SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
------ EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
For the transition period from _________ to ________
Commission file number 000-19319
VERTEX PHARMACEUTICALS INCORPORATED
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-3039129
(State of incorporation) (I.R.S. Employer Identification
No.)
130 WAVERLY STREET
CAMBRIDGE, MASSACHUSETTS 02139-4242
(Address of principal executive offices) (Zip Code)
(617) 577-6000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
(Title of class)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 of 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 X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. __________
As of March 22, 1999 there were outstanding 25,400,241 shares of Common Stock, $.01 par value per share. The aggregate market
value of shares of Common Stock held by non-affiliates of the registrant, based upon the last sales price for such stock on that date as
reported by The Nasdaq National Stock Market, was approximately $637,750,000.
DOCUMENTS INCORPORATED BY REFERENCE
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Portions of the definitive Proxy Statement for the 1999 Annual Meeting of Stockholders to be held on May 19, 1999 are incorporated
by reference into Part III.
The "Company" and "Vertex," as used in this Annual Report on Form 10-K, refer to Vertex Pharmaceuticals Incorporated, a
Massachusetts corporation.
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This Annual Report on Form 10-K contains forward-looking statements based on current management expectations. When used in this
Report, the words "expects," "anticipates," "estimates," "plans," "believes," and similar expressions are intended to identify
forward-looking statements. Such statements are subject to risks and uncertainties. Factors that could cause actual results to differ from
these expectations include, but are not limited to, those discussed in the section of Item 1 entitled "Risk Factors." These
forward-looking statements speak only as of the date of this Report. The Company expressly disclaims any obligation or undertaking
to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's
expectations with regard thereto or any change in the events, conditions or circumstances on which any such statement is based.
Vertex is a registered trademark of Vertex Pharmaceuticals Incorporated, and Incel is a trademark of Vertex Pharmaceuticals
Incorporated. Agenerase is a trademark of the Glaxo Wellcome Group of companies.
ITEM 1. BUSINESS
PART I
Vertex is engaged in the discovery, development and commercialization of novel, small molecule pharmaceuticals for the treatment of
diseases for which there are currently limited or no effective treatments. The Company is a leader in the use of structure-based drug
design, an approach to drug discovery that integrates advanced biology, biophysics, chemistry, and information technologies in a
coordinated and simultaneous fashion. The Company believes that this integrated approach is applicable to therapeutic targets in a
broad range of diseases. Vertex's goal is to create a portfolio of highly specific, proprietary, small molecule drugs based on its
knowledge of the atomic structure of proteins involved in the control of disease processes.
Agenerase-TM- for the treatment of HIV infection and AIDS is the Company's first product to have a New Drug Application filed with
the U.S. FDA for marketing approval. The Company's drug candidates currently in clinical trials include:
- Two compounds, Incel-TM- in Phase II, and VX-853, in Phase I/II clinical studies for treatment of cancer multidrug resistance; -
VX-497, an inhibitor of the enzyme IMPDH, currently in Phase II studies for the treatment of psoriasis and hepatitis C virus infection;
- Timcodar dimesylate, a neurophilin ligand compound in a Phase II study for the treatment of diabetic neuropathy; - VX-740, an
inhibitor of the enzyme ICE, that recently completed a Phase I clinical trial and may be useful in the treatment of inflammatory
diseases; and
- VX-745, an inhibitor of the enzyme p38 MAP kinase, currently in a Phase I clinical trial, that may be useful in the treatment of
inflammatory and neurological diseases.
In addition, the Company has research programs aimed at developing orally available small molecule compounds targeting
neurodegenerative disorders and hepatitis C virus infection.
STRUCTURE-BASED DRUG DESIGN
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Drugs are natural or synthetic compounds that interact with a target molecule, typically a protein, either to induce or to inhibit that
molecule's function within the human body. Traditionally, pharmaceutical products have been discovered through screening thousands
of compounds in predictive assays for a chosen disease target. Vertex uses an information-driven drug design approach that integrates
multiple advanced technologies.
Vertex's discovery programs have yielded clinical drug candidates in an average of 39 months from project initiation, two times faster
than the industry average. Also, Vertex has at least one product candidate in clinical development from each of its first five research
programs. In contrast, across the pharmaceutical industry an average of just 25% of all research projects result in a drug entering
clinical trials.
The drug discovery process is complex and involves multiple steps and disciplines. The key steps in the discovery and development of
a compound for human testing (a drug candidate) typically include:
- identification of a drug target; - development of a relevant biological assay; - selection of compounds for screening; - identification of
a lead molecule; - optimization of the lead molecule; and - preclinical development.
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The Company's approach to structure-based design is an integrated approach combining efforts in biology, biophysics and chemistry in
a coordinated and simultaneous fashion throughout the discovery process. This enables the Company to capture and apply information
generated in one scientific discipline across an entire project. In addition, Vertex leverages the information base from its programs to
capitalize on emerging therapeutic opportunities as they are discovered.
Vertex integrates a number of core technologies as part of the Company's drug discovery platform. These include:
- FUNCTIONAL GENOMICS. Vertex uses a number of functional genomics techniques, such as gene knock-out mice, to help guide
target selection and test the potential of its compounds in disease models.
- BIOPHYSICS. Vertex's crystallography group has solved more than a dozen structures and more than 200 target/inhibitor complexes
in the past eight years. Vertex scientists have also pioneered innovative nuclear magnetic resonance (NMR) techniques, including the
use of NMR for screening and a proprietary technology called NMR-SHAPES that can rapidly identify classes of compounds with
appropriate binding properties.
- CHEMISTRY. Vertex applies combinatorial chemistry techniques together with a strategy of parallel synthesis to explore the
suitability and activity of a wide range of compounds.
- COMPUTER-BASED MODELING. Vertex applies advanced, proprietary computational modeling tools to guide combinatorial and
medicinal chemistry efforts in identifying and optimizing leads.
- PHARMACOLOGY. At Vertex, pharmacological testing and pharmacokinetic and pharmacodynamic modeling are used early in the
drug discovery process to improve the likelihood that compounds will possess desirable characteristics.
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The Company believes that its integrated structure-based approach to drug discovery and the applicability of this approach to a broad
range of protein targets provides the Company with significant competitive advantages in the discovery and development of novel
therapeutics for a variety of diseases.
CORPORATE STRATEGY
Vertex is concentrating on the discovery and development of drugs for the treatment of viral diseases, multidrug resistance in cancer,
autoimmune diseases, inflammatory diseases and neurological diseases. The Company's research and development strategy is to
identify therapeutic areas in which there is (i) an unmet clinical need, (ii) evidence that interaction with known protein targets will
produce a therapeutic effect, and (iii) evidence that the protein targets will be appropriate for structural analysis using Vertex's
scientific approach.
The Company's business strategy is to develop some products independently and to form collaborations with pharmaceutical
companies in other programs for which they can provide resources and access to competencies complementary to Vertex's in-house
capabilities. Corporate collaborations with other pharmaceutical companies allow Vertex to share the inherent risks of drug
development and allocate the Company's internal resources more effectively. The financial support, as well as the resources in
development, marketing and sales, provided by corporate collaborators has allowed Vertex to focus on expanding its clinical and
discovery pipeline. As Vertex increases its capabilities in manufacturing, marketing and sales, collaborative agreements will still
remain an important part of the Company's business strategy, allowing the Company to select from its broad pipeline those products
best suited to commercialization by the Company, while retaining a substantial interest in the commercial success of partnered
projects. In its collaborative agreements, Vertex seeks to participate, through manufacturing, co-promotion and marketing rights, in
generating significant downstream revenue for each of its products.
PRODUCT DEVELOPMENT AND RESEARCH PROGRAMS
The following are the Company's most advanced research and development programs.
CLINICAL DEVELOPMENT PROGRAMS
AGENERASE-TM-
OVERVIEW
Agenerase-TM- (Glaxo Wellcome's brand name for the compound amprenavir) is the Company's most advanced product. Agenerase, a
second generation HIV protease inhibitor, is an orally deliverable drug for the treatment of HIV infection and AIDS. It was developed
by Vertex in collaboration with Glaxo Wellcome plc. and Kissei Pharmaceutical Co., Ltd. Glaxo Wellcome has filed a New Drug
Application for Agenerase with the U.S. Food and Drug Administration in the United States and has made equivalent filings in Europe,
Canada and other countries. The U.S. FDA has designated Agenerase as a fast-track product, and FDA review is expected to be
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completed by mid-April 1999. Upon approval by regulatory authorities, Glaxo Wellcome will market Agenerase in the United States
and other countries, with co-promotion assistance by the Company. Kissei is the Company's partner for the development and
commercialization of amprenavir in the Far East.
World sales of antiviral drugs for the treatment of AIDS and HIV infection were an
BACKGROUND
estimated $4 billion in 1998. Nevertheless, there remains a significant need for new therapeutic options for the management of HIV
infection. In the United States and elsewhere, the majority of HIV-infected patients are undiagnosed or untreated with any antiviral
drug. The antiviral drugs currently on the market have significant limitations, creating a significant market opportunity for Agenerase.
Suboptimal treatment strategies and poor adherence to complex drug regimens result in the development of drug-resistant virus and
need for subsequent changes in treatment regimens for many patients. Switching antiviral medications is therefore done on a routine
basis, also resulting in the need for new agents.
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HIV protease is a key enzyme involved in the viral replication of HIV. Agenerase is an HIV protease inhibitor designed by Vertex to
effectively block the replication of HIV and to possess key competitive characteristics. Four other companies are marketing protease
inhibitors approved by the FDA. However, clinician and patient acceptance of these products may be limited by complex dosing
regimens, which can result in poor patient compliance, and by dose-limiting side effects.
The Company believes that Agenerase compares favorably with the protease inhibitors currently on the market in terms of potency,
tolerability, dosing regimen and resistance profile. Agenerase is taken twice daily, without restrictions regarding dosing with or
without food or water. In addition, clinical studies have shown that Agenerase penetrates the tissues of the central nervous system,
which may be important in preventing the development of resistance. Agenerase has a unique IN VITRO resistance profile, and
preliminary clinical data have shown that patients previously treated with Agenerase can be successfully treated with a subsequent
protease inhibitor. To date, HIV has been shown to develop resistance to antiviral drugs, including currently marketed HIV protease
inhibitors. Preliminary data also suggest that Agenerase is less associated with blood lipid abnormalities than other HIV protease
inhibitors. However, there can be no assurance that disease resistance or other factors will not limit the efficacy of Agenerase.
In addition to protease inhibitors, there are two other classes of antiviral drugs currently approved for the treatment of HIV/AIDS.
Nucleoside reverse transcriptase inhibitors, or NRTIs, include AZT, d4T, ddI, ddC, 3TC and abacavir. Non-nucleoside reverse
transcriptase inhibitors, or NNRTIs, include efavirenz, nevirapine and delavirdine. Both classes of drugs act by inhibiting reverse
transcriptase, a viral enzyme required for replication. The clinical utility of each of these drugs is limited by significant side effects and
by the development of viral resistance. Clinical studies have demonstrated that therapies for HIV infection which comprise a
combination of three or more drugs including at least two drug classes ("drug cocktails") are superior in potency and durability of
response to those which do not. Such combinations are currently accepted as the standard of care for HIV infection.
PROGRAM STATUS
Glaxo Wellcome, the Company's HIV research and development partner, has filed for U.S. regulatory approval for marketing
Agenerase and has made equivalent regulatory filings in Europe, Canada and other countries. Glaxo Wellcome is the global leader in
sales of HIV therapeutics. To support Agenerase in the marketplace, Vertex has established a small clinical liaison force to build
relationships with physicians and patient treatment advocates. The Company will receive a royalty based on Glaxo Wellcome's sales of
Agenerase. Agenerase has already been made available to more than 2,000 patients through an early access program.
Glaxo Wellcome filed the New Drug Application for Agenerase on October 15, 1998, and the FDA has designated Agenerase for
review under the its guidelines for accelerated approval. Vertex and Glaxo Wellcome are continuing development activities with
respect to Agenerase, including on-going Phase III studies to support the full approval of the drug, and on-going and planned Phase IV
studies designed to further characterize and expand the utilization of the product.
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There can be no assurance, however, that the New Drug Application will be approved within the expected time-frame or at all, that full
approval will be granted on the basis of ongoing Phase III studies, or that the Phase IV studies will commence as planned or will be
successful.
In 1995, Kissei completed single dose and multi-dose, placebo-controlled, Phase I clinical trials. Vertex expects that in 1999 Kissei
will initiate a Phase II/III efficacy trial in HIV-positive patients in Japan. The results of such trials, together with clinical data from the
Glaxo Wellcome trials, could form the basis for a filing for marketing approval of amprenavir in Japan. There can be no assurance,
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however, that these clinical trials will commence or proceed as currently anticipated.
In collaboration with Glaxo Wellcome, Vertex is also engaged in research to develop new formulations of amprenavir. In addition,
Vertex and Glaxo Wellcome are continuing to evaluate new lead classes of third generation HIV protease inhibitors discovered under
their HIV research collaboration.
PATENTS
The Company has patents and pending patent applications in the United States and in certain foreign countries covering intellectual
property developed as part of the Company's HIV research and development program. These include issued United States patents that
cover classes of chemical compounds, pharmaceutical formulations and/or uses of the same for treating HIV infection and AIDS. The
patents include specific coverage for amprenavir, the Company's lead drug candidate for treating HIV infection and AIDS,
pharmaceutical formulations containing amprenavir and methods of using of amprenavir to treat HIV infection or AIDS-related central
nervous system disorders. Another issued United States patent covers processes for preparing synthetic intermediates useful in the
synthesis of a class of compounds that includes amprenavir. The Company also has a non-exclusive, worldwide license under certain
G.D. Searle & Company patent applications claiming HIV protease inhibitors.
CANCER MULTIDRUG RESISTANCE (MDR) PROGRAM
OVERVIEW
Vertex is developing novel compounds to treat and prevent the occurrence of drug resistance associated with the failure of cancer
chemotherapy. Vertex is developing Incel-TM- (also referred to as biricodar dicitrate or VX-710), a compound that blocks major
multidrug resistance mechanisms, including P-glycoprotein, or P-gp, and multidrug resistance associated protein, or MRP. Incel, an
intravenous compound, is intended to be administered in combination with cancer chemotherapy agents, such as doxorubicin,
paclitaxel, vincristine, etoposide and mitoxantrone. Vertex is conducting Phase II clinical trials of Incel in five different types of
cancer. In addition, Vertex is conducting a Phase I/II clinical trial of the compound VX-853, an oral MDR inhibitor, in patients with
solid tumors. The Company retains all commercial rights to Incel worldwide, except for Canada, where BioChem Pharma Inc. has
rights under a collaboration agreement with Vertex.
BACKGROUND
The American Cancer Society estimates that during 1998 more than 1.2 million people in the United States were diagnosed with
invasive cancer and more than 560,000 people in the U.S. died from such cancers. The Company believes that a significant number of
these patients fail to respond or relapse following chemotherapy because of multidrug resistance, or MDR.
Multidrug resistance is frequently associated with the failure of chemotherapy. A major contributing factor to MDR is the presence of
molecular pumps, including P-gP and MRP, that function to expel chemotherapeutic agents from cancer cells, preventing the sustained
delivery of
potent levels of the chemotherapeutic agents required for therapeutic benefit. As a consequence, such resistant tumor cells cannot be
killed efficiently by anticancer drugs such as doxorubicin, vincristine, etoposide and paclitaxel. P-gp has been associated with MDR in
a variety of cancers including liver cancer, breast cancer, soft tissue sarcoma, prostate cancer, colon cancer, pancreatic cancer, acute
myelogenous leukemia, multiple myeloma and certain lung cancers. MRP was recently identified as another drug efflux pump and is
also associated with resistance observed.
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No drug has been approved by the FDA specifically for the treatment of MDR, but several compounds are in advanced clinical studies.
Certain agents, such as dex-verapamil and cyclosporin A, have been shown in preliminary human studies to have some promise for
overcoming clinical resistance to certain commonly used chemotherapeutic agents. The Company believes these drugs affect only a
subset of the MDR pumps and may have side effects that could limit broad use. Second generation multidrug reversing agents, such as
valspodar, a cyclosporin analog, are also currently being evaluated by other companies.
PROGRAM STATUS
Vertex's lead compound, Incel, has displayed potent activity IN VITRO as an inhibitor of MDR for a number of chemotherapeutic
agents in a variety of tumor types. Vertex has completed two Phase I/II studies with Incel in combination with doxorubicin and with
paclitaxel. Vertex also completed a Phase II study of Incel in combination with doxorubicin in patients with liver cancer. Vertex does
not intend to pursue this indication further at the present time. The Company is currently conducting five Phase II clinical studies of
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Incel. Preliminary results from the Phase II studies indicate that sustained blood levels of Incel in excess of those necessary to reverse
MDR IN VITRO can be achieved. Pharmacokinetic data of Incel in combination with paclitaxel indicated that the compound has a
dose sparing effect, suggesting that approximately one-half the dose of paclitaxel can be used when that drug is administered with
Incel.
Phase II clinical trials of Incel are currently being conducted in the following indications:
- BREAST CANCER. In 1997, the Company initiated a Phase II multi-center trial to assess the safety and efficacy of the
co-administration of Incel and paclitaxel in patients with metastatic breast cancer. Interim data reported at the 21st Annual Breast
Cancer Symposium in 1998 suggest that Incel may play a role in restoring the activity of paclitaxel in some patients with advanced
breast cancer whose tumors have previously been resistant to paclitaxel therapy.
- SOFT TISSUE SARCOMA. The Company began a Phase II trial in 1997 to study Incel in combination with doxorubicin in patients
with soft tissue sarcoma. Preliminary results from 11 patients, announced at the 4th Connective Tissue Oncology Society Meeting in
1998 indicated that treatment with Incel and doxorubicin was well-tolerated, showed no marked drug interactions, and indicated that
Incel could also play a role in restoring the activity of doxorubicin in this patient population.
- OVARIAN CANCER. A study of Incel in combination with paclitaxel in patients with ovarian cancer began in 1997. This open-label
Phase II clinical trial will evaluate the tolerability, safety, pharmacokinetics and efficacy of the compound with paclitaxel.
- PROSTATE CANCER. In 1998, Vertex began a Phase II clinical trial evaluating the pharmacokinetics and efficacy of Incel in
combination with mitoxantrone and prednisone in patients with advanced hormone-refractory prostate cancer. This study is the first to
examine Incel's activity in an exclusively chemotherapy-naive patient population.
- SMALL CELL LUNG CANCER. Also begun in 1998, this is an open-label, multi-center trial to evaluate the tolerability,
pharmacokinetics and anti-tumor activity of Incel in combination with doxorubicin and vincristine in patients with progressive disease,
who responded to initial
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therapy and subsequently relapsed. This study will try to correlate the multidrug resistance profile of each patient with any therapeutic
response to Incel.
Preliminary results from some of these studies are expected in 1999. The results will help to determine the most appropriate regimens
and indications for Phase III clinical development of Incel. However, there can be no assurance that additional clinical trials will
commence or trials currently under way will proceed as currently anticipated. The clinical efficacy of the suppression of mechanisms
of action of MDR in chemotherapy in the treatment of cancer is unproven, and, therefore, there can be no assurance that the
Company's MDR compounds in development will improve the efficacy of chemotherapy.
PATENTS
The Company has patents and pending patent applications in the United States and in certain foreign countries covering intellectual
property developed as part of the Company's MDR research and development program. These include issued United States patents
claiming Incel and structurally related compounds, VX-853 and structurally related compounds, and other compounds for treating
multidrug resistance.
IMPDH PROGRAM
OVERVIEW
IMPDH is an enzyme that controls the synthesis of certain nucleotides which are required for RNA and DNA synthesis. Most cell
types can use an alternative pathway if IMPDH is inhibited, but a few cell types, such as lymphocytes and virus-infected cells, are
completely dependent on this enzyme. IMPDH inhibitors thus selectively block the proliferation of lymphocytes and the replication of
certain viruses, and Vertex believes that IMPDH inhibitors may be useful both in immunosuppression and as antiviral agents. VX-497
is a novel, orally administered IMPDH inhibitor designed by Vertex. Vertex is conducting Phase II clinical trials of VX-497 for the
treatment of severe chronic plaque-type psoriasis and for the treatment of hepatitis C virus ("HCV") infection. The Company retains
all commercial rights to compounds resulting from this program.
BACKGROUND
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IMPDH catalyzes a key step in nucleotide biosynthesis. IMPDH inhibition appears to selectively suppress immune system cells while
leaving other cells unaffected and may play an important role in down regulating inappropriate immune responses common to a range
of human diseases, including multiple sclerosis, inflammatory bowel disease, psoriasis, rheumatoid arthritis and systemic lupus
erythematosus. IMPDH inhibitors can be used to prevent the rejection of transplanted organs and may also have anti-viral effects.
The Company is aware of only two IMPDH inhibitors currently on the market in the United States. Hoffmann-La Roche's
mycophenolate mofetil is approved for use in combination with cyclosporine to prevent acute rejection in kidney and heart
transplantation. Schering-Plough's ribavirin was approved in 1998 for treatment, in combination with alpha interferon, of Hepatitis C
infection. The Company believes that compound-specific side effects of mycophenolate mofetil and ribavirin may limit their use for
chronic autoimmune disorders.
Psoriasis was selected as the first chronic autoimmune indication for VX-497 development. There is a sigificant medical need for new
therapies for moderate to severe psoriasis patients. A chemically unrelated IMPDH inhibitor, mycophenolic acid, was investigated in
psoriasis in the 1970's. Despite clear-cut efficacy, its development was terminated due to toxicity and tolerability
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problems. It did however, establish proof of the principle of IMPDH inhibition as a therapeutic approach for psoriasis. In addition to
topical and intralesional medications, moderate to severely afflicted patients are treated with phototherapy (UVB and PUVA), and
systemic drugs such as methotrexate, retinoids, and cyclosporine. However, these treatments require extensive medical supervision,
and/or have serious toxic side effects.
As an immunosuppressive, VX-497 may block the growth of certain lymphocyte populations that contribute to the inflammation of the
liver in HCV patients. VX-497 may also have a direct antiviral effect on HCV and other viruses. Although it has not been possible to
test potential drugs against hepatitis C IN VITRO because an HCV replication model has not been available, studies of VX-497
against related viruses have demonstrated that VX-497 may be a powerful inhibitor of viral replication.
According to the U.S. Center for Disease Control (CDC) estimates, approximately 4 million people in the United States are infected
with HCV, and there are estimated to be approximately 170 million chronic carriers of the virus worldwide. Current treatment options
are limited. Various forms of interferon alpha are the most common treatment used, but provide lasting benefit in less than 20% of
patients. Recent research results indicate that combination therapy of interferon plus ribavirin may increase the long-term rate of
sustained response to treatment. Still, more than 50% of patients fail combination ribavirin-interferon therapy, and additional safe and
effective treatments for HCV infection are needed.
PROGRAM STATUS
A Phase I clinical trial investigating the pharmacokinetics and tolerability of VX-497 in escalating single doses in healthy subjects was
completed in the United Kingdom in early 1998. Data from that study show that VX-497 is well tolerated and achieves blood levels
well above the threshhold necessary to inhibit IMPDH IN VITRO.
Vertex is now conducting a Phase II clinical trial of VX-497 to determine the tolerability and pharmacokinetic profile of VX-497 in
psoriasis patients. This is a randomized, blinded dose range-finding study. Preliminary safety and efficacy of VX-497 are being
assessed in the 12-week trial. Vertex is also conducting a Phase II study of VX-497 for the treatment of HCV infection. Preliminary
safety and efficacy are being assessed in this four-week dose range-finding monotherapy trial.
Future clinical development of VX-497 in HCV may involve assessment of the compound in combination with other agents such as
interferon alpha. The Company may also expand clinical development of VX-497 into additional autoimmune, transplant and antiviral
indications in the future. There can be no assurance, however, that additional clinical trials will commence or that studies currently
under way will proceed as anticipated.
PATENTS
The Company has patents and pending patent applications in the United States and in certain foreign countries covering intellectual
property developed as part of the Company's IMPDH research and development program. These include an issued United States patent
which covers a class of chemical compounds, pharmaceutical compositions containing such compounds, and methods of using those
compounds to treat or prevent IMPDH-mediated diseases. The class of compounds covered by this patent includes VX-497.
ICE PROGRAM
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OVERVIEW
Vertex is conducting research and development on inhibitors of interleukin-1 beta converting enzyme (ICE) for the treatment of acute
and chronic inflammatory conditions, including rheumatoid arthritis (RA). The Company is collaborating with Hoechst Marion
Roussel (HMR) in the development of the ICE inhibitor compound VX-740. A Phase I clinical trial of VX-740 in healthy volunteers
was recently completed. Inhibitors of ICE may have application to a wide range of chronic and acute inflammatory diseases, such as
rheumatoid arthritis, osteoarthritis, inflammatory bowel disease, sepsis, and pancreatitis.
BACKGROUND
Elevation of interleukin-1 beta (IL-1 beta) levels has been correlated to a number of acute and chronic inflammatory diseases. There
are approximately 2.1 million patients with rheumatoid arthritis in the United States alone. Numerous companies are seeking to
develop drugs to treat these conditions through various mechanisms. However, although several companies are pursuing ICE as a drug
target, Vertex is not aware of any company with an ICE-inhibiting compound in clinical development, and there currently are no IL-1
beta inhibitors approved for marketing.
Inside specialized immune system cells, ICE activates the inflammatory cytokine protein IL-1 beta and the protein gamma interferon, a
key immunoregulator that modulates antigen presentation, T-cell activation, and cell adhesion. This triggers a cascade of events that
produces inflammation. Vertex and HMR scientists have designed several classes of small molecule ICE inhibitors, including VX-740,
the development candidate in the collaboration.
Currently, non-steroidal anti-inflammatory drugs and other anti-inflammatory approaches which provide some symptomatic relief
without altering disease progression, are used extensively in the treatment of RA. A few disease-modifying anti-rheumatic drugs such
as methotrexate have been available or have been investigated for a number of years, but have toxicities that limit their long-term use.
New biologics such as etanercept (Enbrel) and infliximab (Remicade) seek to attenuate the anti-inflammatory process by targeting
TNF-alpha. In addition, studies with soluble IL-1 receptor and IL-1 receptor antagonist have shown reduced joint destruction in RA
patients. However, current anticytokine therapies for RA and inflammatory bowel disease are protein-based and must be injected. The
Company believes that an oral therapy which can alter the course of disease with few side effects would be a major addition to the RA
therapeutic arsenal.
PROGRAM STATUS
The first clinical trial of VX-740 was a study involving 18 healthy volunteers begun in 1998. This study was designed to test the
pharmacokinetics and tolerability of the compound in a range of single doses. Preliminary results of this study indicate that the drug
was well tolerated. VX-740 has been shown to be orally active in several animal models of human inflammatory disease, including
models for acute and chronic arthritis. Vertex expects that a Phase II study of VX-740 for the treatment of rheumatoid arthritis will be
the next step in the development program. However, there can be no assurance that clinical trials will commence or proceed as
currently anticipated.
PATENTS
The Company has patents and pending patent applications in the United States and in certain foreign countries covering intellectual
property developed as part of the Company's ICE research and development program. These include issued United States patents
covering several
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different classes of compounds useful as inhibitors of ICE, pharmaceutical compositions containing those compounds and methods of
using those compounds to treat ICE-related diseases. These patents and applications include a series of patents and applications
purchased from Sanofi S.A., in July 1997. The Company also has a United States patent obtained from Sanofi S.A. that covers DNA
sequences encoding ICE.
NEUROPHILIN LIGAND PROGRAM
OVERVIEW
The goal of the Neurophilin Ligand Program is to discover and develop drugs useful in the treatment of neurological disorders such as
peripheral neuropathies, including diabetic neuropathy, Parkinson's disease, trauma, and amyotrophic lateral sclerosis, or ALS. Vertex
has used information-driven drug design to synthesize a library of orally available small molecule compounds that have the potential to
promote recovery of nerve function and nerve growth. Vertex is engaged in worldwide strategic partnership with Schering AG,
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Germany for research, development and commercialization of neurophilin ligands for the treatment of a variety of neurological
disorders. In November 1998, Vertex started a Phase II clinical trial of timcodar dimesylate (also referred to as VX-853) in diabetic
neuropathy patients. Schering AG has an option to co-develop timcodar dimesylate with Vertex under the collaboration agreement.
BACKGROUND
Neurodegenerative disorders are among the diseases with the fewest available effective treatments. Central nervous system disorders
such as Alzheimer's disease, Parkinson's disease and multiple sclerosis affect millions of patients worldwide, and for some of these
there are no approved therapies that alter the course of disease progression. Peripheral neuropathies encompass a wide spectrum of
clinical syndromes for which treatments of only limited efficacy are available. Diabetic neuropathy, the indication for Vertex's ongoing
Phase II study of timcodar dimesylate, is the most common identifiable cause of neuropathy. There are approximately 1.3 million
patients with moderate to severe diabetic neuropathy in the United States.
Effective treatment of both central and peripheral neurological disorders has long been hampered by the inability to slow, arrest, or
reverse nerve damage or progression. Other companies are developing various neurotrophic factors (proteins) for these indications, but
the Company believes their clinical utility is likely to be limited. Based on Vertex's extensive research in the field of
immunosuppressive drugs, the Company has been able to generate a large number of compounds, known as neurophilin ligands, that
trigger nerve growth activity. Extensive IN VITRO and IN VIVO studies conducted with a reference compound designed by Vertex
support the broad potential of Vertex's neurophilin ligands in the treatment of degenerative central nervous system and peripheral
nervous system diseases. Vertex's clinical neurophilin ligand candidate, timcodar, has demonstrated potent activity in promoting
neurite outgrowth and functional recovery of nerves in preclinical studies. Vertex researchers are still seeking to determine the
mechanism of action of neurophilin ligands.
PROGRAM STATUS
In October 1998, Vertex started a Phase II clinical trial with timcodar dimesylate. Approximately 70 patients will be enrolled in the
trial, which is expected to be conducted at eight centers in the United States. This is a double-blind, placebo controlled trial. Primary
objectives will be to evaluate the safety and tolerability of six different dose regimens of timcodar administered orally over a 28-day
period. Nerve function will also be monitored. A single-dose Phase I study of four different doses of timcodar in healthy volunteers
was completed in 1998, providing support for Phase II clinical development in the indication of diabetic neuropathy. IN
VITRO results have shown timcodar's ability to promote neurite outgrowth, and IN VIVO results have shown that timcodar can
prevent neural dysfunction in a model of diabetic polyneuropathy.
Page 11
PATENTS
The Company has patents and pending patent applications in the United States and in certain foreign countries covering intellectual
property developed as part of the Company's Neurophilin research and development program. These include issued United States
patents covering the use of various classes of chemical compounds to treat a wide variety of neurological disorders. One of these
patents specifically covers the use of timcodar to treat neurological disorders.
P38 MAP KINASE PROGRAM
OVERVIEW
Vertex is collaborating with Kissei on the design, development and commercialization of inhibitors of p38 MAP kinase. The p38 MAP
kinase is a human enzyme involved with the onset and progression of inflammation and programmed cell death. The objective of
Vertex's research collaboration with Kissei is to identify and extensively evaluate compounds that target p38 MAP kinase to develop
novel, orally active drugs for the treatment of inflammatory diseases, such as rheumatoid arthritis, asthma, and Crohn's disease, and
neurological diseases such as stroke. In March 1999, the Company initiated a Phase I clinical trial with VX-745, a novel orally
administered investigational drug targeting p38 MAP kinase.
BACKGROUND
The mitogen-activated protein (MAP) kinases are a family of structurally-related human enzymes involved in intracellular signaling
pathways that enable cells to respond to their environment. When activated, the p38 MAP kinase triggers production of the cytokines
interleukin-1 (IL-1), interleukin-6
(IL-6) and tumor necrosis factor TNF-alpha. Excess levels of IL-1 and TNF-alpha are associated with a broad range of acute and
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chronic inflammatory diseases. They also play an important role in programmed cell death associated with ischemia and stroke, and in
neurodegenerative diseases such as Alzheimer's and Parkinson's disease. Vertex is aware of several other companies that are
developing p38 MAP kinase inhibitors.
PROGRAM STATUS
During 1998, Vertex and Kissei selected VX-745 as a lead drug development candidate targeting p38 MAP kinase. The Company
began a Phase I clinical trial of the compound in healthy volunteers in early 1999. The study, which is being conducted in Europe, will
assess the compound's safety and help to determine the dose range for subsequent studies. The Phase I randomized, blinded clinical
trial is designed to test the pharmacokinetics and tolerability of VX-745 in escalating single doses in healthy volunteers. The trial will
assess the ability of different doses of VX-745 to inhibit experimentally induced TNF-alpha production using specific biochemical
assays. Following completion of the study, Vertex may conduct additional single or multidose trials of VX-745. VX-745 has been
shown to slow disease progression in animal models of immune-mediated arthritis. However, there can be no assurance that clinical
trials will commence or proceed as currently anticipated.
PATENTS
Page 12
The Company has pending patent applications in the United States and in certain foreign countries covering intellectual property
developed as part of the Company's p38 MAP Kinase research and development program. Certain of the applications cover a class of
chemical compounds that includes VX-745, as well as VX-745 specifically, compositions comprising those compounds and the use of
those compounds to treat p38-related disorder.
RESEARCH PROGRAMS
HEPATITIS C VIRUS PROGRAMS
The Company is conducting two discovery research programs to develop compounds to treat hepatitis C. Identified in 1989, the
hepatitis C virus (HCV) causes chronic inflammation in the liver. In a majority of patients, HCV establishes a chronic infection that
can persist for decades and eventually lead to cirrhosis, liver failure and liver cancer. HCV infection represents a significant medical
problem worldwide for which there is inadequate or no therapy for a majority of patients. Sources at the CDC have estimated that
approximately 4 million Americans, or more than 1% of the population, may be infected with HCV, and there are estimated to be more
than 100 million chronic carriers of the virus worldwide. Currently, there is no vaccine available to prevent hepatitis C infection. The
only drugs approved for the treatment of hepatitis C are interferon alpha and ribavarin. Combination therapy with interferon alpha and
ribavarin is the most successful treatment currently available, but over 50% of patients still failed to show long-term sustained
response to that combination, and safe and effective treatments for HCV infection are needed.
HEPATITIS C PROTEASE
The hepatitis C NS3-4A serine protease is a virally encoded enzyme generally believed to be essential for replication of HCV. Under
an agreement signed during 1997, Vertex and Eli Lilly and Company are collaborating on the research, development and
commercialization of novel, orally active HCV protease inhibitors for the treatment of hepatitis C infection. This research derives
heavily from detailed structural information about the protease, discovered and developed by Vertex researchers.
The Company has pending patent applications in the United States and in certain foreign countries covering intellectual property
developed as part of the Company's Hepatitis C Protease research and development program. Vertex has an issued United States patent
covering an assay useful to evaluate potential inhibitors of Hepatitis C protease.
HEPATITIS C HELICASE
Vertex is also conducting discovery research to design orally deliverable drugs to inhibit the hepatitis C virus helicase. The NS3
helicase enzyme is believed to play an essential role in the infectious cycle of the hepatitis C virus by aligning viral DNA in its proper
configuration for replication. Therefore, the HCV helicase represents an attractive target for drug discovery.
Researchers from Vertex solved the three-dimensional atomic structure of the hepatitis C virus NS3 helicase. Vertex is using the
structural information to identify and optimize inhibitors of the enzyme, employing structure-based techniques, including cluster-based
screening, and
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computational, combinatorial, and medicinal chemistry, to design novel small molecule inhibitors of the HCV helicase for clinical
development as new antiviral drugs to treat HCV infection.
The Company has pending patent applications in the United States covering intellectual property developed as part of the Company's
Hepatitis C Helicase research and development program. These applications cover Hepatitis C helicase inhibitors and the X-ray crystal
structure of Hepatitis C helicase.
CASPASE INHIBITORS PROGRAM
Vertex is conducting a major multidisciplinary research effort to design of novel, small molecule inhibitors of apoptosis (programmed
cell death) for the treatment of a variety of pathological conditions including major neurodegenerative and cardiovascular diseases. In
this separate caspase inhibitor program, Vertex scientists are capitalizing on expertise gained through the Company's successful design
and optimization of inhibitors of ICE (Caspase-1). Recent highlights include the solution of the caspase-3 structure by X-ray
crystallography and the first description of the caspase-9 gene knockout mouse, establishing that this enzyme is of particular
importance in neurobiology. With respect to drug discovery, Vertex's caspase research has resulted in the identification of novel
compounds with activity in enzyme assays, cellular assays, and animal models. The goal of Vertex's caspase inhibitors program is to
discover and develop novel drugs useful for treating neurodegenerative disorders such as Alzheimer's and Parkinson's disease and for
decreasing the tissue damage in myocardial infarction and stroke.
JNK3 MAP KINASE INHIBITORS PROGRAM
Vertex is currently engaged in a research effort to identify JNK3 MAP kinase inhibitors. Vertex's studies have been accelerated by the
experience gained in Vertex's p38 MAP kinase program with Kissei. Jun N-terminal kinase (JNK) is a member of the same group of
structurally-related enzymes as p38 MAP kinase. Recent findings suggest that JNK3 plays an important role in central nervous system
disorders such as epilepsy, stroke and Alzheimer's Disease. JNK3 also has been implicated in Parkinson's disease. Vertex has solved
and in 1998 reported in the journal STRUCTURE the X-ray crystal structure of JNK3 complexed to an analog of the co-factor
molecule ATP. Using proprietary structural information of the JNK3 and other MAP kinase enzymes, Vertex scientists selected initial
compounds for investigation as potential inhibitors. Vertex has identified several novel classes of JNK3 MAP kinase inhibitors and is
currently using advanced drug discovery technology to move lead compounds toward clinical candidate status.
CORPORATE COLLABORATIONS
Vertex has entered into corporate collaborations with pharmaceutical companies that provide financial and other resources, including
capabilities in research, development, manufacturing, and sales and marketing, to support the Company's research and development
programs. At present, the Company has the following major corporate collaborations.
GLAXO WELLCOME PLC.
Vertex and Glaxo Wellcome are collaborating on the development and commercialization of Agenerase (amprenavir). Under the
collaborative agreement for research and development of HIV protease inhibitors, which began in December 1993, Glaxo Wellcome
agreed to pay Vertex up to $42 million, comprised of a $15 million initial license payment paid in December 1993, $14 million of
product research funding over five years and $13 million of development and commercialization milestone payments for an initial drug
candidate. From the inception of the agreement in December 1993 through December 31, 1998, Vertex has recognized as revenue $34
million. The Company has received the full amount of research funding specified under the agreement. Glaxo Wellcome is
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also obligated to pay to Vertex additional development and commercialization milestone payments for subsequent drug candidates. In
addition, Glaxo Wellcome is required to bear the costs of development in its territory under the collaboration. Glaxo Wellcome has
exclusive rights to develop and commercialize Vertex HIV protease inhibitors in all parts of the world except the Far East and will pay
Vertex a royalty on sales. Vertex has retained certain bulk drug manufacturing rights and certain co-promotion rights in the territories
licensed to Glaxo Wellcome.
Glaxo Wellcome has the right to terminate its agreement with the Company without cause upon twelve months' notice. Termination by
Glaxo Wellcome of the agreement will relieve Glaxo Wellcome of its obligation to make further commercialization and development
milestone and royalty payments, and will end any license granted to Glaxo Wellcome by Vertex thereunder, and could have a material
adverse effect on the Company's business and result of operations.
Vertex and Glaxo Wellcome have a non-exclusive, worldwide license under certain Searle patent applications claiming HIV protease
inhibitors to permit Vertex and Glaxo Wellcome to develop, manufacture and market Agenerase free of the risk of intellectual property
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claims by Searle. The terms of the license require Vertex to pay Searle a royalty on net sales.
KISSEI PHARMACEUTICAL CO., LTD.
