems, elevators or other equipment which if purchased the cost of which would be excluded from Operating
Expenses as a capital cost, except equipment not affixed to the Project which is used in providing engineering, janitorial or similar services and, further excepting from this exclusion such equipment rented or leased to remedy or ameliorate an
emergency condition in the Project ;
(k) all items and services for which Tenant or any other tenant in the Project reimburses Landlord or which Landlord provides selectively to one or more tenants (other than Tenant) without
reimbursement;
(l) any costs expressly excluded from Operating Expenses elsewhere in this Lease;
(m) rent for any office space occupied by Project management personnel to the extent the size or rental rate of such office space exceeds the size or fair market rental value of office space
occupied by management personnel of the comparable buildings in the vicinity of the Building, with adjustment where appropriate for the size of the applicable project;
(n) costs arising from the gross negligence or willful misconduct of Landlord in connection with this Lease; and
(o) costs incurred to comply with laws relating to the removal of hazardous material (as defined under applicable law) which was in existence in the Building or on the Project prior to the
Lease Commencement Date, and was of such a nature that a federal, State or municipal governmental authority, if it had then had knowledge of the presence of such hazardous material, in the state, and under the conditions that it then existed in the
Building or on the Project, would have then required the removal of such hazardous material or other remedial or containment action with respect thereto; and costs incurred to remove, remedy, contain, or treat hazardous material, which hazardous
material is brought into the Building or onto the Project after the date hereof by Landlord or any other tenant of the Project and is of such a nature, at that time, that a federal, State or municipal governmental authority, if it had then had
knowledge of the presence of such hazardous material, in the state, and under the conditions, that it then exists in the Building or on the Project, would have then required the removal of such hazardous material or other remedial or containment
action with respect thereto.
If Landlord is not furnishing any particular work or service (the cost of which, if performed by Landlord, would be included in Operating Expenses) to a tenant who has undertaken to perform such work
or service in lieu of the performance thereof by Landlord, Operating Expenses shall be deemed to be increased by an amount equal to the additional Operating Expenses which would reasonably have been incurred during such period by Landlord if it had
at its own expense furnished such work or service to such tenant. If the Project is not at least one hundred percent (100%) occupied during all or a portion of any Expense Year, Landlord shall make an appropriate adjustment to the components of
Operating Expenses for such year to determine the amount of Operating Expenses that would have been incurred had the Project been one hundred percent (100%) occupied; and the amount so determined shall be deemed to have been the amount of Operating
Expenses for such year.
4.2.5 Taxes.
4.2.5.1 "Tax Expenses" shall mean all federal, state, county, or local governmental or municipal taxes, fees, charges or other impositions of every kind and
nature, whether general, special, ordinary or extraordinary (including, without limitation, real estate taxes, general and special assessments, transit taxes, leasehold taxes or taxes based upon the receipt of rent, including gross receipts or sales
taxes applicable to the receipt of rent, unless required to be paid by Tenant, personal property taxes imposed upon the fixtures, machinery, equipment, apparatus, systems and equipment, appurtenances, furniture and other personal property used in
connection with the Project, or any portion thereof), which shall be paid or accrued during any Expense Year (without regard to any different fiscal year used by such governmental or municipal authority) because of or in connection with the
ownership, leasing and operation of the Project, or any portion thereof.
4.2.5.2 Tax Expenses shall include, without limitation: (i) Any tax on the rent, right to rent or other income from the Project, or any portion thereof, or as against the business of leasing the
Project, or any portion thereof; (ii) Any assessment, tax, fee, levy or charge in addition to, or in substitution, partially or totally, of any assessment, tax, fee, levy or charge previously included within the definition of real property tax; (iii)
Any assessment, tax, fee, levy, or charge allocable to or measured by the area of the Premises or the Rent payable hereunder, including, without limitation, any business or gross income tax or excise tax with respect to the receipt of such rent, or
upon or with respect to the possession, leasing, operating, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or any portion thereof; and (iv) Any assessment, tax, fee, levy or charge, upon this transaction or
any document to which Tenant is a party, creating or transferring an interest or an estate in the Premises or the improvements thereon.
4.2.5.3 Any costs and expenses (including, without limitation, reasonable attorneys' and consultants' fees) incurred in attempting to protest, reduce or minimize Tax Expenses shall be included in
Tax Expenses in the Expense Year such expenses are incurred. Tax refunds shall be credited against Tax Expenses and refunded to Tenant regardless of when received, based on the Expense Year to which the refund is applicable, provided that in no event
shall the amount to be refunded to Tenant for any such Expense Year exceed the total amount paid by Tenant as Additional Rent under this Article 4 for such Expense Year. If Tax Expenses for any period during the Lease Term or any extension thereof
are increased after payment thereof for any reason, including, without limitation, error or reassessment by applicable governmental or municipal authorities, Tenant shall pay Landlord upon demand Tenant's Share of any such increased Tax Expenses.
Notwithstanding anything to the contrary contained in this Section 4.2.5, there shall be excluded from Tax Expenses (i) all excess profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and succession taxes, estate taxes,
federal and state income taxes, and other taxes to the extent applicable to Landlord's net income (as opposed to rents, receipts or income attributable to operations at the Project), (ii) any items included as Operating Expenses, and (iii) any items
paid by Tenant under Section 4.5 of this Lease.
4.2.6 "Tenant's Share" shall mean the percentage set forth in Section 6 of the Summary.
4.3 Allocation of Direct Expenses.
4.3.1 Method of Allocation. The parties acknowledge that the Building is a part of a multi- building project and that the costs and expenses
incurred in connection with the Project (i.e., the Direct Expenses) should be shared between the Building and the other buildings in the Project. Accordingly, as set forth in Section 4.2 above, Direct Expenses (which consist of Operating
Expenses and tax Expenses) are determined annually for the Project as a whole, and a portion of the Direct Expenses, which portion shall be determined by Landlord on an equitable basis, shall be allocated to the Building (as opposed to other
buildings in the Project). Such portion of Direct Expenses allocated to the Building shall include all Direct Expenses attributable solely to the Building and an equitable portion of the Direct Expenses attributable to the Project as a whole, and
shall not include Direct Expenses attributable solely to other buildings in the Project.
4.3.2 Cost Pools. Landlord shall have the right, from time to time, to equitably allocate some or all of the Direct Expenses for the Project among
different portions or occupants of the Project (the "Cost Pools"), in Landlord's reasonable discretion. Such Cost Pools may include, but shall not be limited to, the office space tenants of a building of the
Project or of the Project, and the laboratory space tenants of a building of the Project or of the Project. The Direct Expenses within each such Cost Pool shall be allocated and charged to the tenants within such Cost Pool in an equitable manner.
4.4 Calculation and Payment of Additional Rent. Tenant shall pay to Landlord, in the manner set forth in Section 4.4.1, below, and as Additional Rent,
Tenant's Share of Direct Expenses for each Expense Year.
4.4.1 Statement of Actual Direct Expenses and Payment by Tenant. Landlord shall give to Tenant following the end of each Expense Year, a statement
(the "Statement") prepared on a line-item by line-item basis as to general categories, which shall state the Direct Expenses incurred or accrued for such preceding Expense Year, and which shall indicate the
amount of Tenant's Share of Direct Expenses. Upon receipt of the Statement for each Expense Year commencing or ending during the Lease Term, Tenant shall pay, within thirty (30) days, the full amount of Tenant's Share of Direct Expenses for such
Expense Year, less the amounts, if any, paid during such Expense Year as "Estimated Direct Expenses," as that term is defined in Section 4.4.2, below, and if Tenant paid more as Estimated Direct
Expenses than the actual Tenant's Share of Direct Expenses, Tenant shall receive a credit in the amount of Tenant's overpayment against Rent next due under this Lease. The failure of Landlord to timely furnish the Statement for any Expense Year shall
not prejudice Landlord or Tenant from enforcing its rights under this Article 4. Even though the Lease Term has expired and Tenant has vacated the Premises, when the final determination is made of Tenant's Share of Direct Expenses for
the Expense Year in which this Lease terminates, Tenant shall pay to Landlord such amount within thirty (30) days of demand therefor, and if Tenant paid more as Estimated Direct Expenses than the actual Tenant's Share of Direct Expenses, Landlord
shall, within thirty (30) days, deliver a check payable to Tenant in the amount of the overpayment or apply such overpayment against any unpaid Rent. The provisions of this Section 4.4.1 shall survive the expiration or earlier termination of
the Lease Term.
4.4.2 Statement of Estimated Direct Expenses. In addition, Landlord shall give Tenant a yearly expense estimate statement (the "Estimate Statement") which shall set forth Landlord's reasonable estimate (the "Estimate"), prepared on a line-item by line-item basis as to general categories, of what the
total amount of Direct Expenses for the then-current Expense Year shall be and the estimated Tenant's Share of Direct Expenses (the "Estimated Direct Expenses"). The failure of Landlord to timely furnish the
Estimate Statement for any Expense Year shall not preclude Landlord from enforcing its rights to collect any Estimated Direct Expenses under this Article 4, nor shall Landlord be prohibited from revising any Estimate Statement or Estimated
Direct Expenses theretofore delivered to the extent necessary. Thereafter, Tenant shall pay, with its next installment of Base Rent due, a fraction of the Estimated Direct Expenses for the then-current Expense Year (reduced by any amounts paid
pursuant to the last sentence of this Section 4.4.2). Such fraction shall have as its numerator the number of months which have elapsed in such current Expense Year, including the month of such payment, and twelve (12) as its denominator.
Until a new Estimate Statement is furnished (which Landlord shall have the right to deliver to Tenant at any time), Tenant shall pay monthly, with the monthly Base Rent installments, an amount equal to one-twelfth (1/12) of the total Estimated Direct
Expenses set forth in the previous Estimate Statement delivered by Landlord to Tenant.
4.5 Taxes and Other Charges for Which Tenant Is Directly Responsible.
4.5.1 Tenant shall be liable for and shall pay ten (10) days before delinquency, taxes levied against Tenant's equipment, furniture, fixtures and any other personal property located in or about
the Premises. If any such taxes on Tenant's equipment, furniture, fixtures and any other personal property are levied against Landlord or Landlord's property or if the assessed value of Landlord's property is increased by the inclusion therein of a
value placed upon such equipment, furniture, fixtures or any other personal property and if Landlord pays the taxes based upon such increased assessment, which Landlord shall have the right to do regardless of the validity thereof but only under
proper protest if requested by Tenant, Tenant shall upon demand repay to Landlord the taxes so levied against Landlord or the proportion of such taxes resulting from such increase in the assessment, as the case may be.
4.5.2 If the tenant improvements in the Premises, whether installed and/or paid for by Landlord or Tenant and whether or not affixed to the real property so as to become a part thereof, are
assessed for real property tax purposes at a valuation higher than the valuation at which tenant improvements conforming to Landlord's "building standard" in other space in the Building are assessed, then the Tax Expenses levied against Landlord or
the property by reason of such excess assessed valuation shall be deemed to be taxes levied against personal property of Tenant and shall be governed by the provisions of Section 4.5.1, above.
4.5.3 Notwithstanding any contrary provision herein, Tenant shall pay prior to delinquency any (i) rent tax or sales tax, gross receipts tax, service tax, transfer tax or value added tax,
business tax or any other applicable tax on the rent or services herein or otherwise respecting this Lease, (ii) taxes assessed upon or with respect to the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy
by Tenant of the Premises or any portion of the Project, including the Project parking facility; or (iii) taxes assessed upon this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the
Premises.
4.6 Landlord’s Books and Records. Upon Tenant's written request (an "Audit Request") given not more
than sixty (60) days after Tenant's receipt of a Statement for a particular Expense Year, and provided that Tenant is not then in default under this Lease, beyond any applicable notice and cure period expressly set forth in this Lease, Landlord shall
furnish Tenant with such reasonable supporting documentation in connection with said Direct Expenses. Landlord shall provide said information to Tenant within sixty (60) days after Tenant's written request therefor. Within sixty (60) days after
receipt of such information by Tenant (the "Review Period"), if Tenant disputes the amount of Direct Expenses set forth in the Statement, an independent Certified Public Accountant (which accountant (A) is a
Certified Public Accountant, (B) is a member of a nationally recognized accounting firm, and (C) is not working on a contingency fee basis), designated and paid for by Tenant, may, after reasonable notice to Landlord and at reasonable times, inspect
Landlord's records with respect to the Statement at Landlord's offices, provided that Tenant is not then in default under this Lease, beyond any applicable notice and cure period expressly set forth in this Lease, and Tenant has paid all amounts
required to be paid under the applicable Estimate Statement and Statement, as the case may be. In connection with such inspection, Tenant and Tenant's agents must agree in advance to follow Landlord's reasonable rules and procedures regarding
inspections of Landlord's records, and shall execute a commercially reasonable confidentiality agreement regarding such inspection. Tenant's failure to dispute the amount of Direct Expenses set forth in any Statement within the Review Period shall be
deemed to be Tenant's approval of such Statement and Tenant, thereafter, waives the right or ability to dispute the amounts set forth in such Statement. If after such inspection, Tenant still disputes such Additional Rent, a determination as to the
proper amount shall be made, at Tenant's expense, by an independent Certified Public Accountant (the "Accountant") selected by Landlord and subject to Tenant's reasonable approval; provided that if such
determination by the Accountant proves that Direct Expenses were overstated by more than five percent (5%), then the cost of the Accountant shall be paid for by Landlord. Tenant hereby acknowledges that Tenant's sole right to inspect Landlord's books
and records and to contest the amount of Direct Expenses payable by Tenant shall be as set forth in this Section 4.6 and in no event shall Tenant have the right to inspect Landlord's books and records and/or contest the amount of Direct
Expenses payable by Tenant more than one (1) time for any Expense Year, and Tenant hereby waives any and all other rights pursuant to applicable law to inspect such books and records and/or to contest the amount of Direct Expenses payable by Tenant.
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5.
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USE OF PREMISES
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5.1 Permitted Use. Tenant shall use the Premises solely for the Permitted Use set forth in Section 7 of the Summary and Tenant shall not
use or permit the Premises or the Project to be used for any other purpose or purposes whatsoever without the prior written consent of Landlord, which may be withheld in Landlord's sole discretion.
5.2 Prohibited Uses. Tenant further covenants and agrees that Tenant shall not use, or suffer or permit any person or persons to use, the
Premises or any part thereof for any use or purpose in violation of the laws of the United States of America, the State of California, or the ordinances, regulations or requirements of the local municipal or county governing body or other lawful
authorities having jurisdiction over the Project) including, without limitation, any such laws, ordinances, regulations or requirements relating to hazardous materials or substances, as those terms are defined by Applicable Laws now or hereafter in
effect, or any Underlying Documents. Landlord shall have the right to impose reasonable and customary rule and regulations regarding the use of the Project, as reasonably deemed necessary by Landlord with respect to the orderly operation of the
Project, and Tenant shall comply with such reasonable rules and regulations. Tenant shall not do or permit anything to be done in or about the Premises which will in any way damage the reputation of the Project or obstruct or interfere with the
rights of other tenants or occupants of the Building, or injure or annoy them or use or allow the Premises to be used for any improper, unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about the
Premises. Tenant shall comply with, and Tenant's rights and obligations under the Lease and Tenant's use of the Premises shall be subject and subordinate to, all recorded easements, covenants, conditions, and restrictions now or hereafter affecting
the Project.
5.3 Hazardous Materials.
5.3.1 Tenant's Obligations.
5.3.1.1 Prohibitions. As a material inducement to Landlord to enter into this Lease with Tenant, Tenant has fully and accurately completed
Landlord’s Pre-Leasing Environmental Exposure Questionnaire (the “Environmental Questionnaire”), which is attached as Exhibit E. Tenant agrees that except for
those chemicals or materials, and their respective quantities, specifically listed on the Environmental Questionnaire, neither Tenant nor Tenant’s employees, contractors and subcontractors of any tier, entities with a contractual relationship with
Tenant (other than Landlord), or any entity acting as an agent or sub-agent of Tenant (collectively, "Tenant's Agents") will produce, use, store or generate any "Hazardous Materials," as that term is defined
below, on, under or about the Premises, nor cause or permit any Hazardous Material to be brought upon, placed, stored, manufactured, generated, blended, handled, recycled, used or "Released," as that term is defined below, on, in, under or about the
Premises. If any information provided to Landlord by Tenant on the Environmental Questionnaire, or otherwise relating to information concerning Hazardous Materials is false, incomplete, or misleading in any material respect, the same shall be deemed
an Event of Default by Tenant under this Lease. Landlord’s prior written consent shall be required to any Hazardous Materials use for the Premises not described on the initial Environmental Questionnaire, such consent to be withheld in Landlord’s
sole discretion. Tenant shall not install or permit any underground storage tank on the Premises. For purposes of this Lease, "Hazardous Materials" means all flammable explosives, petroleum and petroleum
products, waste oil, radon, radioactive materials, toxic pollutants, asbestos, polychlorinated biphenyls (“PCBs”), medical waste, chemicals known to cause cancer or reproductive toxicity, pollutants,
contaminants, hazardous wastes, toxic substances or related materials, including without limitation any chemical, element, compound, mixture, solution, substance, object, waste or any combination thereof, which is or may be hazardous to human health,
safety or to the environment due to its radioactivity, ignitability, corrosiveness, reactivity, explosiveness, toxicity, carcinogenicity, infectiousness or other harmful or potentially harmful properties or effects, or defined as, regulated as or
included in, the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” or “toxic substances” under any Environmental Laws. The term “Hazardous Materials” for purposes of this Lease shall also include any mold, fungus or
spores, whether or not the same is defined, listed, or otherwise classified as a “hazardous material” under any Environmental Laws, if such mold, fungus or spores may pose a risk to human health or the environment or negatively impact the value of
the Premises. For purposes of this Lease, "Release" or "Released" or "Releases" shall mean any release, deposit, discharge,
emission, leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing, or other movement of Hazardous Materials into the environment.
5.3.1.2 Notices to Landlord. Tenant shall notify Landlord in writing as soon as possible but in no event later than five (5) days after (i) the
occurrence of any actual, alleged or threatened Release of any Hazardous Material in, on, under, from, about or in the vicinity of the Premises (whether past or present), regardless of the source or quantity of any such Release, or (ii) Tenant
becomes aware of any regulatory actions, inquiries, inspections, investigations, directives, or any cleanup, compliance, enforcement or abatement proceedings (including any threatened or contemplated investigations or proceedings) relating to or
potentially affecting the Premises, or (iii) Tenant becomes aware of any claims by any person or entity relating to any Hazardous Materials in, on, under, from, about or in the vicinity of the Premises, whether relating to damage, contribution, cost
recovery, compensation, loss or injury. Collectively, the matters set forth in clauses (i), (ii) and (iii) above are hereinafter referred to as “Hazardous Materials Claims”. Tenant shall promptly forward to
Landlord copies of all orders, notices, permits, applications and other communications and reports in connection with any Hazardous Materials Claims. Additionally, Tenant shall promptly advise Landlord in writing of Tenant’s discovery of any
occurrence or condition on, in, under or about the Premises that could subject Tenant or Landlord to any liability, or restrictions on ownership, occupancy, transferability or use of the Premises under any "Environmental Laws," as that term is
defined below. Tenant shall not enter into any legal proceeding or other action, settlement, consent decree or other compromise with respect to any Hazardous Materials Claims without first notifying Landlord of Tenant’s intention to do so and
affording Landlord the opportunity to join and participate, as a party if Landlord so elects, in such proceedings and in no event shall Tenant enter into any agreements which are binding on Landlord or the Premises without Landlord’s prior written
consent. Landlord shall have the right to appear at and participate in, any and all legal or other administrative proceedings concerning any Hazardous Materials Claim. For purposes of this Lease, “Environmental Laws”
means all applicable present and future laws relating to the protection of human health, safety, wildlife or the environment, including, without limitation, (i) all requirements pertaining to reporting, licensing, permitting, investigation and/or
remediation of emissions, discharges, Releases, or threatened Releases of Hazardous Materials, whether solid, liquid, or gaseous in nature, into the air, surface water, groundwater, or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of Hazardous Materials; and (ii) all requirements pertaining to the health and safety of employees or the public. Environmental Laws include, but are not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 USC § 9601, et seq., the Hazardous Materials Transportation Authorization Act of 1994, 49 USC § 5101, et seq., the Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act of 1976, and Hazardous and Solid Waste Amendments of 1984, 42 USC § 6901, et seq., the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 USC § 1251, et seq., the Clean Air Act of 1966, 42 USC § 7401,
et seq., the Toxic Substances Control Act of 1976, 15 USC § 2601, et seq., the Safe Drinking Water Act of 1974, 42 USC §§ 300f through 300j, the Occupational Safety and Health Act of 1970, as amended, 29 USC § 651 et seq., the Oil Pollution Act of
1990, 33 USC § 2701 et seq., the Emergency Planning and Community Right-To-Know Act of 1986, 42 USC § 11001 et seq., the National Environmental Policy Act of 1969, 42 USC § 4321 et seq., the Federal Insecticide, Fungicide and Rodenticide Act of 1947,
7 USC § 136 et seq., California Carpenter-Presley-Tanner Hazardous Substance Account Act, California Health & Safety Code §§ 25300 et seq., Hazardous Materials Release Response Plans and Inventory Act, California Health & Safety Code, §§
25500 et seq., Underground Storage of Hazardous Substances provisions, California Health & Safety Code, §§ 25280 et seq., California Hazardous Waste Control Law, California Health & Safety Code, §§ 25100 et seq., and any other state or local
law counterparts, as amended, as such Applicable Laws, are in effect as of the Lease Commencement Date, or thereafter adopted, published, or promulgated.