AMPRENAVIR
Vertex and Kissei are collaborating on the development of amprenavir, Vertex's HIV protease inhibitor. Under the collaborative
agreement, which began in April 1993, Kissei agreed to pay to Vertex up to $20 million, comprised of $9.8 million of product research
funding over three years, $7 million of development and commercialization milestone payments and a $3.2 million equity investment.
From the inception of the agreement in April 1993 through December 31, 1998, $14.6 million has been recognized as revenue. During
1997, the Company also received $4 million related to reimbursements of certain development costs. The Company has received the
full amount of research funding specified under the agreement. Kissei has exclusive rights to develop and commercialize amprenavir in
Japan, the People's Republic of China and several other countries in the Far East and will pay Vertex a royalty on sales. Vertex is
responsible for the manufacture of bulk product for Kissei.
P38 MAP KINASE
In September 1997, the Company and Kissei entered into a collaborative agreement for the p38 MAP kinase program for the
development and commercialization of novel, orally active drugs for the treatment of inflammatory and neurological diseases. Under
the terms of the agreement, Kissei agreed to pay the Company up to $22 million, composed of a $4 million license payment paid in
September 1997, $11 million of product research funding over three years and $7 million of development and commercialization
milestone payments. From the inception of the agreement in September 1997 through December 31, 1998, $11 million has been
recognized as revenue. The Company and Kissei will collaborate to identify and extensively evaluate compounds that target p38 MAP
kinase. Kissei will have the right to develop and commercialize these compounds in its licensed territories. Kissei has exclusive rights
to p38 MAP kinase compounds in Japan and certain Southeast Asian countries and semi-exclusive rights in China, Taiwan and South
Korea. The Company retains exclusive marketing rights in the United States, Canada, Europe, and the rest of the world. In addition,
the Company will have the right to supply bulk drug material to Kissei for sale in its territory, and will receive royalties and drug
supply payments on any product sales. Kissei has the right to terminate the agreement without cause upon six months' notice.
BIOCHEM PHARMA INC.
Page 15
The Company and BioChem are collaborating on the development and commercialization of Incel, the Company's lead compound in
its cancer multidrug resistance program. Under the collaborative agreement, which began in May 1996, BioChem agreed to pay the
Company up to $4 million comprised of an initial license payment of $500,000 and development and commercialization milestone
payments. From the inception of the agreement in May 1996 through December 31, 1998, $0.8 million has been recognized as
revenue. BioChem also agreed to bear certain costs of development of Incel in Canada. BioChem has exclusive rights to develop and
commercialize Incel in Canada. The Company will supply BioChem's requirements of bulk and finished forms of Incel. BioChem will
make payments to the Company for those materials based on sales of products by BioChem, which will cover Vertex's cost of
supplying materials and will provide a profit to Vertex. BioChem has the right to terminate the agreement without cause upon six
months' notice. Termination will relieve BioChem of any further payment obligations and will end any license granted to BioChem by
Vertex under the agreement.
HOECHST MARION ROUSSEL
Vertex and HMR are collaborating on the development of ICE inhibitors as anti-inflammatory agents. Under the collaborative
agreement, which commenced in September 1993, HMR is obligated to pay to Vertex up to $30.5 million, comprised of $18.5 million
of product research funding over five years and $12 million of development and commercialization milestone payments. From the
inception of the agreement in September 1993 through December 31, 1998, $21.5 million has been recognized as revenue. The
Company received additional revenue related to reimbursements for clinical development in 1997. The Company has received the full
amount of research funding specified under the agreement. HMR has exclusive rights to develop and market drugs resulting from the
collaborative effort in Europe, Africa and the Middle East, and Vertex has exclusive development and marketing rights in the rest of
the world, except the Far East, where Vertex shares those rights with HMR. HMR is obligated to pay a royalty to Vertex on any sales
made in Europe, and Vertex is obligated to pay a royalty to HMR on any sales made in the United States or the rest of the Americas.
Each party will have the option to co-promote products in the other party's exclusive territory. Vertex and HMR will each have rights
to develop and market the drugs in Far Eastern countries including Japan.
ELI LILLY & COMPANY
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In June 1997, Vertex and Lilly entered into a collaborative agreement for the research, development and commercialization of novel,
small molecule compounds to treat hepatitis C infection. Under the terms of the agreement, Lilly will pay the Company up to $51
million composed of a $3 million up front payment paid in June 1997, $33 million of product research funding over six years and $15
million of development and commercialization milestone payments. From the inception of the agreement in June 1997 through
December 31, 1998, $10.8 million has been recognized as revenue. The Company and Lilly will jointly manage the research,
development, manufacturing and marketing of drug candidates emerging from the collaboration. The Company will have primary
responsibility for drug design, process development and pre-commercial drug substance manufacturing, and Lilly will have primary
responsibility for formulation, preclinical and clinical development and global marketing. The Company has the option to supply
100% of Lilly's commercial drug substance supply needs. The Company will receive royalties on future product sales, if any. If the
Company exercises its commercial supply option, the Company will receive drug supply payments in addition to royalties on future
product sales, if any. Lilly has the right to terminate the agreement without cause upon six months' notice after June 1999.
SCHERING AG
Page 16
The Company and Schering AG, Germany are collaborating on the research, development and commercialization of novel, orally
active neurophilin ligand compounds to promote nerve regeneration for the treatment of a number of neurological diseases. Under the
terms of the agreement, Schering AG will pay the Company up to $88 million composed of a $6 million upfront license payment paid
in September 1998, $22 million of product research funding over five years and $60 million of development and commercialization
milestone payments. From the inception of the agreement in August 1998 through December 31, 1998, $10 million has been
recognized as revenue. Under terms of the agreement, Vertex and Schering AG will have an equal role in management of neurophilin
ligand research and product development. In North America, Vertex will have manufacturing rights, and Vertex and Schering AG will
share equally in the marketing expenses and profits from commercialized compounds. In addition to having manufacturing rights in
North America, the Company retains the option to manufacture bulk drug substance for sales and marketing in territories outside
Europe, the Middle East and Africa. Schering AG will have the right to manufacture and market any commercialized compounds in
Europe, the Middle East and Africa, and pay Vertex a royalty on product sales. After December 2000, Schering AG has the right to
terminate without cause upon a six months' written notice.
ALTUS BIOLOGICS INC.
Altus Biologics Inc. develops, manufactures and markets products based on a novel and proprietary technology for stabilizing
proteins. At December 31, 1998, Vertex owned approximately 70% of the capital stock of Altus. In February 1999, Vertex
restructured its investment in Altus. As part of the transaction, Vertex provided Altus $3 million of cash and surrendered its shares of
Altus preferred stock in exchange for two new classes of preferred stock and warrants. The new preferred stock provides Vertex with a
minority ownership position in Altus, and the warrants, which become exercisable upon certain events, will provide Vertex with
significant additional ownership potential. As a result of the transaction, Altus now operates independently from Vertex. In addition,
Vertex has retained a non-exclusive royalty-free right to use Altus' technology for discovering, developing and manufacturing small
molecule drugs.
PATENTS AND PROPRIETARY INFORMATION
The Company has rights in certain patents and pending patent applications that relate to compounds it is developing and methods of
using such compounds, as discussed above. In addition, the Company actively seeks, when appropriate, protection for its products and
proprietary information by means of United States and foreign patents, trademarks and contractual arrangements. Vertex has pending
applications in the United States, and foreign counterpart applications in countries it deems appropriate, for all of its most advanced
research and development programs. In addition, the Company relies upon trade secrets and contractual arrangements to protect
certain of its proprietary information and products.
There can be no assurance that any patents will issue from any of the Company's patent applications or, even if patents issue or have
issued, that the claims thereof will provide the Company with any significant protection against competitive products or otherwise be
valuable commercially. Legal standards relating to the validity of patents and the proper scope of their claims in the biopharmaceutical
field are still evolving, and there is no consistent policy regarding the breadth of claims allowed in biopharmaceutical patents. No
assurance can be given as to the Company's ability to avoid infringing, and thus having to negotiate a license under, any patents issued
to others, or that a license to such patents would be available on commercially acceptable terms, if at all. See Item 3, "Legal
Proceedings."
Further, there can be no assurance that any patents issued to or licensed by the Company will not be infringed by the products of
others, which may require the Company to engage in patent infringement litigation. In addition to being a party to patent infringement
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litigation, the Company could be required to participate in interference proceedings declared by the United States Patent and
Trademark Office. Defense or prosecution of patent infringement litigation, as well as participation in interference proceedings, can be
expensive and time consuming, even in those instances in which the outcome is favorable to the Company. If the outcome of any such
litigation or proceeding were adverse, the Company could be subject to significant liabilities to third parties, could be required to
obtain licenses from third parties or could be required to cease sales of the affected products, any of which could have a material
adverse effect on the Company.
Much of the Company's technology and many of its processes are dependent upon the knowledge, experience and skills of key
scientific and technical personnel. To protect its rights to its proprietary know-how and technology, the Company requires all
employees, consultants, advisors and collaborators to enter into confidentiality agreements that prohibit the disclosure of confidential
information to anyone outside the Company. These agreements require disclosure and assignment to the Company of ideas,
developments, discoveries and inventions made by employees, consultants, advisors and collaborators. However, there can be no
assurance that these agreements will effectively prevent disclosure of the Company's confidential information or will provide
meaningful protection for the Company's confidential information if there is unauthorized use or disclosure.
MANUFACTURING
The Company relies on third party manufacturers and collaborative partners to produce its compounds for preclinical and clinical
purposes and may do so for commercial production of any compounds that are approved for marketing. Commercial manufacturing of
Agenerase will be done, at least initially, by Glaxo Wellcome. Vertex retains the option to manufacture a portion of Glaxo Wellcome's
requirements for bulk drug substance. If Vertex were to exercise that option, it would rely upon one or more contract manufacturers to
manufacture the Agenerase bulk drug substance on its behalf.
The Company has established a quality assurance program, including a set of standard operating procedures, intended to ensure that
third party manufacturers under contract produce the Company's compounds in accordance with the FDA's current Good
Manufacturing Practices, or cGMP, and other applicable regulations.
The Company believes that all of its existing compounds can be produced using established manufacturing methods, primarily through
standard techniques of pharmaceutical synthesis. The Company believes that it will be able to continue to negotiate third party
manufacturing arrangements on commercially reasonable terms and that it will not be necessary for it to develop internal
manufacturing capability in order to successfully commercialize its products. The Company's objective is to maintain flexibility in
deciding whether to develop internal manufacturing capabilities for certain of its potential products. However, in the event that the
Company is unable to obtain contract manufacturing, or obtain such manufacturing on commercially reasonable terms, it may not be
able to commercialize its products as planned. The Company has limited experience in manufacturing pharmaceutical or other
products or in conducting manufacturing testing programs required to obtain FDA and other regulatory approvals, and there can be no
assurance that the Company will further develop such capabilities successfully.
Since most of the Company's potential products are at an early stage of development, the Company will need to improve or modify its
existing manufacturing processes and capabilities to produce commercial quantities of any drug product economically. The Company
cannot quantify the time or expense that may ultimately be required to improve or modify its existing process technologies, but
it is possible that such time or expense could be substantial.
Page 18
The production of Vertex's compounds is based in part on technology that the Company believes to be proprietary. Vertex may license
this technology to contract manufacturers to enable them to manufacture compounds for the Company. In addition, a contract
manufacturer may develop process technology related to the manufacture of Vertex's compounds that the manufacturer owns either
independently or jointly with the Company. This would increase the Company's reliance on such manufacturer or require the Company
to obtain a license from such manufacturer in order to have its products manufactured.
Some of the Company's current corporate partners have certain manufacturing rights with respect to the Company's products under
development, and there can be no assurance that such corporate partners' rights will not impede the Company's ability to conduct the
development programs and commercialize any resulting products in accordance with the schedules and in the manner currently
contemplated by the Company.
COMPETITION
The Company is engaged in pharmaceutical fields characterized by extensive research efforts, rapid technological progress and intense
competition. There are many public and private companies, including pharmaceutical companies, chemical companies and
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biotechnology companies, engaged in developing products for the same human therapeutic applications as those targeted by Vertex. In
order for the Company to compete successfully, it must demonstrate improved safety, efficacy, ease of manufacturing and market
acceptance of its products over those of its competitors who have received regulatory approval and are currently marketing their drugs.
In the field of HIV protease inhibition, Merck & Co., Inc., Abbott Laboratories, Inc., Hoffmann-La Roche, and Agouron
Pharmaceuticals, Inc. have HIV protease inhibitor drugs that are already on the market. Many of the Company's competitors have
substantially greater financial, technical and human resources than those of the Company and more experience in the development of
new drugs. See "Risk Factors--Vertex Faces Substantial Competition."
GOVERNMENT REGULATION
The Company's development, manufacture and potential sale of therapeutics are subject to extensive regulation by United States and
foreign governmental authorities. In particular, pharmaceutical products are subject to rigorous preclinical and clinical testing and to
other approval requirements by the FDA in the United States under the Food, Drug and Cosmetic Act and by comparable agencies in
most foreign countries.
As an initial step in the FDA regulatory approval process, preclinical studies are typically conducted in animals to identify potential
safety problems. For certain diseases, animal models exist that are believed to be predictive of human efficacy. For such diseases, a
drug candidate is tested in an animal model. The results of the studies are submitted to the FDA as a part of the Investigational New
Drug application (IND) which is filed to comply with FDA regulations prior to commencement of human clinical testing. For other
diseases for which no appropriately predictive animal model exists, no such results can be filed. For several of the Company's drug
candidates, no appropriately predictive model exists. As a result, no IN VIVO evidence of efficacy would be available until such
compounds progress to human clinical trials.
Clinical trials are typically conducted in three sequential phases, although the phases may overlap. In Phase I, which frequently begins
with the initial introduction of the drug into healthy human subjects prior to introduction into patients, the compound will be tested for
safety, dosage tolerance, absorption, bioavailability, biodistribution, metabolism, excretion, clinical pharmacology and, if possible, for
early information on effectiveness. Phase II typically involves
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studies in a small sample of the intended patient population to assess the efficacy of the drug for a specific indication, to determine
dose tolerance and the optimal dose range and to gather additional information relating to safety and potential adverse effects. Phase
III trials are undertaken to further evaluate clinical safety and efficacy in an expanded patient population at geographically dispersed
study sites, to determine the overall risk-benefit ratio of the drug and to provide an adequate basis for physician labeling. Each trial is
conducted in accordance with certain standards under protocols that detail the objectives of the study, the parameters to be used to
monitor safety and the efficacy criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND. Further, each
clinical study must be evaluated by an independent Institutional Review Board at the institution at which the study will be conducted.
The Institutional Review Board will consider, among other things, ethical factors, the safety of human subjects and the possible
liability of the institution.
Data from preclinical testing and clinical trials are submitted to the FDA in a New Drug Application (NDA) for marketing approval.
The process of completing clinical testing and obtaining FDA approval for a new drug is likely to take a number of years and require
the expenditure of substantial resources. Preparing an NDA involves considerable data collection, verification, analysis and expense,
and there can be no assurance that approval will be granted on a timely basis, if at all. The approval process is affected by a number of
factors, including the severity of the disease, the availability of alternative treatments and the risks and benefits demonstrated in
clinical trials. The FDA may deny an NDA if applicable regulatory criteria are not satisfied or may require additional testing or
information. Among the conditions for marketing approval is the requirement that the prospective manufacturer's quality control and
manufacturing procedures conform to the FDA's cGMP regulations, which must be followed at all times. In complying with standards
set forth in these regulations, manufacturers must continue to expend time, monies and effort in the area of production and quality
control to ensure full technical compliance. Manufacturing establishments, both foreign and domestic, also are subject to inspections
by or under the authority of the FDA and by or under the authority of other federal, state or local agencies.
Even after initial FDA approval has been obtained, further studies, including post-marketing studies, may be required to provide
additional data on safety and will be required to gain approval for the use of a product as a treatment for clinical indications other than
those for which the product was initially tested. Also, the FDA will require post-marketing reporting to monitor the side effects of the
drug. Results of post-marketing programs may limit or expand further marketing of the products. Further, if there are any
modifications to the drug, including changes in indication, manufacturing process, labeling or manufacturing facilities, an NDA
supplement may be required to be submitted to the FDA.
The Orphan Drug Act provides incentives to drug manufacturers to develop and manufacture drugs for the treatment of diseases or
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conditions that affect fewer than 200,000 individuals in the United States. Orphan drug status can also be sought for diseases or
conditions that affect more than 200,000 individuals in the United States if the sponsor does not realistically anticipate its product
becoming profitable from sales in the United States. Under the Orphan Drug Act, a manufacturer of a designated orphan product can
seek tax benefits, and the holder of the first FDA approval of a designated orphan product will be granted a seven-year period of
marketing exclusivity for that product for the orphan indication. While the marketing exclusivity of an orphan drug would prevent
other sponsors from obtaining approval of the same compound for the same indication, it would not prevent other types of drugs from
being approved for the same use. The Company may apply for orphan drug status for certain indications of MDR in cancer.
Under the Drug Price Competition and Patent Term Restoration Act of 1984, a sponsor may be granted marketing exclusivity for a
period of time following FDA approval of certain drug applications if FDA approval is received before the expiration of the patent's
original term. This
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marketing exclusivity would prevent a third party from obtaining FDA approval for a similar or identical drug through an Abbreviated
New Drug Application, which is the application form typically used by manufacturers seeking approval of a generic drug. The statute
also allows a patent owner to extend the term of the patent for a period equal to one-half the period of time elapsed between the filing
of an IND and the filing of the corresponding NDA plus the period of time between the filing of the NDA and FDA approval. The
Company intends to seek the benefits of this statute, but there can be no assurance that the Company will be able to obtain any such
benefits.
Whether or not FDA approval has been obtained, approval of a drug product by regulatory authorities in foreign countries must be
obtained prior to the commencement of commercial sales of the product in such countries. Historically, the requirements governing the
conduct of clinical trials and product approvals, and the time required for approval, have varied widely from country to country.
In addition to the statutes and regulations described above, the Company is also subject to regulation under the Occupational Safety
and Health Act, the Environmental Protection Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act
and other present and potential future federal, state and local regulations.
HUMAN RESOURCES
As of December 31, 1998, Vertex had 304 full-time employees, including 219 in research and development, 38 in support services and
47 in general and administrative functions, and one part-time employee. Fourteen of these employees were located at Vertex's new
U.K. research and development facility, opened in 1998. The Company's scientific staff members (103 of whom hold Ph.D. and/or
M.D. degrees) have diversified experience and expertise in molecular and cell biology, biochemistry, animal pharmacology, synthetic
organic chemistry, protein x-ray crystallography, protein nuclear magnetic resonance spectroscopy, computational chemistry,
biophysical chemistry, medicinal chemistry, clinical pharmacology and clinical medicine. In addition, the Company's Altus subsidiary
had 30 full-time employees as of December 31, 1998. The Company's employees are not covered by a collective bargaining
agreement, and the Company considers its relations with its employees to be good.
EXECUTIVE OFFICERS
The names, ages and positions held by the executive officers of the Company are as follows:
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Name Age Position
---- --- --------
Joshua S. Boger, Ph.D. . . . . . . . .47 Chairman, President and Chief
Executive Officer
Richard H. Aldrich . . . . . . . . . .44 Senior Vice President and Chief
Business Officer
Vicki L. Sato, Ph.D. . . . . . . . . .50 Senior Vice President of
Research
and Development and Chief
Scientific Officer; Chair of the
Scientific Advisory Board
Iain P. M. Buchanan. . . . . . . . . .45 Vice President of European
Operations; Managing Director of
Vertex Pharmaceuticals (Europe)
Limited
Thomas G. Auchincloss, Jr. . . . . . .37 Vice President of Finance and
Treasurer
Page 21
All executive officers are elected by the Board of Directors to serve in their respective capacities until their successors are elected and
qualified or until their earlier resignation or removal.
Dr. Boger is a founder of the Company and was its President and Chief Scientific Officer from its inception in 1989 until May 1992,
when he became President and Chief Executive Officer. In 1997, Dr. Boger became Chairman, President and Chief Executive Officer.
Dr. Boger has been a director since the Company's inception. Prior to founding the Company in 1989, Dr. Boger held the position of
Senior Director of Basic Chemistry at Merck Sharp & Dohme Research Laboratories in Rahway, New Jersey, where he headed both
the Department of Medicinal Chemistry of Immunology & Inflammation and the Department of Biophysical Chemistry. Dr. Boger is
also a Director of Millennium Pharmaceuticals, Inc. Dr. Boger holds a B.A. in chemistry and philosophy from Wesleyan University
and M.S. and Ph.D. degrees in chemistry from Harvard University.
Mr. Aldrich served as Vice President of Business Development of the Company from June 1989 to May 1992, when he became Vice
President and Chief Business Officer. In December 1993, Mr. Aldrich was promoted to Senior Vice President and Chief Business
Officer. He joined Vertex from Integrated Genetics, where he headed that company's business development group. Previously, he
served as Program Executive at Biogen, Inc., where he coordinated worldwide commercial development of several
biopharmaceuticals, and as Licensing Manager at Biogen S.A. in Geneva, Switzerland, where he managed European and Far Eastern
licensing. Mr. Aldrich previously worked at the Boston Consulting Group, an international management consulting firm. Mr. Aldrich
received a B.S. degree from Boston College and an M.B.A. from the Amos Tuck School of Business, Dartmouth College.
Dr. Sato joined Vertex in September 1992 as Vice President of Research and was appointed Senior Vice President of Research and
Development in September 1994. Previously, she was Vice President, Research and a member of the Scientific Board of Biogen, Inc.
As research head at Biogen, she directed research programs in the fields of inflammation, immunology, AIDS therapy and
cardiovascular therapy from early research into advanced product development. Dr. Sato received an A.B. in biology from Radcliffe
College and A.M. and Ph.D. degrees from Harvard University. Following postdoctoral work in chemistry and immunology at the
University of California at Berkeley and Stanford Medical School, she was appointed to the faculty of Harvard University in the
Department of Biology. Dr. Sato is also a Director of Mitotix, Inc.
Mr. Buchanan joined the Company in April 1994 from Cilag AG, a subsidiary of Johnson & Johnson based in Zug, Switzerland, where
he served as its Regional Licensing Director since 1987. He previously held the position of Marketing Director of Biogen, Inc. in
Switzerland. Prior to Biogen, Mr. Buchanan served in Product Management at Merck Sharp & Dohme (UK) Limited. Mr. Buchanan
holds a B.Sc. from the University of St. Andrews, Scotland.
Mr. Auchincloss joined the Company in October 1994 after serving as an investment banker at Bear, Stearns & Co. Inc. since 1988,
most recently as Associate Director of the Corporate Finance Department. Prior to Bear Stearns, Mr. Auchincloss was a financial
analyst for PaineWebber, Inc. Mr. Auchincloss holds a B.S. from Babson College and an M.B.A. from The Wharton School,
2002. EDGAR Online, Inc.
University of Pennsylvania.
SCIENTIFIC ADVISORY BOARD
Page 22
The Company's Scientific Advisory Board consists of individuals with demonstrated expertise in various fields who advise the
Company concerning long-term scientific planning, research and development. The Scientific Advisory Board also evaluates the
Company's research programs, recommends personnel to the Company and advises the Company on technological matters. The
members of the Scientific Advisory Board, which is chaired by Dr. Vicki L. Sato, are:
Vicki L. Sato, Ph.D. . . . . . Senior Vice President of Research and
Development and Chief Scientific
Officer,
Vertex Pharmaceuticals Incorporated.
Steven J. Burakoff, M.D. . . . Chair, Department of Pediatric Oncology,
Dana-Farber Cancer Institute; Professor
of Pediatrics, Harvard Medical School.
Eugene H. Cordes, Ph.D.. . . . Professor of Pharmacy and Chemistry,
University of Michigan at Ann Arbor.
Jerome E. Groopman, M.D. . . . Chief, Division of Experimental
Medicine,
Beth Israel Deaconess Medical Center;
Recanati Chair of Medicine and
Professor of Medicine, Harvard Medical
School.
Stephen C. Harrison, Ph.D. . . Higgins Professor of Biochemistry,
Harvard University; Investigator, Howard
Hughes Medical Institute; Professor of
Biological Chemistry and Molecular
Pharmacology and Professor of
Pediatrics,
Harvard Medical School.
Jeremy R. Knowles, D. Phil.. . Dean of the Faculty of Arts and Sciences
and Amory Houghten Professor of
Chemistry
and Biochemistry, Harvard University.
Robert T. Schooley, M.D. . . . Tim Gill Professor of Medicine and
Head of Infectious Disease, University
of
Colorado Health Sciences Center.
Other than Dr. Sato, none of the members of the Scientific Advisory Board is employed by the Company, and members may have
other commitments to or consulting or advisory contracts with their employers or other entities that may conflict or compete with their
obligations to the Company. Accordingly, such persons are expected to devote only a small portion of their time to the Company. In
addition to its Scientific Advisory Board, Vertex has established consulting relationships with a number of scientific and medical
experts who advise the Company on a project-specific basis.
Page 23
RISK FACTORS
The following factors, among others, could cause actual results to differ materially from those contained in forward-looking statements
in this Report or presented elsewhere by Vertex.
2002. EDGAR Online, Inc.
Market Acceptance of Agenerase Cannot Yet Be Determined
Agenerase is currently awaiting marketing approval by regulatory authorities, and it is too early to predict whether the product will be
successful in the market. Four other HIV protease inhibitors are on the market, as well as a number of other products for the treatment
of HIV infection and AIDS. In addition, numerous other drugs are still in development by the Company's competitors, which may have
more efficacy, fewer side effects, easier administration and/or lower costs. To date, HIV has been shown to develop resistance to
antiviral drugs, including currently marketed HIV protease inhibitors. There can be no assurance that such disease resistance or other
factors will not limit the efficacy of Agenerase. Although Vertex will co-promote Agenerase, most of the marketing effort and all of
the sales effort will be made by Glaxo Wellcome, and Vertex will have little control over the success of those efforts.
SUCCESSFUL DEVELOPMENT OF PIPELINE CANNOT BE PREDICTED
The products that the Company is pursuing will require extensive additional development, testing and investment, as well as regulatory
approvals, prior to commercialization. No assurance can be given that the Company's product development efforts will be successful,
that required regulatory approvals will be obtained or that any products, if introduced, will be commercially successful. The results of
preclinical and initial clinical trials of products under development by the Company are not necessarily predictive of results that will
be obtained from large-scale clinical testing, and there can be no assurance that clinical trials of products under development will
demonstrate the safety and efficacy of such products or will result in a marketable product. The administration alone or in combination
with other drugs of any product developed by the Company may produce undesirable side effects in humans. The failure to
demonstrate adequately the safety and efficacy of a therapeutic drug under development could delay or prevent regulatory approval of
the product and could have a material adverse effect on the Company. In addition, the FDA may require additional clinical trials,
which could result in increased costs and significant development delays. Commercial formulation and manufacturing processes have
yet to be developed for the Company's drug candidates other than Agenerase. The Company or its collaborators may encounter
difficulties in their manufacturing process development and formulation activities that could result in delays in clinical trials,
regulatory submissions and commercialization of its products, or cause negative financial and competitive consequences.
CLINICAL TRIAL TIMING MAY BE SUBJECT TO DELAYS
The rate of completion of clinical trials of the Company's products is dependent upon, among other factors, the rate of patient accrual.
Patient accrual is a function of many factors, including the size of the patient population, the proximity of patients to clinical sites, the
eligibility criteria for the trial and the availability of clinical trial material. Delays in planned patient enrollment in clinical trials may
result in increased costs, program delays or both, which could have a material adverse effect on the Company. There can be no
assurance that if clinical trials are completed the Company will be able to submit an NDA or that any such application will be reviewed
and approved by the FDA in a timely manner, if at all.
Page 24
VERTEX IS DEPENDENT ON COLLABORATIVE PARTNERS
The Company is engaged in research and development collaborations, pursuant to which its partners have agreed to fund portions of
the Company's research and development programs and/or to conduct certain research and development relating to specified products,
in exchange for certain technology, product and marketing rights relating to those products. Some of the Company's current corporate
partners have certain rights to control the planning and execution of product development and clinical programs, and there can be no
assurance that such corporate partners' rights to control aspects of such programs will not impede the Company's ability to conduct
such programs in accordance with the schedules and in the manner currently contemplated by the Company for such programs. If any
of the Company's corporate collaborators were to terminate its relationship with Vertex, it could have a material adverse effect on the
Company's ability to fund related and other programs and to develop, manufacture and market any products that may have resulted
from such collaboration. The Company expects to seek additional collaborative arrangements to develop and commercialize its
products in the future. There can be no assurance that the Company will be able to establish acceptable collaborative arrangements in
the future or that such collaborative arrangements will be successful.
THE TECHNOLOGIES USED BY VERTEX ARE RAPIDLY CHANGING
The Company is engaged in pharmaceutical fields characterized by extensive research efforts, rapid technological progress and intense
competition. Further, the Company believes that interest in the application of structure-based drug design and related technologies may
continue and may accelerate as the technologies become more widely understood. Businesses, academic institutions, governmental
agencies and other public and private research organizations are conducting research to develop technologies that may compete with
those used by the Company. It is possible that the Company's competitors could acquire or develop technologies that would render the
Company's technology obsolete or noncompetitive.
2002. EDGAR Online, Inc.
VERTEX FACES SUBSTANTIAL COMPETITION
There are many public and private companies, including pharmaceutical companies, chemical companies and biotechnology
companies, engaged in developing products for the human therapeutic applications targeted by Vertex. The Company is aware of
efforts by others to develop products in each of the areas in which the Company has products in development. In addition, there can be
no assurance that the Company's products in development will be able to compete effectively with products which are currently on the
market. In order for the Company to compete successfully in these areas, it must demonstrate improved safety, efficacy, ease of
manufacturing and market acceptance over its competitors, who have received regulatory approval and are currently marketing. Many
of the Company's competitors have substantially greater financial, technical and human resources than those of the Company. In
addition, many of the Company's competitors have significantly greater experience than the Company in conducting preclinical testing
and human clinical trials of new pharmaceutical products, and in obtaining FDA and other regulatory approvals of products.
Accordingly, certain of the Company's competitors may succeed in obtaining regulatory approval for products more rapidly than the
Company. If the Company obtains regulatory approval and commences commercial sales of its products, it will also compete with
respect to manufacturing efficiency and sales and marketing capabilities, areas in which it currently has no experience.
VERTEX RELIES ON THIRD PARTY MANUFACTURERS
The Company's ability to conduct clinical trials and its ability to commercialize its potential products will depend, in part, on its ability
to manufacture its products on a large scale, either directly or through third parties, at a competitive cost and in accordance with FDA
and other
Page 25
regulatory requirements. The Company currently does not have the capacity to manufacture drugs in large-scale quanties and is
dependent on third party manufacturers or collaborative partners for the production of its compounds for preclinical research, clinical
trial purposes and commercial production. In the event that the Company is unable to obtain contract manufacturing, or obtain such
manufacturing on commercially reasonable terms, it may not be able to conduct or complete clinical trials or commercialize its
products as planned. The Company has no experience in manufacturing pharmaceutical or other products, and there can be no
assurance that the Company will successfully develop such capabilities. Some of the Company's current corporate partners have
certain manufacturing rights with respect to the Company's products under development, and there can be no assurance that such
corporate partners' manufacturing rights will not impede the Company's ability to conduct the development programs and
commercialize any resulting products in accordance with the schedules and in the manner currently contemplated by the Company.
THE REGULATORY APPROVAL PROCESS IS SUBJECT TO UNCERTAINTIES
The FDA and comparable agencies in foreign countries impose substantial requirements on the introduction of therapeutic
pharmaceutical products through lengthy and detailed laboratory and clinical testing procedures, sampling activities and other costly
and time-consuming procedures. Satisfaction of these requirements typically takes several years or longer and may vary substantially
based upon the type, complexity and novelty of the pharmaceutical product. Data obtained from preclinical and clinical activities are
susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. In addition, delays or rejections may be
encountered based on changes in, or additions to, regulatory policies for drug approval during the period of product development and
regulatory review. The effect of government regulation may be to delay or prevent the commencement of clinical trials or marketing of
Company products, if any are developed and submitted for approval, for a considerable period of time, to impose costly procedures
upon the Company's activities and to provide a competitive advantage to larger companies or companies more experienced in
regulatory affairs that compete with the Company. Moreover, even if approval is granted, such approval may entail limitations on the
indicated uses for which a compound may be marketed.
THE SCOPE OF PATENT PROTECTION IS UNCERTAIN
The Company's success will depend, in part, on its ability to obtain United States and foreign patent protection for its products and
their uses, to preserve its trade secrets and to operate without infringing the proprietary rights of third parties. There can be no
assurance that patents will issue from any of the Company's pending or future patent applications. Legal standards relating to the
validity of patents and the proper scope of their claims in the biopharmaceutical field are still evolving, and there is no consistent law
or policy regarding the valid breadth of claims in biopharmaceutical patents or the effect of prior art on them. If the Company is unable
to obtain adequate patent protection, its ability to prevent competitors from making, using and selling competing products will be
limited. Furthermore, the Company's activities may infringe the claims of the patents held by third parties. Defense and prosecution of
patent claims, as well as participation in interference proceedings, can be expensive and time-consuming, even in those instances in
which the outcome is favorable to the Company. If the outcome of any such litigation or proceeding were adverse, the Company could
be subject to significant liabilities to third parties, could be required to obtain licenses from third parties or could be required to cease
sales of the affected products, any of which could have a material adverse effect on the Company.
2002. EDGAR Online, Inc.
Page 26
VERTEX WILL CONTINUE TO HAVE SIGNIFICANT FUTURE CAPITAL NEEDS; AVAILABILITY OF ADDITIONAL
FUNDING IS UNCERTAIN
The Company expects to incur substantial research and development and related supporting expenses as it designs and develops
existing and future compounds and undertakes clinical trials of potential drugs resulting from such compounds. The Company also
expects to incur substantial administrative and commercialization expenditures in the future and substantial expenses related to the
filing, prosecution, defense and enforcement of patent and other intellectual property claims. The Company anticipates that it will
finance these substantial cash needs with Agenerase royalty revenue, its existing cash reserves, together with interest earned thereon,
future payments under its collaborative agreements, facilities and equipment financing and additional collaborative agreements. To the
extent that funds from these sources are not sufficient to fund the Company's activities, it will be necessary to raise additional funds
through public offerings or private placements of debt or equity securities or other methods of financing. Any equity financings could
result in dilution to the Company's then existing stockholders. Any debt financing, if available at all, may be on terms which, among
other things, restrict the Company's ability to pay dividends (although the Company does not intend to pay dividends for the
foreseeable future). If adequate funds are not available, the Company may be required to curtail significantly or discontinue one or
more of its research, drug discovery or development programs, including clinical trials, or attempt to obtain funds through
arrangements with collaborative partners or others that may require the Company to relinquish rights to certain of its technologies or
products in research or development. No assurance can be given that additional financing will be available on acceptable terms, if at
all.
THIRD PARTY PHARMACEUTICAL REIMBURSEMENT POLICIES MAY AFFECT PRODUCT PRICING
The success of the Company's products in the United States and other significant markets will depend, in part, upon the extent to which
a consumer will be able to obtain reimbursement for the cost of such products from government health administration authorities,
third-party payors and other organizations. Significant uncertainty exists as to the reimbursement status of newly approved therapeutic
products. Even if a product is approved for marketing, there can be no assurance that adequate reimbursement will be available. The
Company is unable to predict what additional legislation or regulation relating to the health care industry or third-party coverage and
reimbursement may be enacted in the future or what effect the legislation or regulation would have on the Company's business. Failure
to obtain reimbursement could have a material adverse effect on the Company.
THE COMPANY LACKS SALES AND MARKETING EXPERIENCE
The Company currently has little experience in marketing and no experience selling pharmaceutical products. The Company must
either develop a marketing and sales force or enter into arrangements with third parties to market and sell any of its product candidates
which are approved by the FDA. In the territories where the Company retains marketing and co-promotion rights, there can be no
assurance that the Company will successfully develop its own sales and marketing experience or that it will be able to enter into
marketing and sales agreements with others on acceptable terms, if at all. If the Company develops its own marketing and sales
capability, it will compete with other companies that currently have experienced and well-funded marketing and sales operations. To
the extent that the Company has or enters into co-promotion or other sales and marketing arrangements with other companies, any
revenues to be received by the Company will be dependent on the efforts of others, and there can be no assurance that such efforts will
be successful.
THERE IS A RISK OF PRODUCT LIABILITY
Page 27
The Company's business will expose it to potential product liability risks that are inherent in the testing, manufacturing and marketing
of pharmaceutical products. The use of the Company's products in clinical trials also exposes the Company to the possibility of
product liability claims and possible adverse publicity. These risks will increase to the extent the Company's products receive
regulatory approval and are commercialized. There can be no assurance that the Company will be able to maintain its existing levels of
product liability insurance or be able to obtain or maintain such additional insurance as it may need in the future on acceptable terms.
Nor can there be any assurance that the Company's existing insurance or any such additional insurance will provide adequate coverage
against potential liabilities.
SHARE PRICE MAY FLUCTUATE BASED ON FACTORS BEYOND VERTEX'S CONTROL
Market prices for securities of companies such as Vertex are highly volatile, and the market for the securities of such companies,
including the Common Stock of the Company, has from time to time experienced significant price and volume fluctuations that are
unrelated to the operating performance of these particular companies. Factors such as announcements of results of clinical trials,
2002. EDGAR Online, Inc.
technological innovations or new products by Vertex or its competitors, government regulatory action, public concern as to the safety
of products developed by the Company or others, patent or proprietary rights developments and market conditions for pharmaceutical
and biotechnology stocks, in general, could have a significant adverse effect on the future market price of the Company's common
stock.
VERTEX HAS ANTI-TAKEOVER PROVISIONS THAT MAY DISCOURAGE CHANGE IN CONTROL
The Company's charter and By-law provisions and the Company's Stockholder Rights Plan may discourage certain types of
transactions involving an actual or potential change in control of the Company which might be beneficial to the Company or its
stockholders. The Company's charter provides for staggered terms for the members of the Board of Directors. The Company's By-laws
grant the Directors a right to adjourn annual meetings of stockholders, and certain provisions of the By-laws may be amended only
with an 80% stockholder vote. Pursuant to the Company's Stockholder Rights Plan, each share of Common Stock has an associated
preferred share purchase right (a "Right"). The Rights will not trade separately from the Common Stock until, and are exercisable only
upon, the acquisition or the potential acquisition through tender offer by a person or group of 15% or more of the outstanding
Common Stock. Shares of any class or series of preferred stock may be issued by the Company in the future without stockholder
approval and upon such terms as the Board of Directors may determine. The rights of the holders of Common Stock will be subject to,
and may be adversely affected by, the rights of the holders of any class or series of preferred stock that may be issued in the future.
ITEM 2. PROPERTIES
The Company leases an aggregate of approximately 134,000 square feet of laboratory and office space in seven facilities at in
Cambridge, Massachusetts. The leases have expiration dates ranging from December 2000 to 2009. The Company has the option to
extend the lease for the Company's headquarters facility at 130 Waverly Street, Cambridge, for up to two additional terms, ending in
2015.
During 1998, Vertex opened a research and development facility in the U.K. of approximately 7,000 square feet of laboratory and
office space located in Swindon under a lease expiring in August 2000. The Company has the right to terminate this lease at any time
after June 1999. The Company has also leased approximately 24,000 square feet of laboratory and office
Page 28
space in Milton Park under a lease expiring in 2013, with a right of early termination in 2008. Upon completion of construction of the
Milton Park facility, expected by the third quarter of 1999, the Company will consolidate its U.K. business and research and
development activities from Ascot and Swindon to Milton Park.
The Company believes its facilities are adequate for its current needs. The Company believes it can obtain additional space on
commercially reasonable terms.
ITEM 3. LEGAL PROCEEDINGS
Chiron Corporation ("Chiron") filed suit on July 30, 1998 against the Company and Eli Lilly and Company in the United States
District Court for the Northern District of California, alleging infringement by the defendants of various U.S. patents issued to Chiron.