5.3.1.3 Releases of Hazardous Materials. If any Release of any Hazardous Material in, on, under, from or about the Premises shall occur at any time
during the Lease and/or if any other Hazardous Material condition exists at the Premises that requires response actions of any kind, in addition to notifying Landlord as specified above, Tenant, at its own sole cost and expense, shall (i) immediately
comply with any and all reporting requirements imposed pursuant to any and all Environmental Laws, (ii) provide a written certification to Landlord indicating that Tenant has complied with all applicable reporting requirements, (iii) take any and all
necessary investigation, corrective and remedial action in accordance with any and all applicable Environmental Laws, utilizing an environmental consultant approved by Landlord, all in accordance with the provisions and requirements of this
Section 5.3, including, without limitation, Section 5.3.4, and (iv) take any such additional investigative, remedial and corrective actions as Landlord shall in its reasonable discretion deem necessary such that the Premises are
remediated to the condition existing prior to such Release.
5.3.1.4 Indemnification.
5.3.1.4.1 In General. Without limiting in any way Tenant’s obligations under any other provision of this Lease, Tenant shall be solely responsible
for and shall protect, defend, indemnify and hold the Landlord Parties harmless from and against any and all claims, judgments, losses, damages, costs, expenses, penalties, enforcement actions, taxes, fines, remedial actions, liabilities (including,
without limitation, actual attorneys’ fees, litigation, arbitration and administrative proceeding costs, expert and consultant fees and laboratory costs) including, without limitation, consequential damages and sums paid in settlement of claims,
which arise during or after the Lease Term, whether foreseeable or unforeseeable, that arise during or after the Lease Term in whole or in part, foreseeable or unforeseeable, directly or indirectly arising out of or attributable to the presence, use,
generation, manufacture, treatment, handling, refining, production, processing, storage, Release or presence of Hazardous Materials in, on, under or about the Premises by Tenant or Tenant's Agents.
5.3.1.4.2 Limitations. Notwithstanding anything in Section 5.3.1.4, above, to the contrary, Tenant's indemnity of Landlord as set forth in
Section 5.3.1.4, above, shall not be applicable to claims based upon Hazardous Materials which may exist in, on or about the Premises as of the date of this Lease ("Existing Hazardous Materials"), except
to the extent that Tenant's construction activities and/or Tenant's other acts (including Tenant's failure to remove, remediate or otherwise treat or “Clean-up,” as that term is defined in Section 5.3.4, below, the subject Existing Hazardous
Materials during the tenancy of the Premises) caused or exacerbated the subject claim but only to the extent Tenant is notified of the Existing Hazardous Materials by Landlord.
5.3.1.5 Compliance with Environmental Laws. Without limiting the generality of Tenant’s obligation to comply with Applicable Laws as otherwise
provided in this Lease, Tenant shall, at its sole cost and expense, comply with all Environmental Laws. Tenant shall obtain and maintain any and all necessary permits, licenses, certifications and approvals appropriate or required for the use,
handling, storage, and disposal of any Hazardous Materials used, stored, generated, transported, handled, blended, or recycled by Tenant on the Premises. Landlord shall have a continuing right, without obligation, to require Tenant to obtain, and to
review and inspect any and all such permits, licenses, certifications and approvals, together with copies of any and all Hazardous Materials management plans and programs, any and all Hazardous Materials risk management and pollution prevention
programs, and any and all Hazardous Materials emergency response and employee training programs respecting Tenant’s use of Hazardous Materials. Upon request of Landlord, Tenant shall deliver to Landlord a narrative description explaining the nature
and scope of Tenant’s activities involving Hazardous Materials and showing to Landlord’s satisfaction compliance with all Environmental Laws and the terms of this Lease.
5.3.2 Assurance of Performance.
5.3.2.1 Environmental Assessments In General. Landlord may, but shall not be required to, engage from time to time such contractors as Landlord
determines to be appropriate to perform environmental assessments of a scope reasonably determined by Landlord (an "Environmental Assessment") to ensure Tenant’s compliance with the requirements of this Lease
with respect to Hazardous Materials. .
5.3.2.2 Costs of Environmental Assessments. All costs and expenses incurred by Landlord in connection with any such Environmental Assessment
initially shall be paid by Landlord; provided that if any such Environmental Assessment shows that Tenant has failed to comply with the provisions of this Section 5.3, then all of the costs and expenses of such Environmental Assessment shall
be reimbursed by Tenant as Additional Rent within ten (10) days after receipt of written demand therefor.
5.3.3 Tenant’s Obligations upon Surrender. At the expiration or earlier termination of the Lease Term, Tenant, at Tenant’s sole cost and expense,
shall: (i) cause all Hazardous Materials to be removed from the Premises and disposed of in accordance with all Environmental Laws and as necessary to allow the Premises to be used for any purpose; and (ii) cause to be removed all containers
installed or used by Tenant or Tenant’s Agents to store any Hazardous Materials on the Premises, and cause to be repaired any damage to the Premises caused by such removal.
5.3.4 Clean-up.
5.3.4.1 Environmental Reports; Clean-Up. If any written report, including any report containing results of any Environmental Assessment (an “Environmental Report”) shall indicate (i) the presence of any Hazardous Materials as to which Tenant has a removal or remediation obligation under this Section 5.3, and (ii) that as a result of same, the
investigation, characterization, monitoring, assessment, repair, closure, remediation, removal, or other clean-up (the “Clean-up”) of any Hazardous Materials is required, Tenant shall immediately prepare and
submit to Landlord within thirty (30) days after receipt of the Environmental Report a comprehensive plan, subject to Landlord’s written approval, specifying the actions to be taken by Tenant to perform the Clean-up so that the Premises are restored
to the conditions required by this Lease. Upon Landlord’s approval of the Clean-up plan, Tenant shall, at Tenant’s sole cost and expense, without limitation on any rights and remedies of Landlord under this Lease, immediately implement such plan with
a consultant reasonably acceptable to Landlord and proceed to Clean-Up Hazardous Materials in accordance with all Applicable Laws and as required by such plan and this Lease. If, within thirty (30) days after receiving a copy of such Environmental
Report, Tenant fails either (a) to complete such Clean- up, or (b) with respect to any Clean-up that cannot be completed within such thirty-day period, fails to proceed with diligence to prepare the Clean-up plan and complete the Clean-up as promptly
as practicable, then Landlord shall have the right, but not the obligation, and without waiving any other rights under this Lease, to carry out any Clean-up recommended by the Environmental Report or required by any governmental authority having
jurisdiction over the Premises, and recover all of the costs and expenses thereof from Tenant as Additional Rent, payable within ten (10) days after receipt of written demand therefor.
5.3.4.2 No Rent Abatement. Tenant shall continue to pay all Rent due or accruing under this Lease during any Clean-up, and shall not be entitled to
any reduction, offset or deferral of any Base Rent or Additional Rent due or accruing under this Lease during any such Clean-up.
5.3.4.3 Surrender of Premises. Tenant shall complete any Clean-up prior to surrender of the Premises upon the expiration or earlier termination of
this Lease. Tenant shall obtain and deliver to Landlord a letter or other written determination from the overseeing governmental authority confirming that the Clean-up has been completed in accordance with all requirements of such governmental
authority and that no further response action of any kind is required for the unrestricted use of the Premises (“Closure Letter”). Upon the expiration or earlier termination of this Lease, Tenant shall also be
obligated to close all permits obtained in connection with Hazardous Materials in accordance with Applicable Laws.
5.3.4.4 Failure to Timely Clean-Up. Should any Clean-up for which Tenant is responsible not be completed, or should Tenant not receive the Closure
Letter and any governmental approvals required under Environmental Laws in conjunction with such Clean-up prior to the expiration or earlier termination of this Lease, then Tenant shall be liable to Landlord as a holdover tenant (as more particularly
provided in Article 16) until Tenant has fully complied with its obligations under this Section 5.3.
5.3.5 Confidentiality. Unless compelled to do so by Applicable Law, Tenant agrees that Tenant shall not disclose, discuss, disseminate or copy any
information, data, findings, communications, conclusions and reports regarding the environmental condition of the Premises to any Person (other than Tenant’s consultants, attorneys, property managers and employees that have a need to know such
information), including any governmental authority, without the prior written consent of Landlord. In the event Tenant reasonably believes that disclosure is compelled by Applicable Law, it shall provide Landlord ten (10) days’ advance notice of
disclosure of confidential information so that Landlord may attempt to obtain a protective order. Tenant may additionally release such information to bona fide prospective purchasers or lenders, subject to any such parties’ written agreement to be
bound by the terms of this Section 5.3.
5.3.6 Copies of Environmental Reports. Within thirty (30) days of receipt thereof, Tenant shall provide Landlord with a copy of any and all
environmental assessments, audits, studies and reports regarding Tenant’s activities with respect to the Premises, or ground water beneath the Land, or the environmental condition or Clean-up thereof. Tenant shall be obligated to provide Landlord
with a copy of such materials without regard to whether such materials are generated by Tenant or prepared for Tenant, or how Tenant comes into possession of such materials.
5.3.7 Intentionally Omitted.
5.3.8 Signs, Response Plans, Etc. Tenant shall be responsible for posting on the Premises any signs required under applicable Environmental Laws.
Tenant shall also complete and file any business response plans or inventories required by any Applicable Laws. Tenant shall concurrently file a copy of any such business response plan or inventory with Landlord.
5.3.9 Survival. Each covenant, agreement, representation, warranty and indemnification made by Tenant set forth in this Section 5.3 shall
survive the expiration or earlier termination of this Lease and shall remain effective until all of Tenant’s obligations under this Section 5.3 have been completely performed and satisfied.
| 6. |
SERVICES AND UTILITIES
|
6.1 In General. Landlord shall provide the following services on all days (unless otherwise stated below) during the Lease Term.
6.1.1 Subject to limitations imposed by all governmental rules, regulations and guidelines applicable thereto, Landlord shall provide heating, ventilation and air conditioning to the office
portions of the Premises ("HVAC") when necessary for normal comfort for normal office use in the Premises from 7:00 A.M. to 6:00 P.M. Monday through Friday (collectively, the "Building
Hours"), except for the date of observation of New Year's Day, President's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day and, at Landlord's discretion, other locally or nationally recognized holidays
(collectively, the "Holidays"). HVAC to the lab portion of the Premises will be provided 24 hours per day, 7 days per week. Tenant shall cooperate fully with Landlord at all times and abide by all regulations
and requirements that Landlord may reasonably prescribe for the proper functioning and protection of the HVAC, electrical, mechanical and plumbing systems.
6.1.2 Landlord shall provide reasonably sufficient electricity to the Premises (including adequate electrical wiring and facilities for connection to Tenant's lighting fixtures and incidental
use equipment), provided that the connected electrical load of Tenant's lighting fixtures and the incidental use equipment does not, in the aggregate, exceed the connected electrical loads typically required at First Class Life Sciences Projects.
Tenant will design Tenant's electrical system serving any equipment producing nonlinear electrical loads to accommodate such nonlinear electrical loads, including, but not limited to, oversizing neutral conductors, derating transformers and/or
providing power-line filters. Engineering plans shall include a calculation of Tenant's fully connected electrical design load with and without demand factors and shall indicate the number of watts of unmetered and submetered loads. Tenant shall bear
the cost of replacement of lamps, starters and ballasts for non-Building standard lighting fixtures within the Premises. If electricity is separately sub-metered, then Tenant shall pay to Landlord the cost of such utilities based on such sub-meter,
and reimbursement for any penalties for usage or other surcharges imposed by any utility company. If electricity is not separately sub-metered, then the cost of electricity used by Tenant in the Premises shall be equitably allocated by Landlord on a
basis consistent with commercial reasonable property management practices. Within twenty (20) days after receipt of Landlord's statement of apportionment or statement setting forth the charges payable by Tenant, Tenant shall pay to Landlord, as
Additional Rent (and not as a Direct Expense), the cost of such electrical services so apportioned or so provided by Landlord. Notwithstanding anything to the contrary set forth herein, to the extent the Premises generates electricity demand on a
shared resource (e.g. electricity for the central plant), the cost of such electricity shall be allocated to Tenant on a pro rata basis or other reasonable basis consistent with commercial reasonable property management practices.
6.1.3 Landlord shall provide city water from the regular Building outlets for drinking, kitchen, lavatory and toilet purposes in the Building Common Areas and the Premises.
6.1.4 Landlord shall provide nonexclusive, non-attended automatic passenger elevator service during the Building Hours, shall have one elevator available at all other times, including on the
Holidays, except in the event of emergency.
6.1.5 Landlord shall provide shared autoclave, glass wash, and ice machine as well as access to all shared conference rooms within the Building and Project (including neighboring Building) to the
same extent the foregoing is being provided to other tenants in the Building.
6.1.6 Landlord shall not provide janitorial services for the Premises. Tenant shall be solely responsible for performing all janitorial services and other cleaning of the Premises, all in
compliance with Applicable Laws. The janitorial and cleaning of the Premises shall be adequate to maintain the Premises in a manner consistent with First Class Life Sciences Projects.
6.1.7 Landlord shall provide janitorial services for the Common Areas in a manner consistent with First Class Life Sciences Projects.
6.1.8 If Tenant desires to use HVAC during hours other than those for which Landlord is obligated to supply such utilities pursuant to the terms of Section 6.1.1 of this Lease, Tenant
shall give Landlord such prior notice, if any, as Landlord shall from time to time reasonably establish as appropriate, of Tenant's desired use in order to supply such HVAC, and Landlord shall supply such heat, ventilation or air conditioning to
Tenant at such hourly cost to Tenant as Landlord shall reasonably determine for the Building.
6.2 Interruption of Use. Tenant agrees that Landlord shall not be liable for damages, by abatement of Rent or otherwise, except as expressly set
forth in Section 19.5 below, for failure to furnish or delay in furnishing any service (including telephone and telecommunication services), or for any diminution in the quality or quantity thereof, when such failure or delay or diminution is
occasioned, in whole or in part, by breakage, repairs, replacements, or improvements, by any strike, lockout or other labor trouble, by inability to secure electricity, gas, water, or other fuel at the Building or Project after reasonable effort to
do so, by any riot or other dangerous condition, emergency, accident or Casualty (as that term is defined in Section 11.1 below) whatsoever, by act or default of Tenant or other parties, or by any other cause; and such failures or delays or
diminution shall never be deemed to constitute an eviction or disturbance of Tenant's use and possession of the Premises or relieve Tenant from paying Rent, except as expressly set forth in Section 19.5 below, or performing any of its
obligations under this Lease. Furthermore, Landlord shall not be liable under any circumstances for a loss of, or injury to, property or for injury to, or interference with, Tenant's business, including, without limitation, loss of profits, however
occurring, through or in connection with or incidental to a failure to furnish any of the services or utilities as set forth in this Article 6.
6.3 Energy Performance Disclosure Information. Tenant hereby acknowledges that Landlord may be required to disclose certain information
concerning the energy performance of the Building pursuant to California Public Resources Code Section 25402.10 and the regulations adopted pursuant thereto (collectively the “Energy Disclosure Requirements”).
Tenant hereby acknowledges prior receipt of the Data Verification Checklist, as defined in the Energy Disclosure Requirements (the “Energy Disclosure Information”), and agrees that Landlord has timely complied
in full with Landlord’s obligations under the Energy Disclosure Requirements. Tenant acknowledges and agrees that (i) Landlord makes no representation or warranty regarding the energy performance of the Building or the accuracy or completeness of the
Energy Disclosure Information, (ii) the Energy Disclosure Information is for the current occupancy and use of the Building and that the energy performance of the Building may vary depending on future occupancy and/or use of the Building, and (iii)
Landlord shall have no liability to Tenant for any errors or omissions in the Energy Disclosure Information. If and to the extent not prohibited by Applicable Laws, Tenant hereby waives any right Tenant may have to receive the Energy Disclosure
Information, including, without limitation, any right Tenant may have to terminate this Lease as a result of Landlord’s failure to disclose such information. Further, Tenant hereby releases Landlord from any and all losses, costs, damages, expenses
and/or liabilities relating to, arising out of and/or resulting from the Energy Disclosure Requirements, including, without limitation, any liabilities arising as a result of Landlord’s failure to disclose the Energy Disclosure Information to Tenant
prior to the execution of this Lease. Tenant’s acknowledgment of the AS-IS condition of the Premises pursuant to the terms of this Lease shall be deemed to include the energy performance of the Building. Tenant further acknowledges that pursuant to
the Energy Disclosure Requirements, Landlord may be required in the future to disclose information concerning Tenant’s energy usage to certain third parties, including, without limitation, prospective purchasers, lenders and tenants of the Building
(the “Tenant Energy Use Disclosure”). Tenant hereby (A) consents to all such Tenant Energy Use Disclosures, and (B) acknowledges that Landlord shall not be required to notify Tenant of any Tenant Energy Use
Disclosure. Further, Tenant hereby releases Landlord from any and all losses, costs, damages, expenses and liabilities relating to, arising out of and/or resulting from any Tenant Energy Use Disclosure. The terms of this Section 6.3 shall
survive the expiration or earlier termination of this Lease.
6.4 Tenant Maintained Security. Tenant hereby acknowledges that Landlord shall have no obligation to provide, or otherwise pay for, any guard
service or other security measures for the benefit of the Premises or the Project. Tenant hereby assumes all responsibility for the protection of Tenant and its agents, employees, contractors, invitees and guests, and the property thereof, from acts
of third parties, including keeping doors locked and other means of entry to the Premises closed. In accordance with the terms and conditions of Article 8 of this Lease, Tenant may, at its own expense, install its own security system (“Tenant’s Security System”) in the Premises; provided, however, that Tenant shall coordinate the installation and operation of Tenant’s Security System with Landlord to assure that Tenant’s Security System is
compatible with Landlord’s security system and the Building systems and equipment, and to the extent that Tenant’s Security System is not compatible with Landlord’s security system and the Building systems and equipment, Tenant shall not be entitled
to install or operate the Tenant’s Security System. Tenant shall be solely responsible, at Tenant’s sole cost and expense, for the installation, monitoring, operation and removal of Tenant’s Security System.
| 7. |
REPAIRS
|
7.1 Tenant Repair Obligations. Except as otherwise expressly provided in this Lease, Tenant shall, at Tenant's own expense, keep the Premises,
including all improvements, fixtures and furnishings therein, and the floor or floors of the Building on which the Premises are located, in good order, repair and condition at all times during the Lease Term. In addition, Tenant shall, at Tenant's
own expense, but under the supervision and subject to the prior approval of Landlord, and within any reasonable period of time specified by Landlord, promptly and adequately repair all damage to the Premises and replace or repair all damaged, broken,
or worn fixtures and appurtenances, except for damage caused by ordinary wear and tear or beyond the reasonable control of Tenant; provided however, that, Landlord shall have the exclusive right, at Landlord's option, but not the obligation, to make
such repairs and replacements, and Tenant shall pay to Landlord the cost thereof, including Landlord's standard fee for its involvement with such repairs and replacements (to be uniformly established for the Building at a commercially reasonable
level), promptly upon being billed for same. Landlord may, but shall not be required to, enter the Premises pursuant to the terms of Article 27, below, to make such repairs, alterations, improvements or additions to the Premises or to the
Project or to any equipment located in the Project as Landlord shall desire or deem necessary or as Landlord may be required to do by governmental or quasi-governmental authority or court order or decree. Tenant hereby waives any and all rights under
and benefits of subsection 1 of Section 1932 and Sections 1941 and 1942 of the California Civil Code or under any similar law, statute, or ordinance now or hereafter in effect.
7.2 Landlord Repair Obligations. Notwithstanding the foregoing, Landlord shall be responsible for repairs and replacement as necessary to the
exterior walls, exterior doors and windows and waterproofing of the Building envelope, foundation and roof (including roof membrane, gutters, flashings, and downspouts) of the Building, utility connections to the Building, the structural portions of
the floors of the Building (the "Building Structure"), the base Building plumbing, sewer, drainage, electrical, fire protection, elevator, life safety, heating, ventilation and air-conditioning systems (the "Building Systems" and together with the Building Structure, the "Base Building") of the Building, and the Common Areas, except to the extent that such repairs are required
due to the negligence or willful misconduct of Tenant; provided, however, that if such repairs are due to the negligence or willful misconduct of Tenant, Landlord shall nevertheless make such repairs at Tenant's expense, or, if covered by Landlord's
insurance, Tenant shall only be obligated to pay any deductible in connection therewith. Subject to the terms of Article 27, below, Landlord may, but shall not be required to, enter the Premises at all reasonable times and upon reasonable
prior notice to make such repairs, alterations, improvements or additions to the Premises or to the Project or to any equipment located in the Project as Landlord shall desire or deem necessary or as Landlord may be required to do by governmental or
quasi-governmental authority or court order or decree. Tenant hereby waives any and all rights under and benefits of subsection 1 of Section 1932 and Sections 1941 and 1942 of the California Civil Code or under any similar law, statute, or ordinance
now or hereafter in effect.
| 8. |
ADDITIONS AND ALTERATIONS
|
8.1 Landlord's Consent to Alterations. Tenant may not make any improvements, alterations, additions or changes to the Premises or any mechanical,
plumbing or HVAC facilities or systems pertaining to the Premises (collectively, the "Alterations") without first procuring the prior written consent of Landlord to such Alterations, which consent shall be
requested by Tenant not less than thirty (30) days prior to the commencement thereof, and which consent shall not be unreasonably withheld by Landlord, provided it shall be deemed reasonable for Landlord to withhold its consent to any Alteration
which adversely affects the structural portions or the systems or equipment of the Building or is visible from the exterior of the Building. Notwithstanding the foregoing, Tenant shall be permitted to make Alterations following ten (10) business
days’ notice to Landlord, but without Landlord's prior consent, to the extent that such Alterations (i) do not affect the Building Systems or Building Structure, (ii) are not visible from the exterior of the Building, (iii) cost less than $100,000.00
for a particular job of work, and (iv) do not require a building permit and do not diminish the value of the Premises, Building or Project. The construction of the initial improvements to the Premises shall be governed by the terms of the Tenant Work
Letter and not the terms of this Article 8.
8.2 Manner of Construction. Landlord may impose, as a condition of its consent to any and all Alterations or repairs of the Premises or about
the Premises, such requirements as Landlord in its reasonable discretion may deem desirable, including, but not limited to, the requirement that upon Landlord's request, Tenant shall, at Tenant's expense, remove such Alterations upon the expiration
or any early termination of the Lease Term. Tenant shall construct such Alterations and perform such repairs in a good and workmanlike manner, in conformance with any and all applicable federal, state, county or municipal laws, rules and regulations
and pursuant to a valid building permit, issued by the city in which the Building is located (or other applicable governmental authority). Tenant shall not use (and upon notice from Landlord shall cease using) contractors, services, workmen, labor,
materials or equipment that, in Landlord's reasonable judgment, would disturb labor harmony with the workforce or trades engaged in performing other work, labor or services in or about the Building or the Common Areas. Upon completion of any
Alterations (or repairs), Tenant shall deliver to Landlord final lien waivers from all contractors, subcontractors and materialmen who performed such work. In addition to Tenant's obligations under Article 9 of this Lease, upon completion of
any Alterations, Tenant agrees to cause a Notice of Completion to be recorded in the office of the Recorder of the County of San Diego in accordance with Section 3093 of the Civil Code of the State of California or any successor statute, and Tenant
shall deliver to the Project construction manager a reproducible copy of the "as built" drawings of the Alterations as well as all permits, approvals and other documents issued by any governmental agency in
connection with the Alterations.
8.3 Payment for Improvements. With respect to payments to be made to Tenant's contractors for any Alterations, Tenant shall (i) comply with
Landlord's reasonable requirements for final lien releases and waivers in connection with Tenant's payment for work to contractors, and (ii) cause Tenant's contractor to sign Landlord's standard contractor's rules and regulations. In addition, in
connection with all Alterations, Tenant shall pay Landlord an oversight fee equal to four percent (4%) of the cost of such work, and shall reimburse Landlord for Landlord's reasonable, actual, out-of-pocket costs and expenses actually incurred in
connection with such work.
8.4 Construction Insurance. In addition to the requirements of Article 10 of this Lease, in the event that Tenant makes any
Alterations, prior to the commencement of such Alterations, Tenant shall provide Landlord with evidence that Tenant carries "Builder's All Risk" insurance in an amount approved by Landlord covering the
construction of such Alterations, and such other insurance as Landlord may reasonably require, it being understood and agreed that all of such Alterations shall be insured by Tenant pursuant to Article 10 of this Lease immediately upon
completion thereof. In addition, Tenant's contractors and subcontractors shall be required to carry (i) Commercial General Liability Insurance in an amount approved by Landlord, with Landlord, and, at Landlord's option, Landlord's property manager
and project manager, as additional insureds in an amount approved by Landlord, and otherwise in accordance with the requirements of Article 10 of this Lease, and (ii) workers compensation insurance with a waiver of subrogation in favor of Landlord .
Landlord may, in its discretion, require Tenant to obtain a lien and completion bond or some alternate form of security satisfactory to Landlord in an amount sufficient to ensure the lien-free completion of such Alterations and naming Landlord as a
co-obligee.
8.5 Landlord's Property. All Alterations, improvements, fixtures, equipment and/or appurtenances which may be installed or placed in or about
the Premises, from time to time, shall be at the sole cost of Tenant and shall be and become the property of Landlord and remain in place at the Premises following the expiration or earlier termination of this Lease. Notwithstanding the foregoing,
Landlord may, by written notice to Tenant prior to the end of the Lease Term, or given following any earlier termination of this Lease, require Tenant, at Tenant's expense, to remove any Alterations and/or improvements and/or systems and equipment
within the Premises and to repair any damage to the Premises and Building caused by such removal and return the affected portion of the Premises to a building standard tenant improved condition as determined by Landlord. If Tenant fails to complete
such removal and/or to repair any damage caused by the removal of any Alterations and/or improvements and/or systems and equipment in the Premises and return the affected portion of the Premises to a building standard tenant improved condition as
reasonably determined by Landlord, Landlord may do so and may charge the cost thereof to Tenant. Tenant hereby protects, defends, indemnifies and holds Landlord harmless from any liability, cost, obligation, expense or claim of lien in any manner
relating to the installation, placement, removal or financing of any such Alterations, improvements, fixtures and/or equipment in, on or about the Premises, which obligations of Tenant shall survive the expiration or earlier termination of this
Lease.
9. COVENANT AGAINST LIENS Tenant shall keep the Project and Premises free from any liens or encumbrances arising out of the work
performed, materials furnished or obligations incurred by or on behalf of Tenant, and shall protect, defend, indemnify and hold Landlord harmless from and against any claims, liabilities, judgments or costs (including, without limitation, reasonable
attorneys' fees and costs) arising out of same or in connection therewith. Tenant shall give Landlord notice at least twenty (20) days prior to the commencement of any such work on the Premises (or such additional time as may be necessary under
Applicable Laws) to afford Landlord the opportunity of posting and recording appropriate notices of non-responsibility (to the extent applicable pursuant to then Applicable Laws). Tenant shall remove any such lien or encumbrance by bond or otherwise
within ten (10) business days after notice by Landlord, and if Tenant shall fail to do so, Landlord may pay the amount necessary to remove such lien or encumbrance, without being responsible for investigating the validity thereof.
| 10. |
INSURANCE
|
10.1 Indemnification and Waiver. Except to the extent caused by Landlord’s gross negligence or willful misconduct, Tenant hereby assumes all
risk of damage to property or injury to persons in, upon or about the Premises from any cause whatsoever and agrees that Landlord, its partners, subpartners and their respective officers, agents, servants, employees, lenders, any property manager
and independent contractors (collectively, "Landlord Parties") shall not be liable for, and are hereby released from any responsibility for, any damage either to person or property or resulting from the loss
of use thereof, which damage is sustained by Tenant or by other persons claiming through Tenant. Tenant shall indemnify, defend, protect, and hold harmless the Landlord Parties from any and all claims, loss, cost, damage, injury, expense and
liability (including without limitation court costs and reasonable attorneys' fees) incurred in connection with or arising from any cause in, on or about the Premises, any acts, omissions or negligence of Tenant or of any person claiming by,
through or under Tenant, or of the contractors, agents, servants, employees, invitees, guests or licensees of Tenant or any such person, in, on or about the Project or any breach of the terms of this Lease, either prior to, during, or after the
expiration of the Lease Term, provided that the terms of the foregoing indemnity shall not apply to the extent caused by the gross negligence or willful misconduct of Landlord. Should Landlord be named as a defendant in any suit brought against
Tenant in connection with or arising out of Tenant's occupancy of the Premises, Tenant shall pay to Landlord its costs and expenses incurred in such suit, including without limitation, its actual professional fees such as reasonable appraisers',
accountants' and attorneys' fees. The provisions of this Section 10.1 shall survive the expiration or sooner termination of this Lease with respect to any claims or liability arising in connection with any event occurring prior to such
expiration or termination.
10.2 Tenant's Compliance With Landlord's Property Insurance. Landlord shall insure the Building during the Lease Term against loss or damage
under an "all risk" property insurance policy. Such coverage shall be in such amounts, from such companies, and on such other terms and conditions, as Landlord may from time to time reasonably determine. Additionally, at the option of Landlord,
such insurance coverage may include the risks of earthquakes and/or flood damage and additional hazards, a rental loss endorsement and one or more loss payee endorsements in favor of the holders of any mortgages or deeds of trust encumbering the
interest of Landlord in the Building or the ground or underlying lessors of the Building, or any portion thereof. Tenant shall, at Tenant's expense, comply with all insurance company requirements pertaining to the use of the Premises. If Tenant's
conduct or use of the Premises causes any increase in the premium for such insurance policies then Tenant shall reimburse Landlord for any such increase. Tenant, at Tenant's expense, shall comply with all rules, orders, regulations or requirements
of the American Insurance Association (formerly the National Board of Fire Underwriters) and with any similar body. Tenant shall also provide Landlord and Landlord’s insurer(s) with such information regarding the use of the Premises and any damage
to the Premises as they may require in connection with the placement of insurance for the Premises or the adjusting of any losses to the Premises.
10.3 Tenant's Insurance. Tenant shall maintain the following coverages in the following amounts.
10.3.1 Commercial General Liability Insurance on an occurrence form covering the insured against claims of bodily injury, personal injury and property damage (including loss of use thereof)
arising out of Tenant's operations, and contractual liabilities including a contractual coverage, and including products and completed operations coverage, for limits of liability on a per location basis of not less than (which minimum limits of
liability insurance may be satisfied through a combination of primary and excess/umbrella insurance):
|
Bodily Injury and Property Damage Liability
|
$5,000,000 each occurrence
$5,000,000 annual aggregate
|
|
Personal Injury Liability
|
$3,000,000 each occurrence
$3,000,000 annual aggregate
|
10.3.2 Property Insurance covering (i) all office furniture, business and trade fixtures, office equipment, free-standing cabinet work, movable partitions, merchandise and all other items of
Tenant's property on the Premises installed by, for, or at the expense of Tenant, (ii) the "Tenant Improvements," as that term is defined in the Tenant Work Letter, and any other improvements which exist in
the Premises as of the Lease Commencement Date (excluding the Base Building) (the "Original Improvements"), and (iii) all other improvements, alterations and additions to the Premises. Such insurance shall be
written on an "all risks" of physical loss or damage basis, for the full replacement cost value (subject to reasonable deductible amounts) new without deduction for depreciation of the covered items and in
amounts that meet any co-insurance clauses of the policies of insurance and shall include coverage for damage or other loss caused by fire or other peril including, but not limited to, vandalism and malicious mischief, theft, water damage of any
type, including sprinkler leakage, bursting or stoppage of pipes, and explosion.
10.3.3 Business Income Interruption for one (1) year plus Extra Expense insurance in such amounts as will reimburse Tenant for actual direct or indirect loss of earnings attributable to the risks
outlined in Section 10.3.2 above.
10.3.4 Worker's Compensation and Employer's Liability or other similar insurance pursuant to all applicable state and local statutes and regulations. The policy shall include a waiver of
subrogation in favor of Landlord, its employees, Lenders and any property manager or partners.
10.4 Form of Policies. The minimum limits of policies of insurance required of Tenant under this Lease shall in no event limit the liability of
Tenant under this Lease. Such insurance shall (i) name Landlord, its subsidiaries and affiliates, its property manager (if any) and any other party the Landlord so specifies, as an additional insured or loss payee, as applicable, including Landlord's
managing agent, if any; (ii) be issued by an insurance company having a rating of not less than A:IX in Best's Insurance Guide or which is otherwise acceptable to Landlord and licensed to do business in the State of California; (iv) be primary
insurance as to all claims thereunder and provide that any insurance carried by Landlord is excess and is non-contributing with any insurance required of Tenant; (v) be in form and content reasonably acceptable to Landlord; and (vi) provide that said
insurance shall not be canceled or coverage changed unless thirty (30) days' prior written notice shall have been given to Landlord and any mortgagee of Landlord (unless such cancellation is the result of non-payment of premiums). Tenant shall
deliver said policy or policies or certificates thereof to Landlord on or before the Lease Commencement Date and at least ten (10) days before the expiration dates thereof. In the event Tenant shall fail to procure such insurance, or to deliver such
policies or certificate, Landlord may, at its option, procure such policies for the account of Tenant, and the cost thereof shall be paid to Landlord within five (5) days after delivery to Tenant of bills therefor.
10.5 Subrogation. Landlord and Tenant hereby agree to look solely to, and seek recovery only from, their respective insurance carriers in the
event of a property or business interruption loss to the extent that such coverage is agreed to be provided hereunder. The parties each hereby waive all rights and claims against each other for such losses, and waive all rights of subrogation of
their respective insurers, provided such waiver of subrogation shall not affect the right to the insured to recover thereunder. The parties agree that their respective insurance policies do now, or shall, contain the waiver of subrogation.
10.6 Additional Insurance Obligations. Tenant shall carry and maintain during the entire Lease Term, at Tenant's sole cost and expense, increased
amounts of the insurance required to be carried by Tenant pursuant to this Article 10 and such other reasonable types of insurance coverage and in such reasonable amounts covering the Premises and Tenant's operations therein, as may be
reasonably requested by Landlord or Landlord's lender, but in no event in excess of the amounts and types of insurance then being required by landlords of buildings comparable to and in the vicinity of the Building.
| 11. |
DAMAGE AND DESTRUCTION
|
11.1 Repair of Damage. Tenant shall promptly notify Landlord of any damage to the Premises resulting from fire or any other casualty ("Casualty"). If the Premises or any Common Areas serving or providing access to the Premises shall be damaged by fire or other casualty, Landlord shall promptly and diligently, subject to reasonable delays for
insurance adjustment or other matters beyond Landlord's reasonable control, and subject to all other terms of this Article 11, restore the Base Building and such Common Areas. Such restoration shall be to substantially the same condition of
the Base Building and the Common Areas prior to the casualty, except for modifications required by zoning and building codes and other laws or by the holder of a mortgage on the Building or Project or any other modifications to the Common Areas
deemed desirable by Landlord, which are consistent with the character of the Project, provided that access to the Premises shall not be materially impaired. Subject to the terms of Section 11.2, below, Tenant shall, at its sole cost and expense,
repair any injury or damage to the Tenant Improvements and the Original Improvements installed in the Premises and shall return such Tenant Improvements and Original Improvements to their original condition. Whether or not Landlord delivers a
“Landlord Repair Notice,” as that term is defined in Section 11.2 below, prior to the commencement of construction, Tenant shall submit to Landlord, for Landlord's review and approval, all plans, specifications and working drawings relating
thereto, and Landlord shall select the contractors to perform such improvement work. Tenant shall in addition cooperate with requests for information regarding any repairs from Landlord’s insurer(s) by providing the requested information within ten
(10) days after Tenant receives the request. Landlord shall not be liable for any inconvenience or annoyance to Tenant or its visitors, or injury to Tenant's business resulting in any way from such damage or the repair thereof; provided however, that
if such Casualty shall have damaged the Premises or Common Areas necessary to Tenant's occupancy, and the Premises are not occupied by Tenant as a result thereof, then during the time and to the extent the Premises are unfit for occupancy, the Rent
shall be abated in proportion to the ratio that the amount of rentable square feet of the Premises which is unfit for occupancy for the purposes permitted under this Lease bears to the total rentable square feet of the Premises. In the event that
Landlord shall not deliver the Landlord Repair Notice, Tenant's right to rent abatement pursuant to the preceding sentence shall terminate as of the date which is reasonably determined by Landlord to be the date Tenant should have completed repairs
to the Premises assuming Tenant used reasonable due diligence in connection therewith. Notwithstanding any contrary provision of this Article 11, the parties hereby agree as follows: (i) the closure of the Project, the Building, the Common
Areas, or any part thereof to protect public health shall not constitute a Casualty for purposes of this Lease, (ii) Casualty covered by this Article 11 shall require that the physical or structural integrity of the Premises, the Project, the
Building, or the Common Areas is degraded as a direct result of such occurrence, and (iii) a Casualty under this Article 11 shall not be deemed to occur merely because Tenant is unable to productively use the Premises in the event that the
physical and structural integrity of the Premises is undamaged.
11.2 Landlord's Option to Repair. Upon the occurrence of any damage to the Premises, Landlord may, at Landlord's option, deliver a notice (the "Landlord Repair Notice") to Tenant, and upon receipt of a Landlord Repair Notice Tenant shall assign to Landlord (or to any party designated by Landlord) all insurance proceeds payable to Tenant under Tenant's
insurance required under Section 10.3 of this Lease, and Landlord shall repair any injury or damage to the Tenant Improvements and the Original Improvements installed in the Premises and shall return such Tenant Improvements and Original
Improvements to their original condition; provided that if the cost of such repair by Landlord exceeds the amount of insurance proceeds received by Landlord from Tenant's insurance carrier (including by taking into account any deductible or
self-insured retention), as assigned by Tenant, the cost of such repairs shall be paid by Tenant to Landlord prior to Landlord's commencement of repair of the damage. Notwithstanding the terms of Section 11.1 of this Lease, Landlord may elect
not to rebuild and/or restore the Premises, Building and/or Project, and instead terminate this Lease, by notifying Tenant in writing of such termination within sixty (60) days after the date of discovery of the damage, such notice to include a
termination date giving Tenant sixty (60) days to vacate the Premises, but Landlord may so elect only if the Building or Project shall be damaged by Casualty or cause, whether or not the Premises are affected, and one or more of the following
conditions is present: (i) in Landlord's reasonable judgment, repairs cannot reasonably be completed within one hundred fifty (150) days after the date of discovery of the damage (when such repairs are made without the payment of overtime or other
premiums); (ii) the holder of any mortgage on the Building or Project or ground lessor with respect to the Building or Project shall require that the insurance proceeds or any portion thereof be used to retire the mortgage debt, or shall terminate
the ground lease, as the case may be; (iii) the damage is not fully covered by Landlord's insurance policies; (iv) Landlord decides to rebuild the Building or Common Areas so that they will be substantially different structurally or architecturally;
(v) the damage occurs during the last twelve (12) months of the Lease Term; or (vi) any owner of any other portion of the Project, other than Landlord, does not intend to repair the damage to such portion of the Project; provided, however, that if
Landlord does not elect to terminate this Lease pursuant to Landlord's termination right as provided above, and the repairs cannot, in the reasonable opinion of Landlord, be completed within one (1) year after being commenced, Tenant may elect, no
earlier than sixty (60) days after the date of the damage and not later than ninety (90) days after the date of such damage, to terminate this Lease by written notice to Landlord effective as of the date specified in the notice, which date shall not
be less than thirty (30) days nor more than sixty (60) days after the date such notice is given by Tenant. Notwithstanding the provisions of this Section 11.2, Tenant shall have the right to terminate this Lease under this Section 11.2 only if each
of the following conditions is satisfied: (a) the damage to the Project by Casualty was not caused by the gross negligence or intentional act of Tenant or its partners or subpartners and their respective officers, agents, servants, employees, and
independent contractors; (b) Tenant is not then in default under this Lease; (c) as a result of the damage, Tenant cannot reasonably conduct business from the Premises; and, (d) as a result of the damage to the Project, Tenant does not occupy or use
the Premises at all.