The infringement action relates to research activities by the defendants in the hepatitis C viral protease field and the alleged use of
inventions claimed by Chiron in connection with that research and development. Chiron has requested damages in an unspecified
amount, as well as an order permanently enjoining the defendants from unlicensed use of Chiron inventions. While the final outcome
of these actions cannot be determined, the Company believes that the plaintiff's claims are without merit and intends to defend the
actions vigorously.
ITEM 4. SUBMISSION OF MATTERS TO SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year ended December 31, 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock trades on the Nasdaq National Market ("Nasdaq") under the symbol "VRTX." The following table sets
forth the high, low and last sale prices of each quarter for the Common Stock as reported by Nasdaq for the periods indicated.
2002. EDGAR Online, Inc.
1997 High Low Close
------------------------------------------------------------------------
First Quarter $52 3/4 $37 3/4 $40 1/2
Second Quarter 49 3/4 27 5/8 38 1/4
Third Quarter 41 5/8 29 3/8 37 3/4
Fourth Quarter 38 3/8 25 1/4 33
1998 High Low Close
------------------------------------------------------------------------
First Quarter $40 3/8 $31 1/4 $31
15/16
Second Quarter 33 7/8 21 1/2 22 1/2
Third Quarter 27 7/8 14 1/2 23
Fourth Quarter 30 20 29 3/4
The last sale price of the Common Stock on March 12, 1999, as reported by Nasdaq, was $26.75 per share. As of March 12, 1999,
there were 254 holders of record of the Common Stock (approximately 7,200 beneficial holders).
Page 29
The Company has never declared or paid any cash dividends on its Common Stock and currently expects that future earnings, if any,
will be retained for use in its business.
RECENT SALES OF UNREGISTERED SECURITIES
None
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for each of the five years in the period ended December 31, 1998 are derived from
the Company's Consolidated Financial Statements. This data should be read in conjunction with the Company's audited financial
statements and related notes, and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1998 1997 1996 1995 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Consolidated Statement of Operations Data:
Revenues:
Collaborative and other research and
development revenues. . . . . . . . . . . $ 29,055 $ 29,926 $ 13,341 $ 22,081 $ 19,571
Investment income. . . . . . . . . . . . . . 15,343 13,873 5,257 5,453 3,574
-------- -------- -------- -------- --------
Total revenues. . . . . . . . . . . . . . 44,398 43,799 18,598 27,534 23,145
-------- -------- -------- -------- --------
Costs and expenses:
Research and development . . . . . . . . . 58,668 51,624 35,212 41,512 34,761
General and administrative . . . . . . . . 18,135 11,430 7,929 7,069 5,540
License Payment. . . . . . . . . . . . . . . -- -- 15,000 -- --
Interest . . . . . . . . . . . . . . . . . 681 576 462 481 439
-------- -------- -------- -------- --------
Total costs and expenses. . . . . . . . . 77,484 63,630 58,603 49,062 40,740
-------- -------- -------- -------- --------
Net loss . . . . . . . . . . . . . . . . . . $(33,086) $(19,831) $(40,005) $(21,528) $(17,595)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Basic and diluted net loss per common
share. . . . . . . . . . . . . . . . . . . . . $ (1.31) $ (0.82) $ (2.13) $ (1.25) $ (1.11)
Basic and diluted weighted average
number of common shares outstanding. . . . . . 25,299 24,264 18,798 17,231 15,818
2002. EDGAR Online, Inc.
DECEMBER 31,
----------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
Consolidated Balance Sheet Data:
Cash, cash equivalents and investments . . . $245,652 $279,671 $130,359 $86,978 $106,470
Total assets . . . . . . . . . . . . . . . . 266,346 295,604 143,499 98,981 116,175
Obligations under capital leases and debt,
excluding current portion. . . . . . . . . . 7,032 5,905 5,617 4,912 4,729
Accumulated deficit. . . . . . . . . . . . . (149,861) (116,775) (96,944) (56,939) (35,411)
Total stockholders' equity . . . . . . . . . 246,212 276,001 130,826 85,272 105,478
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Page 30
THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS WHICH ARE SUBJECT TO CERTAIN RISKS AND
UNCERTAINTIES THAT CAN CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE DESCRIBED.
FACTORS THAT MAY CAUSE SUCH DIFFERENCES INCLUDE BUT ARE NOT LIMITED TO THOSE DESCRIBED IN THE
SECTION ENTITLED "RISK FACTORS." READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE
FORWARD-LOOKING STATEMENTS WHICH SPEAK ONLY AS OF THE DATE HEREOF. THE COMPANY UNDERTAKES
NO OBLIGATION TO PUBLICLY UPDATE OR REVISE THESE FORWARD-LOOKING STATEMENTS TO REFLECT
EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF.
The Company is engaged in the discovery, development and commercialization of novel, small molecule pharmaceuticals for the
treatment of major diseases for which there are currently limited or no effective treatments. The Company is a leader in the use of
structure-based drug design, an approach to drug discovery that integrates advanced biology, biophysics, chemistry and information
technologies. The Company is conducting research and development programs to develop pharmaceuticals for the treatment of viral
diseases, multidrug resistance in cancer, autoimmune and inflammatory diseases and neurodegenerative disorders.
To date, the Company has not received any material revenues from the sale of pharmaceutical products. A New Drug Application
("NDA") was submitted in October 1998 for the Company's lead product, Agenerase-TM- (amprenavir) for the treatment of HIV
infection. Glaxo Wellcome plc ("Glaxo Wellcome"), Vertex's partner, has also submitted applications for market approval to Canadian
and European regulatory agencies. Assuming the NDA is approved, the Company will receive a royalty on sales of Agenerase from
Glaxo Wellcome. The Company has incurred operating losses since its inception and expects to incur a loss in 1999. The Company
believes that operating losses may continue beyond 1999, even if significant royalties are realized on Agenerase-TM- sales, because
the Company is planning to make significant investments in research and development for its other potential products. The Company
expects that losses will fluctuate from quarter to quarter and that such fluctuations may be substantial.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997.
The Company's total revenues were $44,398,000 in 1998 as compared to $43,799,000 in 1997. In 1998, revenues consisted of
$27,939,000 under the Company's collaborative agreements, $15,343,000 in investment income and $1,116,000 in government grants
and other income. Collaborative revenue in 1998 included a $6,000,000 payment from Schering AG, Germany ("Schering AG")
associated with the signing of a collaborative agreement for the Company's neurophilin ligand program and $4,000,000 of research
funding under that agreement, a $2,000,000 milestone payment from Kissei Pharmaceutical Co., Ltd. ("Kissei") for the acceptance of
VX-745 as the lead development candidate for the Company's p38 MAP kinase program, and a $3,000,000 milestone payment from
Glaxo Wellcome for the NDA filing for Agenerase. Other collaborative revenue in 1998 included $3,738,000 from Kissei, $3,457,000
from Glaxo Wellcome, $5,193,000 from Eli Lilly and Company ("Lilly") and $551,000 from others. Research funding requirements
under the Glaxo Wellcome agreement ended on December 31, 1998, although Glaxo Wellcome continues to have certain development
funding obligations. In 1997, revenues consisted of $27,703,000 under the Company's collaborative agreements, $13,873,000 in
investment income, and $2,223,000 in government grants and other income. Revenue from collaborative agreements in 1997 consisted
of $3,275,000 from Glaxo Wellcome, $8,660,000 from Hoechst Marion Roussel ("HMR"), $9,810,000 from Kissei, $5,694,000 from
Lilly and $264,000 from others.
Page 31
2002. EDGAR Online, Inc.
Total costs and expenses increased to $77,484,000 in 1998 from $63,630,000 in 1997. Research and development expenses increased
to $58,668,000 in 1998 from $51,624,000 in 1997. The Company increased research staffing, including opening a research site in the
U.K., to fully staff a higher number of discovery programs. In addition, the Company expanded its development infrastructure. General
and administrative expenses increased in 1998 to $18,135,000 from $11,430,000 in 1997 primarily as a result of headcount growth to
handle the administrative requirements of the Company's growing research and development operation, legal expenses associated with
expansion of the Company's intellectual property position and marketing expenses associated with the anticipated launch of Agenerase
and the Company's co-promotion preparations. Interest expense increased in 1998 to $681,000 from $576,000 in 1997 due to higher
levels of equipment financing during 1998.
The Company recorded a net loss of $33,086,000 or $1.31 per share in 1998 compared to a net loss of $19,831,000 or $0.82 per share
in 1997.
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996.
The Company's total revenues increased to $43,799,000 in 1997 from $18,598,000 in 1996. In 1997, revenues consisted of
$27,703,000 under the Company's collaborative agreements, $13,873,000 in investment income, and $2,223,000 in government grants
and other income. The principal reasons for the increase in revenue in 1997 were the commencement of new collaborations with Lilly
on the Company's hepatitis C protease program and with Kissei on the Company's p38 MAP kinase program, in addition to greater
investment income from higher levels of cash and investments. The 1997 collaborations with Lilly and Kissei included payments of
$3,000,000 and $4,000,000, respectively, and research funding of $2,694,000 and $1,500,000, respectively. Other collaborative
revenue in 1997 included $4,310,000 from Kissei, $8,660,000 from HMR, which included a $3,000,000 milestone payment,
$3,275,000 from Glaxo Wellcome, and $264,000 from others. Research funding requirements under the HMR agreement ended on
December 31, 1997, although HMR continues to have certain development funding obligations. In 1996, revenues consisted of
$12,013,000 under the Company's collaborative agreements, $5,257,000 in investment income and $1,328,000 in government grants
and other income. Revenue from collaborative agreements consisted of $6,289,000 from Glaxo Wellcome, $4,196,000 from HMR,
$692,000 from Kissei and $836,000 from others.
The Company's total costs and expenses increased to $63,630,000 in 1997 from $58,603,000 in 1996. In 1996, the Company paid
$15,000,000 to obtain a non-exclusive, world-wide license under certain G.D. Searle & Co. ("Searle") patent applications claiming
HIV protease inhibitors. Research and development expenses increased to $51,624,000 in 1997 from $35,212,000 in 1996 principally
due to the commencement of preclinical development activities for drug candidates in the ICE and IMPDH programs as well as the
continued expansion of the Company's core scientific staff. In addition, general and administrative expenses increased to $11,430,000
in 1997 from $7,929,000 in 1996. The increase in general and administrative expense principally reflects the impact of personnel
additions, an increase in legal expenses related to patent activity and an increase in marketing activities. Interest expense increased to
$576,000 in 1997 from $462,000 in 1996 due to higher levels of equipment lease financing during the year.
The Company recorded a net loss of $19,831,000 or $0.82 per share in 1997 compared to a net loss of $40,005,000 or $2.13 per share
in 1996. The lower loss per share reflects not only a lower aggregate loss but also an increase in average common shares outstanding
from 18,798,000 in 1996 to 24,264,000 in 1997 due to two Common Stock offerings in August 1996 and March 1997.
LIQUIDITY AND CAPITAL RESOURCES
Page 32
The Company's operations have been funded principally through strategic collaborative agreements, public offerings and private
placements of the Company's equity securities, equipment financing, government grants and investment income. Assuming Agenerase
is approved by the FDA, the Company will begin receiving product royalty revenue in 1999. The Company has been expanding its
operations in order to increase and advance the number of potential products in its research and development pipeline. Consequently,
the Company expects to incur increased research and development and related supporting expenses and is likely to continue
experiencing losses on a quarterly and annual basis. The Company also expects to incur substantial administrative and
commercialization expenditures in the future and additional expenses related to the filing, prosecution, defense and enforcement of
patent and other intellectual property rights.
The Company expects to finance these substantial cash needs with expected royalty revenue from Agenerase, its existing cash and
investments of approximately $246,000,000 at December 31, 1998, together with investment income earned thereon, future payments
under its existing collaborative agreements, and facilities and equipment financing. To the extent that funds from these sources are not
sufficient to fund the Company's activities, it will be necessary to raise additional funds through public offerings or private placements
of securities, or new research collaborations for new or existing projects or other methods of financing. There can be no assurance that
such financing will be available on acceptable terms, if at all.
2002. EDGAR Online, Inc.
The Company's aggregate cash and investments decreased by $34,019,000 during 1998 to $245,652,000 at December 31, 1998. Cash
used by operations, principally to fund research and development activities, was $31,055,000 during the same period. The Company
also expended $7,901,000 during this period to acquire property and equipment, principally for research equipment and facilities.
During 1998, the Company entered into equipment financing arrangements in the aggregate amount of $4,085,000 and repaid
$2,716,000 of its lease obligations.
In addition to the expansion of the research and development activities in the U.S., the Company expanded its U.K. operations to
include a research site during 1998. The Company expects that, in general, research and development as well as general and
administrative expenses will continue to increase as the Company starts new research projects, advances current clinical and
preclinical candidates, and expands its marketing and business development activities.
During 1998, the Company and Schering AG entered into a collaborative agreement to research, develop and commercialize novel,
orally active neurophilin ligand compounds to promote nerve regeneration for the treatment of a number of neurological diseases.
Under the terms of the agreement, Schering AG will pay the Company up to $88,000,000 composed of a $6,000,000 license payment
paid in September 1998, $22,000,000 of product research funding over five years and potentially $60,000,000 of development and
commercialization milestone payments.
At December 31, 1998, the Company leased approximately 134,000 square feet of office and research space in the U.S. and 31,000
square feet in the U.K. These leases have terms ranging from 3 to 10 years. In addition, the Company's liability for capitalized
equipment lease obligations and other equipment financing totaled approximately $10 million at December 31, 1998.
YEAR 2000
The Company has completed its evaluation of its business critical information technology systems ("IT Systems") and has determined
the actions necessary in order to ensure that such IT Systems will be able to function without disruption with respect to the application
of dating systems in the Year 2000. The Company has begun to upgrade, replace and test certain of its IT
Page 33
Systems based on the results of that evaluation. Evaluation of embedded systems in the Company's non-computer equipment ("Non-IT
Systems") for Year 2000 compliance is under way but has not been completed.
In addition to risks associated with the Company's own computer systems and equipment, the Company has relationships with, and is
to varying degrees dependent upon, a number of third parties that provide goods, services and information to the Company. These
include contract manufacturers, suppliers, licensees and licensors, vendors, research partners and financial institutions, whose systems
and equipment are outside the control of the Company. If certain of these third parties experience failures in their computer systems or
equipment due to Year 2000 non-compliance, it could affect the Company's ability to engage in normal business activities. The
Company intends to contact its significant vendors and partners to ascertain their Year 2000 compliance and to determine the extent to
which the Company is vulnerable to their non-compliance, if any.
The Company expects to complete its internal evaluation and remediation efforts and its assessment of third party compliance and
contingency plans by mid-1999. However, there can be no assurance that these evaluations and any required remedial actions will be
able to be completed on a timely basis. The Company believes that its IT Systems and Non-IT Systems are either already Year 2000
compliant or will be so prior to the Year 2000. The Company estimates the cost of making its IT systems and Non-IT systems Year
2000 complaint will be approximately $200,000. There can be no assurance, however, that the Company will not experience
unexpected costs in achieving full Year 2000 compliance, which could result in a material adverse effect on the Company's future
results of operations. The Company believes that it will be able to locate alternate sources for any critical goods or services provided
by non-compliant third parties, if any. However, the Company may not be able to timely develop or implement contingency plans to
address those business critical systems and third party relationships which may not be Year 2000 compliant.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company owns financial instruments that are sensitive to market risks as part of its investment portfolio. The investment portfolio
is used to preserve the Company's capital until it is required to fund operations, including the Company's research and development
activities. None of these market-risk sensitive instruments are held for trading purposes. The Company does not own derivative
financial instruments in its investment portfolio.
INTEREST RATE RISK
2002. EDGAR Online, Inc.
The Company invests its cash in a variety of financial instruments, principally securities issued by the U.S. Government and its
agencies, investment grade corporate and money market instruments. These investments are denominated in U.S. dollars. These bonds
are subject to interest rate risk, and could decline in value if interest rates fluctuate. The Company's investment portfolio includes only
marketable securities with active secondary or resale markets to help ensure portfolio liquidity and the Company has implemented
guidelines limiting the duration of investments. Due to the conservative nature of these instruments, the Company does not believe that
it has a material exposure to interest rate risk.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page 34
The information required by Item 8 is contained on pages F-1 through F-18 of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
PART III
The information regarding directors required by this Item is included in the definitive Proxy Statement for the Company's 1999 Annual
Meeting of Stockholders, to be filed with the Commission on or about April 12, 1999 (the "1999 Proxy Statement"), under "Election
of Directors" and is incorporated herein by reference. The information regarding executive officers required by this Item is included in
Part I of this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is included in the 1999 Proxy Statement under "Executive Compensation" and is incorporated
herein by reference (excluding, however, the "Report on Executive Compensation" and the Performance Graph contained in the 1999
Proxy Statement, which shall not be deemed incorporated herein).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is included in the 1999 Proxy Statement under "Security Ownership of Certain Beneficial
Owners and Management" and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
Page 35
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS. The Financial Statements required to be filed by Item 8 of this Annual Report on Form 10-K,
and filed herewith, are as follows:
2002. EDGAR Online, Inc.
Page Number in
This Form 10-k
--------------
Report of Independent Accountants . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets as of December 31, 1998 and 1997. . . . F-3
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996 . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1998, 1997 and 1996 . . . . . . . . . . . F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements. . . . . . . . . . . . . F-7 to
F-18
(a)(2) FINANCIAL STATEMENT SCHEDULES.
Financial Statement Schedules have been omitted because they are either not applicable or the required information is included in the
consolidated financial statements or notes thereto.
(a)(3) EXHIBITS.
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1 Restated Articles of Organization filed with the Commonwealth of
Massachusetts on July 31, 1991 (filed as Exhibit 3.1 to the Company's
1997 Annual Report on Form 10-K (File No. 0-19319) and incorporated
herein by reference).
3.2 Articles of Amendment filed with the Commonwealth of Massachusetts on
June 4, 1997 (filed as Exhibit 3.2 to the Company's 1997 Annual
Report
on Form 10-K (File No. 0-19319) and incorporated herein by
reference).
3.3 Certificate of Vote of Directors Establishing a Series of a Class of
Stock, as filed with the Secretary of the Commonwealth of
Massachusetts on July 31, 1991 (filed as Exhibit 3.3 to the Company's
1997 Annual Report on Form 10-K (File No. 0-19319) and incorporated
herein by reference).
3.4 By-laws of the Company (filed as Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (Registration No. 33-43874) and
incorporated herein by reference).
Page 36
2002. EDGAR Online, Inc.
4.1 Specimen stock certificate (filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-1 (Registration No. 33-40966) or
amendments thereto and incorporated herein by reference).
4.2 Stockholder Rights Plan (filed as Exhibit 4.2 to the Company's
Registration Statement on Form S-1 (Registration No. 33-40966) or
amendments thereto and incorporated herein by reference).
4.3 First Amendment to Rights Agreement dated as of February 21, 1997
(filed as Exhibit 4.3 to the Company's 1996 Annual Report on Form
10-K
(File No. 0-19319) and incorporated herein by reference).
10.1 1991 Stock Option Plan, as amended and restated as of May 13, 1993
(filed as Exhibit 28.1 to the Company's Registration Statement on
Form
S-8 (No. 33-65742) and incorporated herein by reference).*
10.2 1994 Stock and Option Plan (filed as Exhibit 10.2 to the Company's
1994 Annual Report on Form 10-K (File No. 0-19319) and incorporated
herein by reference).*
10.3 1996 Stock and Option Plan (filed as Exhibit 10.3 to the Company's
1996 Annual Report on Form 10-K (File No. 0-19319) and incorporated
herein by reference).*
10.4 Amendment to 1996 Stock and Option Plan adopted December 12, 1997
(filed as Exhibit 10.4 to the Company's 1997 Annual Report on Form
10-K (File No. 0-19319) and incorporated herein by reference).*
10.5 Non-Competition and Stock Repurchase Agreement between the Company
and
Joshua Boger, dated April 20, 1989 (filed as Exhibit 10.2 to the
Company's Registration Statement on Form S-1 (Registration No.
33-40966) or amendments thereto and incorporated herein by
reference).*
10.6 Form of Employee Stock Purchase Agreement (filed as Exhibit 10.3 to
the Company's Registration Statement on Form S-1 (Registration No.
33-40966) or amendments thereto and incorporated herein by
reference).*
10.7 Form of Employee Non-Disclosure and Inventions Agreement (filed as
Exhibit 10.4 to the Company's Registration Statement on Form S-1
(Registration No. 33-40966) or amendments thereto and incorporated
herein by reference).
10.8 Form of Executive Employment Agreement executed by Richard H.
Aldrich,
Joshua S. Boger, and Vicki L. Sato (filed as Exhibit 10.6 to the
Company's 1994 Annual Report on Form 10-K (File No. 0-19319) and
incorporated herein by reference).*
10.9 Form of Amendment to Employment Agreement executed by Richard H.
Aldrich, Joshua S. Boger and Vicki L. Sato (filed as Exhibit 10.1 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
June
30, 1995 (File No. 0-19319) and incorporated herein by reference).
10.10 Series C Convertible Preferred Stock Purchase Agreement between the
Company and the party named therein, dated September 21, 1990 (filed
as Exhibit 10.8 to the Company's Registration Statement on Form S-1
(Registration No. 33-40966) or amendments thereto and incorporated
herein by reference).
2002. EDGAR Online, Inc.
Page 37
10.11 Stock Purchase Agreement dated November 10, 1994 between the Company
and Biotech Target S.A. (filed as Exhibit 10.12 to the Company's 1994
Annual Report on Form 10-K (File No. 0-19319) and incorporated herein
by reference).
10.12 Lease dated October 1, 1992 between C. Vincent Vappi and the Company
relating to the premises at 40 Allston Street, 618 Putnam Street, 228
Sidney Street, and 240 Sidney Street (filed as Exhibit 10.14 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1992 (File No. 0-19319) and incorporated herein by reference).
10.13 First Amendment as of March 1, 1995 to the lease between C. Vincent
Vappi and the Company (filed as Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995
(File No. 0-19319) and incorporated herein by reference).
10.14 Second Amendment as of February 12, 1997 to Lease between C. Vincent
Vappi and the Company (filed as Exhibit 10.14 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996 (File No.
0-19319) and incorporated herein by reference ).
10.15 Lease dated March 1, 1993, between Fort Washington Realty Trust and
the Company, relating to the premises at 625 Putnam Avenue,
Cambridge,
MA (filed as Exhibit 10.10 to the Company's Annual Report on Form
10-K
for the year ended December 31, 1993 (File No. 0-19319) and
incorporated herein by reference).
10.16 First Amendment, dated 1 December 1996, to Lease between Fort
Washington Realty Trust and the Company dated 1 March 1993 (filed as
Exhibit 10.16 to the Company's Annual Report on Form 10-K for the
year
ended December 31, 1996 (File No. 0-19319) and incorporated herein by
reference).
10.17 Second Amendment, dated 1 February 1998, to Lease between Fort
Washington Realty Trust and the Company dated 1 March 1993 (filed as
Exhibit 10.17 to the Company's 1997 Annual Report on Form 10-K (File
No. 0-19319) and incorporated herein by reference).
10.18 Lease dated March 3, 1995, between Fort Washington Realty Trust and
the Company, relating to the premises at 130 Waverly Street,
Cambridge, MA (filed as Exhibit 10.15 to the Company's 1994 Annual
Report on Form 10-K (File No. 0-19319) and incorporated herein by
reference).
10.19 First Amendment to Lease dated March 3, 1995 between Fort Washington
Realty Trust and the Company (filed as Exhibit 10.15 to the Company's
1995 Annual Report on Form 10-K (File No. 0-19319) and incorporated
herein by reference).
10.20 Second Amendment to Lease and Option Agreement dated June 12, 1997
between Fort Washington Realty Trust and the Company (filed
herewith).
10.21 Agreement for Lease of Premises at 88 Milton Park, Abingdon,
Oxfordshire between Milton Park Limited and Vertex Pharmaceuticals
(Europe) Limited and Vertex Pharmaceuticals Incorporated (filed
herewith)
2002. EDGAR Online, Inc.
Page 38
10.22 Research and Development Agreement dated April 13, 1993 between the
Company and Kissei Pharmaceutical Co., Ltd. (with certain
confidential
information deleted) (filed as Exhibit 10.1 to the Company's
Quarterly
Report on Form 10-Q for the quarter ended March 31, 1993 (File No.
0-19319) and incorporated herein by reference).
10.23 Research, Development, and License Agreement dated September 8, 1993
between the Company and Roussel Uclaf (with certain confidential
information deleted) (filed as Exhibit 10.1 to the Company's
Quarterly
Report on Form 10-Q for the quarter ended September 30, 1993 (File
No.
0-19319) and incorporated herein by reference).
10.24 Research Agreement and License Agreement, both dated December 16,
1993, between the Company and Burroughs Wellcome Co. (with certain
confidential information deleted) (filed as Exhibit 10.16 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1993 (File No. 0-19319) and incorporated herein by reference).
10.25 License Agreement and Supply Agreement, both dated May 9, 1996,
between the Company and BioChem Pharma (International) Inc. (with
certain confidential information deleted) (filed as Exhibit 10.1 to
the Company's Quarterly Report on 10-Q for the quarter ended March
31,
1996 (File No. 0-19319) and incorporated herein by reference).
10.26 Research and Development Agreement between the Company and Eli Lilly
and Company effective June 11, 1997 (filed with certain confidential
information deleted as Exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1997, and incorporated
herein by reference).
10.27 Research and Development Agreement between the Company and Kissei
Pharmaceutical Co. Ltd. effective September 10, 1997 (filed, with
certain confidential information deleted, as Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997, and incorporated herein by reference).
10.28 Research Agreement between the Company and Schering AG dated as of
August 24, 1998 (filed, with certain confidential information
deleted,
as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for
the
quarter ended September 30, 1998, and incorporated herein by
reference).
21 Subsidiaries of the Company (filed as Exhibit 21 to the Company's
1997 Annual Report on Form 10-K (File No. 0-19319) and incorporated
herein by reference).
23 Consent of Independent Accountants (filed herewith).
27 Financial Data Schedule (submitted as an exhibit only in the
electronic format of this Annual Report on Form 10-K submitted to the
Securities and Exchange Commission).
------------------
2002. EDGAR Online, Inc.
* Compensatory plan or agreement applicable to management and employees.
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the Company during the quarter ended December 31, 1998.
Page 39
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
VERTEX PHARMACEUTICALS INCORPORATED
March 29, 1999 By: /s/ Joshua S. Boger
-----------------------------------------
Joshua S. Boger
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
2002. EDGAR Online, Inc.
Name Title Date
---- ----- ----
/s/ Joshua S. Boger Director, Chairman, President March 29, 1999
------------------------------- and Chief Executive Officer
Joshua S. Boger (Principal Executive Officer)
/s/ Thomas G. Auchincloss, Jr. Vice President of Finance March 29, 1999
------------------------------- and Treasurer
Thomas G. Auchincloss, Jr. (Principal Financial Officer)
/s/ Hans D. Van Houte Controller March 29, 1999
-------------------------------
Hans D. van Houte
/s/ Barry M. Bloom Director March 24, 1999
-------------------------------
Barry M. Bloom
/s/ Donald R. Conklin Director March 29, 1999
-------------------------------
Donald R. Conklin
/s/ Roger W. Brimblecombe Director March 26, 1999
-------------------------------
Roger W. Brimblecombe
/s/ William W. Helman IV Director March 29, 1999
-------------------------------
William W. Helman IV
/s/ Bruce I. Sachs Director March 29, 1999
-------------------------------
Bruce I. Sachs
/s/ Charles A. Sanders Director March 29, 1999
-------------------------------
Charles A. Sanders
/s/ Elaine S. Ullian Director March 24, 1999
-------------------------------
Elaine S. Ullian
Page 40
EXHIBIT INDEX
2002. EDGAR Online, Inc.
10.20 Second Amendment to Lease and Option Agreement dated June 12, 1997
between Fort Washington Realty Trust and the Company (filed
herewith).
10.21 Agreement for Lease of Premises at 88 Milton Park, Abingdon,
Oxfordshire between Milton Park Limited and Vertex Pharmaceuticals
(Europe) Limited and Vertex Pharmaceuticals Incorporated (filed
herewith)
23 Consent of Independent Accountants (filed herewith).
27 Financial Data Schedule (submitted as an exhibit only in the
electronic format of this Annual Report on Form 10-K submitted to the
Securities and Exchange Commission).
Index to Consolidated Financial Statements
VERTEX PHARMACEUTICALS INCORPORATED
Page Number
-----------
Report of Independent Accountants F-2
Consolidated Balance Sheets as of December 31, 1998 and 1997 F-3
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996 F-4
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1998, 1997 and 1996 F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 F-6
Notes to Consolidated Financial Statements F-7 to F-18
To the Board of Directors and Shareholders of Vertex Pharmaceuticals Incorporated:
Page F-1
Report of Independent Accountants
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of stockholders'
equity and of cash flows present fairly, in all material respects, the financial position of Vertex Pharmaceuticals Incorporated and its
subsidiaries at December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the
period ended December 31, 1998 in conformity with generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our
audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed above.
2002. EDGAR Online, Inc.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 25, 1999
CONSOLIDATED BALANCE SHEETS
VERTEX PHARMACEUTICALS INCORPORATED
Page F-2
December 31,
----------------------
(DOLLARS IN THOUSANDS) 1998 1997
------------------------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $24,169 $71,454
Investments 221,483 208,217
Prepaid expenses and other current assets 3,056 1,952
-------------------------------------------------------------------------------------------------------------------
Total current assets 248,708 281,623
Restricted cash 2,316 2,316
Property and equipment, net 14,476 11,095
Other assets 846 570
-------------------------------------------------------------------------------------------------------------------
Total assets $266,346 $295,604
-------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities:
Obligations under capital lease and debt $2,752 $2,510
Accounts payable 2,808 4,247
Accrued expenses 7,542 6,385
Deferred revenue -- 556
-------------------------------------------------------------------------------------------------------------------
Total current liabilities 13,102 13,698
Obligations under capital lease and debt,
excluding current portion 7,032 5,905
-------------------------------------------------------------------------------------------------------------------
Total liabilities 20,134 19,603
Commitments (Note G)
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized;
none issued
Common stock, $.01 par value; 100,000,000 shares authorized;
25,358,559 and 25,215,617 shares issued and outstanding
in 1998 and 1997, respectively 254 252
Additional paid-in capital 395,165 392,372
Accumulated other comprehensive income (loss) 654 152
Accumulated deficit (149,861) (116,775)
-------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 246,212 276,001
-------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $266,346 $295,604
-------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
VERTEX PHARMACEUTICALS INCORPORATED
Page F-3
2002. EDGAR Online, Inc.
Year Ended December 31,
-----------------------
(In thousands, except per share data) 1998 1997 1996
-------------------------------------------------------------------------------------------------------------------
Revenues:
Collaborative and other research and development $29,055 $29,926 $ 13,341
Investment income 15,343 13,873 5,257
------ ------ -----
Total revenues 44,398 43,799 18,598
-------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Research and development 58,668 51,624 35,212
General and administrative 18,135 11,430 7,929
License payment -- -- 15,000
Interest 681 576 462
---- ---- ----
Total costs and expenses 77,484 63,630 58,603
-------------------------------------------------------------------------------------------------------------------
Net loss $(33,086) $(19,831) $(40,005)
-------------------------------------------------------------------------------------------------------------------
Basic and diluted loss per common share $(1.31) $(0.82) $(2.13)
Basic and diluted weighted average number of
common shares outstanding 25,299 24,264 18,798
------------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
VERTEX PHARMACEUTICALS INCORPORATED
Page F-4
Accumulated
Common Stock Additional Other Total
------------------- Paid-in Accumulated Comprehensive Comprehensive Stockholders'
(In thousands) Shares Amount Capital Deficit income (loss) income (loss) Equity
------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 17,299 $173 $142,038 $(56,939) $85,272
Net change in unrealized holding gains/
losses on investments $35 $ 35 35
Translation adjustments 14 14 14
Net loss (40,005) (40,005) (40,005)
--------
Comprehensive loss (39,956)
--------
Issuances of common stock:
Public offering of common stock 3,450 34 77,481 77,515
Private placement of common stock 152 2 4,998 5,000
Benefit plans 196 2 2,993 2,995
------------------------------------------------------------------------------------------------ -----------
Balance, December 31, 1996 21,097 211 227,510 (96,944) 49 130,826
Net change in unrealized holding gains/
losses on investments 115 115 115
Translation adjustments (12) (12) (12)
Net loss (19,831) (19,831) (19,831)
--------
Comprehensive loss (19,728)
--------
Issuances of common stock:
Public offering of common stock 3,450 34 148,776 148,810
Private placement of common stock 264 3 9,997 10,000
Benefit plans 405 4 6,089 6,093
------------------------------------------------------------------------------------------------ -----------
Balance, December 31, 1997 25,216 252 392,372 (116,775) 152 276,001
Net change in unrealized holding gains/
losses on investments 502 502 502
Translation adjustments -- -- --
Net loss (33,086) (33,086) (33,086)
--------
Comprehensive loss $(32,584)
--------
Issuances of common stock:
Benefit plans 143 2 2,793 2,795
------------------------------------------------------------------------------------------------ -----------
Balance, December 31, 1998 25,359 $254 $395,165 $(149,861) $ 654 $246,212
------------------------------------------------------------------------------------------------ -----------
------------------------------------------------------------------------------------------------ -----------
The accompanying notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
VERTEX PHARMACEUTICALS INCORPORATED
Page F-5
2002. EDGAR Online, Inc.
Year Ended December 31,
-----------------------
(In thousands) 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $ (33,086) $ (19,831) $(40,005)
Adjustment to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 4,520 3,588 3,160
Realized gains/losses on available for sale securities (547) -- --
Changes in assets and liabilities:
Prepaid expenses and other current assets (1,104) (161) (832)
Accounts payable (1,439) 2,856 (1,631)
Accrued expenses 1,157 3,630 (748)
Deferred revenue (556) 556 (197)
--------- --------- --------
Net cash provided (used) by operating activities (31,055) (9,362) (40,253)
-----------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of investments (507,540) (303,599) (73,035)
Sales and maturities of investments 495,323 191,005 36,150
Expenditures for property and equipment (7,901) (6,020) (3,983)
Other assets (276) (200) 518
--------- --------- --------
Net cash provided (used) by investing activities (20,394) (118,814) (40,350)
-----------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Repayment of capital lease obligations and debt (2,716) (3,104) (2,187)
Proceeds from equipment sale/leaseback -- 1,179 3,727
Proceeds from debt 4,085 1,813 --
Proceeds from public offerings of common stock -- 148,810 77,515
Proceeds from private placement of common stock -- 10,000 5,000
Proceeds from other issuances of capital stock 2,795 6,093 2,995
--------- --------- --------
Net cash provided (used) by financing activities 4,164 164,791 87,050
-----------------------------------------------------------------------------------------------------------------
Effect of exchange rates on cash -- (12) 14
-----------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (47,285) 36,603 6,461
Cash and cash equivalents at beginning of year 71,454 34,851 28,390
-----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 24,169 $ 71,454 $ 34,851
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements.
VERTEX PHARMACEUTICALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Page F-6
A. THE COMPANY
Vertex Pharmaceuticals Incorporated ("Vertex" or the "Company") uses a range of drug discovery technologies to identify, design and
develop novel, orally deliverable compounds that have the potential to treat major human diseases. As of December 31, 1998, the
Company has not received any material revenues from the sale of pharmaceutical products. The Company's revenues during 1998,
1997 and 1996 principally resulted from research support payments from corporate partners and investment income. The Company
expects to incur an operating loss in 1999 and potentially beyond 1999, as a result of expenditures for its research and development
programs.
The consolidated financial statements include the accounts of the Company and the following subsidiaries: Altus Biologics Inc.
("Altus"), Vertex Securities Corp. and Vertex Pharmaceuticals (Europe) Limited. All material intercompany transactions are
eliminated. Minority interests are carried at cost.
The Company is subject to risks common to companies in the biotechnology industry including, but not limited to, rapid technological
change and competition, dependence on key personnel, uncertainty of protection of proprietary technology, clinical trial uncertainty,
dependence on collaborative partners, share price volatility, the possible need to obtain additional funding, uncertainties relating to
pharmaceutical pricing and reimbursement, limited experience in manufacturing and sales and marketing, potential product liability
and the need for compliance with government regulations.
B. ACCOUNTING POLICIES
2002. EDGAR Online, Inc.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make
certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash equivalents, which are money market funds and debt securities, are valued at cost plus accrued interest. The Company considers
all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. Changes in
cash and cash equivalents may be affected by shifts in investment portfolio maturities as well as by actual cash receipts and
disbursements. Financial instruments which potentially subject the Company to concentration of credit risk consist principally of
money market funds and marketable securities. The Company places these investments in highly rated financial institutions, and, by
policy, limits the amounts of credit exposure to any one financial institution. These amounts at times may exceed federally insured
limits. The Company has not experienced any losses in such accounts and does not believe it is exposed to any significant credit risk
on these funds.
INVESTMENTS
Investments consist of marketable securities which are classified as available for sale. Investments are stated at fair value with
unrealized gains and losses included as a component of accumulated
other comprehensive income (loss) until realized. The fair value of these securities is based on quoted market prices. Realized gains
and losses are determined on the specific identification method and are included in investment income.
Page F-7
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation and amortization are provided using the straight-line method over the lesser
of the lease terms or the estimated useful lives of the related assets, generally four or five years for equipment and furniture and three
years for purchased software. Leasehold improvements are amortized over the life of leases. When assets are retired or otherwise
disposed of, the assets and related allowances for depreciation and amortization are eliminated from the accounts and any resulting
gain or loss is reflected in income (loss).
REVENUE RECOGNITION
Revenue under research and development arrangements is recognized as earned under the terms of the respective agreements. License
payments are recorded as revenue when contractual obligations have been met. Product research funding is recorded as revenue,
generally on a quarterly basis, as research effort is incurred. Deferred revenue arises from payments received which have not yet been
earned under research and development arrangements. The Company recognizes milestone payments when the milestones are
achieved.
RESEARCH AND DEVELOPMENT
All research and development costs are expensed as incurred.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the expected future tax consequences, using current tax rates, of temporary
differences between the financial statement carrying amounts and the income tax bases of assets and liabilities. A valuation allowance
is applied against any net deferred tax asset if, based on the weighted available evidence, it is more likely than not that some or all of
the deferred tax assets will not be realized.
BASIC AND DILUTED LOSS PER COMMON SHARE
Basic earnings per share is based upon the weighted average number of common shares outstanding during the period. Diluted
earnings per share is based upon the weighted average number of common shares outstanding during the period plus additional
2002. EDGAR Online, Inc.
weighted average common equivalent shares outstanding during the period when the effect is not anti-dilutive. Common equivalent
shares result from the assumed exercise of outstanding stock options, the proceeds of which are then assumed to have been used to
repurchase outstanding stock using the treasury stock method. Common equivalent shares have not been included in the per-share
calculations as the effect would be anti-dilutive. Potential common equivalent shares consist of 5,837,000 stock options outstanding
with a weighted average exercise price of $22.62 as of December 31, 1998.
SEGMENT INFORMATION
The Company is in one business segment, the business of discovery, development and commercialization of novel, small molecule
pharmaceuticals. The Company follows the requirements of FAS 131 "Disclosures about Segments of an Enterprise and Related
Information."
C. INVESTMENTS
Page F-8
Investments consist of the following at December 31 (in thousands):
1998 1997
-------------- ----------------
Cost Fair Value Cost Fair Value
-----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents
Cash and money market funds $20,888 $20,888 $43,072 $43,072
Corporate debt securities 3,281 3,281 28,382 28,382
------ ------ ------- -------
Total cash and cash equivalents $24,169 $24,169 $71,454 $71,454
-------- -------- --------- ---------
-------- -------- --------- ---------
Investments
US Government securities
Due within 1 year $18,383 $18,363 $4,719 $4,713
Due within 1 to 5 years 28,734 28,834 40,167 40,200
Due over 5 years 3,048 3,037 --- ---
Corporate debt securities
Due within 1 year 21,684 21,638 71,136 71,165
Due within 1 to 5 years 133,039 133,665 69,771 69,851
Due over 5 years 15,945 15,946 22,276 22,288
-------- -------- --------- ---------
Total Investments $220,833 $221,483 $208,069 $208,217
-------- -------- --------- ---------
-------- -------- --------- ---------
Gross unrealized holding gains and losses at December 31, 1998 were $911,000 and $261,000, respectively, and at December 31,
1997 were $184,000 and $36,000, respectively. Gross realized gains and losses for 1998 were $852,000 and $305,000, respectively.
The effect of gross realized gains and losses on the financial statements for the years 1997 and 1996 was immaterial. Maturities stated
are final maturities, the effective maturities for certain securities may be shorter in duration.
D. RESTRICTED CASH
In accordance with an operating lease agreement, the Company holds in deposit approximately $2,316,000 with its bank to
collateralize a conditional, stand-by letter of credit in the name of the landlord. The letter of credit is redeemable only if the Company
defaults on the lease under specific criteria. These funds are restricted from the Company's use during the lease period, although the
Company is entitled to all interest earned on the funds.
E. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31 (in thousands):
2002. EDGAR Online, Inc.
1998 1997
-------------------------------------------------------------------------------------------------------------------
Leasehold improvements $7,804 $6,983
Furniture and equipment 11,070 4,511
Software 3,276 2,823
Equipment under capital lease 20,471 20,403
-------------------------------------------------------------------------------------------------------------------
42,621 34,720
Less accumulated depreciation and amortization 28,145 23,625
-------------------------------------------------------------------------------------------------------------------
$14,476 $11,095
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
The net book value of equipment under capital lease was $3,687,000 and $5,811,000 at December 31, 1998 and 1997, respectively.
F. ACCRUED EXPENSES
Page F-9
Accrued expenses consist of the following at December 31 (in thousands):
1998 1997
-------------------------------------------------------------------------------------------------------------------
Professional fees $2,134 $1,192
Development contract costs 2,391 2,663
Payroll and benefits 1,239 1,145
Other 1,778 1,385
-------------------------------------------------------------------------------------------------------------------
$7,542 $6,385
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
G. COMMITMENTS, CAPITAL LEASES AND DEBT OBLIGATIONS
CAPITAL LEASES AND DEBT OBLIGATIONS
At December 31, 1998, long-term capital lease and debt obligations were due as follows (in thousands):
Year ended December 31, Capital leases Debt Total
-------------------------------------------------------------------------------------------------------------------
1999 $ 2,065 $ 947 $ 3,012
2000 1,478 1,027 2,505
2001 1,315 1,114 2,429
2002 89 1,351 1,440
2003 -- 873 873
-------------------------------------------------------------------------------------------------------------------
Total 4,947 5,312 10,259
Less amount representing interest payments 475 -- 475
-------------------------------------------------------------------------------------------------------------------
Present value of minimum lease and debt payments 4,472 5,312 9,784
Less current portion 1,805 947 2,752
-------------------------------------------------------------------------------------------------------------------
$ 2,667 $ 4,365 $ 7,032
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
During 1997 and 1996, the Company financed under capital lease arrangements an aggregate of $1,179,000 and $3,727,000,
respectively, of asset cost under its master lease agreements. At the end of the lease term, the Company has the right to either return the
equipment to the lessor or purchase the equipment for fair market value at that time. These agreements have a term of five years and
require that the Company maintain a certain level of cash and investments.
During 1998, the Company financed under a master debt agreement, assets with a cost of $1,574,000, $1,506,000 and $1,005,000 with
interest rates of 7.89%,
8.06% and 8.08%, respectively. During 1997, the Company financed under a master debt agreement, assets with a cost of $676,000
and $1,137,000 with interest rates of 8.59% and 8.38%, respectively. The Company has certain equipment with a net book value of
2002. EDGAR Online, Inc.
$4,945,000, designated as collateral under these agreements. These agreements have a term of five years, and require that the
Company maintain a certain level of cash and investments. The carrying value of these debt obligations approximates fair value.
Interest paid under capital leases and debt was $681,000, $576,000 and $462,000 in 1998, 1997 and 1996, respectively.
COMMITMENTS
The Company leases its facilities and certain equipment under operating leases. The Company's leases have terms through the year
2009. Noncancelable future minimum payments are as follows:
$5,507,000 in 1999, $5,612,000 in 2000, $4,744,000 in 2001, $4,408,000 in 2002, $4,408,000 in 2003 and $15,813,000 thereafter.
Rental expense was $4,358,000, $3,363,000 and $3,063,000 in 1998, 1997 and 1996, respectively.
Page F-10
The Company has certain license and maintenance contracts that contain future, committed payments for the support and upgrade of
specific software programs currently used in research. For the years 1999, 2000 and 2001 the amounts committed under these
contracts are $314,000, $343,000 and $376,000, respectively.
H. INCOME TAXES
The Company's federal statutory income tax rate for 1998, 1997 and 1996 was 34%. The Company recorded no income tax benefit for
1998, 1997 and 1996 and recorded a full valuation allowance against net operating losses due to uncertainties related to realizability of
these tax assets.
Deferred tax liabilities and assets are determined based on the difference between financial statement and tax bases using enacted tax
rates in effect for the year in which the differences are expected to reverse. The components of the deferred taxes at December 31,
were as follows (in thousands):
1998 1997
-------------------------
Net operating loss $ 57,295 $ 38,434
Tax credits carryforward 10,958 5,829
Property, plant and equipment 1,345 1,211
Other 572 468
--------- --------
Gross deferred tax asset 70,170 45,942
Valuation allowance (70,170)
(45,942)
--------- --------
Net deferred tax balance $ -- $ --
--------- --------
--------- --------
For federal income tax purposes, as of December 31, 1998, the Company has net operating loss carryforwards of approximately
$143,238,000 and $7,624,000 of tax credits, which may be used to offset future income. These net operating loss carryforwards expire
beginning in 2005, and the tax credit carryforwards begin to expire in 2004. Approximately $22,935,000 of the net operating loss
carryforwards and $245,000 of the tax credit carryforwards belong to Altus and can only be used to offset future income of Altus. A
valuation allowance has been established for the full amount of the deferred tax asset since it is more likely than not that the deferred
tax asset will not be realized.
The amount of tax credits and net operating loss carryforwards that the Company may utilize in any one year is limited in accordance
with Internal Revenue Code ss.382. This limitation arises whenever a cumulative change in ownership in excess of 50% occurs. A
change of ownership has occurred which will limit the amount of net operating loss and tax credits available prior to the change. There
may also be further changes of ownership subsequent to 1998 which may also limit the amount of net operating loss and tax credit
utilization in a subsequent year.
I. COMMON AND PREFERRED STOCK
2002. EDGAR Online, Inc.
COMMON STOCK
Page F-11
In June 1997, Eli Lilly and Company ("Lilly") purchased 263,922 shares of the Company's common stock for $10,000,000. In March
1997, the Company completed a public offering of 3,450,000 shares of its common stock at a price of $45.50 per share with net
proceeds to the Company of approximately $148,810,000. In August 1996, the Company completed a public offering of 3,450,000
shares of its Common Stock at a price of $24 per share with net proceeds to the Company of approximately $77,515,000. In June
1996, Glaxo Wellcome purchased 151,792 shares of the Company's Common Stock for approximately $5,000,000.
During 1997, the Company increased the authorized number of shares of Common Stock by 50,000,000 shares to 100,000,000 shares.
At December 31, 1998, 7,862,000 shares of the Company's Common Stock were reserved for exercise of Common Stock options
granted or to be granted under its 1991 Stock Option Plan, 1994 Stock and Option Plan, and 1996 Stock and Option Plan, 48,000
shares were reserved for exercise of certain other options granted in 1991, 88,000 shares of Common Stock were reserved for issuance
under the Company's 401(k) Plan, and 76,000 shares of Common Stock were reserved for issuance under the Company's Employee
Stock Purchase Plan.
STOCK OPTION PLANS
The Company applies APB Opinion No. 25 and related interpretations in accounting for its stock-based compensation plans. However,
pro forma disclosures as if the Company adopted the cost recognition requirements under FASB Statement No. 123 "Accounting for
Stock-Based Compensation" ("SFAS 123") in 1998, 1997 and 1996 are presented below. Compensation expense of $91,000 and
$66,000 was recognized during 1998 and 1997, respectively. No compensation expense was recognized for these plans in 1996.
The Company has the 1991 Stock Option Plan (the "1991 Plan") and 1994 Stock and Option Plan (the "1994 Plan") and 1996 Stock
and Option Plan (the "1996 Plan"). Under the 1994 Plan and the 1996 Plan, stock rights, which are either (i) incentive stock options
when Internal Revenue Code requirements are met, (ii) non-qualified stock options ("NQSOs"), or (iii) award shares of Common
Stock or the opportunity to make a direct purchase of shares of Common Stock ("Stock Awards"), may be granted to employees
(including officers and directors who are employees), consultants, advisors and non-employee directors (NQSOs and stock awards
only). Incentive stock options granted under the Plans may not be granted at a price less than the fair market value of the Common
Stock on the date of grant. Non-qualified stock options may be granted at an exercise price established by the Compensation
Committee of the Board of Directors, which may be less than, equal to or greater than the fair value of the Common Stock on the date
of grant. Vesting periods, generally four or five years, are determined by the Compensation Committee. Incentive stock options
granted under the Plans must expire not more than ten years from the date of grant. At December 31, 1998, the Company had
2,074,000 shares of common stock available for future grant under its stock option plans.
Stock option activity for the years ended December 31, 1998, 1997 and 1996 is as follows (shares in thousands):
Page F-12
1998 1997 1996
---------------------- ----------------------- ------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
Outstanding at
beginning of year 4,702 $22.03 4,033 $18.98 3,196 $14.63
Granted 1,341 $24.57 1,257 $29.78 1,056 $31.11
Exercised (78) $14.89 (375) $13.97 (139) $12.96
Canceled (128) $25.90 (213) $23.99 (80) $16.11
----- ----- ----
Outstanding at end
of year 5,837 $22.62 4,702 $22.03 4,033 $18.98
----- ----- -----
Options exercisable
at year-end 2,758 $18.76 1,944 $16.50 1,625 $13.92
----- ----- -----
Weighted average fair
value of options granted
during the year $11.68 $13.94 $15.04
------ ------ ------
------ ------ ------
2002. EDGAR Online, Inc.
The fair value of each option granted during 1998, 1997 and 1996 was estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions: (1) expected life of 5.11 years for the 1998 grants, 5.18 years
for the 1997 grants and 5.41 years for the 1996 grants
(2) expected volatility of 46.5% for the 1998 grants, 44.7% for the 1997 grants and 42% for the 1996 grants (3) risk-free interest rate
of 4.86% for the 1998 grants, 5.5% for the 1997 grants and 6.30% for the 1996 grants and (4) no dividend yield.
The following table summarizes information about stock options outstanding and exercisable at December 31, 1998 (shares in
thousands):
Options Outstanding Options Exercisable
---------------------------------------------- ------------------------
Weighted Weighted Weighted
Average Average Average
Range of Number Remaining Exercise Number Exercise
Exercise Prices Outstanding Contractual Life Price Exercisable Price
--------------- ----------- ---------------- ----- ----------- -----
$6.48 - $15.00 1,152 4.94 $11.88 1,021 $11.82
$15.13 - $19.00 1,273 6.08 $17.43 984 $17.03
$19.87 - $27.25 1,219 9.68 $24.03 63 $22.54
$27.34 - $30.50 982 8.92 $27.48 231 $27.62
$33.19 - $49.13 1,211 8.17 $32.94 459 $32.97
----- ------
$ 6.48 - $49.13 5,837 7.52 $22.62 2,758 $18.76
----- ------
----- ------
EMPLOYEE STOCK PURCHASE PLAN
Page F-13
Under the Company's Employee Stock Purchase Plan, substantially all permanent employees may, through payroll withholdings,
purchase shares of the Company's Common Stock at a price of 85% of the lesser of fair market value at the beginning or end of each
six-month withholding period. During 1998, 38,170 shares of Common Stock at a price of $22.66 per share were issued to employees
under the plan. During 1997, 26,213 shares were issued at an average price of $28.00 per share. During 1996, 32,296 shares of
Common Stock at an average price of $19.21 per share were issued to employees under the plan. Had the Company adopted SFAS
123, the weighted average fair value of each purchase right granted during 1998, 1997 and 1996 would have been $7.65, $9.16 and
$5.76, respectively. The fair value was estimated at the beginning of the withholding period using the Black-Scholes option-pricing
model with the following weighted average assumptions: (1) expected life of one half year for all years (2) expected volatility of 52%,
51% and 41% for 1998, 1997 and 1996, respectively (3) risk-free interest rate of 4.70% for 1998, 5.43% for 1997 and 5.50% for 1996
and
(4) no dividend yield.
PRO FORMA DISCLOSURES
Had compensation cost for the Company's 1998, 1997 and 1996 grants for stock-based compensation plans been determined consistent
with SFAS 123, the Company's net loss and net loss per share for 1998, 1997 and 1996 would approximate the pro forma amounts
below (in thousands except per share data):
1998 1997 1996
---- ---- ----
Net loss As reported $(33,086) $(19,831) $(40,005)
Pro forma $(41,542) $(25,154) $(42,025)
Basic and diluted loss per share As reported $ (1.31) $(0.82) $(2.13)
Pro forma $ (1.64) $(1.04) $(2.24)
The effects of applying SFAS 123 in this pro forma disclosure are not indicative of future amounts since SFAS 123 does not apply to
awards prior to 1995 and additional awards in future years are anticipated.
RIGHTS
2002. EDGAR Online, Inc.
Each holder of a share of outstanding Common Stock also holds one share purchase right (a "Right") for each share of Common Stock.
Each Right entitles the holder to purchase from the Company one one-hundredth of a share of Series A junior participating preferred
stock, $.01 par value (the "Junior Preferred Shares"), of the Company at a price of $270 per one one-hundredth of a Junior Preferred
Share (the "Purchase Price"). The Rights are not exercisable until the earlier of acquisition by a person or group of 15% or more of the
outstanding Common Stock (an "Acquiring Person") or the announcement of an intention to make or commencement of a tender offer
or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 15% or more of the
outstanding Common Stock. In the event that any person or group becomes an Acquiring Person, each holder of a Right other than the
Acquiring Person will thereafter have the right to receive upon exercise that number of shares of Common Stock having a market value
of two times the Purchase Price and, in the event that the Company is acquired in a business combination transaction or 50% or more
of its assets are sold, each holder of a Right will thereafter have the right to receive upon exercise that number of shares of Common
Stock of the acquiring company which at the time of the transaction will have a market value of two times the Purchase Price. Under
certain specified circumstances, the Board of Directors of the
Page F-14
Company may cause the Rights (other than Rights owned by such person or group) to be exchanged, in whole or in part, for Common
Stock or Junior Preferred Shares, at an exchange rate of one share of Common Stock per Right or one one-hundredth of a Junior
Preferred Share per Right. At any time prior to the acquisition by a person or group of beneficial ownership of 15% or more of the
outstanding Common Stock, the Board of Directors of the Company may redeem the Rights in whole at a price of $.01 per Right.
J. COLLABORATIVE RESEARCH AND DEVELOPMENT AGREEMENTS
The Company and Schering AG, Germany ("Schering AG") are collaborating on the research, development and commercialization of
novel, orally active neurophilin ligand compounds to promote nerve regeneration for the treatment of a number of neurological
diseases. Under the terms of the agreement, Schering AG agreed to pay the Company up to $88,000,000 composed of a $6,000,000
license payment paid in September 1998, $22,000,000 of product research funding over five years and $60,000,000 of development
and commercialization milestone payments. From the inception of the agreement in August 1998 through December 31, 1998,
$10,000,000 has been recognized as revenue. Under terms of the agreement, Vertex and Schering AG will have an equal role in
management of neurophilin ligand research and product development. In North America, Vertex will have manufacturing rights, and
Vertex and Schering AG will share equally in the marketing expenses and profits from commercialized compounds. In addition to
having manufacturing rights in North America, the Company retains the option to manufacture bulk drug substance for sales and
marketing in territories outside Europe, the Middle East and Africa. Schering AG will have the right to manufacture and market any
commercialized compounds in Europe, the Middle East and Africa, and pay Vertex a royalty on product sales, if any. After December
2000, Schering AG has the right to terminate without cause upon a six months' written notice. Revenues earned from Schering AG
under the neurophilin ligand agreement were $10,000,000 in 1998.
The Company and Kissei Pharmaceutical Co., Ltd. ("Kissei") are collaborating to design inhibitors of p38 MAP kinase and to develop
them as novel, orally active drugs for the treatment of inflammatory and neurological diseases. Under the terms of the agreement,
Kissei agreed to pay the Company up to $22,000,000 composed of a $4,000,000 license payment, $11,000,000 of product research
funding over three years and $7,000,000 of development and commercialization milestone payments. From the inception of the
agreement in September 1997 through December 31, 1998, $11,000,000 has been recognized as revenue. Kissei will have the right to
develop and commercialize these compounds in its licensed territories. Kissei has exclusive rights to p38 MAP kinase compounds in
Japan and certain Southeast Asian countries and semi-exclusive rights in China, Taiwan and South Korea. The Company retains
exclusive marketing rights in the United States, Canada, Europe and the rest of the world. In addition, the Company will have the right
to supply bulk drug material to Kissei for sale in its territory and will receive royalties and drug supply payments on future product
sales, if any. Kissei has the right to terminate the agreement without cause upon six months' notice. Revenues earned from Kissei under
the p38 MAP kinase agreement were $5,521,000 and $5,500,000 in 1998 and 1997, respectively.
The Company and Lilly are collaborating on designing inhibitors of the hepatitis C protease enzyme and developing them as novel
drugs to treat hepatitis C infection. Under the terms of the agreement, Lilly agreed to pay the Company up to $51,000,000 composed
of a $3,000,000 payment paid in June 1997, $33,000,000 of product research funding over six years and $15,000,000 of development
and commercialization milestone payments. From the inception of the agreement in June 1997 through December 31, 1998,
$10,829,000 has been recognized as revenue. The Company has the option to supply 100 percent of Lilly's commercial drug substance
supply needs. The Company will receive royalties on future product sales, if any. If the Company exercises its commercial supply
option, the Company will receive drug supply payments in addition to royalties on future product sales, if any. Lilly has the right to
terminate the agreement
without cause upon six months' notice after June 1999. In connection with this collaboration, Lilly purchased 263,922 shares of the
Page F-15
2002. EDGAR Online, Inc.
Company's common stock for $10,000,000. Revenues earned from Lilly were $5,193,000 and $5,694,000 in 1998 and 1997,
respectively.
The Company and BioChem Pharma ("BioChem") are collaborating on the development and commercialization in Canada of
Incel-TM- (VX-710), Vertex's lead multidrug resistance reversal agent. Under the development agreement, BioChem agreed to pay
Vertex up to $4,000,000 comprised of an initial licensing fee of $500,000 and development and commercialization milestones
payments. From the inception of the agreement in May 1996 through the year ended December 31, 1998, $750,000 has been
recognized as license and research revenue. BioChem has agreed to fund certain development activities for Incel in Canada, including
Phase II clinical trials in two different cancer indications which are currently underway. Vertex has agreed to supply BioChem's
clinical and commercial drug supply needs. BioChem has agreed to pay Vertex a portion of its net sales, which will cover Vertex's cost
of supplying material and will provide a profit to Vertex. BioChem has the right to terminate the agreement without cause upon six
months' notice. Termination will relieve BioChem of any further payment obligations and will end any license granted to BioChem by
Vertex under the agreement. Revenues earned from BioChem were $56,000, $251,000 and $577,000 in 1998, 1997 and 1996,
respectively.
The Company and Glaxo Wellcome are collaborating on the development and commercialization of compounds in connection with the
Company's HIV Program. Under the collaborative agreement, Glaxo Wellcome agreed to pay the Company up to $42,000,000
comprised of a $15,000,000 initial license payment paid in 1993, $14,000,000 of product research funding over five years and
$13,000,000 of development and commercialization milestone payments. From the inception of the agreement in December 1993
through the year ended December 31, 1998, $34,000,000 has been recognized as revenue. Research funding under this agreement
ended on December 31, 1998. Glaxo Wellcome is also obligated to pay to the Company additional development and
commercialization milestone payments for subsequent drug candidates. In addition, Glaxo Wellcome agreed to bear all costs of
development in its territory of drug candidates under the collaboration. Under the agreement, Glaxo Wellcome is also required to pay
Vertex a royalty on sales, if any. Glaxo Wellcome has the right to terminate the license arrangements without cause upon twelve
months' notice given at any time. Termination by Glaxo Wellcome of the license arrangements under the agreement will relieve it of its
obligation to make further commercialization and development milestone and royalty payments and will end any license granted to
Glaxo Wellcome by Vertex thereunder. Revenues earned from Glaxo Wellcome were $6,457,000, $3,275,000 and $6,289,000 for
1998, 1997 and 1996, respectively.
In June 1996, the Company and Glaxo Wellcome obtained a worldwide, non-exclusive license under certain G.D. Searle & Co.
("Searle") patent applications in the area of HIV protease inhibition. Vertex paid $15,000,000 and Glaxo Wellcome paid $10,000,000
to Searle for the license. The Company also agreed to pay Searle a royalty on sales of Agenerase (amprenavir), if any.
The Company and Hoechst Marion Roussel ("HMR") are collaborating on the development of interleukin-1 beta converting enzyme
inhibitor. Under the collaborative agreement, HMR agreed to pay the Company up to $30,500,000, comprised of $18,500,000 of
product research funding over five years and $12,000,000 of development and commercialization milestone payments. From the
inception of the agreement in September 1993 through the year ended December 31, 1998, $21,500,000 has been recognized as
revenue. Revenues earned under the HMR agreement were $460,000, $8,660,000 and $4,196,000 in 1998, 1997 and 1996,
respectively. Research funding under this agreement ended on December 31, 1997.
The Company and Kissei are collaborating on the development and commercialization of amprenavir, the drug candidate from the
Company's HIV Program. Under the collaborative
Page F-16
agreement, Kissei agreed to pay the Company up to $20,000,000, comprised of $9,800,000 of product research funding through 1995,
$7,000,000 of development milestone and territory option payments and a $3,200,000 equity investment. From the inception of the
agreement in April 1993 through the year ended December 31, 1998, $14,642,000 has been recognized as revenue. During 1997, the
Company also received $4,000,000 related to reimbursements of certain development costs. Under the collaboration, Kissei is also
required to pay Vertex a royalty on sales, if any. Revenues earned under this Kissei agreement were $217,000, $4,310,000 and
$692,000 in 1998, 1997 and 1996, respectively. Research funding under this agreement ended on December 31, 1995.
K. EMPLOYEE BENEFITS
The Company has a 401(k) retirement plan in which substantially all of its permanent employees are eligible to participate.
Participants may contribute up to 15% of their annual compensation to the plan, subject to statutory limitations. For 1998, the
Company declared discretionary matching contributions to the plan in the aggregate amount of $672,000, payable in the form of shares
of the Company's Common Stock. Of these shares, 19,419 were issued as of December 31, 1998 with the remaining 7,195 issuable in
1999. For 1997, the Company declared discretionary matching contributions to the plan in the aggregate amount of $482,000, payable
in the form of shares of the Company's Common Stock. Of these shares, 6,458 were issued as of December 31, 1997 with the
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remaining 7,113 issued in 1998. For 1996, the Company declared discretionary matching contributions to the plan in the aggregate
amount of $426,000, payable in the form of shares of the Company's Common Stock. Of these shares, 7,013 were issued as of
December 31, 1996 with the remaining 5,278 issued in 1997.
L. RELATED PARTY
A sibling of the Company's President is a partner in the law firm representing the Company to which $333,000, $394,000 and
$472,000 in legal fees were paid in 1998, 1997 and 1996, respectively.
M. LEGAL PROCEEDINGS
Chiron Corporation ("Chiron") filed suit on July 30, 1998 against the Company and Lilly in the United States District Court for the
Northern District of California, alleging infringement by the defendants of various U.S. patents issued to Chiron. The infringement
action relates to research activities by the defendants in the hepatitis C viral protease field and the alleged use of inventions claimed by
Chiron in connection with that research and development. Chiron has requested damages in an unspecified amount, as well as an order
permanently enjoining the defendants from unlicensed use of Chiron inventions. While the final outcome of these actions cannot be
determined, the Company believes that the plaintiff's claims are without merit and intends to defend the actions vigorously.
N. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The Company has adopted SFAS No. 130, "Reporting Comprehensive Income," which requires that all components of comprehensive
income and total comprehensive income be reported and that changes be shown in a financial statement displayed with the same
prominence as other financial statements. The Company has disclosed this information in its statement of stockholders' equity and
consists of the following (in thousands):
Page F-17
Accumulated
Cumulative Unrealized Other
Translation gain/(loss) on comprehensive
Adjustment investments income (loss)
Balance as of December 31, 1996 $ 16 $ 33 $ 49
Foreign currency translation adjustment (12) -- (12)
Unrealized holding gains arising during
the period -- 115 115
------ -------- ---------
Balance as of December 31, 1997 4 148 152
Foreign currency translation adjustment -- -- --
Unrealized gains/(losses) on securities:
Unrealized holding gains arising during
the period -- 1,049 1,049
Less: reclassification adjustment for gains
Included in net loss (547) (547)
------ -------- ---------
Balance as of December 31, 1998 $ 4 $ 650 $ 654
------ -------- ---------
O. SUBSEQUENT EVENTS
ALTUS BIOLOGICS, INC.
Altus develops, manufactures and markets products based on a novel and proprietary technology for stabilizing proteins. At December
31, 1998, Vertex owned approximately 70% of the capital stock of Altus. On February 5, 1999, Vertex restructured its investment in
Altus. As part of the transaction, Vertex provided Altus $3,000,000 of cash and surrendered its shares of Altus preferred stock in
exchange for two new classes of preferred stock and warrants. The new preferred stock provides Vertex with a minority equity
ownership position in Altus, and the warrants become exercisable upon certain events. As a result of the transaction, Altus operates
independently from Vertex as a minority-owned subsidiary. In addition, Vertex has retained a non-exclusive royalty-free right to use
Altus' technology for discovering, developing and manufacturing small molecule drugs.
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P. QUARTERLY FINANCIAL DATA (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE)
First Second Third Fourth Total
----- ------ ----- ------ -----
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- ----
1998
Total revenues $ 7,169 $ 7,152 $ 18,417 $ 11,660 $ 44,398
Total expenses 15,583 16,954 20,690 24,257 77,484
Net loss (8,414) (9,802) (2,273) (12,597) (33,086)
Basic and diluted earnings per share
(0.33) (0.39) (0.09) (0.50) (1.31)
1997
Total revenues $ 6,918 $ 12,155 $ 13,547 $ 11,179 $ 43,799
Total expenses 12,684 13,567 19,403 17,976 63,630
Net loss (5,766) (1,412) (5,856) (6,797) (19,831)
Basic and diluted earnings per share (0.26) (0.06) (0.23) (0.27) (0.82)
Page F-18
SECOND AMENDMENT TO LEASE
This SECOND AMENDMENT TO LEASE is made by and between David E. Clem and David M. Roby, Trustees of Fort Washington
Realty Trust under Declaration of Trust dated June 19, 1995 and recorded with the Middlesex County (South District) Registry of
Deeds in Book 25422, Page 360 (the "Landlord") and Vertex Pharmaceuticals Incorporated (the "Tenant").
Reference is hereby made to that certain lease (the "Lease") dated March 3, 1995, by and between Landlord's predecessor, Fort
Washington Limited Partnership and Tenant with respect to a portion of the property (the "Premises") located at 40 Erie Street,
Cambridge, Massachusetts, (the "Building") as more particularly described in the Lease as amended by a First Amendment to Lease
(the "First Amendment").
WHEREAS, the Tenant has requested, and the Landlord has agreed, to further amend the Lease to add additional space to the
Premises upon the terms and conditions set forth in this Second Amendment to Lease.
WHEREAS, Landlord and Tenant desire to amend and modify the terms of the Lease to incorporate the additional space and to ratify
and confirm the terms of the Lease as amended by the First Amendment as more particularly set forth below.
NOW, THEREFORE, in consideration of the mutual promises herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows:
1. Upon occupancy by Tenant, the definition of the Premises set forth in the Lease shall be amended to include the addition of 41,132
r.s.f. of space (the "Additional Space") in the Building currently leased to Millennium Pharmaceuticals, Inc. ("Millennium"). See
EXHIBIT A annexed hereto for the layout of the Additional Space.
2. Tenant shall take occupancy of the Additional Space beginning on the later of (i) the date upon which Millennium vacates the
Additional Space, or
(ii) March 19, 1999, and continuing for a period of ten (10) years from the date upon which Tenant occupies the Additional Space (the
"Additional Space Term"). On or after March 19, 1999, if necessary, Landlord shall use best efforts to expedite Millennium's
departure from the Additional Space, including filing an eviction proceeding. Landlord warrants and represents that according to the
terms of its lease with Millennium that the lease expires on March 18, 1999 as to the Premises and the associated parking spaces. As to
the Premises and the associated parking spaces, Landlord hereby agrees that Landlord will not extend or renew the term of
Millennium's lease or waive any failure by Millennium to vacate. Landlord shall not be held liable for any loss or damage incurred by
Tenant as a result of a hold-over by Millennium. Landlord represents that in addition to other sums for holding over, Millennium must
pay a holdover premium equal to the greater of (a) twice the then fair market rent as reasonably determined by Landlord, or (b) the
total of the Fixed Rent, Additional Rent (as those terms are defined in the Millennium lease) and all other payments then payable under
the Millennium lease. Landlord agrees that it shall not waive the payment to Landlord of any such holdover premium by Millennium.
2
Provided that tenant has exercised in each instance its options to extend the Lease Term for the original Premises: (a) Tenant shall
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have two (2) options to extend the Additional Space Term (the "Additional Space Options") for successive periods of five (5) years
each (the "Additional Space Extension Periods"), subject to and on the terms set forth herein. Tenant may only exercise the Additional
Space Options with respect to the entire Additional Space. If Tenant shall desire to exercise any Additional Space Option, it shall give
Landlord a notice (the "Additional Space Inquiry Notice") of such desire not later than fifteen (15) months prior to the expiration of
the Additional Space Term of this Lease or the preceding Additional Space Extension Period, as the case may be. Thereafter, the Fair
Market Rent (as defined in Subsection (c) below) for the applicable Additional Space Extension Period shall be determined in
accordance with Subsection (d) below. After the applicable Fair Market Rent has been so determined, Tenant shall exercise each
Additional Space Option by giving Landlord notice (the "additional Space Exercise Notice") of its election to do so not later than
twelve (12) months prior the expiration of the Additional Space Term of this Lease, or the preceding Additional Space Extension
Period, as the case may be. If Tenant fails to timely give either the additional Space Inquiry Notice of the Additional Space Exercise
Notice to Landlord with respect to any Additional Space Option, Tenant shall be conclusively deemed to have waived such Additional
Space Option hereunder.
(b) Notwithstanding any contrary provision of this Lease, each Additional Space Option and any exercise by Tenant thereof shall be
void and of no force or effect unless on the dates Tenant gives Landlord its Additional Space Inquiry Notice and Additional Space
Exercise Notice for each Additional Space Option and on the date of commencement of each Additional Space Extension Period (i)
this Lease is in full force and effect, (ii) there is no Event of Default of Tenant under this Lease, and (iii) Tenant has not assigned or
subleased (or agreed to assign or sublease) more than fifty percent (50%) of the rentable floor area then comprising the Additional
Space.
(c) All of the terms, provisions, covenants, and conditions of this Lease shall continue to apply during each Additional Space
Extension Period, except that the Additional Space Annual Fixed Rent Rate during each Additional Space Extension Period (the
"Extension Rent") shall be equal to the fair market rent for the Additional Space determined as of the date twelve (12) months prior to
expiration of the Additional Space Term or the preceding Additional Space Extension Period, as the case may be, in accordance with
the procedure set forth in Subsection (d) below (the "Fair Market Rent").
(d) The Fair Market Rent for each Additional Space Extension Period shall be determined as follows: Within five (5) days after Tenant
gives landlord its Additional Space Inquiry Notice with respect to any Additional Space Option, Landlord shall give Tenant notice of
Landlord's determination of the Fair Market Rent for the applicable Additional Space Extension Period. Within ten (10) days after
Tenant receives such notice, Tenant shall notify Landlord of its agreement with or objection to Landlord's determination of the Fair
Market Rent, whereupon the Fair Market Rent shall be determined by arbitration conducted in the manner set forth below. If Tenant
does not notify Landlord within such ten (10) day period of Tenant's agreement with or objection to Landlord's determination of the
Fair Market Rent, then the Fair Market Rent of the applicable Additional Space Extension Period shall be deemed to be
Landlord's determination of the Fair Market Rent as set forth in the notice from Landlord described in this section.
3
(e) If Tenant notifies Landlord of Tenant's objection to Landlord's determination of Fair Market Rent under the preceding subsection,
such notice shall also set forth a request for arbitration and Tenant's appointment of a commercial real estate broker having at least ten
(10) years experience in the commercial leasing market in the City of Cambridge, Massachusetts (an "Arbitrator"). Within five (5)
days thereafter, Landlord shall by notice to Tenant appoint a second Arbitrator. Each Arbitrator shall be advised to determine the Fair
Market Rent for the applicable Additional Space Extension Period within thirty (30) days after Landlord's appointment of the second
Arbitrator. On or before the expiration of such thirty (30) days period, the two Arbitrators shall confer to compare their respective
determinations of the Fair Market Rent. If the difference between the amounts so determined by the two Arbitrators is less than or
equal to ten percent (10%) of the lower said amounts then the final determination of the Fair Market Rent shall be equal to the average
of said amounts. If such difference between said amounts is greater than ten percent (10%), then the two arbitrators within ten (10)
days thereafter shall appoint a third Arbitrator (the "Third Arbitrator"), who shall be instructed to determine the Fair Market Rent for
the applicable Additional Space Extension Period within ten (10) days after his appointment by selecting one of the amounts
determined by the other two Arbitrators. Each party shall bear the cost of the Arbitrator selected by such party. The cost of the Third
Arbitrator, if any, shall be shared equally by Landlord and Tenant.
3. Tenant shall accept the Additional Space in "as is" condition. Tenant acknowledges that Landlord has made, in anticipation of
Tenant's future occupancy, for the benefit of Tenant at Landlord's sole cost and expense, certain improvements to the Additional Space
as outlined in EXHIBIT B. Landlord agrees to consult with Tenant prior to agreeing to any changes requested by Millennium to the
Additional Space.
4. Upon execution of this Second Amendment to Lease, section 4.1(d) of the Lease will be stricken in its entirety and be null and void
and of no further force and effect.
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5. Upon occupancy by Tenant of the Additional Space, Tenant shall pay to Landlord Annual Fixed Rent for the Additional Space in
the amount of $1,460,186.00 (the "Additional Space Annual Fixed Rent Rate"), payable in equal monthly installments of $121,682.17
in advance on the first day of each calendar month; and for any portion of a calendar month at the beginning or end of the Term, at that
rate payable in advance for such portion.
6. Article 4.1(b) shall be renumbered as 4.1(b)(1) and the following shall be added to the Lease as Article 4.1(b)(2):
(b) (2) Adjustment for CPI - Additional Space. (a) On December 31, 2000 (the "First Adjustment Date"), the Additional Space Annual
Fixed Rent Rate shall be increased by multiplying said rate by the lesser of (i) a fraction, the numerator of which shall be the Price
Index (as hereinafter defined) most recently established prior to the First adjustment Date, and the denominator of which shall be the
Base Price Index (as hereinafter defined), or (ii) one hundred four percent (104%) per year, compounded annually over the period of
time beginning
4
April 1, 1997 through the First Adjustment Date. (b) On December 31, 2005 (the "Second Adjustment Date"), the Additional Space
Annual Fixed Rent Rate (as adjusted) shall be increased by multiplying said rate by the lesser of (i) a fraction, the numerator of which
shall be the Price Index (as hereinafter defined) most recently established prior to the Second Adjustment Date, and the denominator of
which shall be the Base Price Index (as hereinafter defined), or
(ii) one hundred four percent (104%) per years, compounded annually over the five (5) years of the Additional Space Term of this
Lease. As used herein, the term "Price Index" shall mean and refer to the "Consumer Price Index for Urban Wage Earners and Clerical
Workers, for the Boston Massachusetts area, All Items (1982-84=100)" published by the Bureau of Labor Statistics of the United
States Department of Labor or successor or substitute index appropriately adjusted, and the term "Base Price Index" shall mean and
refer to the Price Index most recently established prior to the Commencement Date. In the event of the Price Index (or a successor or
substitute index) shall not be published for the City of Boston, Massachusetts area or for the months indicated above, the
corresponding index for the United States City Average (and if this is not available, a reliable governmental or other nonpartisan
publication evaluating similar or equivalent information as used in the Price Index) shall be used. In the even the Price Index ceases to
use the 1982-84 average of 100 as the basis of calculation, or if a substantial change is made in the terms or numbers of items
contained in the Price Index, then the Price Index shall be adjusted to the figure that would have been arrived at had the manner of
computing the Price Index in effect at the date of this Lease not been changed.
7. Upon commencement of the Additional Space Term, the Tenant's Proportionate Fraction as set forth in the Lease will be amended
to 100%.
8. The provisions of Paragraph 10.11 of the Lease shall include reference to the Additional Space Annual Fixed Rent Rate in
determining the "Security Deposit Amount" as the same may be adjusted. Upon commencement of the Additional Space Term, the
Tenant shall increase the Security Deposit Amount by an amount equal to one (1) year Additional Space Annual Fixed Rent plus
additional amounts, if any, as set forth in paragraph 10.11 as amended. The Security Deposit Amount shall be adjusted as provided in
Section 10.11 by including the Additional Space Annual Fixed Rent Rate and other rental amounts due with respect to the Additional
Space, as the same may be adjusted in accordance with Section 4.1(b), Section 4.1(c), Section 10.12, Section 10.13 and
Section 10.14 of the Lease as amended. The additional Security Deposit Amount may be in the form of a Letter of Credit in the form
of Exhibit L to the Lease and must be delivered on the commencement of the Additional Space Term.
9. Upon Tenant's reasonable request and subject to availability on the lot upon which the Building is situated, Landlord shall provide
additional surface parking spaces to Tenant on a tenancy-at-will basis for an additional charge of $75.00 per space per month.
10. Landlord acknowledges that Tenant presently intends to reconfigure the Additional Space upon taking occupancy. The process for
such reconfiguration of the Additional Space shall be in accordance with paragraph 3.3 of the Lease. However, Tenant shall be under
no obligation to reconfigure the Additional Space.
11. Exhibit I of the Lease is hereby replaced with the Exhibit "I" attached hereto.
5
All capitalized terms used herein shall have the same meaning as set forth in the Lease.
Except as otherwise expressly set forth herein, all other terms of the Lease shall apply to the Additional Space, are hereby ratified and
confirmed and shall remain unchanged and in full force and effect.
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Executed this 13th day of June, 1997.