11.3 Waiver of Statutory Provisions. The provisions of this Lease, including this Article 11, constitute an express agreement between
Landlord and Tenant with respect to any and all damage to, or destruction of, all or any part of the Premises, the Building or the Project, and any statute or regulation of the State of California, including, without limitation, Sections 1932(2) and
1933(4) of the California Civil Code, with respect to any rights or obligations concerning damage or destruction in the absence of an express agreement between the parties, and any other statute or regulation, now or hereafter in effect, shall have
no application to this Lease or any damage or destruction to all or any part of the Premises, the Building or the Project.
12. NONWAIVER No provision of this Lease shall be deemed waived by either party hereto unless expressly waived in a writing
signed thereby. The waiver by either party hereto of any breach of any term, covenant or condition herein contained shall not be deemed to be a waiver of any subsequent breach of same or any other term, covenant or condition herein contained. The
subsequent acceptance of Rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular Rent so accepted,
regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such Rent. No acceptance of a lesser amount than the Rent herein stipulated shall be deemed a waiver of Landlord's right to receive the full amount due, nor
shall any endorsement or statement on any check or payment or any letter accompanying such check or payment be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the full
amount due. No receipt of monies by Landlord from Tenant after the termination of this Lease shall in any way alter the length of the Lease Term or of Tenant's right of possession hereunder, or after the giving of any notice shall reinstate, continue
or extend the Lease Term or affect any notice given Tenant prior to the receipt of such monies, it being agreed that after the service of notice or the commencement of a suit, or after final judgment for possession of the Premises, Landlord may
receive and collect any Rent due, and the payment of said Rent shall not waive or affect said notice, suit or judgment.
13. CONDEMNATION If the whole or any part of the Premises, Building or Project shall be taken by power of eminent domain or
condemned by any competent authority for any public or quasi-public use or purpose, or if any adjacent property or street shall be so taken or condemned, or reconfigured or vacated by such authority in such manner as to require the use,
reconstruction or remodeling of any part of the Premises, Building or Project, or if Landlord shall grant a deed or other instrument in lieu of such taking by eminent domain or condemnation, Landlord shall have the option to terminate this Lease
effective as of the date possession is required to be surrendered to the authority. Tenant shall not because of such taking assert any claim against Landlord or the authority for any compensation because of such taking and Landlord shall be entitled
to the entire award or payment in connection therewith, except that Tenant shall have the right to file any separate claim available to Tenant for any taking of Tenant's personal property and fixtures belonging to Tenant and removable by Tenant upon
expiration of the Lease Term pursuant to the terms of this Lease, and for moving expenses, so long as such claims do not diminish the award available to Landlord, its ground lessor with respect to the Building or Project or its mortgagee, and such
claim is payable separately to Tenant. All Rent shall be apportioned as of the date of such termination. If any part of the Premises shall be taken, and this Lease shall not be so terminated, the Rent shall be proportionately abated. Tenant hereby
waives any and all rights it might otherwise have pursuant to Section 1265.130 of The California Code of Civil Procedure. Notwithstanding anything to the contrary contained in this Article 13, in the event of a temporary taking of all or any portion
of the Premises for a period of one hundred and fifty (150) days or less, then this Lease shall not terminate but the Base Rent and the Additional Rent shall be abated for the period of such taking in proportion to the ratio that the amount of
rentable square feet of the Premises taken bears to the total rentable square feet of the Premises. Landlord shall be entitled to receive the entire award made in connection with any such temporary taking. Notwithstanding any contrary provision of
this Lease, the following governmental actions shall not constitute a taking or condemnation, either permanent or temporary: (i) an action that requires Tenant's business or the Building or Project to close during the Lease Term, and (ii) an action
taken for the purpose of protecting public safety (e.g., to protect against acts of war, the spread of communicable diseases, or an infestation), and no such governmental actions shall entitle Tenant to any compensation from Landlord or any
authority, or Rent abatement or any other remedy under this Lease.
| 14. |
ASSIGNMENT AND SUBLETTING
|
14.1 Transfers. Tenant shall not, without the prior written consent of Landlord, assign, mortgage, pledge, hypothecate, encumber, or permit any
lien to attach to, or otherwise transfer, this Lease or any interest hereunder, permit any assignment, or other transfer of this Lease or any interest hereunder by operation of law, sublet the Premises or any part thereof, or enter into any license
or concession agreements or otherwise permit the occupancy or use of the Premises or any part thereof by any persons other than Tenant and its employees and contractors (all of the foregoing are hereinafter sometimes referred to collectively as "Transfers" and any person to whom any Transfer is made or sought to be made is hereinafter sometimes referred to as a "Transferee"). If Tenant desires Landlord's consent to
any Transfer, Tenant shall notify Landlord in writing, which notice (the "Transfer Notice") shall include (i) the proposed effective date of the Transfer, which shall not be less than thirty (30) days nor more
than one hundred eighty (180) days after the date of delivery of the Transfer Notice, (ii) a description of the portion of the Premises to be transferred (the "Subject Space"), (iii) all of the terms of the
proposed Transfer and the consideration therefor, including calculation of the "Transfer Premium", as that term is defined in Section 14.3 below, in connection with such Transfer, the name and address
of the proposed Transferee, and a copy of all existing executed and/or proposed documentation pertaining to the proposed Transfer, and (iv) current financial statements of the proposed Transferee certified by an officer, partner or owner thereof,
business credit and personal references and history of the proposed Transferee and any other information reasonably required by Landlord which will enable Landlord to determine the financial responsibility, character, and reputation of the proposed
Transferee, nature of such Transferee's business and proposed use of the Subject Space. Any Transfer made without Landlord's prior written consent shall, at Landlord's option, be null, void and of no effect, and shall, at Landlord's option,
constitute an Event of Default by Tenant under this Lease. Whether or not Landlord consents to any proposed Transfer, Tenant shall pay Landlord's reasonable review and processing fees, as well as any reasonable professional fees (including, without
limitation, attorneys', accountants', architects', engineers' and consultants' fees) incurred by Landlord in an amount not to exceed $3,000.00 for a Transfer in the ordinary course of business, within thirty (30) days after written request by
Landlord.
14.2 Landlord's Consent. Landlord shall not unreasonably withhold, condition or delay its consent to any proposed Transfer of the Subject Space
to the Transferee on the terms specified in the Transfer Notice. Without limitation as to other reasonable grounds for withholding consent, the parties hereby agree that it shall be reasonable under this Lease and under any Applicable Law for
Landlord to withhold consent to any proposed Transfer where one or more of the following apply:
14.2.1 The Transferee is of a character or reputation or engaged in a business which is not consistent with the quality of the Building or the Project;
14.2.2 The Transferee intends to use the Subject Space for purposes which are not permitted under this Lease;
14.2.3 The Transferee is either a governmental agency or instrumentality thereof;
14.2.4 The Transferee is not a party of reasonable financial worth and/or financial stability in light of the responsibilities to be undertaken in connection with the Transfer on the date consent
is requested; or
14.2.5 The proposed Transfer would cause a violation of another lease for space in the Project, or would give an occupant of the Project a right to cancel its lease;
14.2.6 Either the proposed Transferee, or any person or entity which directly or indirectly, controls, is controlled by, or is under common control with, the proposed Transferee, (i) occupies
space in the Project at the time of the request for consent, or (ii) is negotiating with Landlord or has negotiated with Landlord during the six (6) month period immediately preceding the date Landlord receives the Transfer Notice, to lease space in
the Project.
If Landlord consents to any Transfer pursuant to the terms of this Section 14.2 (and does not exercise any recapture rights Landlord may have under Section 14.4 of this Lease), Tenant
may within six (6) months after Landlord's consent, but not later than the expiration of said six-month period, enter into such Transfer of the Premises or portion thereof, upon substantially the same terms and conditions as are set forth in the
Transfer Notice furnished by Tenant to Landlord pursuant to Section 14.1 of this Lease, provided that if there are any changes in the terms and conditions from those specified in the Transfer Notice such that Landlord would initially have
been entitled to refuse its consent to such Transfer under this Section 14.2, Tenant shall again submit the Transfer to Landlord for its approval and other action under this Article 14 (including Landlord's right of recapture, if any,
under Section 14.4 of this Lease). Notwithstanding anything to the contrary in this Lease, if Tenant or any proposed Transferee claims that Landlord has unreasonably withheld or delayed its consent under Section 14.2 or otherwise has
breached or acted unreasonably under this Article 14, their sole remedies shall be a suit for contract damages (other than damages for injury to, or interference with, Tenant's business including, without limitation, loss of profits, however
occurring) or declaratory judgment and an injunction for the relief sought, and Tenant hereby waives all other remedies, including, without limitation, any right at law or equity to terminate this Lease, on its own behalf and, to the extent permitted
under all Applicable Laws, on behalf of the proposed Transferee.
14.3 Transfer Premium. If Landlord consents to a Transfer, as a condition thereto which the parties hereby agree is reasonable, Tenant shall pay
to Landlord fifty percent (50%) of any "Transfer Premium," as that term is defined in this Section 14.3, received by Tenant from such Transferee. "Transfer Premium"
shall mean all rent, additional rent or other consideration payable by such Transferee in connection with the Transfer in excess of the Rent and Additional Rent payable by Tenant under this Lease during the term of the Transfer on a per rentable
square foot basis if less than all of the Premises is transferred, and after deduction of (i) any costs of improvements made to the Subject Space in connection with such Transfer, (ii) brokerage commissions paid in connection with such Transfer, and
(iii) reasonable legal fees incurred in connection with such Transfer. "Transfer Premium" shall also include, but not be limited to, key money, bonus money or other cash consideration paid by Transferee to
Tenant in connection with such Transfer, and any payment in excess of fair market value for services rendered by Tenant to Transferee or for assets, fixtures, inventory, equipment, or furniture transferred by Tenant to Transferee in connection with
such Transfer. The determination of the amount of Landlord's applicable share of the Transfer Premium shall be made on a monthly basis as rent or other consideration is received by Tenant under the Transfer.
14.4 Landlord's Option as to Subject Space. Notwithstanding anything to the contrary contained in this Article 14, in the event Tenant
contemplates a Transfer which, together with all prior Transfers then remaining in effect, would cause fifty percent (50%) or more of the Premises to be Transferred for more than fifty percent (50%) of the then remaining Lease Term (taking into
account any extension of the Lease Term which has irrevocably exercised by Tenant), Tenant shall give Landlord notice (the "Intention to Transfer Notice") of such contemplated Transfer (whether or not the
contemplated Transferee or the terms of such contemplated Transfer have been determined). The Intention to Transfer Notice shall specify the portion of and amount of rentable square feet of the Premises which Tenant intends to Transfer (the "Contemplated Transfer Space"), the contemplated date of commencement of the Contemplated Transfer (the "Contemplated Effective Date"), and the contemplated length of the term
of such contemplated Transfer, and shall specify that such Intention to Transfer Notice is delivered to Landlord pursuant to this Section 14.4 in order to allow Landlord to elect to recapture the Contemplated Transfer Space. Thereafter,
Landlord shall have the option, by giving written notice to Tenant within thirty (30) days after receipt of any Intention to Transfer Notice, to recapture the Contemplated Transfer Space. Such recapture shall cancel and terminate this Lease with
respect to such Contemplated Transfer Space as of the Contemplated Effective Date. In the event of a recapture by Landlord, if this Lease shall be canceled with respect to less than the entire Premises, the Rent reserved herein shall be prorated on
the basis of the number of rentable square feet retained by Tenant in proportion to the number of rentable square feet contained in the Premises, and this Lease as so amended shall continue thereafter in full force and effect, and upon request of
either party, the parties shall execute written confirmation of the same. If Landlord declines, or fails to elect in a timely manner, to recapture such Contemplated Transfer Space under this Section 14.4, then, subject to the other terms of
this Article 14, for a period of nine (9) months (the "Nine Month Period") commencing on the last day of such thirty (30) day period, Landlord shall not have any right to recapture the Contemplated
Transfer Space with respect to any Transfer made during the Nine Month Period, provided that any such Transfer is substantially on the terms set forth in the Intention to Transfer Notice, and provided further that any such Transfer shall be subject
to the remaining terms of this Article 14. If such a Transfer is not so consummated within the Nine Month Period (or if a Transfer is so consummated, then upon the expiration of the term of any Transfer of such Contemplated Transfer Space
consummated within such Nine Month Period), Tenant shall again be required to submit a new Intention to Transfer Notice to Landlord with respect any contemplated Transfer, as provided above in this Section 14.4.
14.5 Effect of Transfer. If Landlord consents to a Transfer, (i) the terms and conditions of this Lease shall in no way be deemed to have been
waived or modified, (ii) such consent shall not be deemed consent to any further Transfer by either Tenant or a Transferee, (iii) Tenant shall deliver to Landlord, promptly after execution, an original executed copy of all documentation pertaining to
the Transfer in form reasonably acceptable to Landlord, (iv) Tenant shall furnish upon Landlord's request a complete statement, certified by an independent certified public accountant, or Tenant's chief financial officer, setting forth in detail the
computation of any Transfer Premium Tenant has derived and shall derive from such Transfer, and (v) no Transfer relating to this Lease or agreement entered into with respect thereto, whether with or without Landlord's consent, shall relieve Tenant or
any guarantor of the Lease from any liability under this Lease, including, without limitation, in connection with the Subject Space. Landlord or its authorized representatives shall have the right at all reasonable times to audit the books, records
and papers of Tenant relating to any Transfer, and shall have the right to make copies thereof. If the Transfer Premium respecting any Transfer shall be found understated, Tenant shall, within thirty (30) days after demand, pay the deficiency, and if
understated by more than two percent (2%), Tenant shall pay Landlord's costs of such audit.
14.6 Additional Transfers. For purposes of this Lease, the term "Transfer" shall also include (i) if
Tenant is a partnership, the withdrawal or change, voluntary, involuntary or by operation of law, of fifty percent (50%) or more of the partners, or transfer of fifty percent (50%) or more of partnership interests, within a twelve (12)-month period,
or the dissolution of the partnership without immediate reconstitution thereof, and (ii) if Tenant is a closely held corporation (i.e., whose stock is not publicly held and not traded through an exchange or
over the counter), (A) the dissolution, merger, consolidation or other reorganization of Tenant or (B) the sale or other transfer of an aggregate of fifty percent (50%) or more of the voting shares of Tenant (other than to immediate family members by
reason of gift or death), within a twelve (12)-month period, or (C) the sale, mortgage, hypothecation or pledge of an aggregate of fifty percent (50%) or more of the value of the unencumbered assets of Tenant within a twelve (12)-month period.
Notwithstanding the foregoing, under no circumstances shall the raising of additional capital, or an initial public offering of Tenant's stock on a nationally-recognized stock exchange, be considered a “Transfer” under this Lease, so long as Tenant
is substantially the same legal entity.
14.7 Occurrence of Default. Any Transfer hereunder shall be subordinate and subject to the provisions of this Lease, and if this Lease shall be
terminated during the term of any Transfer, Landlord shall have the right to: (i) treat such Transfer as cancelled and repossess the Subject Space by any lawful means, or (ii) require that such Transferee attorn to and recognize Landlord as its
landlord under any such Transfer. If Tenant shall be in default under this Lease, Landlord is hereby irrevocably authorized, as Tenant's agent and attorney-in-fact, to direct any Transferee to make all payments under or in connection with the
Transfer directly to Landlord (which Landlord shall apply towards Tenant's obligations under this Lease) until such default is cured. Such Transferee shall rely on any representation by Landlord that Tenant is in default hereunder, without any need
for confirmation thereof by Tenant. Upon any assignment, the assignee shall assume in writing all obligations and covenants of Tenant thereafter to be performed or observed under this Lease. No collection or acceptance of rent by Landlord from any
Transferee shall be deemed a waiver of any provision of this Article 14 or the approval of any Transferee or a release of Tenant from any obligation under this Lease, whether theretofore or thereafter accruing. In no event shall Landlord's
enforcement of any provision of this Lease against any Transferee be deemed a waiver of Landlord's right to enforce any term of this Lease against Tenant or any other person. If Tenant's obligations hereunder have been guaranteed, Landlord's consent
to any Transfer shall not be effective unless the guarantor also consents to such Transfer.
14.8 Non-Transfers. Notwithstanding anything to the contrary contained in this Article 14, an assignment or subletting of all or a portion
of the Premises to an affiliate of Tenant (an entity which is controlled by, controls, or is under common control with, Tenant), shall not be deemed a Transfer under this Article 14, provided that Tenant notifies Landlord of any such
assignment or sublease and promptly supplies Landlord with any documents or information requested by Landlord regarding such assignment or sublease or such affiliate, and further provided that such assignment or sublease is not a subterfuge by Tenant
to avoid its obligations under this Lease. "Control," as used in this Section 14.8, shall mean the ownership, directly or indirectly, of at least fifty-one percent (51%) of the voting securities of, or
possession of the right to vote, in the ordinary direction of its affairs, of at least fifty-one percent (51%) of the voting interest in, any person or entity. No such permitted assignment or subletting shall serve to release Tenant from any of its
obligations under this Lease. Tenant shall not be required to pay any review fee to Landlord for Non-Transfers pursuant to this Section 14.8.
| 15. |
SURRENDER OF PREMISES; OWNERSHIP AND REMOVAL OF TRADE FIXTURES
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15.1 Surrender of Premises. No act or thing done by Landlord or any agent or employee of Landlord during the Lease Term shall be deemed to
constitute an acceptance by Landlord of a surrender of the Premises unless such intent is specifically acknowledged in writing by Landlord. The delivery of keys to the Premises to Landlord or any agent or employee of Landlord shall not constitute a
surrender of the Premises or effect a termination of this Lease, whether or not the keys are thereafter retained by Landlord, and notwithstanding such delivery Tenant shall be entitled to the return of such keys at any reasonable time upon request
until this Lease shall have been properly terminated. The voluntary or other surrender of this Lease by Tenant, whether accepted by Landlord or not, or a mutual termination hereof, shall not work a merger, and at the option of Landlord shall operate
as an assignment to Landlord of all subleases or subtenancies affecting the Premises or terminate any or all such sublessees or subtenancies.
15.2 Removal of Tenant Property by Tenant. Upon the expiration of the Lease Term, or upon any earlier termination of this Lease, Tenant shall,
subject to the provisions of this Article 15, quit and surrender possession of the Premises to Landlord in as good order and condition as when Tenant took possession and as thereafter improved by Landlord and/or Tenant, reasonable wear and
tear and repairs which are specifically made the responsibility of Landlord hereunder excepted. Upon such expiration or termination, Tenant shall, without expense to Landlord, remove or cause to be removed from the Premises all debris and rubbish,
and such items of furniture, equipment, free- standing cabinet work, movable partitions and other articles of personal property owned by Tenant or installed or placed by Tenant at its expense in the Premises, and such similar articles of any other
persons claiming under Tenant, as Landlord may, in its sole discretion, require to be removed, and Tenant shall repair at its own expense all damage to the Premises and Building resulting from such removal.
15.3 Environmental Assessment. In connection with its surrender of the Premises, Tenant shall submit to Landlord, at least thirty (30) days prior
to the expiration date of this Lease (or in the event of an earlier termination of this Lease, as soon as reasonably possible following such termination), an environmental Assessment of the Premises by a competent and experienced environmental
engineer or engineering firm reasonably satisfactory to Landlord (pursuant to a contract approved by Landlord and providing that Landlord can rely on the Environmental Assessment), which (i) evidences that the Premises are in a clean and safe
condition and free and clear of any Hazardous Materials (except those necessary for Tenant’s business operations and previously disclosed to Landlord); and (ii) includes a review of the Premises by an environmental consultant for mold, fungus,
spores, and other moisture conditions, and on-site chemical use. If such Environmental Assessment reveals that remediation or Clean-up is required under any Environmental Laws, Tenant shall submit a remediation plan prepared by a recognized
environmental consultant and shall be responsible for all costs of remediation and Clean-up, as more particularly provided in Section 5.3, above.
15.4 Condition of the Building and Premises Upon Surrender. In addition to the above requirements of this Article 15, upon the expiration
of the Lease Term, or upon any earlier termination of this Lease, Tenant shall, surrender the Premises and Building such that the same are in compliance with all Applicable Laws and with Tenant having complied with all of Tenant’s obligations under
this Lease, including those relating to improvement, repair, maintenance, compliance with law, testing and other related obligations of Tenant set forth in Article 7 of this Lease. In the event that the Building and Premises shall be
surrendered in a condition which does not comply with the terms of this Section 15.4, because Tenant failed to comply with its obligations set forth in Lease, then following thirty (30) days’ notice to Tenant, during which thirty (30) day
period Tenant shall have the right to cure such noncompliance, Landlord shall be entitled to expend all reasonable costs in order to cause the same to comply with the required condition upon surrender and Tenant shall immediately reimburse Landlord
for all such costs upon notice and Tenant shall be deemed during the period that Tenant or Landlord, as the case may be, perform obligations relating to the Surrender Improvements to be in holdover under Article 16 of this Lease.
16. HOLDING OVER If Tenant holds over after the expiration of the Lease Term or earlier termination thereof, with the express or implied consent of Landlord, such tenancy shall be from
month-to-month only, and shall not constitute a renewal hereof or an extension for any further term. If Tenant holds over after the expiration of the Lease Term of earlier termination thereof, without the express or implied consent of Landlord, such
tenancy shall be deemed to be a tenancy by sufferance only, and shall not constitute a renewal hereof or an extension for any further term. In either case, Rent shall be payable at a monthly rate equal to the product of (i) the monthly Rent
applicable during the last rental period of the Lease Term under this Lease, and (ii) a percentage equal to 150% during the first month immediately following the expiration or earlier termination of the Lease Term, and 200% thereafter. Such
month-to-month tenancy or tenancy by sufferance, as the case may be, shall be subject to every other applicable term, covenant and agreement contained herein. Nothing contained in this Article 16 shall be construed as consent by Landlord to any
holding over by Tenant, and Landlord expressly reserves the right to require Tenant to surrender possession of the Premises to Landlord as provided in this Lease upon the expiration or other termination of this Lease. The provisions of this Article
16 shall not be deemed to limit or constitute a waiver of any other rights or remedies of Landlord provided herein or at law. If Tenant fails to surrender the Premises upon the termination or expiration of this Lease, in addition to any other
liabilities to Landlord accruing therefrom, Tenant shall protect, defend, indemnify and hold Landlord harmless from all loss, costs (including reasonable attorneys' fees) and liability resulting from such failure, including, without limiting the
generality of the foregoing, any claims made by any succeeding tenant founded upon such failure to surrender and any lost profits to Landlord resulting therefrom.
17. ESTOPPEL CERTIFICATES Within ten (10) business days following a request in writing by Landlord, Tenant shall execute,
acknowledge and deliver to Landlord an estoppel certificate, which, as submitted by Landlord, shall be substantially in the form of Exhibit D, attached hereto (or such other form as may be required by
any prospective mortgagee or purchaser of the Project, or any portion thereof), indicating therein any exceptions thereto that may exist at that time, and shall also contain any other information reasonably requested by Landlord or Landlord's
mortgagee or prospective mortgagee. Any such certificate may be relied upon by any prospective mortgagee or purchaser of all or any portion of the Project. Tenant shall execute and deliver whatever other instruments may be reasonably required for
such purposes. At any time during the Lease Term but not more than once per calendar year (except in connection with a financing, refinancing or sale of the Building or in connection with Tenant’s request for Landlord’s consent to an Alteration or
Transfer), Landlord may require Tenant to provide Landlord with a current financial statement and financial statements of the two (2) years prior to the current financial statement year. Such statements shall be prepared in accordance with generally
accepted accounting principles and, if such is the normal practice of Tenant, shall be audited by an independent certified public accountant. Failure of Tenant to timely execute, acknowledge and deliver such estoppel certificate or other instruments
shall constitute an acceptance of the Premises and an acknowledgment by Tenant that statements included in the estoppel certificate are true and correct, without exception.
18. SUBORDINATION This Lease shall be subject and subordinate to all present and future ground or underlying leases of the
Building or Project and to the lien of any mortgage, trust deed or other encumbrances now or hereafter in force against the Building or Project or any part thereof, if any, and to all renewals, extensions, modifications, consolidations and
replacements thereof, and to all advances made or hereafter to be made upon the security of such mortgages or trust deeds, unless the holders of such mortgages, trust deeds or other encumbrances, or the lessors under such ground lease or underlying
leases, require in writing that this Lease be superior thereto. Tenant covenants and agrees in the event any proceedings are brought for the foreclosure of any such mortgage or deed in lieu thereof (or if any ground lease is terminated), to attorn,
without any deductions or set-offs whatsoever, to the lienholder or purchaser or any successors thereto upon any such foreclosure sale or deed in lieu thereof (or to the ground lessor), if so requested to do so by such purchaser or lienholder or
ground lessor, and to recognize such purchaser or lienholder or ground lessor as the lessor under this Lease, provided such lienholder or purchaser or ground lessor shall agree to accept this Lease and not disturb Tenant's occupancy, so long as
Tenant timely pays the rent and observes and performs the terms, covenants and conditions of this Lease to be observed and performed by Tenant. Landlord's interest herein may be assigned as security at any time to any lienholder. Tenant shall, within
ten (10) days of request by Landlord, execute such further instruments or assurances as Landlord may reasonably deem necessary to evidence or confirm the subordination or superiority of this Lease to any such mortgages, trust deeds, ground leases or
underlying leases. Tenant waives the provisions of any current or future statute, rule or law which may give or purport to give Tenant any right or election to terminate or otherwise adversely affect this Lease and the obligations of the Tenant
hereunder in the event of any foreclosure proceeding or sale.
| 19. |
DEFAULTS; REMEDIES
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19.1 Events of Default. In addition to any other Events of Default specified in this Lease, the occurrence of any of the following shall constitute a default of this
Lease by Tenant (each, an “Event of Default”):
19.1.1 Any failure by Tenant to pay any Rent or any other charge required to be paid under this Lease, or any part thereof, which failure is not cured within five (5) business days after written
notice from Landlord that said amount was not paid when due, provided that if Tenant has previously received one (1) or more notices from Landlord during the immediately preceding twelve (12) month period stating that Tenant failed to pay any amount
required to be paid by Tenant under this Lease when due, then Landlord shall not be required to deliver any notice to Tenant and a Event of Default shall immediately occur upon any failure by Tenant to pay any rent or any other charge required to be
paid under this Lease when due; or
19.1.2 Except where a specific time period is otherwise set forth for Tenant's performance in this Lease, in which event the failure to perform by Tenant within such time period shall be a default
by Tenant under this Section 19.1.2, any failure by Tenant to observe or perform any other provision, covenant or condition of this Lease to be observed or performed by Tenant where such failure continues for thirty (30) days after written
notice thereof from Landlord to Tenant; provided that if the nature of such default is such that the same cannot reasonably be cured within a thirty (30) day period, Tenant shall not be deemed to be in default if it diligently commences such cure
within such period and thereafter diligently proceeds to rectify and cure such default; or
19.1.3 Abandonment or vacation of all or a substantial portion of the Premises by Tenant; or
19.1.4 The failure by Tenant to observe or perform according to the provisions of Articles 5, 14, 17 or 18 of this Lease or any provision of the Tenant Work Letter,
where, in each instance, such failure continues for more than three (3) days after notice from Landlord; or
19.1.5 Tenant's failure to occupy the Premises within ten (10) business days after the Lease Commencement Date.
Any notices to be provided by Landlord under this Section 19.1 shall be in lieu of, and not in addition to, any notice required under Section 1161 et seq. of the Code of Civil Procedure, and
may be served on Tenant in the manner allowed for service of notices under this Lease.
19.2 Remedies Upon Event of Default. Upon the occurrence of any event of default by Tenant, Landlord shall have, in addition to any other remedies
available to Landlord at law or in equity (all of which remedies shall be distinct, separate and cumulative), the option to pursue any one or more of the following remedies (including, without limitation, during any eviction moratorium, to the extent
allowed by Applicable Law), each and all of which shall be cumulative and nonexclusive, without any notice or demand whatsoever.
19.2.1 Terminate this Lease, in which event Tenant shall immediately surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy which it
may have for possession or arrearages in rent, enter upon and take possession of the Premises and expel or remove Tenant and any other person who may be occupying the Premises or any part thereof, without being liable for prosecution or any claim or
damages therefor; and Landlord may recover from Tenant the following:
(i) The worth at the time of award of the unpaid rent which has been earned at the time of such termination; plus
(ii) The worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such
rental loss that Tenant proves could have been reasonably avoided; plus
(iii) The worth at the time of award of the amount by which the unpaid rent for the balance of the Lease Term after the time of award exceeds the amount of such rental loss
that Tenant proves could have been reasonably avoided; plus
(iv) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease or which in
the ordinary course of things would be likely to result therefrom, specifically including but not limited to, brokerage commissions and advertising expenses incurred, expenses of remodeling the Premises or any portion thereof for a new tenant,
whether for the same or a different use, and any special concessions made to obtain a new tenant; and
(v) At Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by Applicable Law.
The term "rent" as used in this Section 19.2 shall be deemed to be and to mean all sums of every nature required to be paid by Tenant pursuant to the
terms of this Lease, whether to Landlord or to others. As used in Sections 19.2.1(i) and (ii), above, the "worth at the time of award" shall be computed by allowing interest at the rate set forth in Article 25 of this
Lease, but in no case greater than the maximum amount of such interest permitted by law. As used in Section 19.2.1(iii) above, the "worth at the time of award" shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%).
19.2.2 Landlord shall have the remedy described in California Civil Code Section 1951.4 (lessor may continue lease in effect after lessee's breach and abandonment and recover rent as it becomes
due, if lessee has the right to sublet or assign, subject only to reasonable limitations). Accordingly, if Landlord does not elect to terminate this Lease on account of any Event of Default by Tenant, Landlord may, from time to time, without
terminating this Lease, enforce all of its rights and remedies under this Lease, including the right to recover all rent as it becomes due.
19.2.3 Landlord shall at all times have the rights and remedies (which shall be cumulative with each other and cumulative and in addition to those rights and remedies available under Sections
19.2.1 and 19.2.2, above, or any law or other provision of this Lease), without prior demand or notice except as required by applicable law, to seek any declaratory, injunctive or other equitable relief, and specifically enforce this
Lease, or restrain or enjoin a violation or breach of any provision hereof.
19.3 Subleases of Tenant. Whether or not Landlord elects to terminate this Lease on account of any Event of Default by Tenant, as set forth in
this Article 19, Landlord shall have the right to terminate any and all subleases, licenses, concessions or other consensual arrangements for possession entered into by Tenant and affecting the Premises or may, in Landlord's sole discretion,
succeed to Tenant's interest in such subleases, licenses, concessions or arrangements. In the event of Landlord's election to succeed to Tenant's interest in any such subleases, licenses, concessions or arrangements, Tenant shall, as of the date of
notice by Landlord of such election, have no further right to or interest in the rent or other consideration receivable thereunder.
19.4 Efforts to Relet. No re-entry or repossession, repairs, maintenance, changes, alterations and additions, reletting, appointment of a receiver
to protect Landlord's interests hereunder, or any other action or omission by Landlord shall be construed as an election by Landlord to terminate this Lease or Tenant's right to possession, or to accept a surrender of the Premises, nor shall same
operate to release Tenant in whole or in part from any of Tenant's obligations hereunder, unless express written notice of such intention is sent by Landlord to Tenant. Tenant hereby irrevocably waives any right otherwise available under any law to
redeem or reinstate this Lease.
19.5 Landlord Default
19.5.1 General. Landlord shall be in default under this Lease if Landlord fails to perform any of its obligations hereunder following the Lease
Commencement Date and such failure continues for thirty (30) days after Tenant delivers to Landlord written notice specifying such failure; however, if such failure cannot reasonably be cured within such 30-day period, but Landlord commences to cure
such failure within such 30-day period and thereafter diligently pursues the curing thereof to completion, then Landlord shall not be in default hereunder or liable for damages therefor. Except where the provisions of this Lease grant Tenant an
express, exclusive remedy, or expressly deny Tenant a remedy, Tenant's exclusive remedy for Landlord's failure to perform its obligations under this Lease shall be limited to damages, injunctive relief, or specific performance; in each case,
Landlord's liability or obligations with respect to any such remedy shall be limited as provided in Section 29.13.
19.5.2 Abatement of Rent. In the event that Tenant is prevented from using, and does not use, the Premises or any portion thereof as a result of (i)
any repair, maintenance or alteration performed by Landlord, or which Landlord failed to perform, after the Lease Commencement Date and required by this Lease, which substantially interferes with Tenant's use of the Premises, or (ii) any failure to
provide services, utilities or access to the Premises as required by this Lease (either such set of circumstances as set forth in items (i) or (ii), above, to be known as an "Abatement Event"), then Tenant
shall give Landlord notice of such Abatement Event, and if such Abatement Event continues for five (5) consecutive business days after Landlord's receipt of any such notice (the "Eligibility Period"), then the
Base Rent, Tenant's Share of Direct Expenses, and Tenant's obligation to pay for parking (to the extent not utilized by Tenant) shall be abated or reduced, as the case may be, after expiration of the Eligibility Period for such time that Tenant
continues to be so prevented from using, and does not use for the normal conduct of Tenant's business, the Premises or a portion thereof, in the proportion that the rentable area of the portion of the Premises that Tenant is prevented from using, and
does not use, bears to the total rentable area of the Premises; provided, however, in the event that Tenant is prevented from using, and does not use, a portion of the Premises for a period of time in excess of the Eligibility Period and the
remaining portion of the Premises is not sufficient to allow Tenant to effectively conduct its business therein, and if Tenant does not conduct its business from such remaining portion, then for such time after expiration of the Eligibility Period
during which Tenant is so prevented from effectively conducting its business therein, the Base Rent and Tenant's Share of Direct Expenses for the entire Premises and Tenant's obligation to pay for parking shall be abated for such time as Tenant
continues to be so prevented from using, and does not use, the Premises. If, however, Tenant reoccupies any portion of the Premises during such period, the Rent allocable to such reoccupied portion, based on the proportion that the rentable area of
such reoccupied portion of the Premises bears to the total rentable area of the Premises, shall be payable by Tenant from the date Tenant reoccupies such portion of the Premises. To the extent an Abatement Event is caused by an event covered by Articles
11 or 13 of this Lease, then Tenant's right to abate rent shall be governed by the terms of such Article 11 or 13, as applicable, and the Eligibility Period shall not be applicable thereto. Such right to abate Base Rent
and Tenant's Share of Direct Expenses shall be Tenant's sole and exclusive remedy for rent abatement at law or in equity for an Abatement Event. Except as provided in this Section 19.5, nothing contained herein shall be interpreted to mean
that Tenant is excused from paying Rent due hereunder.
20. COVENANT OF QUIET ENJOYMENT Landlord covenants that Tenant, on paying the Rent, charges for services and other payments
herein reserved and on keeping, observing and performing all the other terms, covenants, conditions, provisions and agreements herein contained on the part of Tenant to be kept, observed and performed, shall, during the Lease Term, peaceably and
quietly have, hold and enjoy the Premises subject to the terms, covenants, conditions, provisions and agreements hereof without interference by any persons lawfully claiming by or through Landlord. The foregoing covenant is in lieu of any other
covenant express or implied.
21. SECURITY DEPOSIT Concurrently with Tenant's execution of this Lease, Tenant shall deposit with Landlord a security deposit
(the "Security Deposit") in the amount set forth in Section 8 of the Summary, as security for the faithful performance by Tenant of all of its obligations under this Lease. If Tenant defaults with respect to
any provisions of this Lease, including, but not limited to, the provisions relating to the payment of Rent, the removal of property and the repair of resultant damage, Landlord may, without notice to Tenant, but shall not be required to apply all or
any part of the Security Deposit for the payment of any Rent or any other sum in default and Tenant shall, within ten (10) business days after written demand therefor, restore the Security Deposit to its original amount (including, without
limitation, during any eviction moratorium, to the extent allowed by Applicable Law). Any unapplied portion of the Security Deposit shall be returned to Tenant, or, at Landlord's option, to the last assignee of Tenant's interest hereunder, within
sixty (60) days following the later to occur of (i) the expiration or earlier termination of the Lease Term, or (ii) the date on which Tenant vacates and surrenders the Premises to Landlord. Tenant shall not be entitled to any interest on the
Security Deposit. Tenant hereby irrevocably waives and relinquishes any and all rights, benefits, or protections, if any, Tenant now has, or in the future may have, under Section 1950.7 of the California Civil Code, any successor statute, and all
other provisions of law, now or hereafter in effect, including, but not limited to, any provision of law which (i) establishes the time frame by which a landlord must refund a security deposit under a lease, and/or (ii) provides that a landlord may
claim from a security deposit only those sums reasonably necessary to remedy defaults in the payment of rent, to repair damage caused by a tenant or to clean the subject premises. Tenant acknowledges and agrees that (a) any statutory time frames for
the return of a security deposit are superseded by the express period identified in this Article 21, above, and (b) rather than be so limited, Landlord may claim from the Security Deposit (1) any and all sums expressly identified in this Article 21,
above, and (2) any additional sums reasonably necessary to compensate Landlord for any and all losses or damages caused by Tenant's default of this Lease, including, but not limited to, all damages or rent due upon termination of Lease pursuant to
Section 1951.2 of the California Civil Code.
22. COMMUNICATIONS AND COMPUTER LINE Tenant may install, maintain, replace, remove or use any communications or computer wires
and cables serving the Premises (collectively, the "Lines"), provided that Tenant shall obtain Landlord's prior written consent, use an experienced and qualified contractor approved in writing by Landlord, and
comply with all of the other provisions of Articles 7 and 8 of this Lease. Tenant shall pay all costs in connection therewith. Landlord reserves the right, upon notice to Tenant prior to the expiration or earlier termination of this Lease, to require
that Tenant, at Tenant's sole cost and expense, remove any Lines located in or serving the Premises prior to the expiration or earlier termination of this Lease.
| 23. |
SIGNS
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23.1 Full Floors. Subject to Landlord's prior written approval, in its reasonable discretion, and provided all signs are in keeping with the
quality, design and style of the Building and Project, Tenant, if the Premises comprise an entire floor of the Building, at its sole cost and expense, may install identification signage anywhere in the Premises including in the elevator lobby of the
Premises, provided that such signs must not be visible from the exterior of the Building.
23.2 Multi-Tenant Floors. If other tenants occupy space on the floor on which the Premises is located, Tenant's identifying suite entrance signage
shall be provided by Landlord, at Landlord’s initial cost (any changes to Tenant's suite entrance signage shall be subject to Landlord's prior written approval and shall be performed at Tenant's sole cost and expense), and such signage shall be
comparable to that used by Landlord for other similar floors in the Building and shall comply with Landlord's then-current Building standard signage program.
23.3 Prohibited Signage and Other Items. Except as otherwise set forth in this Section 23.3, any signs, notices, logos, pictures, names or
advertisements which are installed and that have not been separately approved by Landlord may be removed without notice by Landlord at the sole expense of Tenant. Tenant may not install any signs on the exterior or roof of the Project or the Common
Areas. Any signs, window coverings, or blinds (even if the same are located behind the Landlord-approved window coverings for the Building), or other items visible from the exterior of the Premises or Building, shall be subject to the prior approval
of Landlord, in its sole discretion.
23.4 Lobby Directory. Landlord, at its sole cost and expense, shall install Tenant's name in the Building directory located in the lobby. Any
changes to Tenant's lobby directory signage shall be subject to Landlord's prior written approval and shall be performed at Tenant's sole cost and expense. Notwithstanding anything to the contrary contained in this Lease, upon the expiration of the
Lease Term, or upon any earlier termination of this Lease, the removal of Tenant's name initially provided for in the Building directory, shall be at Landlord's sole cost and expense.