6
LANDLORD:
By: /s/
-------------------------------------------
David E. Clem, Trustee as aforesaid and
not
individually
By: /s/
-------------------------------------------
David M. Roby, Trustee as aforesaid and
not
individually
TENANT:
VERTEX PHARMACEUTICALS INCORPORATED
By: /s/
-------------------------------------------
Name: Richard H. Aldrich
Title: Senior Vice President
[PLANS]
Exhibit 10.21
DATED 4TH NOVEMBER 1998
MILTON PARK LIMITED
and
VERTEX PHARMACEUTICALS (EUROPE) LIMITED
and
VERTEX PHARMACEUTICALS INCORPORATED
AGREEMENT FOR LEASE
of premises at 88 Milton Park Abingdon Oxfordshire
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INDEX
Clause
1. Definitions and Interpretation
2. The Landlord's Works
3. Inspections
4. Practical Completion
5. The Lease
6. Right to Determine
7. Alienation
8. No Demise
9. No Restrictions
10. Defects And Duty of Care Agreements
11. No Merger
12. Adjudication
13. Service of Notice
14. Title and Matters to which The Premises are
Subject
15. General Conditions
16. Guarantee
17. Acknowledgements
18. Termination
19. Entire Contract
20. Jurisdiction
1
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First Schedule
Approved Drawings and Specifications
Planning Permission
Annexure A the Lease
Annexure B1 Architect's Warranty
Annexure B2 Civil and Structural Engineer's Warranty
Annexure B3 Construction Manager's Warranty
Annexure B4 Mechanical and Electrical Engineer's
Warranty
Annexure B5 Insurance Policy
2
THIS AGREEMENT is made the 4th, day of November 1998
BETWEEN
(1) MILTON PARK LIMITED (Company No. 1772924) whose registered office is at
Nations House 103 Wigmore Street London W1H 9AB ("the Landlord")
(2) VERTEX PHARMACEUTICALS (EUROPE) LIMITED (Company No.2907620)
whose registered office is at 5 Cheapside Court Buckhurst Road Ascot
Berkshire SL-5 7RF("the Tenant")
(3) VERTEX PHARMACEUTICALS INCORPORATED of 130 Waverly Street Cambridge
Massachusetts USA ("the Guarantor") and whose address for service in
the
United Kingdom is at 88 Milton Park Abingdon Oxfordshire
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement unless the context otherwise requires the terms defined in this clause shall for all purposes hereof have the
meaning specified
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"Approved Drawings" the plans listed in and forming a part of
the
First Schedule
"Architect" Nicholas Hare Architects of 3 Barnsbury
Square London N1 1JL or such other architect
as the Landlord may from time to time
appoint
in their place for the purposes of the
Landlord's Works
"Certificate of the written statement of practical
completion
Practical Completion" of the Landlord's Works (other
than the Post Completion Works and the
Optional Works) to be issued by the
Construction Manager in accordance with the
provisions of clause 4 hereof and in this
Agreement the expression
3
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"Practically Completed" and "Practical
Completion" shall be interpreted accordingly
"Completion Date" the fifth working day immediately following
the Practical Completion Date
"Consents" all approvals consents licences and
permissions necessary for the construction
completion and retention of the Landlord's
Works and including (without prejudice to
the
generality of the foregoing) planning
permissions and Building Regulation
approvals
"Construction Manager" Glanville Projects Limited of Porterswood
House Porterswood St. Albans Hertfordshire
AL3 6PD or such other person as the
Landlord may appoint in their place for the
purposes of the Landlord's Works
"Defects Period" 36 calendar months from the Practical
Completion Date (which period shall also be
the Defects Period for the purposes of
Clause
4(4) of the Lease)
"First Anniversary" the first anniversary of the date of issue
of
the Certificate of Practical Completion
"General Conditions" the Standard Conditions of Sale (Third
Edition)
"Insurance Policy" an insurance policy in respect of latent
defects in the Premises to be procured by
the
Landlord at its cost in the form annexed
hereto under Annexure B5 subject to such
minor amendments as the insurers may require
provided that any amendments shall not
affect
the
amount of the insurance cover the risks insured or the amount of the excess
4
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"Landlord's Estate" the land at Milton Park Abingdon Oxfordshire
known as Milton Park shown for the purpose
of
identification only edged red on Plan 2
"Landlord's Solicitors" Pitmans of 47 Castle Street Reading RGI 7SR
(DX40102 Reading (Castle Street)) (Ref:
JCB\Milton)
"Landlord's Works" the construction of the Premises and the
ancillary service areas car parking and
landscaping in accordance with the Approved
Drawings and Specifications
"Lease" the Lease in the form of the draft annexed
as
Annexure A
"Mechanical and Electrical Peter Brett Associates of 16 Westcote Road
Engineers" Reading Berkshire RG 30 2DE or such other
persons as the Landlord may appoint in their
place
"Optional Works" the installation of an external spiral fire
escape forming part of the Landlord's Works
as more particularly described in the Third
Schedule hereto
"Plan 1" the plan so numbered annexed to this
Agreement
"Plan 2" the plan so numbered annexed to this
Agreement
"Planning Permission" detailed planning permission dated 14 April
1997 and including the approval of reserved
matters
"Post Completion Works" those works forming part of the Landlord's
Works as set out in the Second Schedule
hereto
"Practical Completion Date" the date upon which the Landlord's Works
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(other than the Post Completion Works and
the
Optional Works) are practically completed as
stated in the Certificate of Practical
Completion
"Premises" the premises shown edged red on Plan I to be
known as 88 Milton Park Abingdon Oxfordshire
"Professional Team" the Architect the Civil and Structural
Engineer the Mechanical and Electrical
Engineer and the Construction Manager
"Regulations" the Construction (Design and Management)
Regulations 1994
"Rent Commencement Date" the date immediately following the
expiration
of the Rent Free Period
"Rent Free Period" a period of six months from the Completion
Date
"Site Inspections" inspection of the Landlord's Works which are
to be carried out on dates to be agreed
between the parties which shall be no more
frequently than once every 10 working days
(the first of which is to take place on the
[ ] day of [ ]) and shall be
conducted in accordance with the provisions
of Clause 4
"Specifications" the specifications listed in and forming a
part of the First Schedule
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"Civil and Structural
Engineer" Glanville Consultants of Porterswood House
Porterswood St. Albans Hertfordshire AL3
6PQ
or such other civil and structural engineer
from time to time appointed by the Landlord
in their place for the purpose of the
Landlord's Works
"Surveyor" means Mike Taylor of Ridge and Partners
Midland House Westway Oxford or failing him
Peter Blockley Chartered Architect Toll
Cottage Dorking Road Walton on the Hill
Tadworth Surrey KT20 7MY
"Target Date 6th November 1998
"Tenant's Solicitors" means Cameron McKenna Mitre House 160
Aldersgate Street London EC1A 4DD
(Ref.NMH/MIT4.68A/042741.0010)
"Tenant's Surveyor" means Ronald Jenkins Chartered Building
Surveyor 27a Leopold Road Wimbledon London
SW19 7BB
"working days" means any day from Monday to Friday
(inclusive) other than Christmas Day Good
Friday and any statutory bank or public
holiday
1.2 In this Agreement the following expressions shall for all purposes hereof have the meanings attached to them in the Lease unless
the context otherwise requires:
1.2.1 Conduits
1.2.2 Permitted Use
1.2.3 the Principal
Rent
7
1.3 Words importing the singular include the plural and vice versa and words importing one gender include any other gender
1.4 Reference to a numbered schedule paragraph or clause shall where the context so requires be a reference to the schedule paragraph
or clause of this Agreement so numbered
1.5 The clause or paragraph headings in this Agreement are for the convenience of the parties and shall not affect its interpretation
1.6 Where two or more persons are included in the expression "the Landlord" "the Tenant" or "the Guarantor" the agreements by or
with the Landlord the Tenant or the Guarantor shall be deemed to be entered into by or with such persons jointly and severally
1.7 Interest as defined in the Lease shall accrue on a daily basis in respect of any sums due under this Agreement but which shall
remain unpaid for a period exceeding fourteen days and any such interest shall be paid from the date when any such sums became due
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until payment thereof (as well as before any judgment)
1.8 References to "the Landlord" do not include any successors in title of the Landlord to the Premises in respect of any of the
obligations contained herein relating to the carrying out of the Landlord's Works (save in the case of any successor in title of the
Landlord who expressly assumes such obligations) but otherwise do include the Landlord's successors in title to the Premises
1.9 References to any Statute Statutory Instrument Regulation or Order shall be construed as references to those provisions at the date
of commencement of the Landlord's Works and to any provision enacted in substitution therefor to the extent that such variations or
substitution are applicable to the subject matter of this Agreement
2. THE LANDLORD'S WORKS
8
2.1 The Landlord shall at its sole cost use all reasonable endeavours to
complete the Landlord's Works (apart from the Post Completion Works and
Optional Works) and procure the issue of the Certificate of Practical
Completion by the Target Date
2.2 The Landlord will at its sole cost procure the commencement carrying out
and completion of the execution of the Landlord's Works (other than the
Optional Works unless the Tenant shall serve notice under clause 2.11
hereof requiring the Optional Works to be carried out)
2.3 Without prejudice to the generality of the foregoing the Landlord
further
agrees:
2.3.1 to procure that the Landlord's Works shall be carried out in conformity
with the Approved Drawings the Specifications the Consents (to the
extent
that the same are obtained and remaining valid and unrevoked) and the
requirements of all competent and public authorities and to obtain as
soon as practicable any required consents and permissions for the
Landlord's Works which have not already been obtained; and
2.3.2 to procure that the Landlord's Works will be carried out in a good and
workmanlike manner using good quality materials of their several kinds
and in accordance with the Regulations
2.4 The Landlord shall be entitled to substitute for the materials specified
in the Specifications materials of similar quality and suitability and
of
substantially the same appearance (insofar as they shall be visible
after
incorporation into the Landlord's Works)
2.5 The Landlord may make or permit any minor variation to the Approved
Drawings or the Specifications insofar as the same does not materially
affect the quality of the Landlord's Works or the beneficial occupation
and use of the Premises for the Permitted Use
2.6 The Landlord shall procure that none of the following materials are
specified for use in the Landlord's Works:
2.6.1 high alumina cement or concrete whether in structural elements or
otherwise
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2.6.2 wood wool slabs in permanent shuttering form or in structural elements
2.6.3 calcium chloride in any admixtures
2.6.4 any aggregates for use in concrete which do not comply with British
Standard 8110:1985 or any aggregates for use in reinforced concrete
which do not comply with British Standards 882:1983 or such other
British
Standards in respect of each as may be in force at the date of
specification
2.6.5 asbestos or any asbestos containing products as defined in the Asbestos
Regulations 1969 or any statutory modification or re-enactment thereof
in
force at the date of specification
2.6.6 formaldehyde foam or material known to release formaldehyde in
quantities
which the Health & Safety Executive have at the date of specification
certified as hazardous
2.6.7 calcium silicate bricks or tiles any slip bricks any crocodolite any
vermiculite plaster
2.6.8 any material generally known within the construction industry at the
date
of specification to be deleterious to health and safety.
2.7 The Landlord shall at its sole cost enter into any agreement relating to
the Premises including any wayleave and/or similar easement or facility
as may be required in order to secure electricity gas water drainage
telecommunication and other such services and supplies for the benefit
of
the Premises
2.8 Until completion of the Lease the Landlord shall at the cost of the
Landlord insure or procure that the Landlord's Works are kept insured in
the full reinstatement value for the usual contractor's risks
2.9 The Landlord shall provide the Tenant's Surveyor with copies of any
additional detail to the Specifications and the Approved Drawings as
soon
as practicable after the additional details have been designed and if
revisions are necessary to update the Specifications and/or the Approved
Drawings and the Landlord shall take due cognisance of all
representations made by
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or on behalf of the Tenant in respect of such revisions if the
representations are made within 5 working days of the date the
Tenant's
Surveyor receives details of the relevant revisions (excluding the day
of receipt)
2.10
2.10.1 In respect of the Landlord's Works the Landlord is the only client
(as defined in and for the purposes of the Regulations)
2.10.2 The Landlord shall deliver to the Tenant as soon as it is prepared a
copy of the Health and Safety file which complies with the
requirements
of the Regulations
2.10.3 The Landlord shall forthwith either make a declaration to the
Executive
(as defined in the Regulations) that the Landlord is the only client
or
procure that its Agent appointed pursuant to Regulation 4(l) makes a
declaration to the Executive in either case in accordance with
Regulation 4(4) and if requested to do so by the Tenant the Landlord
shall supply to the Tenant a copy of the applicable declaration and of
the Executive's notice in response
2.11 If the Tenant shall request the Landlord in writing prior to date
provided in the Lease for the first review of the rent the Landlord
shall at its own expense carry out the Optional Works within a
reasonable period of time after receipt of such notice to the
reasonable satisfaction of the Tenant
2.12 The Landlord shall carry out the Post Completion Works within a
reasonable period after the date of this Agreement having regard to
the
nature of such works to the reasonable satisfaction of the Tenant
3. INSPECTIONS
3.1 The Tenant and its professional team shall entirely at their own risk be at liberty (by prior appointment on reasonable notice) to
enter upon the Premises for the purpose of viewing the state and progress of the Landlord's Works and to inspect and view the
materials and
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workmanship thereof PROVIDED ALWAYS that the following conditions
shall
be observed in respect of every such entry on the Premises:
3.1.1 The Tenant and its professional team shall be at liberty to visit the
Premises at any reasonable time of the day but on the occasion of any
such visit they shall jointly and immediately report their presence on
the Premises to the Construction Manager or his appointed
representatives:
3.1.2 The Tenant and its professional team shall comply with all safety
requirements imposed by the Construction Manager (or his appointed
representative); and
3.1.3 The Tenant and its professional team shall not interfere with or
interrupt the progress of the Landlord's Works nor give or attempt to
give instructions to any trade contractor or any member of the
Professional Team;
3.2.1 The Tenant or its representative and the Construction Manager or his
appointed representative shall attend the Site Inspections
3.2.2 The Construction Manager shall prepare minutes of each Site Inspection
to record the condition of the Premises and shall use reasonable
endeavours to submit the same to the Tenant within 3 working days of
the Site Inspection
3.2.3 The Tenant shall make representations in writing regarding the
condition of the Landlord's Works to the Construction Manager with a
copy to the Landlord within 5 working days of each Site Inspection
3.2.4 The parties shall use their best endeavours to agree on any additional
works required arising from the Tenant's representations but if such
agreement is not made within 5 working days of the date of receipt of
the Tenant's representations by the Construction Manager the matter
shall be referred to the Surveyor for his determination who shall
determine the matter in accordance with clause 12
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3.2.5 In the event that the Tenant does not make a representation in
accordance with clause 3.2.3 regarding any aspect of the Landlord's
Works completed at the date of a relevant Site Inspection the Tenant
shall not be entitled to make any further representation with regard
to
such matters pursuant to the provisions of clause 4.3
4 PRACTICAL COMPLETION
4.1 The Landlord shall give to the Tenant and the Tenant's Surveyor at
least three working days notice of the date the Construction Manager
intends to inspect that part of the Landlord's Works to be carried out
prior to Practical Completion for the purposes of issuing a
Certificate
of Practical Completion (and as much notice as reasonably practicable
of any adjournment thereof) and the Tenant and its professional team
shall be entitled to attend every such inspection
4.2 The Tenant and its professional team shall be entitled to make
representations to the Construction Manager during such inspection and
the Landlord shall instruct the Construction Manager to have due and
proper professional regard to the same
4.3 If the Tenant's Surveyor reasonably considers that subject to clause
4.6 the Landlord's Works have not been completed in accordance with
this Agreement sufficient for the Construction Manager to issue a
Certificate of Practical Completion he shall within 5 working days
after his inspection notify the Construction Manager in writing of his
reasons and state what further works are required
4.4 Subject to clause 4.5 the Landlord shall carry out such further works
as soon as possible and shall notify the Tenant's Surveyor when such
further works have been completed whereupon the Tenant's Surveyor
shall
within 5 working days re-inspect the Premises and if necessary the
procedure set out in this clause shall be repeated as often as
necessary until subject to clause 4.6 the Landlord's Works are
completed in accordance with this Agreement sufficient to entitle
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the Construction Manager to issue a Certificate of Practical
Completion
and the Construction Manager shall not issue such certificate until
such time as such further works notified by the Tenant's Surveyor have
been completed
4.5 If the Landlord disputes a notice from the Tenant's Surveyor under
clause 4.4 stating further works which are required the dispute shall
be determined by the Surveyor who shall determine the matter in
accordance with clause 12
4.6 For the purposes of this Clause 4 the Tenant shall not be entitled to
object to the issue of the Certificate of Practical Completion on the
grounds of one or more of the following being outstanding:
4.6.1 The Post-Completion Works or the Optional Works
4.6.2 Snagging items which are agreed by the Landlord and the Tenant or
determined by the Surveyor
4.6.3 Soft landscaping
4.6.4 Works which are not reasonably required to enable the Tenant to gain
access to the Premises and beneficially occupy the Premises for the
purposes permitted by the Lease as agreed by the Landlord and the
Tenant or determined by the Surveyor PROVIDED THAT the Landlord shall
procure completion of all such matters to the reasonable satisfaction
of the Tenant's Surveyor as soon as reasonably practicable (or in
accordance with such other timetable in relation to the Post
Completion
Works and the Optional Works as is provided for by this Agreement)
4.7 In the event that the Surveyor upholds an objection of the Landlord
pursuant to Clause 4.5 then the other provisions of this Agreement
(including in particular the definition of Completion Date and Rent
Commencement Date) shall be interpreted as if the Certificate of
14
Practical Completion had been issued on the date on which the Tenant
objected to its issue without justification
4.8 The Landlord shall deliver to the Tenant free of charge a set of "as
built" drawings and all manuals and guarantees in respect of the
Landlord's Works as soon as reasonably practicable following
Practical
Completion
5. THE LEASE
5.1 On the Completion Date the Landlord will grant or will procure the grant of and the Tenant will accept the Lease of the Premises
5.2 The Lease and the Counterpart thereof shall be prepared by the Landlord's Solicitors and the properly executed Counterpart shall
be delivered to the Landlord's Solicitors on completion
5.3 The Lease shall be completed at the offices of the Landlord's Solicitors on or before 2.00 pm on the Completion Date
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5.4 The Principal Rent reserved by the Lease shall be paid from the Rent Commencement Date but all other rents and sums payable
under the Leases shall be paid with effect from the Completion Date
5.5 The Landlord shall grant the Lease with full title guarantee
6. RIGHT TO DETERMINE
If the Practical Completion Date has not occurred on or before the 1st February 1999 the Tenant shall have the right to terminate this
Agreement by serving notice in writing to that effect on the Landlord at any time prior to the date on which the Landlord's Works
(other than the Post Completion Works and the Optional Works) are practically completed for the purposes of this Agreement and in
the event of service of such notice this Agreement shall cease and determine on the date of service of such notice by the Tenant but
without prejudice to the rights and liabilities of the parties which have accrued up to that date
7. ALIENATION
15
The Tenant shall not assign or part with its interest under this Agreement or any part thereof or otherwise dispose of the same or any
part thereof and the Tenant named herein shall personally accept the Lease and execute a counterpart thereof provided that if the
Practical Completion Date has not occurred on or before the 1st February 1999 the Tenant may assign its interest under this
Agreement with the prior consent of the Landlord which shall not be unreasonably withheld or delayed and provided further that the
Tenant may assign the benefit of this Agreement to any person to whom the Lease (when granted) is assigned
8. NO DEMISE
Until the actual grant of the Lease this Agreement shall not operate or be deemed to operate as a demise of the Premises nor (save as
otherwise provided by this Agreement) shall the Tenant have or be entitled to any estate right title or interest in the Premises or any
part thereof
9. NO RESTRICTIONS
Nothing herein contained or implied shall impose or be deemed to impose any restriction on the use of any other part of the Landlord's
Estate not comprised in this Agreement nor give to the Tenant the benefit of or the right to enforce any covenant agreement condition
or stipulation entered into by any purchaser or lessee or tenant of the Landlord in respect of property not comprised in this Agreement
or to prevent or restrict in any way the development of the Landlord's Estate not comprised in this Agreement
10. DEFECTS AND WARRANTY AGREEMENTS
10.1 The Landlord will procure that all defects arising in the Landlord's
Works prior to the expiry of the Defects Period are made good at the
Landlord's cost to comply with the provisions of clause 2.3 hereof
PROVIDED THAT notice of the said defects has been given in writing
to
the Landlord by the Tenant not less than 10 working days before the
expiry of the Defects Period
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and provided that the Tenant affords all access necessary for the same
but the Landlord shall not be liable to compensate the Tenant in
respect of any reasonably necessary disturbance or disruption caused
thereby to the Tenant's business carried on at the Premises but shall
reinstate any damage caused to the Premises or the Tenant's property
as
soon as practicable and to the reasonable satisfaction of the Tenant
10.2 The Landlord shall make good any such defects as aforesaid notified to
it in writing during the period from the date hereof until the First
Anniversary as soon as practicable after the First Anniversary (save
for defects which require urgent attention which shall be remedied as
soon as practicable after written notification to the Landlord) and
after the First Anniversary all defects shall be remedied as soon as
practicable after written notification to the Landlord (provided such
notification is made before the end of the Defects Period) all such
defects being remedied to the reasonable satisfaction of the Tenant
10.3 Following the remedying of any defects in accordance with the
preceding
provisions of this clause it is expressly agreed that in the event of
any claim by the Tenant arising out of the design or workmanship of
the
Landlord's Works the Tenant shall rely upon the enforcement against
the
Professional Team of the rights conferred upon the Tenant by the
warranty agreements referred to in Clause 10.4 of this Agreement and
upon the Insurance Policy
10.4 The Landlord shall procure from the Professional Team and shall
deliver
to the Tenant as soon as practicable after the Completion Date
warranty
agreements executed by such parties in the forms annexed to this
Agreement and for this purpose the relevant form of warranty agreement
is that at Annexure B 1 (in the case of the Architect) Annexure B2 (in
the case of the Civil and Structural Engineer) Annexure B3 (in the
case
of the Construction Manager) and Annexure B4 (in the case of the
Mechanical and Electrical Engineer)
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10.5 The Landlord shall procure the issue of the Insurance Policy with a
minimum level of cover of not less than the full re-building cost of
the Landlord's Works (including all fees and expenses) and shall
comply
with the provisions of clause 4(5) of the Lease as if the Lease had
been completed on the date of this Agreement
11. NO MERGER
This Agreement shall remain in force as to any of the stipulations and obligations hereof which shall not have been performed and
remain to be performed notwithstanding the grant of the Lease SAVE THAT it is hereby expressly agreed that the Landlord shall have
no continuing liability to the Tenant or to any other person for the design and construction of the Landlord's Works after the
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completion of the remedying of defects in accordance with clause 10
12. ADJUDICATION
Where under the terms of this Agreement a matter is referred to the
determination of the Surveyor the following provisions shall apply:-
12.1 The Surveyor shall act as an expert and not as an arbitrator
12.2 The Surveyor must afford each party the opportunity within reasonable
time limits to make representations to inform each party of the
representations of the other and allow each party to make submissions
to him on the representations of the other party
12.3 The fees and expenses of the Surveyor including the costs of his
nomination are to be borne as the Surveyor shall in his discretion
determine (and otherwise equally between the Landlord and the Tenant)
and unless the parties otherwise agree they shall each bear their own
costs relating to the determination of the issue by the Surveyor
unless
the Surveyor shall in his discretion otherwise determine
12.4 The determination by the Surveyor shall be issued as soon as possible
and is to be conclusive and binding upon the parties save in the case
of manifest error
13. SERVICE OF NOTICES
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The provisions of clause 5(2) of the Lease shall apply in relation to notices served pursuant to this Agreement as if the same were set
out herein
14. TITLE AND MATTERS TO WHICH THE PREMISES ARE SUBJECT
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14.1 The Landlord shall deduce its title to grant the Lease to the Tenant
in
accordance with Section 110 of the Land Registration Act 1925 and the
Tenant having received office copies of the said title dated 20th
August 1998 shall be deemed to accept the Lease subject to all matters
contained or referred to in the said office copies and shall not raise
any objection or requisition in relation thereto
14.2 The Premises are let subject to:
14.2.1 all matters registered and capable of registration (whether or not so
registered prior to the date of this Agreement) by any Local or other
Competent Authority
14.2.2 all orders directions notices charges restrictions conditions
agreements schemes resolutions requirements or other matters arising
under any of the Town and Country Planning Acts
14.2.3 all overriding interests as defined by the Land Registration Act 1925
as amended (whether or not the Premises are registered)
14.2.4 all matters revealed by the documentation referred to in clause 14.1
above so far as the same are still subsisting and affect the Premises
and the Tenant or the Tenant's Solicitors having been supplied with
copies of such matters or with such information as the Landlord has
concerned the same the Tenant acknowledges that it has entered into
this Agreement with full knowledge and notice thereof and shall raise
no objection requisition or enquiry in respect of such matters
15. THE GENERAL CONDITIONS
19
The General Conditions are incorporated in this Agreement to the
extent
that they are not varied by or inconsistent with the terms hereof and
subject to the following amendments
15.1.1 General Conditions 1.1.1 (b) and (f) are deleted and all references
in the General Conditions to the "contract" and the "Agreement" shall
be deemed to be references to this Agreement
15.1.2 where General Conditions impose on the Landlord a duty to inform the
Tenant (including but not limited to General Conditions 3.1.33.3.2(b)
and 3.3.2 (c)) that obligation is to be construed as an obligation to
inform the Tenant as soon as practicable after the information in
question has come to the attention of the Landlord.
15.q1.3 General Conditions 2.2 2.3 4.2 4.3.2 5.2.2. (c) (d) (f) and (g)
5.2.3 5.2.5 5.2.6 6.1 6.2 6.7(a) and 6.7(b) are deleted
16. GUARANTEE
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16.1 The Guarantor guarantees to the Landlord the due performance by the
Tenant of the Tenant's obligations under this Agreement
16.2 If at any time before completion of the Lease the Tenant goes into
liquidation or has a petition presented for its winding up or has an
administrative receiver or administrator appointed or in either case
has a receiver appointed or enters into a composition with its
creditors then and in any such case the Landlord may at any time
before
completion of the Lease by notice in writing served on the Tenant's
Solicitors invoke the provisions of clause 16.3
16.3 Immediately upon service of notice pursuant to clause 16.2 (but
without
prejudice to any preexisting right of action of any party in respect
of
any breach by any other party of its obligations under this
agreement):-
(a) the rights of the Tenant under this agreement shall cease and determine absolutely and the Tenant shall be released from any further
liability under this agreement; and
20
(b) this agreement shall from that date have effect as if the obligation to accept the Lease and the other obligations on the part of the
Tenant contained in this agreement were primary obligations of the Guarantor and the Guarantor shall accept the Lease in place of the
Tenant and shall otherwise be bound to the Landlord accordingly
17. ACKNOWLEDGEMENTS
17.1 The Tenant hereby admits and acknowledges as follows:
17.1.1 It has inspected the Approved Drawings and the Specifications and will
prior to the Practical Completion Date inspect the Premises;
17.1.2 It has obtained advice and information with regard to the Premises
independently of the Landlord;
17.1.3 It has seen and accepts the quality and colour of the proposed
finishes
to the external and internal parts of the Premises
17.1.4 It has not been induced to enter into this Agreement by or in reliance
upon any statement either oral or in writing made by or on behalf of
the Landlord other than the Landlord's Solicitors' written replies to
written enquiries made by the Tenant's Solicitors prior to the date
hereof and the Tenant accepts that if any such statement has been made
other than as aforesaid it was not made as a condition warranty or
representation for the purpose of inducing the Tenant to enter into
this Agreement
18. TERMINATION
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18.1 For the purposes of this clause an "event of default" shall occur if
there shall prior to the Completion Date be any breach of the
agreements covenants or other obligations of the Tenant under this
Agreement which (if capable of remedy) shall not be remedied by the
Tenant within such reasonable period as the Landlord shall stipulate
in
writing
21
18.2 Upon the occurrence of an event of default the Landlord in addition to
and without prejudice to any other rights and remedies may prior to
the Completion Date rescind this Agreement forthwith by giving written
notice to the Tenant to that effect and the Tenant's interest
hereunder
shall cease
19. ENTIRE CONTRACT
This Agreement constitutes the entire contract between the parties
20. JURISDICTION
This Agreement shall be governed in accordance with English Law and the parties hereby agree to submit to the jurisdiction of the
Courts of England
IN WITNESS whereof the parties hereto have executed this Agreement under seal
22
FIRST SCHEDULE
SPECIFICATIONS AND PLANS OF LANDLORD'S WORKS ATTACHED HERETO
23
SECOND SCHEDULE
POST COMPLETION WORKS
24
THIRD SCHEDULE
OPTIONAL WORKS
25
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EXECUTED and delivered as a Deed )
by MILTON PARK LIMITED )
acting by:- )
Director
/S/
Director/Secretary
/S/
EXECUTED and delivered as a Deed )
by VERTEX PHARMACEUTICALS )
(EUROPE) LIMITED )
acting by:- )
Director
Director/Secretary
EXECUTED and delivered )
as a DEED by VERTEX )
PHARMACEUTICALS INCORPORATED)
acting by: )
26
88 MILTON PARK OUTLINE SPECIFICATION
VERTEX LANDLORD'S WORKS
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GENERAL
Building 88 is a two storey building comprising c. 2,300 sq m. The building forms part of a development of three similar buildings
orientated in an 'H' shape around a central courtyard. Building 88 has a third storey which has been designed to accommodate plant,
both in an enclosed central area and on open 'balconies' at both ends of the building. The building has two entrance areas both forming
a core containing a stair and lift to the first floor, fitted separate male, female and disabled toilet areas, riser cupboards and doors into
the 'shell workspace' area.
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The core areas will be finished to a normal developer's specification including plastered and painted walls, carpeted first floor landings
and stairs, non slip ceramic tiles to ground floor entrance with plasterboard ceilings and feature lighting. Perimeter radiators provide
space heating. With the exception of the first floor disabled WC and ground floor shower next to lift 4 and staircase 7 described at 10
below, WC areas have fully tiled walls, suspended ceilings, non slip ceramic tiled floors and are fitted with usual sanitary provision.
The remaining 'workspace' area on both ground and first floors are finished as a basic shell with no floor or ceiling finishes, untreated
blockwork walls and unfinished cladding panels. No electrical, gas, water or heating distribution will be made in these areas with only
such services as are necessary for life safety or protection of the building fabric.
The thermal performance of the external building envelope will comply in all respects with the Building Regulations for England and
Wales, Part L, 1995.
All building work will comply with the relevant British Standards, BS Codes of Practice, Public Utility Regulations and Bye Laws.
Mechanical and Electrical installations will comply to the design codes of CIBSE. Health and Safety files and 0 & M Manuals are
provided on practical completion.
All works are being undertaken in accordance with the following drawings:
Architects Drawings:
406(-)002R, 003W, 004T, 005M, 008E, 009C, 011E, 012D, 013B, 015J, 016J, 017D, 021F.
Services Drawings:
WB864/E100/, 401-1, 401-2, 402-1, 402-2, 403-1, 403-2, 404-1, 404-2, 405-1, 405-2, 405-3, 406-1, 406-2, 406-3.
1241/M13A, 14A, 15A, 16A, 17B, 18B.
Peter Brett Associates Drawing:
9422/ME/50OF and H
1. FOUNDATIONS
Mass concrete trench fill and pad foundations on vibro-compacted sub-grade, designed in accordance with the recommendations of the
site investigation report Np 31095/10 dated June 1997.
88 MILTON PARK OUTLINE SPECIFICATION
VERTEX LANDLORD'S WORKS
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1
2. STRUCTURAL FRAME
Steel frame with intumescent paint or boarding to achieve as required fire protection.
Hot rolled structural steel trusses, shot blasted and zinc phosphate primed finish supporting cold rolled galvanised steel purlins.
3. GROUND FLOOR SLAB
In-situ mesh reinforced concrete slab on granular sub-base to core areas, wide bay fibre reinforced concrete slab and granular sub-base
to office areas designed for uniformly distributed load of 20kN/mTO THE POWER OF 2 (4001b per sq ft). Insulation 'U' value is to
be 0.45W/m2 or better
4. EXTERNAL WALLS
Masonry-cavity wall with 'Red Bank Gobelin' or similar external facing brick skin, 160mm cavity with 75mm rockwool partial cavity
fill and 140mm non-load bearing dense blockwork.
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Insulation 'U' Value is to be 0.45W/mTO THE POWER OF 2 DEG.C or better.
Precast reconstituted stone lintels above first floor windows.
Aluminium Pvf2 coated BS 18B 25 Dark Grey RAL 7037 Light Grey flat composite Luxalon cladding panels in window bays and
Kingspan cladding panels fixed horizontally with proprietary fittings at the plant room and gable ends.
5. UPPER FLOORS
Precast concrete floor slabs to first floor offices 260mm deep, designed for uniformly distributed load of 6kN/mTO THE POWER OF
2 (120lb/sq ft).
Precast concrete floor slabs to plant rooms 150mm deep, designed for uniformly distributed load of 5.OkN/mTO THE POWER OF 2.
6. ROOF
Aluminium mill finish standing seam Kalzip roof cladding with 170mm insulation, vapour barrier and steel liner tray, to achieve 'U'
value of
0.45W/mTO THE POWER OF 2. Concealed aluminium gutters and exposed downpipes.
Precast concrete floor planks to flat roof areas 150mm deep with screed to falls and Sarnafil single ply inverted flat roof system.
7. GLAZING
Double glazed polyester powder coated, colour Dark Grey BS 18B 25 externally and White RAL 9016 internally, thermally broken
Hunter Douglas aluminium windows with approximately 50% top hung opening lights. Polyester powder coated aluminium doors and
external fire exit doors.
88 MILTON PARK OUTLINE SPECIFICATION
VERTEX LANDLORD'S WORKS
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2
All ground floor windows to south and west elevations and first floor windows to west elevations to have external aluminium
Kingfisher sun louvres.
Full height glazing to front entrance area.
Glazed rebated entrance doors, letter box and conduit for entry control.
8. INTERNAL WALLS
Blockwork generally to underside of floors or roof structure, with a plaster finish to core areas. No plaster or other finish to other
'workspace' areas.
Block to WC cubicles.
9. STAIRCASES
Precast concrete staircases to front entrances.
Polyester powder coated balustrading and maple handrail to front staircases and landing.
Ladder access to plant rooms.
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Galvanised mild steel painted external spiral fire escape stair to east and west elevation. Galvanised mild steel-painted external spiral
fire escape stair to south elevation to be procured and fitted at a later date--see Agreement for Lease.
10. INTERNAL FITTINGS
DOORS
Internal entrance doors to be solid core maple veneered with vision panels, with maple linings and architraves.
All other doors off entrance areas to be solid core maple veneered flush doors, maple linings and architraves.
Toilet cubicle doors to be maple with maple linings and architraves. Riser duct doors to be painted MDF.
The female toilet doors will be hung on the jamb nearest the basins.
DOOR FURNITURE
Pull handles and kick/push plates to be stainless steel and other ironmongery satin anodised aluminium by Newman Tonks.
JOINERY
Maple skirtings to entrance areas. No skirtings anywhere else in building. All window boards to be omitted as agreed with Vertex.
88 MILTON PARK OUTLINE SPECIFICATION
VERTEX LANDLORD'S WORKS
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3
TOILETS
Toilet areas to have white china sanitaryware, laminate panels to concealed WC and urinal cisterns, solid acrylic resin vanity units to
wash hand basins, toilet roll holders, mirrors, coat hooks and fused spur outlets for hand dryers.
At Vertex's request, the first floor disabled WC and the ground floor shower located next to lift 4 and stair 7 shown on the general
arrangement drawings will be left as a shell, i.e. no wall, floor, ceiling or sanitary fitting or finishes will be included. Drainage services
will be left capped off. No radiators will be installed. Pipework to radiators will be capped off. No mechanical ventilation provision
shall be made.
11. INTERNAL FINISHES
WALLS
Front entrance, staircase and landing areas to be plastered and finished with emulsion paint finish.
All other 'workspace' areas to be fairfaced blockwork.
With the exception of the first floor disabled WC and the ground floor shower next to lift 4 and staircase 7 described at 10 above,
toilet walls to be plastered and have full height Langley ceramic tiles.
FLOORS
Staircase and landing areas to have Escopallas Excell carpet tiles antistatic to IBM Standard for general office use with nosings to
staircase tread.
Cleaners room to be sand/cement screed with sheet vinyl flooring.
2002. EDGAR Online, Inc.
VVith the exception of the first floor disabled WC and the ground floor shower next to lift 4 and staircase 7 described at 10 above,
toilet areas to be sand/cement screed with slip resistant 300 x 300mm Langley ceramic tiling.
Front entrances to have non-slip Langley ceramic tiling with aluminium/polypropylene entrance matting.
'Workspace' areas to be powerfloat concrete on ground floor and concrete planks on first floor. First floor planks to receive a coloured
dust sealer.
Plant room floors and lift motor room will receive and application of three coats of "Watco Octaseal" paint.
Entrance, staircase and landing areas generally to have Gyproc MF plasterboard ceiling.
CEILINGS
4
88 MILTON PARK OUTLINE SPECIFICATION
VERTEX LANDLORD'S WORKS
--------------------------------------------------------------------------------
With the exception of the first floor disabled WC and the ground floor shower next to lift 4 and staircase 7 described at 10 above,
toilet areas to have exposed narrow grid Armstrong Microlux Dune suspended ceiling with 600 x 600mm moisture resisting tiles.
No other ceiling finishes in the building.
12. LIFT
2 No Eight person Schindler 100 Series hydraulic passenger lifts.
Lift car door and returns are finished in stainless steel. Full height carpet tiles to side walls, half height carpet with tinted mirror to rear
wall and handrail below. Carpet tiles to floor. Concealed lighting to ceiling.
A flush telephone wall cabinet (no telephone or cabling) will be provided.
13. ELECTRICAL INSTALLATION
The incoming electrical supply will be provided by the local electricity supply authority, and will be delivered and metered at low
voltage, maximum anticipated load allowance of 290 KVA.
Separate cable risers shall be provided, 1 per each building core. Electrical riser to be fitted out with lighting and small power
distribution system for first floor only. Data/communication risers to provide space for tenant fit out.
LIGHTING
Emergency lighting, based on integral or remote battery units shall be provided to all relevant escape route areas in accordance with
BS5266 and as required by the local authority.
Lighting installation shall comprise of the following areas and the artificial average illumination level will be:
i. Entrance: 200-300 Lux; wall mounted low energy Marlin luminaires.
ii. Staircases and landing areas: 150 Lux; Marlin recessed low energy compact fluorescent luminaires.
iii. Toilets (with the exception of the first floor disabled WC and the ground floor next to lift 4 and staircase 7 described at 10 above):
150 Lux; low energy recessed compact fluorescent Marlin luminaires to cubicles and circulation areas, low voltage Marlin
2002. EDGAR Online, Inc.
downlighters or pelmet lighting over the vanity units.
iv. Plant rooms etc: 200-250 Lux; linear fluorescent luminaires with metal reflectors or compact fluorescent bulkhead luminaires
surface linked.
88 MILTON PARK OUTLINE SPECIFICATION
VERTEX LANDLORD'S WORKS
--------------------------------------------------------------------------------
5
V. Unoccupied 'workspace' areas: Minimum numbers of fluorescent batten tubes to be installed to provide minimum lighting to render
building safe (as agreed with Vertex).
POWER DISTRIBUTION
Single and double outlet switched 13 amp socket outlets shall be positioned within the core areas and plantrooms to provide for routine
maintenance, cleaning and general services. No other small power distribution.
Emergency lighting, based on integral or remotely battery units shall be provided to all relevant escape route areas in accordance with
BS5266 and as required by the local authority.
FIRE ALARM
A "break glass" fire alarm installation and automatic smoke detection system shall be provided to all core and workspace areas of the
building designed in accordance with BS5839, protection category L2. The alarm and detection system shall have the facility to be
extended to accommodate tenant requirements. Fire alarm sounders are provided to give coverage to the whole of the building based
on an open plan basis.
The building shall be provided with its own lightning protection system designed in accordance with BS6651.
LIGHTING PROTECTION
ACCESS SYSTEM PROVISION
An access conduit system shall be provided from the external doors in the entrance areas to above the suspended ceiling for the
installation of a security system by a future tenant.
14. HEATING, PLUMBING AND VENTILATION
GAS - GENERAL
2 No low pressure gas connections shall be provided from the local supply authority mains to the gas meter enclosure. Both gas mains
rise to serve two gas fired low pressure hot water (LPHW) 'Ideal CXD 70' boilers at roof level in the plant room which provide hot
water distribution (see below) and shall be provided to comply with local gas board regulations.
WATER - GENERAL
2 No dedicated 35 mm dia water connections will be provided from the local supply authority mains to 2 No cold water storage tanks
in the plant room.
COLD WATER DISTRIBUTION
6
2002. EDGAR Online, Inc.
88 MILTON PARK OUTLINE SPECIFICATION
VERTEX LANDLORD'S WORKS
--------------------------------------------------------------------------------
Cold water distribution within the 2 core areas of toilet/cleaners accommodation is provided from the storage tanks. Cold water
connected to all sanitary fittings in both core areas. Overflow pipes to toilets discharge onto floor where a gully is provided.
HOT WATER DISTRIBUTION
The building shall be provided with four gas fired boilers in the plant room (as described above) capable of serving hot water to all
appropriate sanitary fittings in the core areas. Two hot water systems will be provided with each system comprising of two gas fired
boiler units, pressurisation set, primary and secondary pipework and hot. water treatment equipment located within the dedicated plant
room.
SPACE HEATING
Dedicated LPHW pipework distribution systems comprising weather compensated circuits shall be provided to be capable of serving a
network of perimeter radiators to the core areas.
VENTILATION
With the exception of the first floor disabled WC and ground floor shower next to lift 4 and staircase 7 described at 10 below, toilet
extract ventilation will be provided to serve the initial cores by central extract fan units in the plantroom. Supply air shall be introduced
from the adjacent circulation areas. Toilet areas shall be maintained at a negative pressure with respect to surrounding areas to control
migration of odours etc.
Ventilation to the roof plant rooms shall be provided to meet local authority requirements via louvres in the external walls.
The sanitary and plumbing systems to serve the toilet and cleaner accommodation shall be designed in accordance with current Codes
of Practice and to suit requirements of local authority.
GENERAL
15. INCOMING SERVICES
Services to be installed to the buildings as follows:
FOUL AND SURFACE WATER SEWERS - Connected to existing main drainage system.
Electricity - Cables to be laid to existing Southern Electric low voltage system. 2 No 145 KVA supplies.
GAS - Pipes to be laid to British Gas main supply. 2 No @ 378 kwh.
BT, MERCURY AND COMTEL - Ducts to be installed for BT, Mercury Communications and Comtel.
7
88 MILTON PARK OUTLINE SPECIFICATION
VERTEX LANDLORD'S WORKS
--------------------------------------------------------------------------------
WATER SUPPLY - Pipework to be laid to existing Thames Water mains supply. 2 No 35mm supplies with meters are provided.
2002. EDGAR Online, Inc.
16. EXTERNAL LIGHTING
Lighting to pedestrian access, car parking, utility and amenity space with low level bollards and 5m columns with amenity luminaire,
Thom Johanna or similar with 150W high pressure lamp in a decorative housing with a dished reflector above, to achieve average
illuminance of 5 - 7 Lux.
17. CAR PARKING
A total of 270 car parking spaces to be provided. Loading - heavy delivery vehicles and cars. Finish -concrete block paving roads and
bituminous macadam spaces with block paving corner demarkation, precast concrete kerbs generally.
Access roads to the development to be finished with bituminous macadam wearing course.
VALE
OF WHITE HORSE
Planning & Engineering Department
8
TOWN AND COUNTRY PLANNING ACT 1990
NOTICE OF PERMISSION
To: Lansdown Estates Group Ltd c/o Granville Projects
80 Milton Park
Abingdon
Oxon OX14 4RY
Application No: MIL/59/122
Proposal: Demolition of 88 Milton Park and erection of
proposed
B1/or B8 development.
Address: 88 Milton Park
Milton
Abingdon
Oxon
OX14 4RY
DATE OF DECISION: 14th April 1997
The Vale of White Horse District Council, in pursuance of powers under the Above Act hereby PERMIT the above development to be
carried out in accordance with the application and accompanying plans submitted by you, subject to compliance with the conditions
specified hereunder.
1. THE DEVELOPMENT TO WHICH THIS PERMISSION RELATES SHALL BE BEGUN WITHIN A PERIOD OF FIVE
YEARS FROM THE DATE OF THIS PERMISSION.
2. THE DEVELOPMENT SHALL BE LANDSCAPED IN ACCORDANCE WITH A SCHEME WHICH SHALL BE SUBMITTED
TO AND APPROVED IN WRITING BY THE DISTRICT PLANNING AUTHORITY BEFORE THE DEVELOPMENT
COMMENCES AND SHALL ENSURE:
a) THE RETENTION OF SELECTED EXISTING TREES AND SHRUBS ON THE SITE,
b) THE PROTECTION 0F THE SELECTED EXISTING TREES AND SHRUBS ON THE SITE DURING THE DEVELOPMENT
OF THE SITE;
2002. EDGAR Online, Inc.
c) THE CARRYING OUT OF ANY EARTH MOVING OPERATIONS CONCURRENTLY WITH THE CARRYING OUT OF
THE BUILDING AND OTHER WORKS;
d) COMPLETION OF THE SCHEME DURING THE PLANTING SEASON NEXT FOLLOWING THE COMPLETION OF THE
BUILDING(S), OR SUCH OTHER DATE AS MAY BE AGREED IN WRITING WITH THE DISTRICT PLANNING,
AUTHORITY;
e) THE MAINTENANCE OF THE LANDSCAPED AREAS FOR A PERIOD OF FIVE YEARS OR UNTIL ESTABLISHED,
WHICHEVER MAY BE LONGER. ANY TREES OR SHRUBS REMOVED, OR WHICH IN THE OPINION OF THE DISTRICT
PLANNING AUTHORITY, ARE DYING, BEING SEVERELY DAMAGED OR BECOMING SERIOUSLY DISEASED WITHIN
FIVE YEARS OF PLANTING, SHALL BE REPLACED BY TREES OR SHRUBS OF SIMILAR SIZE AND SPECIES TO THOSE
ORIGINALLY REQUIRED TO BE PLANTED.
3. PRIOR TO THE FIRST USE OF ANY BUILDING, THE CAR PARKING AREA SHOWN ON THE APPROVED PLAN
REFERENCE (406/002E) SHALL BE CONSTRUCTED, DRAINED, LAID AND MARKED OUT IN ACCORDANCE WITH THE
SPECIFICATION OF OXFORDSHIRE COUNTY COUNCIL OR SUCH WORKS. THEREAFTER THE AREA SHALL BE KEPT
PERMANENTLY FREE OF ANY OBSTRUCTION TO SUCH USE.
The reasons for the Council's decision to grant permission for the development subject to compliance with the conditions hereinbefore
specified are:
1. TO COMPLY WITH THE REQUIREMENTS OF SECTION.91 OF THE TOWN & COUNTRY PLANNING
ACT, 1990.
2. TO ENSURE THE IMPLEMENTATION OF A SATISFACTORY SCHEME OF LANDSCAPING WHICH WILL IN DUE
COURSE IMPROVE THE ENVIRONMENTAL QUALITY OF THE DEVELOPMENT AND SOFTEN ITS IMPACT ON THE
AREA.
3. IN THE INTEREST OF HIGHWAY SAFETY.
/s/
CHIEF PLANNING AND ENGINEERING
OFFICER,
WARRANTY AGREEMENT CoWa/P&T
2002. EDGAR Online, Inc.
(IN SCOTLAND LEAVE BLANK THIS AGREEMENT
FOR APPLICABLE DATE SEE is made the day of 199
CLAUSE ON PAGE 4) ----------- -----------------
BETWEEN:
(insert name of (1) NICHOLAS HARE ARCHITECTS
the Consultant) -----------------------------------------------------------------------------------
of/whose registered office is situated at 3 Barnsbury Square,
-----------------------------------------
London N1 IJL ("the Firm"), and
-----------------------------------------------------------------
(insert name of
the Purchaser/the Tenant) (2) -----------------------------------------------------------------------------------
whose registered office is situated at
-------------------------------------------
-----------------------------------------------------------------------------------
(delete as appropriate) ("the Tenant" which term shall include all permitted assignees
under this Agreement).
WHEREAS:
(delete as appropriate) A. The Tenant has entered into an agreement to lease with
-----------------------------------------------------------------------------------
MILTON PARK LTD
-------------------------------------------------------- ("the Client") relating to
-----------------------------------------------------------------------------------
(insert description of
the premises) -----------------------------------------------------------------------------------
------------------------------------------------------------------ ("the Premises")
(insert -----------------------------------------------------------------------------------
description of
the development) at 86-88 MILTON PARK, ABINGDON, OXON
-----------------------------------------------------------------------------------
(insert address
of the development) --------------------------------------------------------------- "the Development").]
(delete as appropriate) ["The Premises" are also referred to as "the Development" in this Agreement.]
insert date B. By a contract ("the Appointment") dated --------------------------------------------
or appointment the Client has appointed the Firm as [architects] in connection with the
(delete/complete Development.
as appropriate)
C. The Client has entered or may enter into a contract ("the Building Contract") with
(insert name or
building contractor VARIOUS TRADE CONTRACTORS TO BE
or a building ------------------------------------------------------------------------------------
contractor to be SELECTED BY THE CLIENT
selected by the ------------------------------------------------------------------------------------
Client)
------------------------------------------------------------------------------------
for the construction of the Development.
NOW IN CONSIDERATION OF THE PAYMENT OF ONE POUND
(L1) BY THE PURCHASER/THE TENANT TO THE FIRM (RECEIPT OF WHICH THE FIRM ACKNOWLEDGES) IT IS
HEREBY AGREED as follows:
2002. EDGAR Online, Inc.
(delete as appropriate 1. The Firm warrants that it has exercised
to reflect terms of the and will continue to exercise reasonable skill
appointment) [and care] [care and diligence] in the
performance of its services to the Client
under the Appointment. In the event of any
breach of this warranty:
(a) subject to paragraphs (b) and (c) of this
clause, the Firm shall be liable for the
reasonable costs of repair renewal and/or
reinstatement of any part or parts of the
Development to the extent that
- the Tenant incurs such costs and/or
- the Tenant is or becomes liable either
directly or by way of financial
contribution for such costs.
The Firm shall not be liable for other
losses incurred by the Tenant.
(b) the Firm's liability for costs under
this Agreement shall be limited to that
proportion of such costs which it would
be just and equitable to require the Firm
to pay having regard to the extent of the
Firm's responsibility for the same and on
the basis that
---------------------------
(insert the names GLANVILLE AND ASSOCIATES
of other intended
------------------------------------------
warrantors) GLANVILLE PROJECTS
------------------------------------------
PETER BRETT ASSOCIATES
------------------------------------------
MACGREGOR SMITH
------------------------------------------
shall
--------------------------------------
be deemed to have provided contractual
undertakings on terms no less onerous
than this Clause 1 to the Tenant in
respect of the performance of their
services in connection with the
Development and shall be deemed to have
paid to the Tenant such proportion which
it would be just and equitable for them
to pay having regard to the extent of
their responsibility;
(c) the Firm shall be entitled in any action
or proceedings by the Tenant to rely on
any limitation in the Appointment and to
raise the equivalent rights in defence of
liability as it would have against the
Client under the Appointment;
(d) the obligations of the Firm under or
pursuant to this Clause I shall not be
released or diminished by the appointment
of any person by the Tenant to carry out
any independent enquiry into any relevant
matter.
2002. EDGAR Online, Inc.
(delete where 2. [Without prejudice to the generality of Clause
1,
the Firm is the Firm further warrants that it has exercised
the quantity and will continue to exercise reasonable skill
surveyor) and care to see that, unless authorised by the
Client in writing or, where such authorisation
is given orally, confirmed by the Firm to the
Client in writing, none of the following has
been or will be specified by the Firm for use
in the construction of those parts of the
Development to which the Appointment relates:
(a) high alumina cement in structural
elements:
(b) wood wool slabs in permanent formwork to
concrete:
(c) calcium chloride in admixtures for use in
reinforced concrete:
(d) asbestos products:
(e) naturally occurring aggregates for use in
reinforced concrete which do not comply
with British Standard 882: 1983 and/or
naturally occurring aggregates for use in
concrete which do not comply with British
Standard 8110: 1985.
(further
specific
materials
may be added
by agreement) In the event of any breach of this
warranty the provisions of Clauses 1a,
b, c and d shall apply.]
2002. EDGAR Online, Inc.
3. The Firm acknowledges that the Client has
paid all fees and expenses properly due and
owing to the Firm under the Appointment up to
the date of this Agreement.
4. The Tenant has no authority to issue any
direction or instruction to the Firm in relation
to the Appointment.
5. The copyright in all drawings, reports,
models, specifications, bills of quantities,
calculations and other documents and information
prepared by or on behalf of the Firm in
connection with the Development (together
referred to in this Clause 5 as "the Documents")
shall remain vested in the Firm but, subject
to the Firm having received payment of any fees
agreed as properly due under the Appointment.
The Tenant and its appointee shall have a
licence to copy and use the Documents
and to reproduce the designs and content of them
for any purpose related to the Premises
including, but without limitation, the
construction, completion, maintenance,
letting, promotion, advertisement,
reinstatement, refurbishment and repair of the
Premises. Such licence shall enable the Tenant
and its appointee to copy and use the Documents
for the extension of the Premises but such use
shall not include a licence to reproduce the
designs contained in them for any extension of
the Premises. The Firm shall not be liable for
any use by the Tenant or its appointee of any of
the Documents for any purpose other than that
for which the same were prepared by or on
behalf of the Firm.
6. The Firm shall maintain professional indemnity
insurance in an amount of not less than
(insert amount) ONE AND A HALF MILLION POUNDS (L1,500,000) for
any one occurrence or series of occurrences
arising out of any one event for a period
(insert period) of years from the date of practical
completion
of the Premises under the Building Contract,
provided always that such insurance is
available at commercially reasonable rates.
The Firm shall immediately inform the Tenant
if such insurance ceases to be available at
commercially reasonable rates in order that
the Firm and the Tenant can discuss means of
best protecting the respective positions of
the Tenant and the Firm in the absence of such
insurance. As and when it is reasonably
requested to do so by the Tenant or its
appointee the Firm shall produce for
inspection documentary evidence that its
professional indemnity insurance is being
maintained.
(insert number [7 This Agreement may be assigned ONCE by the
of times) Tenant by way of absolute legal assignment to
another person taking an assignment of the
Purchaser's/the Tenant's interest in the
(delete if under Premises without the consent of the Client or
Scots law) the Firm being required and such assignment
shall be effective upon written notice thereof
being given to the Firm. No further assignment
shall be permitted.]
2002. EDGAR Online, Inc.
8 Any notice to be given by the Firm hereunder
shall be deemed to be duly given if it is
delivered by hand at or sent by registered
post or recorded delivery to the Tenant at its
registered office and any notice given by the
Tenant hereunder shall be deemed to be duly
given if it is addressed to "The Senior
Partner"/"The Managing Director" and delivered
by hand at or sent by registered post or
recorded delivery to the above-mentioned
address of the Firm or to the principal
business address of the Firm for the time
being and, in the case of any such notices,
the same shall if sent by registered post or
recorded delivery be deemed to have been
received forty eight hours after being posted.
9 No action of proceedings for any breach of
(complete as this Agreement shall be commenced against the
appropriate) Firm after the expiry of years from the
date of practical completion of the Premises
under the Building Contract.
(delete if under [10 The construction validity and performance of
Scots law) this Agreement shall be governed by English law
and the parties agree to submit to the non-exclusive
jurisdiction of the English Courts.]
(alternatives, [AS WITNESS the hands of the parties the day and
delete as year first before written.
appropriate)
Signed by or on behalf of the Firm
-------------------
(for agreement in the presence of:
executed under hand
--------------------------------
and NOT as a deed)
Signed by or on behalf of the Tenant
-------------------
in the presence of:
-------------------------------]
WARRANTY AGREEMENT CoWa/P&T
2002. EDGAR Online, Inc.
(IN SCOTLAND LEAVE BLANK THIS AGREEMENT
FOR APPLICABLE DATE SEE is made the day of 199
CLAUSE ON PAGE 4) ----------- -----------------
BETWEEN:
(insert name of (1) GLANVILLE AND ASSOCIATES
the Consultant) -----------------------------------------------------------------------------------
of/whose registered office is situated at PORTERSWOOD HOUSE, PORTERSWOOD,
-----------------------------------------
ST. ALBANS, HERTS AL3 6PQ ("the Firm"), and
-----------------------------------------------------------------
(insert name of
the Purchaser/the Tenant) (2) -----------------------------------------------------------------------------------
whose registered office is situated at
-------------------------------------------
-----------------------------------------------------------------------------------
(delete as appropriate) ("the Tenant" which term shall include all permitted assignees
under this Agreement).
WHEREAS:
(delete as appropriate) A. The Tenant has entered into an agreement to lease with
-----------------------------------------------------------------------------------
MILTON PARK LTD
-------------------------------------------------------- ("the Client") relating to
-----------------------------------------------------------------------------------
(insert description of
the premises) -----------------------------------------------------------------------------------
------------------------------------------------------------------ ("the Premises")
(insert -----------------------------------------------------------------------------------
description of
the development) at 86-88 MILTON PARK, ABINGDON, OXON
-----------------------------------------------------------------------------------
(insert address
of the development) --------------------------------------------------------------- "the Development").]
(delete as appropriate) ["The Premises" are also referred to as "the Development" in this Agreement.]
insert date B. By a contract ("the Appointment") dated --------------------------------------------
or appointment the Client has appointed the Firm as [architects] in connection with the
(delete/complete Development.
as appropriate)
C. The Client has entered or may enter into a contract ("the Building Contract") with
(insert name or
building contractor VARIOUS TRADE CONTRACTORS TO BE
or a building ------------------------------------------------------------------------------------
contractor to be SELECTED BY THE CLIENT
selected by the ------------------------------------------------------------------------------------
Client)
------------------------------------------------------------------------------------
for the construction of the Development.
NOW IN CONSIDERATION OF THE PAYMENT OF ONE POUND
(L1) BY THE PURCHASER/THE TENANT TO THE FIRM (RECEIPT OF WHICH THE FIRM ACKNOWLEDGES) IT IS
HEREBY AGREED as follows:
2002. EDGAR Online, Inc.
(delete as appropriate 1. The Firm warrants that it has exercised
to reflect terms of the and will continue to exercise reasonable skill
appointment) [and care] [care and diligence] in the
performance of its services to the Client
under the Appointment. In the event of any
breach of this warranty:
(a) subject to paragraphs (b) and (c) of this
clause, the Firm shall be liable for the
reasonable costs of repair renewal and/or
reinstatement of any part or parts of the
Development to the extent that
- the Tenant incurs such costs and/or
- the Tenant is or becomes liable either
directly or by way of financial
contribution for such costs.
The Firm shall not be liable for other
losses incurred by the Tenant.
(b) the Firm's liability for costs under
this Agreement shall be limited to that
proportion of such costs which it would
be just and equitable to require the Firm
to pay having regard to the extent of the
Firm's responsibility for the same and on
the basis that
(insert the names
of other intended GLANVILLE PROJECTS
warrantors) ------------------------------------------
NICHOLAS HARE ARCHITECTS
------------------------------------------
PETER BRETT ASSOCIATES
------------------------------------------
MACGREGOR SMITH
------------------------------------------
shall
--------------------------------------
be deemed to have provided contractual
undertakings on terms no less onerous
than this Clause 1 to the Tenant in
respect of the performance of their
services in connection with the
Development and shall be deemed to have
paid to the Tenant such proportion which
it would be just and equitable for them
to pay having regard to the extent of
their responsibility;
(c) the Firm shall be entitled in any action
or proceedings by the Tenant to rely on
any limitation in the Appointment and to
raise the equivalent rights in defence of
liability as it would have against the
Client under the Appointment;
(d) the obligations of the Firm under or
pursuant to this Clause I shall not be
released or diminished by the appointment
of any person by the Tenant to carry out
any independent enquiry into any relevant
matter.
2002. EDGAR Online, Inc.
(delete where 2. [Without prejudice to the generality of Clause 1,
the Firm is the Firm further warrants that it has exercised
the quantity and will continue to exercise reasonable skill
surveyor) and care to see that, unless authorised by the
Client in writing or, where such authorisation
is given orally, confirmed by the Firm to the
Client in writing, none of the following has
been or will be specified by the Firm for use
in the construction of those parts of the
Development to which the Appointment relates:
(a) high alumina cement in structural
elements:
(b) wood wool slabs in permanent formwork to
concrete:
(c) calcium chloride in admixtures for use in
reinforced concrete:
(d) asbestos products:
(e) naturally occurring aggregates for use in
reinforced concrete which do not comply
with British Standard 882: 1983 and/or
naturally occurring aggregates for use in
concrete which do not comply with British
Standard 8110: 1985.
(further
specific
materials
may be added
by agreement) In the event of any breach of this
warranty the provisions of Clauses 1a,
b, c and d shall apply.]
2002. EDGAR Online, Inc.
3. The Firm acknowledges that the Client has
paid all fees and expenses properly due and
owing to the Firm under the Appointment up to
the date of this Agreement.
4. The Tenant has no authority to issue any
direction or instruction to the Firm in relation
to the Appointment.
5. The copyright in all drawings, reports,
models, specifications, bills of quantities,
calculations and other documents and information
prepared by or on behalf of the Firm in
connection with the Development (together
referred to in this Clause 5 as "the Documents")
shall remain vested in the Firm but, subject
to the Firm having received payment of any fees
agreed as properly due under the Appointment.
The Tenant and its appointee shall have a
licence to copy and use the Documents
and to reproduce the designs and content of them
for any purpose related to the Premises
including, but without limitation, the
construction, completion, maintenance,
letting, promotion, advertisement,
reinstatement, refurbishment and repair of the
Premises. Such licence shall enable the Tenant
and its appointee to copy and use the Documents
for the extension of the Premises but such use
shall not include a licence to reproduce the
designs contained in them for any extension of
the Premises. The Firm shall not be liable for
any use by the Tenant or its appointee of any of
the Documents for any purpose other than that
for which the same were prepared by or on
behalf of the Firm.
6. The Firm shall maintain professional indemnity
insurance in an amount of not less than
(insert amount) ONE AND A HALF MILLION Pounds (L1,500,000) for
any one occurrence or series of occurrences
arising out of any one event for a period
(insert period) of years from the date of practical
completion
of the Premises under the Building Contract,
provided always that such insurance is
available at commercially reasonable rates.
The Firm shall immediately inform the Tenant
if such insurance ceases to be available at
commercially reasonable rates in order that
the Firm and the Tenant can discuss means of
best protecting the respective positions of
the Tenant and the Firm in the absence of such
insurance. As and when it is reasonably
requested to do so by the Tenant or its
appointee the Firm shall produce for
inspection documentary evidence that its
professional indemnity insurance is being
maintained.
(insert number [7 This Agreement may be assigned ONCE by the
of times) Tenant by way of absolute legal assignment to
another person taking an assignment of the
Purchaser's/the Tenant's interest in the
(delete if under Premises without the consent of the Client or
Scots law) the Firm being required and such assignment
shall be effective upon written notice thereof
being given to the Firm. No further assignment
shall be permitted.]
2002. EDGAR Online, Inc.
8 Any notice to be given by the Firm hereunder
shall be deemed to be duly given if it is
delivered by hand at or sent by registered
post or recorded delivery to the Tenant at its
registered office and any notice given by the
Tenant hereunder shall be deemed to be duly
given if it is addressed to "The Senior
Partner"/"The Managing Director" and delivered
by hand at or sent by registered post or
recorded delivery to the above-mentioned
address of the Firm or to the principal
business address of the Firm for the time
being and, in the case of any such notices,
the same shall if sent by registered post or
recorded delivery be deemed to have been
received forty eight hours after being posted.
9 No action of proceedings for any breach of
(complete as this Agreement shall be commenced against the
appropriate) Firm after the expiry of years from the
date of practical completion of the Premises
under the Building Contract.
(delete if under [10 The construction validity and performance of
Scots law) this Agreement shall be governed by English law
and the parties agree to submit to the non-exclusive
jurisdiction of the English Courts.]
(alternatives, [AS WITNESS the hands of the parties the day and
delete as year first before written.
appropriate)
Signed by or on behalf of the Firm
-------------------
(for agreement in the presence of:
executed under hand
--------------------------------
and NOT as a deed)
Signed by or on behalf of the Tenant
-------------------
in the presence of:
-------------------------------]
LATENT DEFECTS PROPOSAL
Unit 88 Milton Park
2002. EDGAR Online, Inc.
INSURED VALUES:
Items 1/4 - Building
(pound)2,035,000
Item 5 - Disturbance Costs @ 2.5% (pound)
50,000
---------
(pound)2,085,000
Item 6 - Rent 12 months @(pound)300,000 p.a. (pound)
300,000
---------
(pound)2,385,000
---------
PREMIUM:
Items 1/5 - Building/Disturbance Costs
(pound)18,648.24
Deposit (pound)
2,236.00
Item 6 - Rent (pound)
2,246.40
---------
(pound)23,130.64
---------
Single Premium
12 Years Cover
Building Cover Deductible (pound)20,000 Annual Inflation Cover (Building, only) - 5% All Premiums inclusive of Insurance
Premium Tax at 4%
NOTES:
(Rate may change prior to cover commencing)
COMMERCIAL UNION ASSURANCE COMPANY plc
LATENT DEFECTS POLICY
The Insurers agree (subject to the terms definitions exclusions and conditions of this policy) that if after payment of the premium
DAMAGE (as within defined) shall be discovered then the Insurers will pay to the Insured the value of the Property Insured at the time
of the discovery of the DAMAGE or the amount of such DAMAGE or at the Insurers' option reinstate or repair such property or any
part of it or remedy any defect therein to prevent DAMAGE
Provided that the liability of the Insurers under this policy shall not exceed
i in the whole the total sum insured or in respect of any item its sum insured at the time of the discovery of the DAMAGE
ii the sum insured remaining after deduction for any other DAMAGE unless the Insurers shall have agreed to reinstate any such sum
insured
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This policy incorporates the Schedule Specification and Endorsements which shall be read together as one contract. Words and
expressions to which specific meaning is given in any part of this policy shall have the same meaning wherever they appear
THE SCHEDULE
AGENCY MEPC Insurance Management Limited
BRANCH & AGENT NO. 959 800093UP Policy No.
THE INSURERS: Commercial Union Assurance Company
plc
THE INSURED:
ADDRESS
THE PROPERTY INSURED As detailed in the attached
Specification
TOTAL SPECIFICATION SUM INSURED (pound)
DEDUCTIBLE:
In respect of
1 Item No. 4 the first(pound) ) Subject to maximum
) policy deductible
each
2 Item No. 6 the first(pound) ) incident of DAMAGE
) being(pound)
3 All other items the first(pound) )
THE SUM INSURED BY THIS POLICY (pound)
being 100% of the total Specification sum insured
PERIOD OF INSURANCE:
1 For Item 4a
From
to
2 For Items 4b and 4c
From
to
3 For all other items
From
to
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PREMIUM(Pound) less deposit of(pound) =(pound)
(inclusive of(pound) Insurance Premium Tax)
BRANCH ADDRESS: 82 Pall Mall, London, SWIY 5HF
2
THE PROPERTY INSURED
The building situate
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ITEM NO. SUM INSURED
1. The building excluding property as described in item
(pound))
numbers 2 & 3 occupied as
)
)
2 Landlord's fixtures and fittings and permanently
)
installed services forming part of the building
(pound))
)
3 Roads, pavements, car parks, lighting, walls, gates
)
fences and landscaping of the area adjacent to
)
the building but only to the extent of the
)
Insured's liability therefore
(pound))
)
4 Costs incurred in repairing DAMAGE to the Property
)
Insured discovered during the period of insurance
)
applicable to this item
(pound))
)
a in respect of roofs with less than 6% pitch
)
from the horizontal
(pound))
)
b in respect of that part of the Waterproofing
)
Envelope below ground level
(pound))
)
c in respect of other parts of the Waterproof
)
Envelope
(pound))
5 Costs necessarily and reasonably incurred
with the consent of the Insurers for dismantling, moving,
removing, returning and re-erecting property not
forming part of the building to enable repairs or
rebuilding to proceed
(pound)
6 Months rent
(pound)
--------
(pound)
--------
--------
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Payment of any claim under Items Nos 2, 3, 5 and 6 is conditional upon payment being made or liability admitted for a claim under
Item Nos 1 or 4
MEMO
MEMO - WAIVER OF RIGHTS OF REDRESS
Notwithstanding Claims Condition 6 the Insurers hereby agree not to pursue any subrogated rights of redress they may accrue against
the Lansdown Estates Group's design team and construction managers otherwise than in respect of fraud or fraudulent acts.
-3-
DEFINITION
The word DAMAGE, in capital letters, shall mean
1 destruction of or physical damage to
2. threat of imminent collapse of
any portion of the Property Insured for which a Certificate of Practical Completion has been received by the Insurers and for which
they have formally confirmed cover directly caused by
a a defect existing prior to the commencement of the Period of Insurance but remaining undiscovered at that date
i in the design or construction of elements essential to the stability and strength of the Property Insured or in the materials used in the
construction of such elements
ii in the external walls and roofing of the Property Insured
iii in respect of Item No. 4 of the Specification only - in the design or construction of the Waterproofing Envelope, i.e. the roof,
skylights, external walls, cladding, windows, doors and lowest floor or in the materials used in the construction of the Waterproofing
Envelope
b subsidence landslip or ground heave of the land on which the Property stands
-4-
EXCLUSIONS
This policy does not cover
1 DAMAGE discovered after the relevant period of insurance
2 DAMAGE due to arising from
a. wear and tear
b. inadequate maintenance of the Property Insured
c. abnormal use or overloading of the Property Insured beyond its design capacity
d. normal settlement or bedding down
e. normal shrinkage or expansion of materials used in the construction of the Property Insured
f. change in colour texture or any ageing process of the Property Insured
g. faulty or inadequate weatherproofing except as insured by Item No 4 of the Specification
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3. loss or destruction or damage due to or arising from fire, lightning, explosion, earthquake, storm, flood, escape of water from any
tank apparatus or pipe whether caused by DAMAGE insured hereby or otherwise
4. the cost of any work for which any contractor is responsible under the defects liability provisions contained in any contract for
works after issue of Certificate of Practical Completion or date of hand over whichever is applicable
5. consequential or economic loss of any kind or description except loss of rent when such loss is included in the cover under this
policy
6. any property more specifically insured by or on behalf of the Insured
7. loss or destruction or damage caused by pollution or contamination but this shall not exclude destruction of or damage to the
Property Insured, not otherwise excluded, caused by
a. pollution or contamination which itself results from DAMAGE
b. DAMAGE which itself results from pollution or contamination
8. loss or destruction or damage occasioned by war invasion act of foreign enemy hostilities (whether war be declared or not) civil war
rebellion revolution insurrection military or usurped power nationalisation confiscation requisition seizure or destruction by the
government or any public authority
9. loss or destruction of or damage to any property whatsoever or any loss or expense whatsoever resulting or arising therefrom or any
consequential loss directly or indirectly caused by or contributed to by or arising from
a ionising radiations or contamination by radioactivity from any nuclear fuel or from any nuclear waste from the combustion of nuclear
fuel
b the radioactive toxic explosive or other hazardous properties of any explosive nuclear assembly or nuclear component thereof
10. loss or destruction or damage due to or arising from pressure waves caused by aircraft or other aerial devices travelling at sonic or
supersonic speeds
GENERAL PROVISIONS
1 CONDITION OF AVERAGE (UNDERINSURANCE) The sum insured by each item of this policy other than those applying solely
to fees or removal of debris is declared to be separately subject to Average
Whenever a sum insured is declared to be subject to Average if such sum shall at the discovery of any DAMAGE be less than the
value of the property covered within such sum insured the amount payable by the Insurers in respect of such DAMAGE shall be
proportionately reduced
2 DEDUCTIBLES This policy does not cover the amounts of the deductibles stated in the Schedule in respect of each and every loss
as ascertained after the application of all other terms and conditions of the policy including any condition of Average
3 ASSIGNMENT This policy is assignable to any party acquiring an Insurable Interest in the Property Insured subject to prior
notification being received by the Insurers and admitted by them in writing
GENERAL CONDITIONS
1 POLICY VOIDABLE This policy shall be voidable in the event of misrepresentation misdescription or non disclosure in any
material particular
2 RESTRICTIVE AGREEMENTS The Insured shall not enter into any agreement lease or contract with any party which would limit
modify or curtail the fights of the Insurers against third parties without their consent
3 ALTERATION This policy shall be avoided if there be any alteration modification change of use or addition to the Property Insured
whereby the risk of DAMAGE is increased unless admitted by the Insurers in writing
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4. REASONABLE PRECAUTIONS The Insured shall take all reasonable precautions to prevent DAMAGE
5 JURISDICTION This policy shall be construed in accordance with English Scottish or Northern Ireland law and shall be subject to
the exclusive jurisdiction of the appropriate Court of England and Wales Scotland or Northern Ireland and any arbitration hereunder
should be held in the United Kingdom of Great Britain and Northern Ireland
The Insurers shall not be liable to the Insured for exemplary or punitive damages in any circumstances whatsoever
CLAIMS CONDITIONS
1 ACTION BY INSURED
A On discovery of DAMAGE the Insured shall
i notify the Insurers immediately
ii carry out and permit to be taken any action which may be reasonably practicable to prevent further DAMAGE
iii deliver to the Insurers at the Insured's expense
a full information in writing of the property destroyed or damaged and the amount of the DAMAGE
b details of any other insurances on any property hereby insured
within 30 days after discovery of the DAMAGE and
c all such proofs and information relating to the claim as may reasonably be required
d if demanded a statutory declaration of the truth of the claim and of any matters connected with it
B No claim under this policy shall be payable unless the terms of this condition have been complied with
2 FRAUD If a claim is fraudulent in any respect or if fraudulent means are used by the Insured or anyone acting on his behalf to obtain
any benefit under the policy or if any DAMAGE is caused by the wilful act or with the connivance of the Insured all benefit under the
policy shall be forfeited
3 REINSTATEMENT If any property is to be reinstated or replaced by the Insurers the Insured shall at his own expense provide all
such plans documents books and information as may reasonably be required. The Insurers shall not be bound to reinstate exactly but
only as circumstances permit and in a reasonably sufficient manner and shall not in any case be bound to expend in respect of any one
of the items insured more than its sum insured
4 INSURERS RIGHTS FOLLOWING CLAIM On the discovery of DAMAGE in respect of which a claim is made the Insurers and
any person authorised by the Insurers may without thereby incurring any liability or diminishing any of the Insurers rights under this
policy enter the premises where such DAMAGE has occurred
No property may be abandoned to the Insurers
5 CONTRIBUTION AND AVERAGE If at the time of discovery of any DAMAGE there is any other insurance effected by or on
behalf of the Insured covering any of the property destroyed or damaged the liability of the Insurers hereunder shall be limited to its
rateable proportion of such DAMAGE
If any such other insurance shall be subject to any Average (underinsurance) condition this policy if not already subject to any such
condition of Average shall be subject to Average in like manner
If any such other insurance is subject to any provision whereby it is excluded from ranking concurrently with this policy either in
whole or in part or from contributing rateably the liability of the Insurers under this policy shall be limited to that proportion of the
DAMAGE which the sum insured under this policy bears to the value of the property
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6 SUBROGATION
Any claimant under this policy shall at the request and expense of the Insurers take and permit to be taken all necessary steps for
enforcing rights against any other party in the name of the Insured before or after any payment is made by the Insurers
7 ARBITRATION
If any difference arises as to the amount to be paid under this policy (liability being otherwise admitted) such difference shall be
referred to an arbitrator to be appointed by the parties in accordance with statutory provisions. Where any difference is by this
condition to be referred to arbitration the making of an award shall be a condition precedent to any right of action against the Insurers
CLAUSES
1 RENT Any insurance hereby on rent applies only if the said building or any part thereof is unfit for occupation in consequence of
DAMAGE and then the amount payable shall not exceed such proportion of the sum insured on rent as the period necessary for
reinstatement bears to the term of rent insured
2 FEES The insurance by Items Nos 1 to 4 includes an amount in respect of Architect Surveyors' Legal and Consulting Engineers' Fees
necessarily and reasonably incurred in the reinstatement or repair of Property Insured consequent upon its destruction or damage but
not for preparing any claim, it being understood that the amount payable under any item shall not exceed in total its sum insured
3. REMOVAL OF DEBRIS The insurance by Items Nos 1 to 4 extends to include costs and expenses necessarily incurred by the
Insured with the consent of the Insurers in
a removing debris
b dismantling and/or demolishing
c shoring up or propping
of the portion or portions of the Property Insured destroyed or damaged by any peril hereby insured against
The liability of the Insurers under this memo and the policy in respect of any item shall in no case exceed the sum insured thereby
The Insurers will not pay for any costs or expenses:
i incurred in removing debris except from the site of such property destroyed or damaged and the area immediately adjacent to such
site
ii arising from pollution or contamination of property not insured by this policy
4 INDEXATION OF SUM INSURED AND DEDUCTIBLE
The sum insured by each of Item Nos 1, 2, 3, 4 and 5 of the Specification and the amount(s) of the Deductible(s) will each be
separately increased by 5% compound on each anniversary of the commencement of the period of insurance. For the purpose of any
loss settlement the sum insured as adjusted in accordance with the foregoing provisions shall be regarded as the sum insured at the
time of the discovery of the DAMAGE
5 REINSTATEMENT (85% AVERAGE)
Subject to the following Special Conditions in the event of DAMAGE the basis upon which the amount payable in respect of Items
Nos 1 to 4 is to be calculated shall be the reinstatement of the property destroyed or damaged
For the purpose "reinstatement" means
a the rebuilding or replacement of property destroyed which, provided the liability of the Insurers is not increased, may be carried out
i in any manner suitable to the requirements of the Insured
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ii upon another site
b the repair or restoration of property damaged
c the remedy of any defect to prevent DAMAGE
in any case to a condition equivalent to or substantially the same as but not better or more extensive than its condition when new
except as necessary to remedy such defect
SPECIAL CONDITIONS
1 The liability of the Insurers for the repair or restoration of property damaged in part only shall not exceed the amount which would
have been payable had such property been wholly destroyed
2 If at the time of reinstatement the sum representing 85% of the cost which would have been incurred in reinstating the whole of the
property covered by any item subject to this memorandum exceeds its sum insured at the time of the discovery of any DAMAGE, the
liability of the Insurers shall not exceed that proportion of the amount of the DAMAGE which the said sum insured shall bear to the
sum representing the total cost of reinstating the whole of such property at that time
3 No payment beyond the amount which would have been made payable in the absence of this memorandum shall be made
a unless reinstatement commences and proceeds without unreasonable delay
b until the cost of reinstatement shall have been actually incurred
c if the property insured at the time of its loss destruction or damage shall be insured by any other insurance effected by or on behalf of
the Insured which is not upon the same basis of reinstatement
4 All the terms and conditions of the policy shall apply
a in respect of any claim payable under the provisions of this memo except in so far as they are varied hereby
b where claims are payable as if this memo had not been incorporated
6 PUBLIC AUTHORITIES
Subject to the following Special Conditions the insurance by Items Nos 1 to 4 of this policy extends to include such additional cost of
reinstatement of the destroyed or damaged property thereby insured as may be incurred solely by reason of the necessity to comply
with Building or other Regulations under or framed in pursuance of any Act of Parliament or with Bye-Laws of any Public Authority
excluding
a the cost incurred in complying with any of the aforesaid Regulations or Bye-Laws:
i in respect of the discovery OF DAMAGE occurring prior to the granting of this extension
ii in respect of loss destruction or damage not insured by the policy
iii under which notice has been served upon the Insured prior to the discovery of the DAMAGE
iv in respect of undamaged property or undamaged portions of property other than foundations of that portion of the property
destroyed or damaged
b the additional cost that would have been required to make good the property lost destroyed or damaged to a condition equal to its
condition when new had the necessity to comply with any of the aforesaid Regulations or Bye-Laws not arisen
c the amount of any charge or assessment arising out of capital appreciation which may be payable in respect of the property or by the
owner thereof by
SPECIAL CONDITIONS
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1 The work of reinstatement must be commenced and carried out without unreasonable delay after the discovery of the DAMAGE and
may be carried out upon another site (if the aforesaid Regulations or Bye-Laws so necessitate) subject to the liability of the Insurers
under this extension not being thereby increased
2 If the liability of the Insurers under any item of the policy apart from this extension shall be reduced by the application of any of the
terms and conditions of the policy then the liability of the Insurers under this extension in respect of any such itern shall be reduced in
like proportion
3 The total amount recoverable under any item of the policy shall not exceed its sum insured
4 All the terms and conditions of the policy except in so far as they are varied hereby shall apply as if they had been incorporated
herein
5 Interim payments will be available following sectional completion of reinstatement work.
GLANVILLE PROJECTS
Corinthian Court, 80 Milton Park Abingdon, Oxford OX14 4RY
Telephone: 01235 821010 Fax:01235 835492
e-mail: glanville_milt@compuserve.com
13th October 1998
Our Ref: MS/AMB/GP706
Milton Park Limited
Corinthian Court
80 Milton Park
Abingdon
Oxon OX14 4RY
FOR THE ATTENTION OF HUGH RICHARDS
Dear Hugh
86 - 88 MILTON PARK, ABINGDON
As discussed, please see the proposed roller shutter door details as follows:
o Dimension of 3985 mm x 3500 mm
o Heavy Duty
o Profile HR116 double-skinned
o Smooth Aluminium Finish
o Colour RAL 7032 'Pebble' (finish both sides in a tough top grade paint)
o Electrically operated
o 3 Phase supply
o ZAK System
o Safety edge
For further detailed specification, please see the manufacture's brochure.