24. COMPLIANCE WITH LAW Tenant shall not do anything or suffer anything to be done in or about the Premises or the Project
which will in any way conflict with any law, statute, ordinance or other rule, directive, order, regulation, guideline or requirement of any governmental entity or governmental agency (the “Applicable Laws”)
now in force or which may hereafter be enacted or promulgated. At its sole cost and expense, Tenant shall promptly comply with all such governmental measures. Should any standard or regulation now or hereafter be imposed on Landlord or Tenant by a
state, federal or local governmental body charged with the establishment, regulation and enforcement of occupational, health or safety standards for employers, employees, landlords or tenants, then Tenant agrees, at its sole cost and expense, to
comply promptly with such standards or regulations. Tenant shall be responsible, at its sole cost and expense, to make all alterations to the Building and Premises as are required to comply with the governmental rules, regulations, requirements or
standards described in this Article 24. The judgment of any court of competent jurisdiction or the admission of Tenant in any judicial action, regardless of whether Landlord is a party thereto, that Tenant has violated any of said governmental
measures, shall be conclusive of that fact as between Landlord and Tenant. For purposes of Section 1938 of the California Civil Code, Landlord hereby discloses to Tenant, and Tenant hereby acknowledges, that the Project, Building and Premises have
not undergone inspection by a Certified Access Specialist (CASp). As required by Section 1938(e) of the California Civil Code, Landlord hereby states as follows: "A Certified Access Specialist (CASp) can inspect the subject premises and determine
whether the subject premises comply with all of the applicable construction-related accessibility standards under state law. Although state law does not require a CASp inspection of the subject premises, the commercial property owner or lessor may
not prohibit the lessee or tenant from obtaining a CASp inspection of the subject premises for the occupancy or potential occupancy of the lessee or tenant, if requested by the lessee or tenant. The parties shall mutually agree on the arrangements
for the time and manner of the CASp inspection, the payment of the fee for the CASp inspection, and the cost of making any repairs necessary to correct violations of construction-related accessibility standards within the premises." In furtherance of
the foregoing, Landlord and Tenant hereby agree as follows: (a) any CASp inspection requested by Tenant shall be conducted, at Tenant's sole cost and expense, by a CASp approved in advance by Landlord; and (b) pursuant to Article 24 below, Tenant, at
its cost, is responsible for making any repairs within the Premises to correct violations of construction-related accessibility standards; and, if anything done by or for Tenant in its use or occupancy of the Premises shall require repairs to the
Building (outside the Premises) to correct violations of construction-related accessibility standards, then Tenant shall, at Landlord's option, either perform such repairs at Tenant's sole cost and expense or reimburse Landlord upon demand, as
Additional Rent, for the cost to Landlord of performing such repairs.
25. LATE CHARGES If any installment of Rent or any other sum due from Tenant shall not be received by Landlord or
Landlord's designee within five (5) business days after Tenant's receipt of written notice from Landlord that said amount is due, then Tenant shall pay to Landlord a late charge equal to five percent (5%) of the overdue amount plus any reasonable
attorneys' fees incurred by Landlord by reason of Tenant's failure to pay Rent and/or other charges when due hereunder. The late charge shall be deemed Additional Rent and the right to require it shall be in addition to all of Landlord's other rights
and remedies hereunder or at law and shall not be construed as liquidated damages or as limiting Landlord's remedies in any manner. In addition to the late charge described above, any Rent or other amounts owing hereunder which are not paid within
ten (10) days after the date they are due shall bear interest from the date when due until paid at a rate per annum equal to the lesser of (i) the annual "Bank Prime Loan" rate cited in the Federal Reserve Statistical Release Publication G.13(415),
published on the first Tuesday of each calendar month (or such other comparable index as Landlord and Tenant shall reasonably agree upon if such rate ceases to be published) plus four (4) percentage points, and (ii) the highest rate permitted by
Applicable Law.
| 26. |
LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT
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26.1 Landlord's Cure. All covenants and agreements to be kept or performed by Tenant under this Lease shall be performed by Tenant at Tenant's
sole cost and expense and without any reduction of Rent, except to the extent, if any, otherwise expressly provided herein. If Tenant shall fail to perform any obligation under this Lease, and such failure shall continue in excess of the time allowed
under Section 19.1.2, above, unless a specific time period is otherwise stated in this Lease, Landlord may, but shall not be obligated to, make any such payment or perform any such act on Tenant's part without waiving its rights based upon
any default of Tenant and without releasing Tenant from any obligations hereunder.
26.2 Tenant's Reimbursement. Except as may be specifically provided to the contrary in this Lease, Tenant shall pay to Landlord, within thirty
(30) days of delivery by Landlord to Tenant of statements therefor: (i) sums equal to expenditures reasonably made and obligations incurred by Landlord in connection with the remedying by Landlord of Tenant's defaults pursuant to the provisions of Section
26.1; (ii) sums equal to all losses, costs, liabilities, damages and expenses referred to in Article 10 of this Lease; and (iii) sums equal to all expenditures made and obligations incurred by Landlord in collecting or attempting to
collect the Rent or in enforcing or attempting to enforce any rights of Landlord under this Lease or pursuant to law, including, without limitation, all reasonable legal fees and other amounts so expended. Tenant's obligations under this Section
26.2 shall survive the expiration or sooner termination of the Lease Term.
27. ENTRY BY LANDLORD Landlord reserves the right at all reasonable times and upon reasonable notice (not less than 48
hours prior notice for Landlord’s entry into the laboratory areas within the Premises) to Tenant (except in the case of an emergency) to enter the Premises to (i) inspect them; (ii) show the Premises to prospective purchasers, or to current or
prospective mortgagees, ground or underlying lessors or insurers or, during the last twelve (12) months of the Lease Term, to prospective tenants; (iii) post notices of nonresponsibility (to the extent applicable pursuant to then Applicable Law); or
(iv) alter, improve or repair the Premises or the Building, or for structural alterations, repairs or improvements to the Building or the Building's systems and equipment. Landlord may make any such entries without the abatement of Rent, except as
otherwise provided in this Lease, including, without limitation, as expressly set forth in Section 19.5, and may take such reasonable steps as required to accomplish the stated purposes. In an emergency, Landlord shall have the right to use
any means that Landlord may deem proper to open the doors in and to the Premises. Any entry into the Premises by Landlord in the manner hereinbefore described shall not be deemed to be a forcible or unlawful entry into, or a detainer of, the
Premises, or an actual or constructive eviction of Tenant from any portion of the Premises.
28. TENANT PARKING Tenant shall have the right to use the amount of parking set forth in Section 9 of the Summary at no cost
to Tenant (other than those costs included within Direct Expenses) during the Lease Term and any Option Term, in the on-site and/or off-site, as the case may be, parking facility (or facilities) which serve the Project. Tenant shall abide by all
reasonable rules and regulations which are prescribed from time to time for the orderly operation and use of the parking facility where the parking passes are located (including any sticker or other identification system established by Landlord and
the prohibition of vehicle repair and maintenance activities in the parking facilities), and shall cooperate in seeing that Tenant's employees and visitors also comply with such rules and regulations. Tenant's use of the Project parking facility
shall be at Tenant's sole risk and Tenant acknowledges and agrees that Landlord shall have no liability whatsoever for damage to the vehicles of Tenant, its employees and/or visitors, or for other personal injury or property damage or theft relating
to or connected with the parking rights granted herein or any of Tenant's, its employees' and/or visitors' use of the parking facilities.
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MISCELLANEOUS PROVISIONS
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29.1 Terms; Captions. The words "Landlord" and "Tenant" as used
herein shall include the plural as well as the singular. The necessary grammatical changes required to make the provisions hereof apply either to corporations or partnerships or individuals, men or women, as the case may require, shall in all cases
be assumed as though in each case fully expressed. The captions of Articles and Sections are for convenience only and shall not be deemed to limit, construe, affect or alter the meaning of such Articles and Sections.
29.2 Binding Effect. Subject to all other provisions of this Lease, each of the covenants, conditions and provisions of this Lease shall extend to
and shall, as the case may require, bind or inure to the benefit not only of Landlord and of Tenant, but also of their respective heirs, personal representatives, successors or assigns, provided this clause shall not permit any assignment by Tenant
contrary to the provisions of Article 14 of this Lease.
29.3 No Air Rights. No rights to any view or to light or air over any property, whether belonging to Landlord or any other person, are granted to
Tenant by this Lease. If at any time any windows of the Premises are temporarily darkened or the light or view therefrom is obstructed by reason of any repairs, improvements, maintenance or cleaning in or about the Project, the same shall be without
liability to Landlord and without any reduction or diminution of Tenant's obligations under this Lease.
29.4 Modification of Lease. Should any current or prospective mortgagee or ground lessor for the Building or Project require a modification of
this Lease, which modification will not cause an increased cost or expense to Tenant or in any other way materially and adversely change the rights and obligations of Tenant hereunder, then and in such event, Tenant agrees that this Lease may be so
modified and agrees to execute whatever documents are reasonably required therefor and to deliver the same to Landlord within ten (10) business days following a request therefor. At the request of Landlord or any mortgagee or ground lessor, Tenant
agrees to execute a short form of Lease and deliver the same to Landlord within ten (10) business days following the request therefor.
29.5 Transfer of Landlord's Interest. Tenant acknowledges that Landlord has the right to transfer all or any portion of its interest in the
Project or Building and in this Lease, and Tenant agrees that in the event of any such transfer, Landlord shall automatically be released from all liability under this Lease and Tenant agrees to look solely to such transferee for the performance of
Landlord's obligations hereunder after the date of transfer and such transferee shall be deemed to have fully assumed and be liable for all obligations of this Lease to be performed by Landlord, including the return of any Security Deposit, and
Tenant shall attorn to such transferee.
29.6 Prohibition Against Recording. Except as provided in Section 29.4 of this Lease, neither this Lease, nor any memorandum, affidavit
or other writing with respect thereto, shall be recorded by Tenant or by anyone acting through, under or on behalf of Tenant.
29.7 Landlord's Title. Landlord's title is and always shall be paramount to the title of Tenant. Nothing herein contained shall empower Tenant to
do any act which can, shall or may encumber the title of Landlord.
29.8 Relationship of Parties. Nothing contained in this Lease shall be deemed or construed by the parties hereto or by any third party to create
the relationship of principal and agent, partnership, joint venturer or any association between Landlord and Tenant.
29.9 Application of Payments. Landlord shall have the right to apply payments received from Tenant pursuant to this Lease, regardless of Tenant's
designation of such payments, to satisfy any obligations of Tenant hereunder, in such order and amounts as Landlord, in its sole discretion, may elect.
29.10 Time of Essence. Time is of the essence with respect to the performance of every provision of this Lease in which time of performance is a
factor.
29.11 Partial Invalidity. If any term, provision or condition contained in this Lease shall, to any extent, be invalid or unenforceable, the
remainder of this Lease, or the application of such term, provision or condition to persons or circumstances other than those with respect to which it is invalid or unenforceable, shall not be affected thereby, and each and every other term,
provision and condition of this Lease shall be valid and enforceable to the fullest extent possible permitted by law.
29.12 No Warranty. In executing and delivering this Lease, Tenant has not relied on any representations, including, but not limited to, any
representation as to the amount of any item comprising Additional Rent or the amount of the Additional Rent in the aggregate or that Landlord is furnishing the same services to other tenants, at all, on the same level or on the same basis, or any
warranty or any statement of Landlord which is not set forth herein or in one or more of the exhibits attached hereto.
29.13 Landlord Exculpation. The liability of Landlord or the Landlord Parties to Tenant for any default by Landlord under this Lease or arising in
connection herewith or with Landlord's operation, management, leasing, repair, renovation, alteration or any other matter relating to the Project or the Premises shall be limited solely and exclusively to an amount which is equal to the lesser of (a)
the interest of Landlord in the Building or (b) the equity interest Landlord would have in the Building if the Building were encumbered by third-party debt in an amount equal to eighty percent (80%) of the value of the Building (as such value is
determined by Landlord), provided that in no event shall such liability extend to any sales or insurance proceeds received by Landlord or the Landlord Parties in connection with the Project, Building or Premises. Neither Landlord, nor any of the
Landlord Parties shall have any personal liability therefor, and Tenant hereby expressly waives and releases such personal liability on behalf of itself and all persons claiming by, through or under Tenant. The limitations of liability contained in
this Section 29.13 shall inure to the benefit of Landlord's and the Landlord Parties' present and future partners, beneficiaries, officers, directors, trustees, shareholders, agents and employees, and their respective partners, heirs,
successors and assigns. Under no circumstances shall any present or future partner of Landlord (if Landlord is a partnership), or trustee or beneficiary (if Landlord or any partner of Landlord is a trust), have any liability for the performance of
Landlord's obligations under this Lease. Notwithstanding any contrary provision herein, neither Landlord nor the Landlord Parties shall be liable under any circumstances for injury or damage to, or interference with, Tenant's business, including but
not limited to, loss of profits, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of use, in each case, however occurring, or loss to inventory, scientific research, scientific experiments, laboratory animals,
products, specimens, samples, and/or scientific, business, accounting and other records of every kind and description kept at the premises and any and all income derived or derivable therefrom.
29.14 Entire Agreement. It is understood and acknowledged that there are no oral agreements between the parties hereto affecting this Lease and
this Lease constitutes the parties' entire agreement with respect to the leasing of the Premises and supersedes and cancels any and all previous negotiations, arrangements, brochures, agreements and understandings, if any, between the parties hereto
or displayed by Landlord to Tenant with respect to the subject matter thereof, and none thereof shall be used to interpret or construe this Lease. None of the terms, covenants, conditions or provisions of this Lease can be modified, deleted or added
to except in writing signed by the parties hereto.
29.15 Right to Lease. Landlord reserves the absolute right to effect such other tenancies in the Project as Landlord in the exercise of its sole
business judgment shall determine to best promote the interests of the Building or Project. Tenant does not rely on the fact, nor does Landlord represent, that any specific tenant or type or number of tenants shall, during the Lease Term, occupy any
space in the Building or Project.
29.16 Force Majeure. Notwithstanding anything to the contrary contained in this Lease, any prevention, delay or stoppage due to strikes, lockouts,
labor disputes, acts of God, acts of war, terrorist acts, inability to obtain services, labor, or materials or reasonable substitutes therefor, governmental actions, civil commotions, Casualty, actual or threatened public health emergency (including,
without limitation, epidemic, pandemic, famine, disease, plague, quarantine, and other significant public health risk), governmental edicts, actions, declarations or quarantines by a governmental entity or health organization (including, without
limitation, any shelter-in-place orders, stay at home orders or any restrictions on travel related thereto that preclude Tenant, its agents, contractors or its employees from accessing the Premises, national or regional emergency), breaches in
cybersecurity, and other causes beyond the reasonable control of the party obligated to perform, regardless of whether such other causes are (i) foreseeable or unforeseeable or (ii) related to the specifically enumerated events in this paragraph
(collectively, a "Force Majeure"), shall excuse the performance of such party for a period equal to any such prevention, delay or stoppage. If this Lease specifies a time period for performance of an obligation
of either party, that time period shall be extended by the period of any delay in such party's performance caused by a Force Majeure. Notwithstanding anything to the contrary in this Lease, no event of Force Majeure shall (i) excuse Tenant's
obligations to pay Rent and other charges due pursuant to this Lease, or (ii) be grounds for Tenant to abate any portion of Rent due pursuant to this Lease, or entitle either party to terminate this Lease, except as allowed pursuant to Articles
11 and 13 of this Lease.
29.17 Waiver of Redemption by Tenant. Tenant hereby waives, for Tenant and for all those claiming under Tenant, any and all rights now or hereafter
existing to redeem by order or judgment of any court or by any legal process or writ, Tenant's right of occupancy of the Premises after any termination of this Lease.
29.18 Notices. All notices, demands, statements, designations, approvals or other communications (collectively, "Notices")
given or required to be given by either party to the other hereunder or by law shall be in writing, shall be (A) sent by United States certified or registered mail, postage prepaid, return receipt requested ("Mail"),
(B) transmitted by telecopy, if such telecopy is promptly followed by a Notice sent by Mail, (C) delivered by a nationally recognized overnight courier, or (D) delivered personally. Any Notice shall be sent, transmitted, or delivered, as the case may
be, to Tenant at the appropriate address set forth in Section 10 of the Summary, or to such other place as Tenant may from time to time designate in a Notice to Landlord, or to Landlord at the addresses set forth below, or to such other
places as Landlord may from time to time designate in a Notice to Tenant. Any Notice will be deemed given (i) three (3) days after the date it is posted if sent by Mail, (ii) the date the telecopy is transmitted, (iii) the date the overnight courier
delivery is made, or (iv) the date personal delivery is made. As of the date of this Lease, any Notices to Landlord must be sent, transmitted, or delivered, as the case may be, to the following addresses:
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Torrey Pines Science Center Limited Partnership
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c/o Healthpeak Properties, Inc.
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420 Stevens Avenue, Suite 170
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Solana Beach, California 92075
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Attention: Mike Dorris
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with a copy to:
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Torrey Pines Science Center Limited Partnership
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c/o Healthpeak Properties, Inc.
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5050 S Syracuse St. #800
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Denver, CO 80237
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Attn: Legal Department
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and
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Allen Matkins Leck Gamble Mallory & Natsis LLP
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1901 Avenue of the Stars, Suite 1800
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Los Angeles, California 90067
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Attention: Anton N. Natsis, Esq.
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29.19 Joint and Several. If there is more than one tenant, the obligations imposed upon Tenant under this Lease shall be joint and several.
29.20 Authority. If Tenant is a corporation, trust or partnership, each individual executing this Lease on behalf of Tenant hereby represents
and warrants that Tenant is a duly formed and existing entity qualified to do business in the State of California and that Tenant has full right and authority to execute and deliver this Lease and that each person signing on behalf of Tenant is
authorized to do so. In such event, Tenant shall, within ten (10) days after execution of this Lease, deliver to Landlord satisfactory evidence of such authority and, if a corporation, upon demand by Landlord, also deliver to Landlord satisfactory
evidence of (i) good standing in Tenant's state of incorporation and (ii) qualification to do business in the State of California.
29.21 Attorneys' Fees. In the event that either Landlord or Tenant should bring suit for the possession of the Premises, for the recovery of
any sum due under this Lease, or because of the breach of any provision of this Lease or for any other relief against the other, then all costs and expenses, including reasonable attorneys' fees, incurred by the prevailing party therein shall be paid
by the other party, which obligation on the part of the other party shall be deemed to have accrued on the date of the commencement of such action and shall be enforceable whether or not the action is prosecuted to judgment.