2002. EDGAR Online, Inc.
Delivery/installation is eight weeks from finalised details being agreed and order being placed.
If you require any further information please do not hesitate to contact me.
Yours sincerely
/s/Mark Sperring
---------------------
MARK SPERRING
CONSTRUCTION
MANAGER
These regulations are imposed by the Landlord and affect the whole of the Estate
1. No open storage of materials or pallets shall be permitted on the Premises.
ESTATE REGULATIONS
2. All rubbish and waste materials shall be placed in proper receptacles in an area designated by the Landlord and not be allowed to
accumulate. No waste materials shall be burnt within the Estate.
3. No smoke or fumes or noxious smells shall be emitted from the Premises so as to cause in the opinion of the Landlord or its
surveyors annoyance or interference with the proper enjoyment of adjoining premises of the Landlord or its tenants or of the premises
adjoining or near the Estate.
4. The Tenant must not use industrial machinery engines and equipment so as to cause excessive noise dust or nuisance. Any excess
which in the opinion of the Landlord's Surveyor is causing annoyance to adjoining tenants of the Landlord or to the occupiers in the
vicinity shall be abated immediately upon notice.
5. No mechanically operated vehicles, cycles, hand trucks or trailers shall be parked or left unattended outside areas properly reserved
for such parking or in such manner as to obstruct roadways into or on the Estate nor so as to prevent ingress and egress of fire fighting
equipment round the curtilage of a building or buildings erected thereon and not to cause any obstruction on any of the common parts
of the Estate by parking vehicles or leaving goods thereon.
6. The Tenant must secure all buildings comprised in the Premises by locking all windows and doors therein for the purpose of
ensuring proper security and to reduce the risk of the spread of fire.
7. The Tenant must not load or off-load vehicles except within the curtilage of the Premises.
8. The Tenant must not store inflammable materials, explosive substances or liquids except in proper containers or receptacles
properly labelled and signed all in accordance with the regulations of all competent authorities and to the satisfaction of the Landlord's
insurers and in any event not abutting any boundary fences or other adjoining property of the Landlord.
9. Any external lighting within the curtilage of the Premises is to be maintained in good condition and fully operate during night time
working hours.
10. Traffic Regulations as shown by road signs must be observed including parking and speed limits.
11. Care and consideration must be given to pedestrians and others using Estate roads.
12. All vehicles on the Estate are at the owner's risk and the Landlord will not be liable for damage or theft or any other hazard.
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13. The Tenant shall at all times insofar as it lies within its power take all such steps as are necessary to ensure that all vehicles (except
private cars and light vans with a carrying capacity of less than 15 cwt.) shall when leaving the Estate (a) by the Potash Lane entrance
under all circumstances turn Southwards away from the village of Milton and (b) by the Harwell Lane entrance under no circumstances
tum northwards towards the village of Sutton Courtenay. Such vehicles shall at no time travel over any part of those sections of Potash
Lane and Harwell Lane which run between the two entrances to the Estate and the villages of Milton and Sutton Courtenay
respectively likewise the Tenant shall take all such steps as are necessary to ensure that all such vehicles when returning to the Estate
shall under no circumstances travel over any part of the above mentioned sections of Potash Lane and Harwell Lane.
14. Animals must be kept under proper control.
15. The playing of games is prohibited on the roadways and other areas and in the interests of safety boating, swimming and paddling
in the lakes is also prohibited
16. The Tenant is to ensure that employees familiarise themselves with the procedure in case of fire and the use of fire telephone and
fire appliances.
17. If any fire appliance or other safety equipment provided by the Landlord is used or found to have been damaged this fact must be
reported to the Landlord's Security Officer at the Information Building.
18. All goods brought into the Estate area at the owner's risk.
19. Personnel must confine themselves to their own employer's premises and areas of common use on the Estate.
20. No vehicle of any description shall be driven on or over any roads on the Estate by any person who does not at the relevant time
possess a valid licence entitling him to drive that class of vehicle on a public highway.
[VERTEX LETTERHEAD]
MILTON PARK LIMITED
CORINTHIAN COURT
80 MILTON PARK
ABINGDON
OXFORDSHIRE
OX14 RY
November 2, 1998
Re: PROPOSED AGREEMENT FOR LEASE AND LEASE (THE "TRANSACTION DOCUMENTS")
BETWEEN MILTON PARK LIMITED (THE "LANDLORD"), VERTEX PHARMACEUTICALS (EUROPE) LIMITED (THE
"TENANT") AND VERTEX PHARMACEUTICALS INCORPORATED (THE "COMPANY") FOR UNIT 88. THE FORUM
MILTON PARK ABINGDON OXFORDSHIRE (THE "PREMISES")
Dear Sirs:
The undersigned has acted as counsel to the Company in connection with its guarantee of the obligations of Vertex Pharmaceuticals
(Europe) Limited under the Transaction Documents.
I have reviewed the Transaction Documents, the Restated Articles of Organization of the Company and the By-Laws of the Company.
I have also examined such other documents and records and have performed such investigation as to matters of fact and law as I have
deemed necessary or appropriate for the purpose of this opinion. With respect to certain matters of fact, I have relied upon
representations of the officers of the Company.
In my examination, I have assumed the genuineness of all signatures, the authenticity of all documents submitted to me as originals, the
conformity with the original documents of all documents submitted to me as copies or facsimiles, and the authenticity and
completeness of the originals of such latter documents. I have assumed the due authorization and execution by the Landlord and
Tenant of the Transaction Documents. I have assumed (without independent verification) that the Landlord has full power and
authority to enter into, execute and deliver the Transaction Documents and perform its obligations thereunder and the conditions
thereof in accordance with their terms.
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I am member of the bar of the Commonwealth of Massachusetts and I express no opinion as to any matters insofar as any laws other
than the laws of the Commonwealth of Massachusetts may apply. This opinion is given subject further to the qualification that
enforcement of the Transaction Documents may be affected by events or changes in the law of the Commonwealth of Massachusetts
occurring after the date of this opinion, and I disclaim any obligation to advise you of any such events or changes in the law which
might affect any matters or opinions set forth herein.
Milton Park Limited
November 2, 1998
Page 2
Based upon the foregoing, and subject the qualifications and exceptions herein contained, I am of the opinion that:
1. The Company is a corporation duly organized and existing, under the laws of the Commonwealth of Massachusetts and has the
corporate power to carry on its business as it is now being conducted and to own its property and other assets.
2. The Company has the corporate power and legal capacity to enter into, execute and deliver the Transaction Documents and to
perform all its obligations under the Transaction Documents.
3. The execution and delivery of the Transaction Documents by the Company has been duly authorized by all necessary corporate
action of the Company.
4. Execution of the Transaction Documents by Richard H. Aldrich, Senior Vice President and Chief Business Officer of the Company,
on behalf of the Company, will constitute and operate as due execution thereof.
5. When the Transaction Documents are duly executed and delivered by the Company, they will be legally binding and enforceable
against the Company in the Commonwealth of Massachusetts in accordance with their terms, subject to the qualifications in paragraph
14 below. The performance by the Company of its obligations under the Transaction Documents will not result in the creation or
imposition of any lien, charge, security or encumbrance upon any of its assets or properties under the law of the Commonwealth of
Massachusetts.
6. The execution, delivery of the Transaction Documents by the Company and performance of the Company's obligations thereunder
will not result in any breach of or default under any provisions of Massachusetts law or under any decree of any Massachusetts
governmental authority, agency or court or, to my actual knowledge, under any instrument or under any deed or contract to which the
Company is a party at the date hereof or which at the date hereof binds any of the Company's property or other assets.
7. No taxes of the Commonwealth of Massachusetts are imposed by withholding or otherwise on any payment which may become due
from the Company under the Transaction Documents.
8. Every consent, authorization, license or approval of, or registration with or declaration to, any governmental or public bodies or
authorities or courts required by the Company in connection with the execution, delivery, validity, admissibility in evidence or, subject
to the qualifications set forth in paragraph 14 below, the enforceability of the Transaction Documents or the performance by the
Company of its obligations under the Transaction Documents including (without limitation) all payments which may become due from
the Company in accordance with the provisions of the Transaction Documents have been obtained or made and are in full force and
effect.
Milton Park Limited
November 2, 1998
Page 3
9. Neither the Company, nor any of its assets, is entitled to immunity on the grounds of sovereignty or otherwise from any legal action
or proceeding.
10. It is not necessary to ensure the legality, validity, admissibility in evidence or, subject to the qualifications set forth in paragraph 14
below, enforceability of the Transaction Documents that it or any other instrument be notarized, filed, recorded, registered or enrolled
in any court, public office or elsewhere in the Commonwealth of Massachusetts or that any stamp, registration or similar tax or charge
be paid in the Commonwealth of Massachusetts on or in relation to the Transaction Documents.
11. The Company has the legal capacity to contract to be bound by the choice of English law in the Transaction Documents and to
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submit irrevocably to the jurisdiction of the English Courts under the terms of the Lease, and such a choice of law and submission to
jurisdiction and the irrevocable agreement by the Company to accept service of process by leaving documents at the registered office
of the Tenant will be recognized as valid under the law of the Commonwealth of Massachusetts.
12. Any final judgment against the Company for a sum of money or order for specific performance of the Company's obligations under
the Transaction Documents issued by a court of the Commonwealth of Massachusetts will be enforceable against the Company under
the law of the Commonwealth of Massachusetts, subject to the qualifications set forth in paragraph 14 below.
13. At the date of this letter, to my actual knowledge, without having made any search or investigation of the records of any court,
governmental agency or other body, no litigation, arbitration or other legal proceedings have been commenced before and no judgment
or award has been given or made by any court, tribunal or government agency involving the Company which would (if adversely
determined) be likely to have a materially adverse effect on the Company's ability to observe and perform its obligations under the
Transaction Documents or which in any way disputes or calls into question the power or authority of the Company to enter into and
perform any such obligations.
14. My opinions in paragraphs 5, 8, 10 and 12 with regard to the enforceability of the Transaction Documents are subject to the
qualifications that such enforceability may be limited by (i) any applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or similar laws relating to or affecting the rights or remedies of creditors generally which may be in effect
from time to time, (ii) general principles of equity (regardless of whether considered in a proceeding in equity or at law) (iii) duties and
standards imposed on creditors and parties to contracts, from time to time, including, without limitation, requirements of good faith,
reasonableness, fair dealing and diligence, and (iv) and by equitable principles of general application (regardless of whether such
equitable principles are considered in an action at law or in equity), including concepts of materiality, and by possible limitations on
certain remedial provisions contained therein. The aforesaid opinions as to enforceability of the Transaction Documents are also
subject to the qualification that certain provisions contained in the Transaction Documents may not be enforceable, but (subject to the
limitations set forth in the
Milton Park Limited
November 2, 1998
Page 4
foregoing clauses (i) and (ii)) such unenforceability will not render the Transaction Documents invalid as a whole or substantially
interfere with realization of the principal benefits provided thereby. Further, I express no opinion as to the validity or enforceability of
any provision in the Transaction Documents (i) relating to the rights of the Landlord to collect any payment which is in the nature of or
could be construed to be a penalty, (ii) that may be deemed or construed to waive any constitutional or statutory right of the Company
that may not lawfully be waived, (iii) relating to submission by the Borrower to the jurisdiction of English courts to the extent that a
court has discretion to assume or decline such jurisdiction, (iv) relating to the severability of any provision of the Transaction
Documents, (v) purporting to relieve parties of the consequences of their own negligence or misconduct, or (vi) granting indemnity to
the extent that public policy considerations or court decisions may limit the rights of Landlord to obtain indemnification.
This opinion is given solely in relation to the matters referred to herein and for your benefit and for the benefit or your successors in
title and assigns to the Premises referred to in the Transaction Documents. It may not be quoted, passed to or relied upon by any other
person or for any other purpose.
Very truly yours,
/s/Sarah P. Cecil
-------------------
Sarah P. Cecil
Corporate Attorney
2002. EDGAR Online, Inc.
Vertex Pharmaceuticals (Europe) Milton Park Limited
Ltd Corinthian Court, 80 Milton
Park
5 Cheapside Court Abingdon, Oxfordshire OX14 4RY
Buckhurst Road
Ascot Berks SL5 7RF
Telephone (01235)865555
Fax (01235) 865560
www.miltonpark.co.uk
Dear Sirs
4th November
1998
UNIT 88 MILTON PARK ABINGDON OXFORDSHIRE ("THE PROPERTY")
We are writing to approve in principle your proposed works at the Property as set out on the attached specification and drawings. Our
approval is in principle only at this stage and final approval to your works will only be given by way of our formal Licence for
Alterations. The following terms must be complied with.
1. Prior to any work commencing at the Property, detailed plans and specification of your final proposal for your works are supplied to
us and we have given our approval, which is not to be unreasonably withheld or delayed, to such proposals.
2. Prior to any work commencing at the Property, a formal Licence for the carrying out of the works is entered into by you and by
Vertex Pharmaceuticals Incorporated in such form as we shall reasonably require.
3. You will not commence the carrying out of the works. until you have received all necessary planning and other necessary consents,
and that all works shall comply with building regulations and all other appropriate regulations or codes of practice.
4. You will give prior notice to us of the date of commencement of your works.
5. If commenced the works shall be carried out to a professional standard with good quality materials and to our reasonable
satisfaction.
6. Any variation to the proposed works shall require our prior consent which shall not be unreasonably withheld or delayed.
7. The work and all associated contractors vehicles, plant, materials and personnel shall not interfere with or cause nuisance to any
neighbouring property or occupier.
8. Notwithstanding the provisions and without prejudice to the Agreement for Lease and Lease due to be entered into between us, that
any damage caused to property owned by Milton Park Limited (including hard and soft landscaping areas) in carrying out the works
shall be made good as soon as is practicable after such damage is caused.
9. Where practicable, all contractors vehicles, plant and materials shall be located in the car park area to the north of the Property.
10. [????????] to be entered into between us.
11. That a full height (ground floor slab to underside of first floor concrete plank) high density block wall (or similar) shall be built
along the line of the cladding panels and glazing panels in the area marked "Animal Cage Room" on the plan attached, and adequately
tied into the structure of the Property so as to provide additional security against a break in to this part of the Property.
Please acknowledge receipt of this letter by signing and returned the enclosed duplicate.
Yours faithfully
2002. EDGAR Online, Inc.
/s/
---------------------------------
FOR AND ON BEHALF OF MILTON PARK
LTD
signed by Vertex Pharmaceuticals (Europe) Ltd in acceptance of the terms of this letter.
60-70% Laboratories
20-25% Offices
10-15% Other
[CHART]
[CHART]
GENERAL SPACE ALLOCATION (24,000 sf )
LABORATORY REQUIREMENTS
CHEMISTRY LABORATORY (3000 sf)
100% outside fresh air system with no recirculation 72-80 lnft of bench space with reagent shelves above and base cabinets below
Bench tops to be made of epoxy resin or chemical resistant material 3-4 stainless steel sinks in each lab
Fume cupboards to be 2 m wide at face with face velocities of 75-100 lfpm with sufficient make-up air systems to support this
operation. 24 fume cupboards total.
40 lnft of bench space along walls or other areas for HPLC's and similar equipment
Central (house) nitrogen line on each hood and bench Central (house) nitrogen line on each equipment bench Compressed air to each
module, with drops at equipment benches Central vacuum to each bench/hood
Deionized water outlet at each sink
Electrical requirements: approx 240-260 amps per lab with 2 circuits/bench, 2 circuits/fume cupboard, 8 general circuits per room
Eye-wash safety shower combination unit
CHEMICAL & SOLVENT STORAGE ROOM (500 sf)
100% exhaust
Non-flammable chemicals to be stored via compatibility class in cabinets and shelves
Localized extraction system for stored chemicals Flammable chemicals to be stored in flammable storage cabinet that meet local fire
codes
THESE REQUIREMENT DESCRIPTIONS AND SPECIFICATIONS ARE PRELIMINARY AND NOT ALL INCLUSIVE OF THE
FINAL DESIGN SPECIFICATIONS TO BE INCLUDED IN VERTEX FIT-OUT OF 88 MILTON PARK. THIS DOCUMENT IS
INTENDED FOR CONCEPTUAL REVIEW AND APPROVAL FROM MILTON PARK LIMITED IN ORDER FOR VERTEX TO
OBTAIN APPROVAL TO PROCEED WITH, GENERAL FIT-OUT PLAN OF 88 MILTON PARK.
BIOLOGY LABORATORY (3000 sf)
Air supply 70% exhaust/30% recirculated
120 lnft bench space (epoxy) per lab with reagent shelves above and base cabinets below
1-2 chemical fume cupboards, galvanized ductwork. Fume hood 1-2m wide at face with face velocity of 80-90 lf pm Central (house)
nitrogen line (high pressure) on each equipment bench Deionized water outlet in each sink Electrical requirements: 2 circuits/bench, 1
circuit/fume cupboard, 4-208/30/30a circuits, 6-8 general circuits throughout 3-4 stainless steel sinks
Eye wash safety shower combination unit
COMMON EQUIPMENT SPACE (2000 sf)
2002. EDGAR Online, Inc.
Up to 70% recirculated air
80 lnft bench space with base cabinets and reagent shelves
Special electrical requirements based on equipment - 208 v 20 amp circuits - 208 v 30 amp circuits - 110 dedicated circuits (amperage
varying from 20-60)
Emergency power outlets on each bank of outlets, if available
Approximately 30-35% of space for common equipment. Number of outlets, emergency circuits, other needs to be determined.
Equipment includes freezers, refrigerators, centrifuges, shakers, spectrophotometers, scintillation counters, gamma counters,
lyophilizers.
COLD ROOM (150 sf)
Approximate size 12' x 12'
1 or 2 walk-in cold rooms, prefabricated unit with condensers independent of main building system. +4(degree)C cold room
House Nitrogen hook-up (100PSI) 10 lnft of bench space
02 level alarm
THESE REQUIREMENT DESCRIPTIONS AND SPECIFICATIONS ARE PRELIMINARY AND NOT ALL INCLUSIVE OF THE
FINAL DESIGN SPECIFICATIONS TO BE INCLUDED IN VERTEX FIT-OUT OF 88 MILTON PARK. THIS DOCUMENT IS
INTENDED FOR CONCEPTUAL REVIEW AND APPROVAL FROM MILTON PARK LIMITED IN ORDER FOR VERTEX TO
OBTAIN APPROVAL TO PROCEED WITH GENERAL FIT-OUT PLAN OF 88 MILTON PARK.
ANIMAL PHARMACOLOGY LAB (3000 sf)
ANIMAL ROOM
100% exhaust with humidity controlled to 45 to 58% Climate controlled room to be maintained between 68%--72 (degree) F, with
failure alarm
Sheet vinyl flooring with coved edges, sealed on all ends for all associated rooms.
Diurnal light cycle timer
Separate exhaust system, with emergency power, to provide 50 lfpm for each animal housing unit, with loss of ventilation alarm 10-12
animal cage housing units with 100 cfm exhaust per unit (1800 cfm total)
Task lighting for benches to be used during dark cycles Two surgery rooms to be physically isolated from main room with bench top
and sink with foot-controlled system. Counter to be 10-15 lnft.
Cage wash area to have stainless counter and sink, with small cage washing machine.
Supply storage room (150 sf)
Deionized water to be made available for washer. Outlet at sink also. Smaller "dirty animal cage room for isolation work, size as noted
on plans.
All areas to be in compliance with Home Office requirements
Similar in design and specification to Biology Lab
PHARMACOLOGY LAB
DARKROOM (200 sf)
Sheet vinyl flooring, sealed on ends
Spiral door 36" diameter, removable 110 dedicated circuit 20 amp
Developer hard piped to drain, with back flow preventer and chemical recovery (Hg) unit
Wall to have pass-through for film developer Safe-light for darkroom use
Stainless steel sink 3 foot, separate drain from developer Safebin storage for films
12 lnft bench acid resistant, w/base cabinets and reagent shelves Paint to be non-glare and dark to avoid light reflection. Low bench
(30"D x 4'W x 29"H ) for Land Camera (Polaroid MP-4)
RADIOISOTOPE LAB (400 sf)
2002. EDGAR Online, Inc.
Dedicated 100% exhaust fume cupboard (-1m) with charcoal filter unit
(75-90 lfpm)
Dedicated electrical outlets (20 amp circuit) for fume cupboard Refrigerator and freezer (under counter) with emergency power
Emergency power for fume cupboard 20 lnft bench with stainless steel top Three (3) foot stainless steel sink, w/deionized water 110 v
20 amp dedicated outlets
THESE REQUIREMENT DESCRIPTIONS AND SPECIFICATIONS ARE PRELIMINARY AND NOT ALL
INCLUSIVE OF THE FINAL DESIGN SPECIFICATIONS TO BE INCLUDED IN VERTEX FIT-OUT OF 88 MILTON PARK.
THIS DOCUMENT IS INTENDED FOR CONCEPTUAL REVIEW AND APPROVAL FROM MILTON PARK LIMITED IN
ORDER FOR VERTEX TO OBTAIN APPROVAL TO PROCEED WITH GENERAL FIT-OUT PLAN OF 88 MILTON PARK.
SPECIALIZED INSTRUMENT ROOMS
NMR Suite
NMR Room/Suite specifications to be determined pending choice of equipment and requirements for magnetic field.
PROTEIN NMR 400
Space requirements (25' x2O')
2-110 V dedicated outlet
208V/30/20 amp circuit
Nitrogen (high pressure 50-90 psi) Vibration platform
12 foot ceiling clearance
COMPUTER MODELING
Standard office space, approx 500 sf, for graphics computers. Final specifications TBD pending choice of equipment
CRYSTALLOGRAPHY LAB
Space requirements (500 sf)
Generator 208 V, 30 amp single phase Rotating Anode 208 V, 50 amp three phase & 115 V, 15A, single phase Cold water (40 psi)
Auxiliary space for chiller and pumps.
Reinforced floor 100-150 lbs/sf
Task lighting over each generator Helium line (1/2" line)
House nitrogen line
Liquid nitrogen insulated lines from central bulk tank
THESE REQUIREMENT DESCRIPTIONS AND SPECIFICATIONS ARE PRELIMINARY AND NOT ALL INCLUSIVE OF THE
FINAL DESIGN SPECIFICATIONS TO BE INCLUDED IN VERTEX FIT-OUT OF 88 MILTON PARK. THIS DOCUMENT IS
INTENDED FOR CONCEPTUAL REVIEW AND APPROVAL FROM MILTON PARK LIMITED IN ORDER FOR VERTEX TO
OBTAIN APPROVAL TO PROCEED WITH GENERAL FIT-OUT PLAN OF 88 MILTON PARK.
CENTRAL STORAGE AND SATELLITE STORAGE
CENTRAL STOCKROOM/STORAGE AREA
All general lab supplies and other small laboratory items
Specifications and final contents to be determined
HAZARDOUS WASTE ROOM
RADIOACTIVE WASTE STORAGE ROOM
Specifications to be determined per review of guidelines
2002. EDGAR Online, Inc.
CENTRAL GAS CYLINDERS STORAGE AREA
Gas cylinder racks
Centralized C02 gas manifold
400-600 gallon liquid nitrogen storage tank located in enclosed area outside loading dock
BULK NITROGEN STORAGE AREA
THESE REQUIREMENT DESCRIPTIONS AND SPECIFICATIONS ARE PRELIMINARY AND NOT ALL
INCLUSIVE OF THE FINAL DESIGN SPECIFICATIONS TO BE INCLUDED IN VERTEX FIT-OUT OF 88 MILTON PARK.
THIS DOCUMENT IS INTENDED FOR CONCEPTUAL REVIEW AND APPROVAL FROM MILTON PARK LIMITED IN
ORDER FOR VERTEX TO OBTAIN APPROVAL TO PROCEED WITH GENERAL FIT-OUT PLAN OF 88 MILTON PARK.
CENTRAL FACILITIES
MECHANICAL ROOM / PLANT SPACE
House vacuum delivered to all laboratories 22 to 28 in/Hg capacity, TBD Deionized water system with regeneration tanks, etc.
Capacity TBD Outlets at all laboratory sinks, glasswash sinks, glass washers, equipment room sinks, isotope room, darkroom, and
specialty equipment rooms where needed. Central fire system
Electrical requirements (estimated) (19-28 watts/sf)
2-3 watts/sf in labs
1-2 watts/sf in offices 10-15 watts/sf for lab and lab support power. Could be higher based on specialized equipment rooms
requirements.
Connected Load vs. Demand Load to be determined
6-8 watts/sf for HVAC
Primary electrical supply upwards of 750-1000 kVA Chillers for building air conditioning (size TBD) Cooling towers as required
Distribution system for helium to crystallography and to analytical laboratories
Distribution system for C02 to tissue culture/immunology laboratories Connection to existing Bulk nitrogen tank for central nitrogen
distribution system to all laboratories.
Stand-by generator to be sized appropriately (possibly located near new substation)
UPS for NMR and computer equipment, sized for 100 amps for 5 minutes Air compressor size TBD
Hot water boilers
Hot water system, size TBD
Central building security system Central telecommunications distribution room
THESE REQUIREMENT DESCRIPTIONS AND SPECIFICATIONS ARE PRELIMINARY AND NOT ALL
INCLUSIVE OF THE FINAL DESIGN SPECIFICATIONS TO BE INCLUDED IN VERTEX FIT-OUT OF 88 MILTON PARK.
THIS DOCUMENT IS INTENDED FOR CONCEPTUAL REVIEW AND APPROVAL FROM MILTON PARK LIMITED IN
ORDER FOR VERTEX TO OBTAIN APPROVAL TO PROCEED WITH GENERAL FIT-OUT PLAN OF 88 MILTON PARK.
ADMINISTRATIVE OFFICES
Offices for administrative functions in Research and Business Development
Administration support area to be open cubicle arrangement
File Storage Room
Copier Room
Telecommunications Room Mail Room
Conference Rooms as space allows, throughout laboratory and offices spaces
LABORATORY OFFICES AND WORK SPACES
R & D WORK SPACE
2002. EDGAR Online, Inc.
Staff Scientist space as offices where it can be accommodated Multi-discipline partition area for remaining staff General interaction
areas throughout as allowed
GENERAL SPACE
LECTURE HALL (FIRST FLOOR OF OFFICE SPACE)
Capable of accommodating 50-80 people
Projection room as required
Room darkening system to eliminate window light as determined
LUNCH ROOM
Space with small kitchen for 20-30 people
No food service option, but small food prep area for employees
RECEPTION
Main entrance for employees and frequent visitors on ground floor Reception located on first floor adjacent to core area Main security
entrance
Card access or other secured access system
EMPLOYEE ENTRANCE
Back of building near rear core
THESE REQUIREMENT DESCRIPTIONS AND SPECIFICATIONS ARE PRELIMINARY AND NOT ALL
INCLUSIVE OF THE FINAL DESIGN SPECIFICATIONS TO BE INCLUDED IN VERTEX FIT-OUT OF 88 MILTON
PARK. THIS DOCUMENT IS INTENDED FOR CONCEPTUAL REVIEW AND APPROVAL FROM MILTON PARK
LIMITED IN ORDER FOR VERTEX TO OBTAIN APPROVAL TO PROCEED WITH
GENERAL FIT-OUT PLAN OF 88 MILTON PARK.
VALE OF WHITE HORSE
Planning & Engineering Department
BUILDING REGULATIONS
BUILDING ACT 1984 Building Regulation Number: 98/0010 l/OTHN1
NOTICE OF PASSING OF BUILDING PLANS
APPLICANT: MILTON PARK LTD
C/O GLANVILLE AND ASSOCIATES
CORINTHIAN COURT
80 MILTON PARK
ABINGDON OX14 4RY
PROPOSAL: ERECTION OF THREE NEW UNITS 86,87 AND
88
LOCATION: SITE OF
88 MILTON PARK
MILTON
ABINGDON
OXON
OX14 4RY
2002. EDGAR Online, Inc.
Plans were deposited with this Local Authority on the 24.03.1998 as in accordance with the Building Regulation 1991 Regulation 11
(1) (b) under plan reference number.
Notice is hereby given pursuant to the Building I Act 1984 Section 16 that the said plans were passed on
Date: 11.09.1998 /s/
------------------------------------
Chief Planning & Engineering
Officer
If the proposed work is not commenced within 3 years of the deposit of the plans, the council may give notice that the said plans shall
no longer have effect, in accordance with the Building Act 1984 Section 32.
Notice is required of commencement and other appropriate stages of work.
This Notice is valid only for the purposes of the Building Regulations 1991 and does not constitute an approval for any other Statutory
requirement whatsoever.
Proposed work within the meaning of Town and Country Planning Acts for which express planning permission is necessary, may not
proceed until such permission is obtained
NOTICE OF COMMENCE AND COMPLETION OF CERTAIN STAGES OF WORK
2002. EDGAR Online, Inc.
14.(1) A person who proposes to carry out building work shall not commence
that work unless. (a) he has given the local authority notice that he
intends to commence work; and (b) at least two days have elapsed since
the end of the day on which he gave the notice.
(2) A person carrying out building work shall not.
(a) cover up any excavation for a foundation, any damp-proof course or any
concrete or other material laid over a site; or
(b) cover up in any way drain or sewer to which these regulations apply,
unless he has given the local authority notice that he intends to
commence that work, and at least one day has elapsed since the end of
the day on which he gave the notice.
(3) A person who has laid, haunched or covered any drain or sewer in
respect of which part H of the schedule 1 (drainage and waste
disposal)
imposes a requirement shall give notice to that effect to the local
authority not more than five days after the completion of the work.
(4) A person carrying out building work shall, not more than five days
after that work has been completed, give the local authority, notice
to
that effect.
(5) Where a building is being erected, and that building (or any part of
it) is to be occupied before completion, the person carrying out that
work shall give the local authority at least five days notice before
the building or any part of it is occupied.
(6) Where a person fails to comply with paragraphs (1) to (3), he shall
comply within a reasonable time with any notice given by local
authority requiring him to cut into, lay open or pull down so much of
the work as prevents them from ascertaining whether these regulations
have been complied with.
(7) If the local authority have given notice specifying the manner in
which
any work contravenes the requirements in these Regulations, a person
who has carried out any further work to secure compliance with these
regulations shall within a reasonable time after completion of such
further work give notice to the local authority of its completion.
(8) In this regulation "day" means any period of 24 hours commencing at
midnight and excludes any Saturday, Sunday, Bank holiday or public
holiday.
VALE OF WHITE HORSE
PLANNING & ENGINEERING DEPARTMENT
TOWN AND COUNTRY PLANNING ACT 1990
NOTICE OF PERMISSION
2002. EDGAR Online, Inc.
To: Lansdown Estates Group Ltd
c/o Granville Projects
80 Milton Park
Abingdon Oxon OX14 4RY
Application No: MIL/59/122
Proposal: Demolition of 88 Milton Park, and erection of
proposed
B1/or B8 development.
Address: 88 Milton Park
Milton
Abingdon
Oxon
OX14 4RY
DATE OF DECISION: 14th April 1997
The Vale of White Horse District Council, in pursuance of powers under the Above Act, hereby PERMIT the above development to
be carried out in accordance with the application and accompanying plans submitted by you, subject to compliance with the conditions
specified hereunder.
1. THE DEVELOPMENT TO WHICH THIS PERMISSION RELATES SHALL BE BEGUN WITHIN A PERIOD OF FIVE
YEARS FROM THE DATE OF THIS PERMISSION.
2. THE DEVELOPMENT SHALL BE LANDSCAPED IN ACCORDANCE WITH A SCHEME WHICH SHALL BE SUBMITTED
TO AND APPROVED IN WRITING BY THE DISTRICT PLANNING AUTHORITY BEFORE THE DEVELOPMENT
COMMENCES AND SHALL ENSURE:
a) THE RETENTION OF SELECTED EXISTING TREES AND SHRUBS ON THE SITE;
b) THE PROTECTION OF THE SELECTED EXISTING TREES AND SHRUBS ON THE SITE DURING THE DEVELOPMENT
OF THE SITE;
c) THE CARRYING OUT OF ANY EARTH MOVING OPERATIONS CONCURRENTLY WITH THE CARRYING OUT OF
THE BUILDING AND OTHER WORKS;
d) COMPLETION OF THE SCHEME DURING THE PLANTING SEASON NEXT FOLLOWING THE COMPLETION OF THE
BUILDING(S), OR SUCH OTHER DATE AS MAY BE AGREED IN WRITING WITH THE DISTRICT PLANNING
AUTHORITY;
[GRAPHIC OMITTED]
E) THE MAINTENANCE OF THE LANDSCAPED AREAS FOR
A PERIOD OF FIVE YEARS OR UNTIL ESTABLISHED,
WHICHEVER MAY BE LONGER. ANY TREES OR SHRUBS
REMOVED, OR WHICH IN THE OPINION OF THE
DISTRICT PLANNING AUTHORITY, ARE DYING,
BEING SEVERELY DAMAGED OR BECOMING
SERIOUSLY DISEASED WITHIN FIVE YEARS OF
PLANTING, SHALL BE REPLACED BY TREES OR
SHRUBS OF SIMILAR SIZE AND SPECIES TO THOSE
ORIGINALLY REQUIRED TO BE PLANTED.
3. PRIOR TO THE FIRST USE OF ANY BUILDING, THE CAR PARKING AREA SHOWN ON THE APPROVED PLAN
REFERENCE (406/002E) SHALL BE CONSTRUCTED, DRAINED, LAID AND MARKED OUT IN ACCORDANCE WITH THE
2002. EDGAR Online, Inc.
SPECIFICATION OF OXFORDSHIRE COUNTY COUNCIL FOR SUCH WORKS. THEREAFTER THE AREA SHALL BE
KEPT PERMANENTLY FREE OF ANY OBSTRUCTION TO SUCH USE.
The reasons for the Council's decision to grant permission for the development subject to compliance with the conditions hereinbefore
specified are:
1. TO COMPLY WITH THE REQUIREMENTS OF SECTION 91 OF THE TOWN & COUNTRY PLANNING ACT, 1990.
2. TO ENSURE THE IMPLEMENTS OF A SATISFACTORY SCHEME OF LANDSCAPING WHICH WILL IN DUE COURSE
IMPROVE THE ENVIRONMENTAL QUALITY OF THE DEVELOPMENT AND SOFTEN ITS IMPACT ON THE AREA.
3. IN THE INTEREST OF HIGHWAY SAFETY
/S/
------------------------------------------
Chief Planning and Engineering officer
[GRAPHIC OMMITTED]
MILTON PARK SUMMARY OF INSURANCE
GUARDIAN POLICY 5OU009645
PERIOD 1.10.98 TO 30.9.99
GENERAL NOTE
The policy operates following insured damage to "buildings" where responsibility for repair/reinstatement rests solely with Milton
Park Limited
INSURED
Milton Park Limited
PROPERTY INSURED
BUILDINGS, INCLUDING:
-Landlords Fixtures and Fittings
-Small outside buildings extensions annexes gangways loading bays service area yards car parks roads pavements walls gates fences
street furniture and landscaping
-Debris removal costs
-Professional Fees
-Services - mains, cabling drains etc, and accessories, extending to the perimeter of the premises or to the public mains
-Metered water
LOSS RENT - 3 YEARS, INCLUDING:
-Rent Receivable
-Monies payable for accommodation and services
2002. EDGAR Online, Inc.
-Automatic cover for rent increases during insurance year
INSURED DAMAGE
Fire
Lightning
Explosion
Aircraft
Riot & Civil Commotion
Malicious Damage
Earthquake or Subterranean Fire
Storm, Tempest or Flood, EXCLUDING
damage by frost
damage to fences, gates and moveable property in the open
Burst Pipes
Impact
Sprinkler Installation Leakage
Theft (other than normally insurable under tenants policies)
Subsidence, landslip or heave, EXCLUDING
normal settlement or bedding down of new structures settlement or movement of made-up ground coastal or river erosion damage
occurring, whilst the property is in course of erection or undergoing demolition,structural alteration or repair damage attributable
solely to change in water table level
Accidental Damage, EXCLUDING
breakage of plate glass in shop fronts faulty or defective design materials inherent vice or latent defect gradual deterioration or wear
and tear faulty or defective workmanship corrosion, rust wet rot, dry rot, vermin, diseases, marring or scratching joint leakage or
failure of welds cracking, fracturing collapse or overheating of boilers economisers and similar plant mechanical or electrical
breakdown or derangement pollution or contamination disappearance or unexplained loss collapse or cracking
Limited cover (pound)100,000 available under Sun Alliance policy.
Full cover placed with Pool Reinsurance Co. Limited at an additional premium
Terrorism
POLICY EXCESS (Buildings cover only)
2002. EDGAR Online, Inc.
1. Malicious Damage, Storm, Tempest, Flood, Burst Pipes,
Accidental Damage (pound)100
2. Vacant Properties - Damage as in 2 and Theft (pound)250
3. Impact by vehicles owned by or under control
of insured (pound)100
4. All other Damage NIL
MAIN POLICY CLAUSES
Average - requirement to insure for full value
Reinstatement - basis of cover is cost of reinstating
damage
Day One Basis - reinstatement cost of buildings assessed at
each annual renewal of policy ("Declared
Value")--policy sum insured extends to 150%
of Declared Value to cover inflation
Non-Invalidation - policy cover not prejudiced by increase in
risk occurring without authority or
knowledge of Insured (i.e. tenants actions)
Other Interests - automatically noted (where required)
Public Authorities - additional cost of reinstatement included
to
comply with building regulations
Workmen - policy not prejudiced by routine works
being carried out to buildings
Unoccupancy - Insurer requires notice of a building being
unoccupied for more than three months
(satisfied by quarterly declaration to
insurer)
Subrogation Waiver - Insurer agrees to waive these rights
against legitimate occupier
Extinguishment Expenses - costs legitimately incurred in fire
fighting (e.g. recharging fire
extinguishers)
Theft of Keys - expenses incurred to replace locks etc.