29.22 Governing Law; WAIVER OF TRIAL BY JURY; JUDICIAL REFERENCE. This Lease shall be construed and enforced in accordance with the laws of the
State of California. IN ANY ACTION OR PROCEEDING ARISING HEREFROM, LANDLORD AND TENANT HEREBY CONSENT TO (I) THE JURISDICTION OF ANY COMPETENT COURT WITHIN THE STATE OF CALIFORNIA, (II) SERVICE OF PROCESS BY ANY MEANS AUTHORIZED BY CALIFORNIA LAW,
AND (III) IN THE INTEREST OF SAVING TIME AND EXPENSE, TRIAL WITHOUT A JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR THEIR SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN
CONNECTION WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY EMERGENCY OR STATUTORY REMEDY. IN THE EVENT LANDLORD COMMENCES ANY SUMMARY PROCEEDINGS OR
ACTION FOR NONPAYMENT OF BASE RENT OR ADDITIONAL RENT, TENANT SHALL NOT INTERPOSE ANY COUNTERCLAIM OF ANY NATURE OR DESCRIPTION (UNLESS SUCH COUNTERCLAIM SHALL BE MANDATORY) IN ANY SUCH PROCEEDING OR ACTION, BUT SHALL BE RELEGATED TO AN INDEPENDENT
ACTION AT LAW. IF THE JURY WAIVER PROVISIONS OF THIS SECTION 29.22 ARE NOT ENFORCEABLE UNDER CALIFORNIA LAW, THEN THE FOLLOWING PROVISIONS SHALL APPLY. IT IS THE DESIRE AND INTENTION OF THE PARTIES TO AGREE UPON A MECHANISM AND PROCEDURE UNDER WHICH
CONTROVERSIES AND DISPUTES ARISING OUT OF THIS LEASE OR RELATED TO THE PREMISES WILL BE RESOLVED IN A PROMPT AND EXPEDITIOUS MANNER. ACCORDINGLY, EXCEPT WITH RESPECT TO ACTIONS FOR UNLAWFUL OR FORCIBLE DETAINER OR WITH RESPECT TO THE PREJUDGMENT
REMEDY OF ATTACHMENT, ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER (AND/OR AGAINST ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR SUBSIDIARIES OR AFFILIATED ENTITIES) ON ANY MATTERS WHATSOEVER ARISING OUT OF
OR IN ANY WAY CONNECTED WITH THIS LEASE, TENANT'S USE OR OCCUPANCY OF THE PREMISES AND/OR ANY CLAIM OF INJURY OR DAMAGE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, SHALL BE HEARD AND RESOLVED BY A REFEREE UNDER THE PROVISIONS OF THE CALIFORNIA
CODE OF CIVIL PROCEDURE, SECTIONS 638 — 645.1, INCLUSIVE (AS SAME MAY BE AMENDED, OR ANY SUCCESSOR STATUTE(S) THERETO) (THE "REFEREE SECTIONS"). ANY FEE TO INITIATE THE JUDICIAL REFERENCE PROCEEDINGS AND ALL
FEES CHARGED AND COSTS INCURRED BY THE REFEREE SHALL BE PAID BY THE PARTY INITIATING SUCH PROCEDURE (EXCEPT THAT IF A REPORTER IS REQUESTED BY EITHER PARTY, THEN A REPORTER SHALL BE PRESENT AT ALL PROCEEDINGS WHERE REQUESTED AND THE FEES OF SUCH
REPORTER – EXCEPT FOR COPIES ORDERED BY THE OTHER PARTIES – SHALL BE BORNE BY THE PARTY REQUESTING THE REPORTER); PROVIDED HOWEVER, THAT ALLOCATION OF THE COSTS AND FEES, INCLUDING ANY INITIATION FEE, OF SUCH PROCEEDING SHALL BE ULTIMATELY DETERMINED
IN ACCORDANCE WITH SECTION 29.22 ABOVE. THE VENUE OF THE PROCEEDINGS SHALL BE IN THE COUNTY IN WHICH THE PREMISES ARE LOCATED. WITHIN TEN (10) DAYS OF RECEIPT BY ANY PARTY OF A WRITTEN REQUEST TO RESOLVE ANY DISPUTE OR CONTROVERSY PURSUANT TO THIS
SECTION 29.22, THE PARTIES SHALL AGREE UPON A SINGLE REFEREE WHO SHALL TRY ALL ISSUES, WHETHER OF FACT OR LAW, AND REPORT A FINDING AND JUDGMENT ON SUCH ISSUES AS REQUIRED BY THE REFEREE SECTIONS. IF THE PARTIES ARE UNABLE TO AGREE UPON A REFEREE
WITHIN SUCH TEN (10) DAY PERIOD, THEN ANY PARTY MAY THEREAFTER FILE A LAWSUIT IN THE COUNTY IN WHICH THE PREMISES ARE LOCATED FOR THE PURPOSE OF APPOINTMENT OF A REFEREE UNDER THE REFEREE SECTIONS. IF THE REFEREE IS APPOINTED BY THE COURT, THE
REFEREE SHALL BE A NEUTRAL AND IMPARTIAL RETIRED JUDGE WITH SUBSTANTIAL EXPERIENCE IN THE RELEVANT MATTERS TO BE DETERMINED, FROM JAMS, THE AMERICAN ARBITRATION ASSOCIATION OR SIMILAR MEDIATION/ARBITRATION ENTITY. THE PROPOSED REFEREE MAY BE
CHALLENGED BY ANY PARTY FOR ANY OF THE GROUNDS LISTED IN THE REFEREE SECTIONS. THE REFEREE SHALL HAVE THE POWER TO DECIDE ALL ISSUES OF FACT AND LAW AND REPORT HIS OR HER DECISION ON SUCH ISSUES, AND TO ISSUE ALL RECOGNIZED REMEDIES AVAILABLE AT LAW
OR IN EQUITY FOR ANY CAUSE OF ACTION THAT IS BEFORE THE REFEREE, INCLUDING AN AWARD OF ATTORNEYS' FEES AND COSTS IN ACCORDANCE WITH THIS LEASE. THE REFEREE SHALL NOT, HOWEVER, HAVE THE POWER TO AWARD PUNITIVE DAMAGES, NOR ANY OTHER DAMAGES WHICH ARE
NOT PERMITTED BY THE EXPRESS PROVISIONS OF THIS LEASE, AND THE PARTIES HEREBY WAIVE ANY RIGHT TO RECOVER ANY SUCH DAMAGES. THE PARTIES SHALL BE ENTITLED TO CONDUCT ALL DISCOVERY AS PROVIDED IN THE CALIFORNIA CODE OF CIVIL PROCEDURE, AND THE REFEREE
SHALL OVERSEE DISCOVERY AND MAY ENFORCE ALL DISCOVERY ORDERS IN THE SAME MANNER AS ANY TRIAL COURT JUDGE, WITH RIGHTS TO REGULATE DISCOVERY AND TO ISSUE AND ENFORCE SUBPOENAS, PROTECTIVE ORDERS AND OTHER LIMITATIONS ON DISCOVERY AVAILABLE UNDER
CALIFORNIA LAW. THE REFERENCE PROCEEDING SHALL BE CONDUCTED IN ACCORDANCE WITH CALIFORNIA LAW (INCLUDING THE RULES OF EVIDENCE), AND IN ALL REGARDS, THE REFEREE SHALL FOLLOW CALIFORNIA LAW APPLICABLE AT THE TIME OF THE REFERENCE PROCEEDING. THE
PARTIES SHALL PROMPTLY AND DILIGENTLY COOPERATE WITH ONE ANOTHER AND THE REFEREE, AND SHALL PERFORM SUCH ACTS AS MAY BE NECESSARY TO OBTAIN A PROMPT AND EXPEDITIOUS RESOLUTION OF THE DISPUTE OR CONTROVERSY IN ACCORDANCE WITH THE TERMS OF THIS SECTION
29.22. IN THIS REGARD, THE PARTIES AGREE THAT THE PARTIES AND THE REFEREE SHALL USE BEST EFFORTS TO ENSURE THAT (A) DISCOVERY BE CONDUCTED FOR A PERIOD NO LONGER THAN SIX (6) MONTHS FROM THE DATE THE REFEREE IS APPOINTED, EXCLUDING MOTIONS REGARDING
DISCOVERY, AND (B) A TRIAL DATE BE SET WITHIN NINE (9) MONTHS OF THE DATE THE REFEREE IS APPOINTED. IN ACCORDANCE WITH SECTION 644 OF THE CALIFORNIA CODE OF CIVIL PROCEDURE, THE DECISION OF THE REFEREE UPON THE WHOLE ISSUE MUST STAND AS THE DECISION
OF THE COURT, AND UPON THE FILING OF THE STATEMENT OF DECISION WITH THE CLERK OF THE COURT, OR WITH THE JUDGE IF THERE IS NO CLERK, JUDGMENT MAY BE ENTERED THEREON IN THE SAME MANNER AS IF THE ACTION HAD BEEN TRIED BY THE COURT. ANY DECISION OF THE
REFEREE AND/OR JUDGMENT OR OTHER ORDER ENTERED THEREON SHALL BE APPEALABLE TO THE SAME EXTENT AND IN THE SAME MANNER THAT SUCH DECISION, JUDGMENT, OR ORDER WOULD BE APPEALABLE IF RENDERED BY A JUDGE OF THE SUPERIOR COURT IN WHICH VENUE IS PROPER
HEREUNDER. THE REFEREE SHALL IN HIS/HER STATEMENT OF DECISION SET FORTH HIS/HER FINDINGS OF FACT AND CONCLUSIONS OF LAW. THE PARTIES INTEND THIS GENERAL REFERENCE AGREEMENT TO BE SPECIFICALLY ENFORCEABLE IN ACCORDANCE WITH THE CODE OF CIVIL
PROCEDURE. NOTHING IN THIS SECTION 29.22 SHALL PREJUDICE THE RIGHT OF ANY PARTY TO OBTAIN PROVISIONAL RELIEF OR OTHER EQUITABLE REMEDIES FROM A COURT OF COMPETENT JURISDICTION AS SHALL OTHERWISE BE AVAILABLE UNDER THE CODE OF CIVIL PROCEDURE AND/OR
APPLICABLE COURT RULES.
29.23 Submission of Lease. Submission of this instrument for examination or signature by Tenant does not constitute a reservation of, option for or
option to lease, and it is not effective as a lease or otherwise until execution and delivery by both Landlord and Tenant.
29.24 Brokers. Landlord and Tenant hereby warrant to each other that they have had no dealings with any real estate broker or agent in connection
with the negotiation of this Lease, excepting only the real estate brokers or agents specified in Section 12 of the Summary (the "Brokers"), and that they know of no other real estate broker or agent
who is entitled to a commission in connection with this Lease. Each party agrees to indemnify and defend the other party against and hold the other party harmless from any and all claims, demands, losses, liabilities, lawsuits, judgments, costs and
expenses (including without limitation reasonable attorneys' fees) with respect to any leasing commission or equivalent compensation alleged to be owing on account of any dealings with any real estate broker or agent, other than the Brokers,
occurring by, through, or under the indemnifying party. The terms of this Section 29.24 shall survive the expiration or earlier termination of the Lease Term.
29.25 Independent Covenants. This Lease shall be construed as though the covenants herein between Landlord and Tenant are independent and not
dependent and Tenant hereby expressly waives the benefit of any statute to the contrary and agrees that if Landlord fails to perform its obligations set forth herein, Tenant shall not be entitled to make any repairs or perform any acts hereunder at
Landlord's expense or to any setoff of the Rent or other amounts owing hereunder against Landlord.
29.26 Project or Building Name, Address and Signage. Landlord shall have the right at any time to change the name and/or address of the Project or
Building and to install, affix and maintain any and all signs on the exterior and on the interior of the Project or Building as Landlord may, in Landlord's sole discretion, desire. Tenant shall not use the name of the Project or Building or use
pictures or illustrations of the Project or Building in advertising or other publicity or for any purpose other than as the address of the business to be conducted by Tenant in the Premises, without the prior written consent of Landlord.
29.27 Counterparts. This Lease may be executed in counterparts with the same effect as if both parties hereto had executed the same document. Both
counterparts shall be construed together and shall constitute a single lease. Such counterparts may be delivered by the parties hereto by electronic means, including by electronic mail or facsimile transmission and, when so fully delivered, such
copies shall be binding as if ink originals.
29.28 Confidentiality. Tenant acknowledges that the content of this Lease and any related documents are confidential information. Tenant shall keep
such confidential information strictly confidential and shall not disclose such confidential information to any person or entity other than Tenant's financial, legal, and space planning consultants.
29.29 Development of the Project.
29.29.1 Subdivision. Landlord reserves the right to subdivide all or a portion of the buildings and Common Areas. Tenant agrees to execute and
deliver, upon demand by Landlord and in the form requested by Landlord, any additional documents needed to conform this Lease to the circumstances resulting from a subdivision and any all maps in connection therewith. Notwithstanding anything to the
contrary set forth in this Lease, the separate ownership of any buildings and/or Common Areas by an entity other than Landlord shall not affect the calculation of Direct Expenses or Tenant's payment of Tenant's Share of Direct Expenses.
29.29.2 Construction of Property and Other Improvements. Tenant acknowledges that portions of the Project may be under construction following Tenant's
occupancy of the Premises, and that such construction may result in levels of noise, dust, obstruction of access, etc. which are in excess of that present in a fully constructed project. Tenant hereby waives any and all rent offsets (except as
specifically set forth in Section 19.5 of this Lease) or claims of constructive eviction which may arise in connection with such construction.
29.30 No Violation. Tenant hereby warrants and represents that neither its execution of nor performance under this Lease shall cause Tenant to be in
violation of any agreement, instrument, contract, law, rule or regulation by which Tenant is bound, and Tenant shall protect, defend, indemnify and hold Landlord harmless against any claims, demands, losses, damages, liabilities, costs and expenses,
including, without limitation, reasonable attorneys' fees and costs, arising from Tenant's breach of this warranty and representation.
29.31 Transportation Management. Tenant shall fully comply with all present or future programs intended to manage parking, transportation or
traffic in and around the Project and/or the Building, and in connection therewith, Tenant shall take responsible action for the transportation planning and management of all employees located at the Premises by working directly with
Landlord, any governmental transportation management organization or any other transportation-related committees or entities. Such programs may include, without limitation: (i) restrictions on the number of peak-hour vehicle trips generated
by Tenant; (ii) increased vehicle occupancy; (iii) implementation of an in-house ridesharing program and an employee transportation coordinator; (iv) working with employees and any Project, Building or area-wide ridesharing program manager;
(v) instituting employer-sponsored incentives (financial or in-kind) to encourage employees to rideshare; and (vi) utilizing flexible work shifts for employees.
29.32 Signatures. The parties hereto consent and agree that this Lease may be signed and/or transmitted by facsimile, e-mail of a .pdf
document or using electronic signature technology (e.g., via DocuSign or similar electronic signature technology), and that such signed electronic record shall be valid and as effective to bind the party so signing as a paper copy bearing
such party’s handwritten signature. The parties further consent and agree that (1) to the extent a party signs this Lease using electronic signature technology, by clicking “SIGN”, such party is signing this Lease electronically, and (2) the
electronic signatures appearing on this Lease shall be treated, for purposes of validity, enforceability and admissibility, the same as handwritten signatures.
[signature page to follow]
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed the day and date first above written.
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LANDLORD:
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TENANT:
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TORREY PINES SCIENCE CENTER LIMITED PARTNERSHIP,
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BROOKLYN IMMUNOTHERAPEUTICS INC.,
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| a Delaware limited partnership | a Delaware corporation | |||
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By:
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HCP-Torrey Pines Science Center, Inc., a Delaware corporation,
its General Partner
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By:
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/s/ Howard J Federoff
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By:
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/s/ Michael Dorris
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Howard J Federoff
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| Print Name | ||||
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Michael Dorris
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Its:
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CEO | |
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Print Name
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| Its: | Senior Vice President |
By:
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Its:
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EXHIBIT A
TORREY PINES SCIENCE CENTER
OUTLINE OF PREMISES
EXHIBIT A-1
TORREY PINES SCIENCE CENTER
PROJECT SITE PLAN
EXHIBIT B
TORREY PINES SCIENCE CENTER
TENANT WORK LETTER
| 1. |
Landlord Improvements. Except as specifically set forth herein, Landlord shall not be obligated to construct or install any improvements or facilities of any kind in the Premises, and
Tenant shall accept the Premises in its currently-existing, "as-is" condition. Notwithstanding the foregoing, Landlord hereby agrees, at Landlord's sole cost and expense, to (i) re-carpet the interior floors of the entire Premises,
(ii) clean the VCT tile in the lab area of the Premises, and (iii) apply touch-up paint to the painted surfaces of the interior walls of the Premises to the extent necessary in Landlord’s reasonable discretion (collectively, the "Tenant Improvements"). All such Tenant Improvements shall be completed to Landlord's "Building standard" condition, using Building standard methods, materials and procedures, in "Building standard"
color or colors (if applicable) to be designated by Landlord. Tenant shall make no changes or modifications to the Tenant Improvements without the prior written consent of Landlord, which consent may be withheld in Landlord's sole
discretion. The Premises shall be deemed "Ready for Occupancy" upon the substantial completion of construction of the Tenant Improvements with the exception of any punch list items and any
tenant fixtures, work-stations, built-in furniture, or equipment to be installed by Tenant. In the event that the acts or omissions of Tenant or its agents or employees shall delay the substantial completion of the Tenant
Improvements, then the Lease Commencement Date shall be deemed to be the date the substantial completion of the Tenant Improvements would have occurred but for such acts or omissions of Tenant or its agents or employees. Provided that
Tenant and its agents do not interfere with Landlord’s work in the Building and the Premises, Landlord shall allow Tenant access to the Premises prior to Lease Commencement Date for the purpose of Tenant installing equipment or
fixtures (including Tenant's data and telephone equipment) in the Premises. Prior to Tenant's entry into the Premises as permitted by this agreement, Tenant shall submit a schedule to Landlord, for its approval, which schedule shall
detail the timing and purpose of Tenant's entry and Tenant shall deliver to Landlord the policies or certificates evidencing Tenant's insurance as required under the terms this Lease.
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| 2. |
Landlord Warranty. Notwithstanding anything set forth in this Lease to the contrary, upon the Possession Date, the Building Systems shall be in good working condition. If it is
determined that any portions of the Building Systems were not in good working condition on the Possession Date, provided that the need to repair or replace was not caused by the misuse, misconduct, damage, destruction, omissions,
and/or negligence (collectively, "Tenant Damage") of Tenant, its subtenants and/or assignees, if any, or any company which is acquired, sold or merged with Tenant, or by any modifications,
Alterations, or improvements constructed by or on behalf of Tenant, Landlord, at no cost to Tenant and which shall not be included in Operating Expenses, shall promptly commence such work or take such other action as may be necessary
to place the same in good working condition. To the extent repairs which Landlord is required to make pursuant to this Tenant Work Letter are necessitated in part by Tenant Damage, then Tenant shall reimburse Landlord for an equitable
proportion of the reasonable cost of such repair. Following the Landlord Possession Date, Landlord's repair and maintenance obligations shall be governed by the terms of Article 7 of this Lease, below.
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EXHIBIT C
TORREY PINES SCIENCE CENTER
NOTICE OF LEASE TERM DATES
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To:
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Re:
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Lease dated , 20 between , a ("Landlord"), and , a ("Tenant") concerning Suite on floor(s) of the building located at , California.
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Gentlemen:
In accordance with the Lease (the "Lease"), we wish to advise you and/or confirm as follows:
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1.
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The Lease Term shall commence on or has commenced on for a term of ending on .
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2.
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Rent commenced to accrue on , in the amount of .
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| 3. |
If the Lease Commencement Date is other than the first day of the month, the first billing will contain a pro rata adjustment. Each billing thereafter, with the exception of the final billing, shall be for the full amount of the
monthly installment as provided for in the Lease.
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4.
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Your rent checks should be made payable to at .
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5.
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The exact number of rentable/usable square feet within the Premises is square feet.
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| 6. |
Tenant's Share as adjusted based upon the exact number of usable square feet within the Premises is %.
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"Landlord":
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a
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By:
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Agreed to and Accepted as of , 202 .
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"Tenant":
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a
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By:
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EXHIBIT D
TORREY PINES SCIENCE CENTER
FORM OF TENANT'S ESTOPPEL CERTIFICATE
The undersigned as Tenant under that certain Lease (the "Lease") made and entered into as of , 20 by and between as
Landlord, and the undersigned as Tenant, for Premises consisting of the entire office building located at , California, certifies as follows:
1. Attached hereto as Exhibit A is a true and correct copy of the Lease and all amendments and modifications thereto.
The documents contained in Exhibit A represent the entire agreement between the parties as to the Premises.
2. The undersigned currently occupies the Premises described in the Lease, the Lease Term commenced on , and the Lease Term expires
on , and the undersigned has no option to terminate or cancel the Lease or to purchase all or any part of the Premises, the Building and/or the Project.
3. Base Rent became payable on .
4. The Lease is in full force and effect and has not been modified, supplemented or amended in any way except as provided in Exhibit A.
5. Tenant has not transferred, assigned, or sublet any portion of the Premises nor entered into any license or concession agreements with respect thereto except as
follows:
6. Tenant shall not modify the documents contained in Exhibit A without the prior written consent of Landlord's mortgagee.
7. All monthly installments of Base Rent, all Additional Rent and all monthly installments of estimated Additional Rent have been paid when due through
. The current monthly installment of Base Rent is $ .
8. All conditions of the Lease to be performed by Landlord necessary to the enforceability of the Lease have been satisfied and Landlord is not in
default thereunder. In addition, the undersigned has not delivered any notice to Landlord regarding a default by Landlord thereunder. The Lease does not require Landlord to provide any rental concessions or to pay any leasing brokerage
commissions.
9. No rental has been paid more than thirty (30) days in advance and no security has been deposited with Landlord except as provided in the Lease.
Neither Landlord, nor its successors or assigns, shall in any event be liable or responsible for, or with respect to, the retention, application and/or return to Tenant of any security deposit paid to any prior landlord of the Premises,
whether or not still held by any such prior landlord, unless and until the party from whom the security deposit is being sought, whether it be a lender, or any of its successors or assigns, has actually received for its own account, as
landlord, the full amount of such security deposit.
10. As of the date hereof, there are no existing defenses or offsets, or, to the undersigned's knowledge, claims or any basis for a claim, that the
undersigned has against Landlord.
11. If Tenant is a corporation or partnership, each individual executing this Estoppel Certificate on behalf of Tenant hereby represents and warrants
that Tenant is a duly formed and existing entity qualified to do business in California and that Tenant has full right and authority to execute and deliver this Estoppel Certificate and that each person signing on behalf of Tenant is
authorized to do so.
12. There are no actions pending against the undersigned under the bankruptcy or similar laws of the United States or any state.
13. Tenant is in full compliance with all federal, state and local laws, ordinances, rules and regulations affecting its use of the Premises, including,
but not limited to, those laws, ordinances, rules or regulations relating to hazardous or toxic materials. Tenant has never permitted or suffered, nor does Tenant have any knowledge of, the generation, manufacture, treatment, use, storage,
disposal or discharge of any hazardous, toxic or dangerous waste, substance or material in, on, under or about the Project or the Premises or any adjacent premises or property in violation of any federal, state or local law, ordinance, rule
or regulation.
14. To the undersigned's knowledge, all tenant improvement work to be performed by Landlord under the Lease has been completed in accordance with the
Lease and has been accepted by the undersigned and all reimbursements and allowances due to the undersigned under the Lease in connection with any tenant improvement work have been paid in full. All work (if any) in the common areas required
by the Lease to be completed by Landlord has been completed and all parking spaces required by the Lease have been furnished and/or all parking ratios required by the Lease have been met.
The undersigned acknowledges that this Estoppel Certificate may be delivered to Landlord or to a prospective mortgagee or prospective purchaser, and acknowledges that said
prospective mortgagee or prospective purchaser will be relying upon the statements contained herein in making the loan or acquiring the property of which the Premises are a part and that receipt by it of this certificate is a condition of
making such loan or acquiring such property.
Executed at on the day of , 202_.
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"Tenant":
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,
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a
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By:
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Its:
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By:
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Its:
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EXHIBIT E
TORREY PINES SCIENCE CENTER
ENVIRONMENTAL QUESTIONNAIRE
ENVIRONMENTAL QUESTIONNAIRE
FOR COMMERCIAL AND INDUSTRIAL PROPERTIES
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Tenant Name:
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Lease Address:
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Lease Type (check correct box – right click to properties):
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☐ |
Primary Lease/Lessee
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| ☐ |
Sublease from:
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Instructions: The following questionnaire is to be completed by the Lessee representative with knowledge of
the planned operations for the specified building/location. Please print clearly and attach additional sheets as necessary.
| 1.0 |
PROCESS INFORMATION
|
Describe planned site use, including a brief description of manufacturing processes and/or pilot plants planned for this site, if any.
| 2.0 |
HAZARDOUS MATERIALS – OTHER THAN WASTE
|
Will (or are) non-waste hazardous materials be/being used or stored at this site? If so, continue with the next question. If not, go to Section 3.0.
| 2.1 | Are any of the following materials handled on the Property? | ☐ Yes |
☐ No |
[A material is handled if it is used, generated, processed, produced, packaged, treated, stored, emitted, discharged, or disposed.] If YES, check (right click to properties) the applicable correct Fire Code hazard categories below.
| ☐ |
Combustible dusts/fibers
|
☐
|
Explosives
|
☐ |
Flammable liquids
|
||||
| ☐ |
Combustible liquids (e.g., oils)
|
☐ |
Compressed gas - inert
|
☐ |
Flammable solids/pyrophorics
|
||||
| ☐ |
Cryogenic liquids - inert
|
☐ |
Compressed gas - flammable/pyrophoric
|
☐ |
Organic peroxides
|
||||
| ☐ |
Cryogenic liquids -
flammable
|
☐ |
Compressed gas - oxidizing
|
☐ |
Oxidizers - solid or liquid
|
||||
|
☐
|
Cryogenic liquids - oxidizing
|
☐
|
Compressed gas - toxic
|
☐ |
Reactives - unstable or water reactive
|
||||
| ☐ |
Corrosives - solid or liquid
|
☐ |
Compressed gas - corrosive
|
☐ |
Toxics - solid or liquid
|
| 2-2. |
For all materials checked in Section 2.1 above, please list the specific material(s), use(s), and quantities of each used or stored on the site in the table below; or attach a separate inventory. NOTE:
If proprietary, the constituents need not be named but the hazard information and volumes are required.
|
|
Material/
Chemical
|
Physical
State (Solid,
Liquid, or
Gas)
|
Container Size
|
Number of Containers
Used & Stored
|
Total Quantity
|
Units (pounds
for solids,
gallons or liters
for liquids, &
|
|
| 2-3. |
Describe the planned storage area location(s) for the materials in Section 2-2 above. Include site maps and drawings as appropriate.
|
| 2-4. |
Other hazardous materials. Check below (right click to properties) if applicable. NOTE: If either of the latter two are checked (BSL-3 and/or
radioisotope/radiation), be advised that not all lease locations/cities or lease agreements allow these hazards; and if either of these hazards are planned, additional information will be required with copies of oversight agency
authorizations/licenses as they become available.
|
| ☐ |
Risk Group 2/Biosafety Level-2 Biohazards
|
☐ |
Risk Group 3/Biosafety Level-3 Biohazards
|
☐ |
Radioisotopes/Radiation
|
| 3.0 |
HAZARDOUS WASTE (i.e., REGULATED CHEMICAL WASTE)
|
Are (or will) hazardous wastes (be) generated? ☐ Yes ☐ No
If YES, continue with the next question. If not, skip this section and go to section 4.0.
| 3.1 |
Are or will any of the following hazardous (CHEMICAL) wastes generated, handled, or disposed of (where applicable and allowed) on the property?
|
| ☐ |
Liquids
|
☐ |
Process sludges
|
☐ |
PCBs
|
||||
| ☐ |
Solids
|
☐ |
Metals
|
☐ |
wastewater
|
| 3-2. |
List and estimate the quantities of hazardous waste identified in Question 3-1 above.
|
|
WASTE TYPE
|
||||||
|
HAZRDOUS (CHEMICAL)
WASTE GENERATED
|
SOURCE
|
RCRA
listed (federal)
|
Non-
RCRA
(Calif-
ornia
ONLY or recycle)
|
APPROX. MONTHLY QUANTITY
with units
|
DISPOSITION [e.g., off-site
landfill, incineration, fuel
blending scrap metal;
wastewater neutralization (onsite
or off-site)]
|
|
| ☐ | ☐ | |||||
| ☐ | ☐ | |||||
| ☐ | ☐ | |||||
| ☐ | ☐ | |||||
| ☐ | ☐ | |||||
| 3-3. | Waste characterization by: | Process knowledge ☐ | EPA lab analysis ☐ | Both ☐ |
| 3-4. |
Please include name, location, and permit number (e.g. EPA ID No.) for transporter and disposal facility if applicable. Attach separate pages as necessary. If not yet known, write “TBD.”
|
|
Hazardous Waste
Transporter/Disposal Facility Name
|
Facility Location
|
Transporter (T) or
Disposal (D) Facility
|
Permit Number
|
|
| 3-5. |
Are pollution controls or monitoring employed in the process to prevent or minimize the release of wastes into the environment? NOTE: This does NOT mean fume hoods; examples include air scrubbers,
cyclones, carbon or HEPA filters at building exhaust fans, sedimentation tanks, pH neutralization systems for wastewater, etc.
|
| ☐ Yes | ☐ No |
| If YES, please list/describe: |
|
|
| 4.0 |
OTHER REGULATED WASTE (i.e., REGULATED BIOLOGICAL WASTE, referred to as “Medical Waste” in California)
|
4-1. Will (or do) you generate medical waste? ☐ Yes ☐ No If NO, skip to Section 5.0.
|
4-2.
|
Check the types of waste that will be generated, all of which fall under the California Medical Waste Act:
|
| ☐ |
Contaminated sharps (i.e., if contaminated with ≥ Risk Group 2 materials)
|
☐ |
Animal carcasses
|
☐ |
Pathology waste known or suspected to be contaminated with ≥ Risk Group 2 pathogens)
|
||||
| ☐ |
Red bag biohazardous waste (i.e., with ≥ Risk Group 2 materials) for autoclaving
|
☐ |
Human or non-human primate blood, tissues, etc.
(e.g., clinical specimens)
|
☐ |
Trace Chemotherapeutic Waste and/or Pharmaceutical waste
NOT otherwise regulated as RCRA chemical waste
|
|
|
4-3.
|
What vendor will be used for off-site autoclaving and/or incineration?
|
| 4-5. |
Do you have a Medical Waste Permit for this site?
|
☐ Yes | ☐ No, not required. | |
| ☐ No, but an application will be submitted | ||||
| 5.0 |
UNDERGROUND STORAGE TANKS (USTS) & ABOVEGROUND STORAGE TANKS (ASTS)
|
| 5-1. |
Are underground storage tanks (USTs), aboveground storage tanks (ASTs), or associated pipelines used for the storage of petroleum products, chemicals, or liquid wastes present on site (lease renewals) or required for planned
operations (new tenants)?YesNo
|
NOTE: If you will have your own diesel emergency power generator, then you will have at least one AST! [NOTE: If a backup
generator services multiple tenants, then the landlord usually handles the permits.]
If NO, skip to section 6.0. If YES, please describe capacity, contents, age, type of the USTs or ASTs, as well any associated leak detection/spill prevention measures.
Please attach additional pages if necessary.
|
UST or
AST
|
Capacity (gallons)
|
Contents
|
Year
Installed
|
Type (Steel, Fiberglass, etc.)
|
Associated Leak Detection /
Spill Prevention Measures*
|
|
*NOTE: The following are examples of leak detection / spill prevention measures: integrity testing, inventory reconciliation, leak detection
system, overfill spill protection, secondary containment, cathodic protection.
| 5-2. |
Please provide copies of written tank integrity test results and/or monitoring documentation, if available.
|
| 5-3. |
Is the UST/AST registered and permitted with the appropriate regulatory agencies? | ☐ Yes ☐ No, not yet |
If YES, please attach a copy of the required permit(s). See Section 7-1 for the oversight agencies that issue permits, with the exception of those for
diesel emergency power generators which are permitted by the local Air Quality District (Bay Area Air Quality Management District = BAAQMD; or San Diego Air Pollution Control District = San Diego APCD).
| 5-4. |
If this Questionnaire is being completed for a lease renewal, and if any of the USTs/ASTs have leaked, please state the substance released, the media(s) impacted (e.g., soil, water, asphalt, etc.), the actions taken, and all
remedial responses to the incident.
|
| 5-5. |
If this Questionnaire is being completed for a lease renewal, have USTs/ASTs been removed from the Property?
|
|
|
☐ Yes |
☐ No |
| If YES, please provide any official closure letters or reports and supporting documentation (e.g., analytical test results, remediation report results, etc.). | ||
| 5-6. |
For Lease renewals, are there any above or below ground pipelines on site used to transfer chemicals or wastes?
|
|
|
☐ Yes |
☐ No |
|
|
For new tenants, are installations of this type required for the planned operations? |
☐ Yes |
☐ No |
|
|
If YES to either question in this section 5-6, please describe. | ||
| 6.0 |
ASBESTOS CONTAINING BUILDING MATERIALS
|
Please be advised that an asbestos survey may have been performed at the Property. If provided, please review the information that identifies the
locations of known asbestos containing material or presumed asbestos containing material. All personnel and appropriate subcontractors should be notified of the presence of these materials, and informed not to disturb these materials. Any
activity that involves the disturbance or removal of these materials must be done by an appropriately trained individual/contractor.
| 7.0 |
OTHER REGULATORY PERMITS/REQUIREMENTS
|
| 7-1. |
Does the operation have or require an industrial wastewater permit to discharge into the local National Pollutant Discharge Elimination System (NPDES)? [Example: This applies when wastewater from
equipment cleaning is routed through a pH neutralization system prior to discharge into the sanitary or lab sewer for certain pharmaceutical manufacturing wastewater; etc.] Permits are obtained from the regional sanitation
district that is treating wastewater.
|
|
|
☐Yes ☐ No ☐ No, but one will be prepared and submitted to the Landlord property management company.
|
|
|
If so, please attach a copy of this permit or provide it later when it has been prepared. |
| 7-2. |
Has a Hazardous Materials Business Plan (HMBP) been developed for the site and submitted via the State of California Electronic Reporting System (CERS)? [NOTE: The trigger limits for having to do
this are ≥ 200 cubic feet if any one type of compressed gas(except for carbon dioxide and inert simple asphyxiant gases, which have a higher trigger limit of ≥ 1,000 cubic feet); ≥ 55 gallons if any one type of hazardous chemical
liquid; and ≥500 pounds of any one type of hazardous chemical solid. So a full-sixe gas cylinder and a 260- liter of liquid nitrogen are triggers! Don’t forget the diesel fuel in a backup emergency generator if the diesel tank size is
≥ 55 gallons and it is permitted under the tenant (rather than under the landlord).] NOTE: Each local Certified Unified Program Agency (CUPA) in California governs the HMBP process so start there. Examples: the CUPA for cities
in San Mateo County is the County Environmental Health Department; the CUPA for the City of Hayward, CA is the Hayward Fire Department; the CUPA for Mountain View is the Mountain View Fire Department; and, the CUPA for San Diego is the
County of San Diego Hazardous Materials Division (HMD),
|
|
|
☐ Yes ☐ No, not required. ☐ No, but one will be prepared and submitted, and a copy will be provided to the landlord property management company. |
| If one has been completed, please attach a copy. Continue to provide updated versions as they are completed. This is a legal requirement in that State law requires that the owner/operator of a business located on leased or rented real property shall notify, in writing, the owner of the property that the business is subject to and is in compliance with the Hazardous Materials Business Plan requirements (Health and Safety Code Chapter 6.95 Section 25505.1). |
| 7-3. |
NOTE: Please be advised that if you are involved in any tenant improvements that require a construction permit, you will be asked to provide the local city with a Hazardous Materials
Inventory Statement (HMIS) to ensure that your hazardous chemicals fall within the applicable Fire Code fire control area limits for the applicable construction occupancy of the particular building. The HMIS will include much of the
information listed in Section 2-2. Neither the landlord nor the landlord’s property management company expressly warrants that the inventory provided in Section 2-2 will necessarily meet the applicable California Fire Code fire
control area limits for building occupancy, especially in shared tenant occupancy situations. It is the responsibility of the tenant to ensure that a facility and site can legally handle the intended operations and hazardous
materials desired/ needed for its operations, but the landlord is happy to assist in this determination when possible.
|
CERTIFICATION
I am familiar with the real property described in this questionnaire. By signing below, I represent and warrant that the answers to the above questions are complete
and accurate to the best of my knowledge. I also understand that Lessor will rely on the completeness and accuracy of my answers in assessing any environmental liability risks associated with the property.
| Signature: |
|
|
Name: |
|
|
Title: |
|
|
Date: |
| Telephone: |
LEASE
TORREY PINES SCIENCE CENTER
TORREY PINES SCIENCE CENTER LIMITED PARTNERSHIP,
a Delaware limited partnership,
as Landlord,
and
BROOKLYN IMMUNOTHERAPEUTICS INC.,
a Delaware corporation,
as Tenant.
TABLE OF CONTENTS
| Page | ||
|
1.
|
PREMISES, BUILDING, PROJECT, AND COMMON AREAS
|
5
|
|
2.
|
LEASE TERM; OPTION TERM
|
6
|
|
3.
|
BASE RENT
|
6
|
|
4.
|
ADDITIONAL RENT
|
6
|
|
5.
|
USE OF PREMISES
|
11
|
|
6.
|
SERVICES AND UTILITIES
|
16
|
|
7.
|
REPAIRS
|
17
|
|
8.
|
ADDITIONS AND ALTERATIONS
|
17
|
|
9.
|
COVENANT AGAINST LIENS
|
19
|
|
10.
|
INSURANCE
|
19
|
|
11.
|
DAMAGE AND DESTRUCTION
|
21
|
|
12.
|
NONWAIVER
|
22
|
|
13.
|
CONDEMNATION
|
23
|
|
14.
|
ASSIGNMENT AND SUBLETTING
|
23
|
|
15.
|
SURRENDER OF PREMISES; OWNERSHIP AND REMOVAL OF TRADE FIXTURES
|
26
|
|
16.
|
HOLDING OVER
|
27
|
|
17.
|
ESTOPPEL CERTIFICATES
|
27
|
|
18.
|
SUBORDINATION
|
28
|
|
19.
|
DEFAULTS; REMEDIES
|
28
|
|
20.
|
COVENANT OF QUIET ENJOYMENT
|
30
|
|
21.
|
SECURITY DEPOSIT
|
30
|
|
22.
|
COMMUNICATIONS AND COMPUTER LINE
|
30
|
|
23.
|
SIGNS
|
30
|
|
24.
|
COMPLIANCE WITH LAW
|
31
|
|
25.
|
LATE CHARGES
|
31
|
|
26.
|
LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT
|
32
|
|
27.
|
ENTRY BY LANDLORD
|
32
|
|
28.
|
TENANT PARKING
|
32
|
|
29.
|
MISCELLANEOUS PROVISIONS
|
32
|
EXHIBITS
|
A
|
OUTLINE OF PREMISES
|
| B | TENANT WORK LETTER |
|
C
|
FORM OF NOTICE OF LEASE TERM DATES
|
|
D
|
FORM OF TENANT'S ESTOPPEL CERTIFICATE
|
| E | ENVIRONMENTAL QUESTIONNAIRE |
INDEX
|
Page(s)
|
|
|
Abatement Event
|
33
|
|
Accountant
|
13
|
|
Advocate Arbitrators
|
6
|
|
Alterations
|
20
|
|
Base Rent
|
7
|
|
Brokers
|
41
|
|
Building
|
4
|
|
Building Hours
|
17
|
|
Building Structure
|
20
|
|
Building Systems
|
20
|
|
Casualty
|
23
|
|
Common Areas
|
4
|
|
Comparable Buildings
|
6
|
|
Contemplated Effective Date
|
27
|
|
Contemplated Transfer Space
|
27
|
|
Direct Expenses
|
8
|
|
Eligibility Period
|
33
|
|
Estimate
|
12
|
|
Estimate Statement
|
12
|
|
Estimated Direct Expenses
|
12
|
|
Existing Hazardous Materials
|
15
|
|
Expense Year
|
8
|
|
Force Majeure
|
38
|
|
Holidays
|
18
|
|
HVAC
|
17
|
|
Intention to Transfer Notice
|
27
|
|
Landlord
|
1
|
|
Landlord Parties
|
22
|
|
Landlord Repair Notice
|
24
|
|
Lease
|
1
|
|
Lease Commencement Date
|
4
|
|
Lease Expiration Date
|
4
|
|
Lease Term
|
4
|
|
Lease Year
|
5
|
|
Lines
|
34
|
|
Mail
|
38
|
|
Neutral Arbitrator
|
6
|
|
Nine Month Period
|
27
|
|
Notices
|
38
|
|
Operating Expenses
|
8
|
|
Option Conditions
|
5
|
|
Option Rent
|
5
|
|
Option Term
|
5
|
|
Original Improvements
|
23
|
|
Original Tenant
|
5
|
|
Outside Agreement Date
|
6
|
|
Possession Date
|
4
|
|
Premises
|
4
|
|
Project,
|
4
|
|
Review Period
|
13
|
|
Page(s)
|
|
|
Security Deposit
|
33
|
|
Statement
|
12
|
|
Subject Space
|
26
|
|
Summary.
|
1
|
|
Tax Expenses
|
10
|
|
Tenant
|
1
|
|
Tenant Work Letter
|
4
|
|
Tenant’s Security System
|
19
|
|
Tenant's Share
|
11
|
|
Transfer Notice
|
26
|
|
Transferee
|
26
|
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Matthew Angel, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Brooklyn ImmunoTherapeutics, Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report.
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for,
the periods presented in this report.
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting.
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.
|
Date: August 11, 2022
|
/s/ Matthew Angel
|
|
Matthew Angel
|
|
|
Interim Chief Executive Officer and President
|
|
|
(Principal Executive Officer)
|
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Andrew Jackson, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Brooklyn ImmunoTherapeutics, Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report.
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for,
the periods presented in this report.
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting.
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.
|
Date: August 11, 2022
|
/s/ Andrew Jackson
|
|
Andrew Jackson
|
|
|
Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Brooklyn ImmunoTherapeutics, Inc. for the quarterly period ended June 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned
certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge on the date hereof:
1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Brooklyn ImmunoTherapeutics, Inc. for the period presented therein.
|
Date: August 11, 2022
|
/s/ Matthew Angel
|
|
Matthew Angel
|
|
|
Interim Chief Executive Officer and President
|
|
|
(Principal Executive Officer)
|
The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Brooklyn ImmunoTherapeutics, Inc. for the quarterly period ended June 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned
certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge on the date hereof:
1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Brooklyn ImmunoTherapeutics, Inc. for the period presented therein.
|
Date: August 11, 2022
|
/s/ Andrew Jackson
|
|
Andrew Jackson
|
|
|
Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.