Prevention Of Access
(Rent Cover) - Interruption of use following Damage at
nearby property
General Exclusions - Nuclear risk, Sonic Bank, War
2002. EDGAR Online, Inc.
MILTON PARK,LIMITED
INSURANCE 1.10.98 TO 30.9.99
TENANT Vertex Pharmaceuticals (Europe) Limited
PROPERTY MILTON PARK - UNIT 88
INSURER Guardian Insurance Ltd.
POLICY NO. 917F632007
SCOPE OF COVER Commercial "All Risks"
(Physical Loss or Damage)
POLICY EXCESSES Fire, Aircraft, Explosion, Earthquake,
Riot & Civil Commotion, Impact and Terrorism Nil Excess
Subsidence, Landslip or Heave (pound)1,000 Excess
All Other Losses (e.g. Malicious Damage,
Storm, Flood and Burst Pipes) (pound)100 Excess
RENEWAL DATE 30th September 1999
INSURED VALUE Building - (pound)TBA
Loss Rent -(pound)300,000 p.a. (Period Covered - 3 years)
The building value represents the cost of rebuilding as at 1st October 1997 and is inclusive of professional fees and site clearance
costs. The policy cover is placed with the benefit of the Day One Basis inflation protection scheme providing for increased building
costs that may be encountered during a period of reinstatement.
PREMIUM RATE Inclusive of (pound) TBA Terrorism deposit
Insurance Premium Tax at the current rate is included
PREMIUM (pound) TBA
NB: In the event of an incident occurring which may give rise to a claim under these insurance arrangements it is imperative that
immediate notification be made by telephone to the Estate Office on 01235 865555. Full written details of the incident together with
repair estimates should follow as soon as practicable thereafter.
2002. EDGAR Online, Inc.
Arlington Business Park Tel+44 (0) 1734
642000
Theale Fax+44 (0) 1734
642287
Reading, RG7 4SD DX 4053 Reading 1
United Kingdom
The Directors
Lansdown Estates Group Limited
Corinthian Court
80 Milton Park
Abingdon
OXON
OX 14 4RY
15 November 1996
Dear Sirs
ACCOUNTANTS REPORT TO LANSDOWN ESTATES GROUP LIMITED (THE COMPANY) ON THE
STATEMENT OF SERVICE CHARGES FOR MILTON PARK, ABINGDON
In accordance with the terms of engagement with the company in respect of the above named property, we have examined the attached
Statement of Service Charges prepared by the company for the year ended 30 September 1996. In our opinion, the Statement is in
agreement with the books and records in respect of the above named property maintained by the company.
Yours faithfully
KPMG
CHARTERED ACCOUNTANTS
LANSDOWN ESTATES GROUP LTD
EXPENDITURE RELATING TO TENANTS' SERVICES
FOR THE YEAR ENDED 30 SEPTEMBER 1996
2002. EDGAR Online, Inc.
Financed from Monies Financed from the Total Expenditures
collected in the year the Sinking Fund
(pound) (pound) (pound)
Estate Road 197,382 22,573 219,955
Drainage 139,776 39,465 179,241
Electrical 83,840 7,160 91,000
Landscaping 105,815 24,489 130,304
Telecom - Ducting 2,965 2,965
Security 50,770 47,737 98,507
Estate Staff 94,727 94,727
Estate Premises - Rent and Rates 10,949 10,949
Estate Premises - Office Costs 18,589 18,589
Estate Vehicles and Equipment - Running Costs 1,143 1,143
Estate Vehicles and Equipment - Depreciation 11,033 11,033
Insurance 16,896 16,896
-------- ------- ------
733,885 141,424 875,309
Management Fee 73,388 73,388
--------- -------- -------
807,273 141,424 948,697
--------- --------- -------
--------- --------- -------
The above record of expenditure is derived from the accounting records of the company and the expenditure is allocated in accordance
with the accruals concept as required by standard accounting practice.
Accounting Policy
LANDSDOWN ESTATES GROUP LIMITED
EXPENDITURE RELATING TO TENANTS' SERVICES
FOR THE YEAR ENDED 30 SEPTEMBER 1995
2002. EDGAR Online, Inc.
(pound)
(1) Estate Road
190,438
(2) Drainage
166,466
(3) Electrical
82,969
(4) Landscaping
136,912
(5) Telecom-Ducting
2,965
(6) Security
85,396
(7) Estate Staff
99,449
(8) Estate Premises - Rent and Rates
11,691
(9) Estate Premises - Office Costs
33,516
(10) Estate Vehicles and Equipment - Running Cost
1,826
(11) Estate Vehicles and Equipment - Depreciation
12,123
(12) INSURANCE
25,328
-------
849,079
MANAGEMENT FEE
84,907
TOTAL
933,986
The above record of expenditure is derived from the accounting records of the company and the expenditure is allocated in accordance
with the accruals concept as required by standard accounting practice.
ACCOUNTING POLICY
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Arlington Business Park Tel+44 (0) 118 964
2000
Theale Fax+44 (0) 118 964
2222
Reading, RG7 4SO DX 4053 Reading 1
United Kingdom
The Directors
Lansdown Estates Group Limited
Corinthian Court
80 Milton Park
Abingdon
Oxon OX14 4RY
21 November 1997
Dear Sirs
ACCOUNTANTS REPORT TO LANSDOWN ESTATES GROUP LIMITED (THE COMPANY) ON THE
STATEMENT OF SERVICE CHARGES FOR MILTON PARK, ABINGDON
In accordance with our terms of engagement with the company in respect of the above named property, we have examined the attached
Statement of Service Charges prepared by the company for the year ended 30 September 1997. In our opinion, the Statement is in
agreement with the books and records in respect of the above named property maintained by the company.
Yours faithfully
KPMG
LANSDOWN ESTATES GROUP LTD
EXPENDITURE RELATING TO TENANTS' SERVICES
FOR THE YEAR ENDED 30 SEPTEMBER 1997
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Financed from the Monies Financed from the Total Expenditure
collected in the year Sinking Fund
pound) (pound) (pound)
Estate Road 187.774 44.828 232.602
Drainage 148.225 9.125 157.350
Electrical 83.272 83,272
Landscaping 114.891 28.984 143.875
Telecom - Ducting 2.964 2,964
Security 55.809 18.327 74.136
Estate Staff 83.652 83.652
Estate Premises - Rent and Rates 9.960 9.960
Estate Premises - Office Costs 17.137 17.137
Estate Vehicles and
Equipment - Running Costs 1.809 1.809
Estate Vehicles and Equipment
- Depreciation 5.586 5.586
Insurance 7.738 7.738
--------- --------- -------
718.817 101.264 820,081
Management Fee 71.881 71.881
--------- --------- -------
790.698 1 101.264 891.962
--------- --------- -------
--------- --------- -------
The above record of expenditure is derived from the accounting records of the company and the expenditures allocated in accordance
with the accruals concept as required by standard accounting practice.
ACCOUNTING POLICY
Exhibit 3
DATED 1998
MILTON PARK LIMITED (1)
and
VERTEX PHARMACEUTICALS (EUROPE) LIMITED (2)
and
VERTEX PHARMACEUTICALS INCORPORATED (3)
LEASE
of
Oxfordshire
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88 Milton Park Abingdon
THIS LEASE is made on the Lease Date BETWEEN (1) the Landlord (2) the Tenant and
(3) the Guarantor
PARTICULARS DEFINITIONS AND INTERPRETATION
PARTICULARS
A. "Lease Date" is 1998
B. "Landlord" is MILTON PARK LIMITED whose registered office is at Nations House 103 Wiginore Street London W1H 9AB
(Company Registration Number 1772924)
C. "Tenant"is VERTEX PHARMACEUTICALS (EUROPE) LIMITED whose registered office is at 5 Cheapside Court Buckhurst
Road Ascot Berkshire SL5 1RF
(Company Registration Number 2907620)
D. "Guarantor" is VERTEX PHARMACEUTICALS INCORPORATED of 130 Waverly Street Cambridge Massachussets, USA
E. "Premises" are more particularly described in Part 1 of the schedule to this Lease and shortly known as 88 Milton Park Abingdon
Oxfordshire
F. "Centre" means that part of the Estate to be known as the Forum comprising buildings 86/88 Milton Park shown edged green on
Plan 1
G. "Estate" is the Landlord's estate of which the Premises form part known as Milton Park Abingdon Oxfordshire shown verged red on
Plan 2 together with such additional land or excluding such land of lesser area (but including the Premises and the land over which it
enjoys rights granted by this Lease) as the Landlord may from time to time specify and together with all buildings fixtures or structures
whatsoever from time to time thereon
H "Rent Commencement Date" is 1998
I. "Term Date" is the usual quarter day next before the Lease Date
J. "Term " is 15 years calculated from the Term Date
K. "Principal Rent" for the period commencing on the Rent Commencement Date and ending immediately before the first Review Date
is Three hundred thousand pounds ((pound)300,000.00) per annum and for the period commencing on the first Review Date and
thereafter until the next following Review Date is the Review Rent per annum fixed in accordance with clause 6
L. "Permitted Use" is use within Class B1 or Class B8 of the Schedule to the Town and Country Planning (Use, Classes) Order 1987
M. "Estate Service Rent" is the fair and proper proportion applicable to the Premises from time to time of the Estate Service
Expenditure for any relevant Service Period
N. "'Centre Service Rent" is the fair and proper proportion applicable to the Premises from time to time of the Centre Services
Expenditure for any relevant Service Period
1
0. "Provisional Sum" in relation to each Service Period means an amount calculated by the Landlord's managing agents acting as
experts and not arbitrators as their reasonable and proper estimate of the likely Estate Service Rent and Centre Service Rent for the
relevant Service Period
P. "Regulations" are the regulations made by the Landlord in its reasonable and proper discretion applicable to the Estate a copy of
which in their form current at the date of this Lease has been given to the Tenant
Q. "Reversionary Obligations" are the covenants declarations and other matters affecting the Premises contained or referred to in the
Landlord's freehold reversionary title number BK 102078 as at 20th August 1998
R. "Agreement for Lease" means the Agreement dated 1998 between the Landlord (1) the Tenant (2) and the Guarantor (3) pursuant to
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which this Lease is granted
S "Defects Period" means the period of the term terminating on
DEFINITIONS AND INTERPRETATION
1. The following expressions and those contained in the particulars have the meanings specified
(a) "Adjoining Premises" means any land or buildings adjoining or near to the Premises and comprised in the Estate
(b) "Conduits" means pipes sewers drains mains ducts and all other conducting media and ancillary equipment
(c) "Centre Services" means the provision and carrying out by or on behalf of the Landlord of the services set out in Section A of Part
IV of the Schedule hereto
(d) "Centre Services Expenditure" means all expenditure reasonably incurred by the Landlord or which the Landlord anticipates is
likely reasonably to be incurred in providing all or any of the Centre Services and the matters specified in Section B of Part IV of the
Schedule including the reasonable and proper cost of employing managing agents (whether or not the Landlord's or employers) and
caretakers in relation to the Centre but excluding any expenditure on any part of the Centre for which any other tenant shall be
responsible and exclusing also any costs of recovering outstanding sums from any tenant
(e) "Enactment" means any Act of Parliament and all subordinate legislation made under such Acts
(f) "Estate Services" means the provision and carrying out by or on behalf of the Landlord of the Services set out in Section A of Part
V of the Schedule hereto
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(g) "Estate Service Expenditure" means all expepditure reasonably incurred by the Landlord or which the Landlord anticipates is likely
reasonably to be incurred in providing all or any of the Estate Services and the matters specified in Section B of Part V of the Schedule
including the reasonable and proper cost of employing managing agents (whether or not the Landlord's own employees) and caretakers
in relation to the Estate but excluding any expenditure on any part of the Estate for which any other tenant shall be responsible and
excluding also any costs of recovering outstanding sums from any tenant
(h) "Ineligible Use for Value Added Tax Purposes" means a use by the Tenant of the Premises which has the effect that a supply of the
Premises by the Landlord to the Tenant is not a taxable supply notwithstanding that the Landlord may have made an election to waive
the exemption from Value Added Tax pursuant to Schedule 10 to the Value Added Tax Act 1994
(i) "Value Added Tax" means Value Added Tax or any similar tax chargeable instead of or in addition thereto as provided by statute
(j) "Insurers" means the insurance office or underwriters with whom the Premises are insured
(k) "Insured Risks" means:
(i) loss damage or destruction whether total or partial caused by fire lightning explosion aircraft and articles dropped therefrom storm
flood burst pipes impact riot civil commotion malicious damage and other perils against which the Landlord from time to time
reasonably thinks fit to insure except for such exclusions and limitations as may be imposed by the Insurers
(ii) property owners liability; and
(iii) loss of three years Principal Rent Estate Service Rent and Service Centre Rent
(l) "Insurance Rent" means in respect of any period for which the same is required to be calculated an amount equal to the aggregate of
the total premium for insuring the Premises and a fair and proper proportion of the cost of insuring the common parts of the Centre
against the Insured Risks and the reasonable and proper cost of an annual insurance valuation of the Premises where carried out
(m) "Interest" means interest during the period from the date on which the relevant payment is due to the date of payment (both before
and after any judgement) calculated on a daily basis at the rate of four per centurn (4%) per annurn above the base rate for the time
being of Barclays Bank plc or of some other UK clearing bank nominated in writing from time to time by the Landlord
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(n) "Plan 1" and "Plan 2" means the plans so numbered and annexed to this Lease
(o) "Public Authority" means the Secretary of State and any government department public local or any other competent authority
oT-institution and any court of law or any of them or any of their duly authorised officers
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(p) "Review Date" means the day of and every fifth anniversary of that date during the Term
(q) "Current Rent" means the Principal Rent payable under this Lease immediately before the Review Date
(r) "Market Rent" means the yearly rent which might reasonably be expected to be payable on a letting of the Premises on the
assumption that the same is fit for its intended use and is as described in Part VI of the Schedule hereto at the Review Date in the open
market between willing parties with vacant possession without fine or premium for the Term calculated from the Review Date but
otherwise on the terms of this Lease (other than the actual amount of Principal Rent but including the same rent review provisions) on
the assumptions that all covenants on the part of the Tenant in it have been complied with that the Tenant and any hypothetical lessee
and their successors in title is and will remain registered for Value Added Tax purposes and able fully to recover all or any Value
Added Tax which may become payable on supplies made by the Landlord under this Lease and that any rent free or rent concessionary
period in each case given or allowed for a tenant's fitting out period has expired and disregarding any effect on rent of the fact that the
Tenant or any undertenant has been in occupation of the Premises or any part of them any goodwill attached to the Premises by reason
of the business then carried on at them by the Tenant or any undertenant and any effect on rent attributable to the existence of any
alteration or improvement to the Premises carried out during or prior to the commencement of the Term by the Tenant or any
undertenant or their respective predecessors in title (otherwise than pursuant to an obligation to the Landlord or its predecessors in title
excepting any such as may be required in order to comply with any Enactment)
(s) "Review Rent" means the higher of the Current Rent and 74 per cent of the Market Rent
(t) "Surveyor" means an independent chartered surveyor having not less than ten years practice in the United Kingdom next before the
date of his appointment and recent substantial experience in the sale letting and valuation of premises of similar character and quality
to those of the Premises and who is a partner or director of a leading firm or company of chartere d surveyors having specialist market
and valuation knowledge of such premises
(2) Singular words include the plural and vice versa and the masculine gender includes the neuter gender and vice versa and each
includes the feminine gender
(3) The expressions "Landlord" "Tenant" and "the Guarantor" wherever the context so admits include their respective successors in
title and where two or more persons comprise the "Tenant" or "the Guarantor" such persons covenant with the Landlord jointly and
severally
(4) The Landlord and/or the Tenant by covenanting not to do or omit any act or thing also covenants not to permit or suffer it to be
done or omitted
4
(5) References in this Lease to:
(a) any consent licence or approval of the Landlord or words to similar effect mean a consent licence or other approval in writing
signed by or on behalf of the Landlord
(b) the Premises (except in clause 3(10)) shall be construed as extending to any part of the Premises
(c) a specific Enactment includes every statutory modification consolidation and re-enactment and statutory extension of it for the time
being in force (except any reference to the Town and Country Planning (Use Classes)Order 1987)
(d) any rent (whether or not defined in the Particulars or in clause 1(1)) and other amounts which may be or become payable to the
Landlord under this Lease are exclusive of all Value Added Tax which may be or become chargeable on the relevant supply by the
Landlord
(6) This Lease shall be governed by and construed in all respects in accordance with the law of England and the Tenant and the
Guarantor submit to the non-exclusive jurisdiction of the English Courts and agree that any process may be served on them by leaving
a copy of the relevant documents at the registered office of the Tenant
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DEMISE AND RENTS
2. The Landlord with full title guarantee DEMISES the Premises to the Tenant for the Term TOGETHER WITH the rights set out in
Part III of the Schedule and EXCEPT and RESERVED as provided in Part II of the Schedule YIELDING and PAYING:
(1) FIRST yearly and proportionately for any part of a year the Principal Rent payable by equal quarterly payments in advance on the
usual quarter days in each year without deduction the first payment or a proportionate part for the period commencing on the Rent
Commencement Date (calculated on an annual basis) to be made on the that date
(2) SECONDLY with effect from the day of as additional yearly rent the Estate Service Rent (including the Provisional Sum on
account)payable in accordance with clause 7
(3) THIRDLY with effect from the day of as additional yearly rent the Centre Service Rent (including the Provisional Sum on
account)payable in accordance with clause 7
(4) FOURTHLY as additional rent Interest payable on demand on any sum of whatsoever nature due from the Tenant to the Landlord
(whether as rent or
otherwise) which shall not be received by the Landlord within fourteen days after the sum is due
5
(5) FIFTHLY with effect from the day of as additional yearly rent the Insurance Rent payable without deduction within 21 days of
demand
(6) SIXTHLY any Value Added Tax from time to time payable by the Tenant under this Lease
3. The Tenant covenants with the Landlord throughout the Term:
TENANT'S COVENANTS
PAYMENT OF RENTS
(1) (a) To pay the rents reserved by this Lease on the days and in the manner set out in clause 2
(b) To pay in addition to the rents and other amounts which may be or become payable by the Tenant to the Landlord under this Lease
all Value Added Tax which may be or become chargeable on the relevant supply by the Landlord to the Tenant (subject to receipt of
an appropriate Value Added Tax invoice)
PAYMENT OF OUTGOINGS
(2) To pay all existing and future rates taxes duties charges and other outgoings whatsoever whether recurring non-recurring usual or
novel which are now or at any time during the Term shall be payable by the owner landlord tenant or occupier in respect of the
Premises excluding all sums payable by the Landlord in respect of the grant of this Lease or of any dealing with the reversion to this
Lease or of the Landlord's receipt of income
PAYMENT OF COST OF NOTICES CONSENTS ETC
(3) To pay all costs charges and expenses (including counsel's solicitors' and surveyors' fees)incurred by the Landlord in and incidental
to:
(a) the preparation and service of a notice under Section 146 Law of Property Act 1925 or in or in reasonable contemplation of any
proceedings under Section 146 or 147 of that Act notwithstanding that forfeiture is avoided otherwise than by relief granted by the
court and
(b) every step taken during or within 6 months after the expiration of the Term and in reasonable contemplation of or in connection
with or with the actual service of all notices and schedules of dilapidations relating to the Tenant's obligations and
(c) to the extent that such costs charges and expenses are reasonable and proper every application for consent or licence or approval
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under this Lease (save where any consent licence or approval is unreasonably withheld or delayed)
6
REPAIR DECORATION AND GENERAL CONDITION
(4) To repair and renew (where necessary in the context of repair) and keep the Premises in good and substantial repair and condition
and clean and tidy and in good decorative order in conformity with the principles of good estate management (damage by any Insured
Risk excepted save to the extent that the payment of the insurance money has been refused by reason of any act or default of the
Tenant or of any undertenant or of any licensee of the Tenant or any undertenant or of any person at the Premises with the consent of
the Tenant or any undertenant) Provided that the obligations of the Tenant as to the repair of the Premises shall not extend to any
matter for which the Landlord is responsible under Clause 4(4)
STRUCTURAL AND OTHER ALTERATIONS AND SIGNS
(5) (a) Not to erect any new buildings or structures on the Premises
(b) Not to make any alteration or addition to the Premises or any part thereof except with the Landlord's prior written consent (which
will not be unreasonably withheld or delayed) and (if the consent is given) to carry the work out in a good and workmanlike manner to
the reasonable satisfaction of the Landlord and in accordance with the reasonable requirements of the Landlord Provided that the
Tenant may install alter or remove internal demountable partitioning and carry out any other internal non-structural works without
requiring the consent of the Landlord provided details of such internal non-structural works are provided to the Landlord within 3
months of carrying out the same
(c) Not to attach or exhibit in or on the Premises (including the windows) any sign or other material which is visible from the outside
nor to erect its corporate sign on the -signboard provided by the Landlord without the Landlord's consent (such consent not to be
unreasonably withheld or delayed)
(d) At the expiration of the Term (unless either the Landlord shall have notified the Tenant to the contrary not less than three months
before the expiration of the Term or the Landlord and the Tenant shall have otherwise agreed) to reinstate all alterations carried out by
the Tenant and any undertenant or other occupier during the Term and to make good the Premises to the reasonable satisfaction of the
Landlord
COMPLIANCE WITH ENACTMENTS
(6) (a) To comply with all Enactments and with the requirements of every Public Authority in respect of the Premises and their use and
any permitted work being carried out to them and not to do or omit anything by which the Landlord may become liable to make any
payment to do anything under any Enactment or requirement of a Public Authority
(b) Forthwith on receipt of any communication or proposal from any Public Authority relating to the Premises to send the Landlord a
copy of it
7
LANDLORD'S RIGHT TO ENTER FOR VARIOUS PURPOSES
(7) To permit the Landlord and all others properly authorised by it at reasonable times on reasonable prior notice (except in an
emergency) to enter and remain on the Premises with or without equipment for all reasonable and proper purposes authorised by and in
conformity with the provisions of the Lease and to allow the Landlord to affix (but not so as to interfere materially with the Tenant's
use and enjoyment of the Premises) relevant notices to the Premises relating to the letting of the Premises at the expiry of the Term and
the sale of the Landlord's reversionary interest in the Premises
COMPLIANCE WITH NOTICES RELATING TO REPAIR AND CONDITION
(8) IF within two months after service of a notice from the Landlord to remedy any breach of covenant relating to the state of repair or
condition of the Premises (or earlier in the case of emergency) the Tenant shall not have commenced and be proceeding expeditiously
with the remedial work or if in the Landlord's reasonable opinion the Tenant is unlikely to have completed or has not completed the
relevant work within a reasonable time after service of the notice to permit the Landlord to enter the Premises to remedy the breach
and to pay the Landlord the cost of doing so and all expenses incurred (including solicitors costs and surveyors fees) within seven days
of demand use
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(9) (a) Subject to the provisions of sub-clause (b) hereof not to use the Premises or any tenant's chattels in them
(i) for any purpose (and not to do anything in or to the Premises) which may be or become or cause a nuisance disturbance obstruction
or damage to any person or property
(ii) for any dangerous noxious noisy illegal or offensive trade business or activity or for residential purposes
(iii) (without prejudice to the preceding paragraphs of this sub-clause) except for the Permitted Use
(b) Not to use more than 300 sq m of the Premises for the purposes of conducting scientific experiments on live animals ("the
Experiments") provided that such use shall be subject to the Tenant strictly complying with the following conditions:
(i) it shall before commencing the Experiments obtain all necessary consents and shall in the course of the Experiments comply with
all relevant Enactments and regulations
(ii) it shall not publicise or promote (whether orally or in writing) the fact that the Experiments are conducted at the Premises
(iii) subject to the Landlord's prior written approval (such approval not to be unreasonably withheld or delayed) it shall make suitable
provision in relation to the protection of the animals personnel and the Premises
(iv) it shall limit the Experiments conducted in the Premises to those related to medical research
8
(v) it shall only use mice and rats in the Experiments
(vi) it shall cease forthwith upon written notice from the Landlord to conduct the Experiments if in the Landlord's reasonable opinion:
(1) the Experiments are having the effect of materially diminishing the rental or capital value of the Premises or any other premises on
the Estate
(2) the Experiments are materially impeding the letting of any nearby building on the Estate
(3) the Experiments are causing the Landlord to take significant management action as a result of or in reasonable anticipation of the
actions of third parties due to the carrying on of the Experiments at the Premises
(4) the carrying out of the Experiments at the Premises are materially and adversely damaging the reputation of the Landlord or its
employees or the Estate
(10) Not to:
ALIENATION
(a) assign mortgage or charge or in any other manner part with possession of any part of the Premises (as distinct from the whole) save
as specifically permitted herein;
(b) assign underlet or otherwise part with or share possession of the whole of the Premises or underlet any part except in accordance
with clauses 3(10)(c) and 3(10)(d)
(c) assign the whole of the Premises except:
(i) to a person which before the assignment shall have (if reasonably required by the Landlord) procured a covenant with the Landlord
by a reasonably acceptable guarantor or guarantors to guarantee the observance and performance of the Tenant's covenants in this
Lease in the terms set out in Part VII of the Schedule
(ii) to an assignee which is able to recover 80 per cent or more of its input Value Added Tax
(iii) without obtaining the Landlord's consent which shall not be unreasonably withheld or delayed subject:
9
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(A) to the prior satisfaction of the condition in sub-clause 3(1 0)(c)(i) and
(B) the Tenant having first entered into an authorised guarantee agreement with the Landlord complying with the provisions of section
16 of the Landlord and Tenant (Covenants) Act 1995 and containing those provisions mentioned in section 16.5(a) to
(c) (inclusive) of THAT ACT;
(d) underlet the whole of the premises or part thereof:
(i) without obtaining the Landlord's approval of the form and content of the underlease (which shall not be unreasonably withheld or
delayed) and a covenant by the undertenant with the Landlord to observe and perform throughout the term of the underlease those of
the Tenant's covenants (in the case of an underletting -of part so far as they apply to the part being underlet) under this Lease so far as
they relate to the premises being underlet (other than to pay rent) which will be included in the underlease on the part of the
undertenant; nor without prejudice to the generality of the foregoing;
(ii) without reserving as a yearly rent payable by equal quarterly instalments in advance on the usual quarter days the open market rack
rental value of the premises being underlet except on a basis by which the principal rent reserved by the underlease shall be reviewed
not less frequently then once in every five years of the term sub-demised to the greater of:
(A) the rent payable under the underlease immediately before the relevant review; and
(B) the open market rack rental value of the premises demised. by the underlease on the date of review
(iv) in consideration of a fine or premium;
(v) without taking from the undertenant covenants with the Tenant (which the Tenant shall enforce) not to assign the premises being
underlet without the Landlord's consent which shall not be unreasonably withheld or delayed and not to underlet the whole or part of
them or otherwise deal with them by sharing or parting with possession or charging them save in a manner otherwise permitted by this
Lease;
(vi) except on a basis providing for the exclusion of sections 24 to 28 inclusive Landlord and Tenant Act 1954 in relation to the
underlease in pursuance of an Order duly made under Section 38(4)(a) of that Act before the grant of the underlease
10
(vii) except for a term which will end no later (but may end earlier) than the day before the contractual expiry of the Term
(viii) on the basis that there shall be no more than four occupants of the Premises (including the Tenant) at any one time
nor without obtaining the Landlord's consent (which subject to the satisfaction of the above conditions) shall not be unreasonably
withheld or delayed;
(e) agree any variation of any under lease without the landlord's consent (which shall not be unreasonably withheld or delayed);
(f) effect any transaction which this clause allows subject to the Landlord's consent more than three months after the date of the
consent unless it otherwise provides;
(g) assign the whole of the Premises or underlet the whole or part of the Premises to a person who in the reasonable opinion of the
Landlord will use the Premises for an Ineligible Use for Value Added Tax Purposes
(h) Within twenty-eight days after any assignment or other devolution of this Lease to give notice of it in duplicate to the Landlord
with a copy of the instrument (including any relevant probate letters of administration or assent)
(i) The Tenant and/or any undertenant may share occupation of the Premises with a company which is a member of the same group as
the Tenant or the undertenant (within the meaning of Section 42 of the Landlord and Tenant Act 1954) for so long as both companies
remain members of that group and provided that:
(i) no relationship of landlord and tenant is created between the two companies and no security of tenure is conferred upon the
occupier; and
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(ii) within fourteen days of the commencement of the sharing the Tenant gives to the Landlord notice of the company sharing
occupation and the address of its registered office
INSURANCE AND FIRE FIGHTING EQUIPMENT
(11) (a) Not to do or omit anything by which the insurance policy relating to the Premises becomes void or voidable (insofar as the
Tenant has been made aware of the terms of the relevant insurance policy)
(b) To comply with all requirements and reasonable recommendations of the Insurers made known to the Tenant and to provide and
maintain unobstructed appropriate operational fire fighting equipment on the Premises and not to obstruct the means of escape in case
of emergency from or to the Premises
NOT TO OBSTRUCT OR OVERLOAD
(12) Not to obstruct:
(a) or damage or use any area leading to the Premises in a way which causes nuisance or damage
11
(b) or discharge any deleterious matter into any Conduits serving the Premises and to keep them clear and functioning properly
(c) stop-up or darken the windows and other openings of the Premises
(d) any notice erected by the Landlord under clause 3(7) nor to overload or cause undue strain to the Premises or to any structure
surrounding or located within (but excluded from) the Premises or to any Conduits
PRESERVATION OF EASEMENTS
(13) (a) Not to give any acknowledgement that any rights of light and other easements belonging to the Premises are enjoyed by the
consent of any third party
(b) Not to do or omit anything which might subject the Premises to the creation of any new easement and to give notice to the
Landlord forthwith of any encroachment known to the Tenant which might have that effect
DEFECTIVE PREMISES
(14) Immediately upon becoming aware of the same to give notice to the Landlord of any defect in the Premises which might give rise
to:
(a) an obligation on the Landlord to do or refrain from doing anything in relation to the Premises; or
(b) any duty of care or the need to discharge such duty imposed by the Defective Premises Act 1972 or otherwise and at all times to
display and maintain all notices which the Landlord may from time to time reasonably require to be displayed at the Premises in
relation to their state of repair and condition
YIELD UP
(15) At the expiration or sooner determination of the Term:
(a) to remove all tenant's fixtures and chattels and to yield up the Premises in the STATE of repair condition decorative order and
layout required by this Lease and
(b) In the event that at the date of such expiration or sooner determination the Tenant is or has been engaged in carrying out any
Experiments to comply with all Enactments and regulations regarding all decommissioning of laboratories and
(c) To leave all mechanical and electrical installations forming part of or left in the Premises in working order and maintained in
accordance with manufacturers recommendations
COVENANTS
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(16) To observe and perform the Reversionary Obligations and Regulations
12
VALUE ADDED TAX: TO INFORM AND INDEMNIFY
(17) (a) The Tenant shall notify the Landlord in writing within thirty
(30) days of ceasing to use the Premises for an Ineligible Use for Value Added Tax purposes if the Premises were at the most recent
time of supply so used or of starting to use the Premises for an Ineligible Use for Value Added Tax Purposes if the Premises were at
the most recent time of supply not so used
(b) Within thirty (30) days of receiving a request in writing from the Landlord to provide the Landlord with evidence that H M
Customs and Excise has agreed that the Tenant is has been or will be using the Premises for an Ineligible Use for Value Added Tax
Purposes or such other information as the Landlord may reasonably require to enable the Landlord to assess whether the Tenant is has
been or will be using the Premises for an Ineligible Use for Value Added Tax Purposes
(c) Within seven (7) days of receiving any notice in writing from the Landlord which contains a statement of the Landlord's
understanding as to whether or not the Tenant will on the date stated in the notice be using the Premises for an Ineligible Use for Value
Added Tax Purposes to notify the Landlord whether or not that understanding is correct
(d) To maintain suitable records to ensure that the Tenant is able to comply with its obligations in this clause 3(17)
(e) Notwithstanding the provisions of clauses 3(9) and 3(10) of this Lease not to use the Premises for an Ineligible Use for Value
Added Tax Purposes
(f) To indemnify and keep the Landlord indemnified on an after-tax basis from and against all actions claims costs demands expenses
Value Added Tax liabilities and losses (whether arising before or after the beginning of the Term) arising from any breach of the
covenants on the Tenant's part contained in sub-clauses (a) (b) (c) (d) or (e) of this clause 3(17) and for this purpose the Landlord's
losses shall be deemed to include any Value Added Tax on supplies made to the Landlord which the Landlord would be unable to
recover (by way of credit or repayment) or which has been recovered but which the Landlord is liable to repay
LANDLORD'S COVENANTS
4. The Landlord covenants with the Tenant:
QUIET ENJOYMENT
(1) That if the Tenant observes and performs its covenants contained in this Lease the Tenant may peaceably and quietly hold and
enjoy the Premises without any lawful interruption by the Landlord or any person rightfully claiming through under or in trust for it or
by title paramount
MAINTENANCE AND REPAIR
(2) Save for any reason or circumstances beyond the Landlord's control (for which it shall not be liable but which control it shall use
all reasonable endeavours to restore) and save to the extent that the same are maintainable at the public expense to take all steps
necessary and consistent with the principles of good estate management to maintain repair and keep in good and substantial repair and
condition such of the Conduits roadways and other facilities as are referred to in Parts IV and V of the Schedule and save as aforesaid
to provide at all times the Centre Services and the Estate Services
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INSURANCE
(3) (a) to keep the Premises insured against the Insured Risks and (in relation to the risks described in clause 1 (k)(i)) in the full
rebuilding cost (but not necessarily the facsimile reinstatement cost) of the Premises and to use all reasonable endeavours to procure
that such insurance contains a waiver of subrogation rights against the Tenant and tenant's non-invalidation clause
(b) on request to supply the Tenant with suitable evidence of such insurance by way of a Schedule of insurance details including an
accurate summary of the risks against which the insurance is effected and details of all excesses and exclusions
(c) if and whenever during the Term the Premises are damaged or destroyed by an Insured Risk (save to the extent that the payment of
the insurance monies is refused by reason of any act or default of the Tenant or of any undertenant or of any licensee of the Tenant or
any undertenant or of any person at the Premises with the consent of the Tenant or any undertenant) the Landlord will with all
convenient speed take the necessary steps to obtain any requisite planning permissions and consents and if they are obtained to lay out
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all monies received in respect of such insurance (except sums in respect of public liability and loss of rents) in and towards replacing
(but not necessarily in facsimile reinstatement) the damaged or destroyed parts as soon as reasonably practicable and will make up any
deficiency out of its own money PROVIDED ALWAYS THAT the Landlord shall not be liable to do so if it is unable (having used all
reasonable endeavours) to obtain every planning permission and consent necessary to execute the relevant work in which event the
Landlord shall be entitled to retain all the insurance monies received.
DEFECTS
(4) (a) The Landlord shall subject to the provisions of sub-clause (b) hereof as soon as reasonably practicable make good or procure
the making good at its own expense of all defects (but not any defect which is due to normal condensation natural shrinkage or drying
out) in the Premises which are directly attributable to defective design workmanship supervision or materials or defective supervision
of the construction of the Premises or defective preparation of the site on which the Premises are constructed which appear and are
notified to it in writing by the Tenant at any time
14
before the expiration of the Defects Period PROVIDED THAT the Tenant shall afford to the Landlord all reasonable access to the
Premises and areas affected by such defects subject to the Landlord causing as little inconvenience to the occupier of such areas as
may in all the circumstances be practicable and making good all damage to any property of the Tenant or the Premises caused during
such entry to the reasonable satisfaction of the Tenant and for the avoidance of doubt and without prejudice to the generality of the
foregoing the Landlord shall not be required to procure the making good of any defect which is attributable to the carrying out of any
fitting out or other works by the Tenant or to the effect of any such works or to the use and occupation of the Premises by the Tenant
PROVIDED THAT if during the carrying out of any fitting out or other works by the Tenant the Tenant shall discover a defect which
would have been required to be remedied by the Landlord under the provisions of this clause if it had been discovered by some other
means or remained latent the fact that the same shall have been discovered as a result of the carrying out of any fitting out or other
works by the Tenant shall not exclude any liability which the Landlord would have had if the defect had been discovered by some
other means or presented itself under any other circumstances
(b) The Landlord shall make good any such defects as aforesaid notified to it in writing during the period from the date hereof until as
soon as practicable after (save for defects which require urgent attention which shall be remedied as soon as practicable after written
notification to the Landlord) and after all defects shall be remedied as soon as practicable after written notification to the Landlord
(provided such notification is made before the end of the Defects Period) all such defects being remedied to the reasonable satisfaction
of the Tenant
DEFECTS INSURANCE
(5) (a) The Landlord shall as soon as reasonably practicable procure for the Tenant's benefit at the Landlord's own cost a Defects
Insurance Policy ("the Defects Insurance Policy") in the form of the attached draft (subject to such minor amendments as the insurers
may require provided that any amendments shall not affect the amount of the insurance cover the risks insured or the amount of the
excess) in the joint names of the Landlord and the Tenant issued by the Commercial Union Assurance Company plc or some other
reputable insurance company and shall then provide the Tenant with true copy of the proposed Defects Insurance Policy
(b) Notwithstanding that the Defects Insurance Policy shall be in the joint names of the Landlord and the Tenant the Tenant shall be
entitled to any proceeds of the Defects Insurance Policy in respect of its liability under its covenants contained in this Lease in priority
to the Landlord and the Landlord will direct the insurers accordingly in the event of a claim and take such action as may be necessary
and/or appropriate to ensure that monies payable under the Defects Insurance Policy are paid to and received
by the Tenant as soon as practicable after the occurrence of any claim under the Defects Insurance Policy arising
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AGREEMENTS AND DECLARATIONS
5. IT IS AGREED AND DECLARED THAT:
(1) Without prejudice to any other remedies and powers contained in this Lease or otherwise available to the Landlord if
(a) the whole or part of the rents shall be unpaid for twenty-one days after becoming payable (in the case of the Principal Rent whether
formally demanded or not); or
(b) any of the Tenant's covenants in this Lease are not performed or observed; or
(c) the Tenant (or if more than one person any one of them being a company) is the subject of a petition for its winding up; or enters
into liquidation whether voluntary (except for reconstruction or amalgamation of a solvent company) or compulsorily; or has a
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provisional liquidator or a receiver (including an administrative receiver) appointed; or is the subject of an administration order or a
petition for one or of a voluntary arrangement or a proposal for one under Part I Insolvency Act 1986; or is unable to pay its debts
within the meaning of section 123 Insolvency Act 1986 or is otherwise insolvent; or having been registered with unlimited liability it
acquires limited liability; or
(d) the Tenant (or if more than one person any one of them being an individual) is the subject of a bankruptcy petition or bankruptcy
order or of any application or order or appointment under Section 253 or Section 273 or Section 286 Insolvency Act 1986; or
otherwise becomes bankrupt or insolvent; or
(e) the Tenant enters into or makes any proposal to enter into any arrangement or composition for the benefit of his creditors
then the Landlord may at any time thereafter (and notwithstanding the waiver of any previous right of re-entry) re-enter the Premises
whereupon this Lease shall absolutely determine but without prejudice to any Landlord's rights of action in respect of any antecedent
breach of the Tenant's covenants in this Lease
(2) In addition to any other mode of service any notice required or authorised to be given under this Lease shall be validly served if
served in accordance with Section 196 Law of Property Act 1925 as amended by the Recorded Delivery Service Act 1962 and any
such notice shall be deemed (whether or not it is actually the case) to be a notice required to be served for the purposes of such Section
(3) If and whenever during the Term the Premises or the means of access thereto and/or therefrom on the Centre or the Estate or any of
them are damaged or destroyed by any of the Insured Risks so that the Premises or any part of them are unfit for occupation or use
16
or access thereto is prevented then (save to the extent that payment of the insurance money is refused by reason of any act or default of
the Tenant or of any undertenant or of any licensee of the Tenant or any undertenant or of any person at the Premises with the consent
of the Tenant or any undertenant) the Principal Rent the Estate Service Rent and the Centre Service Rent or a fair proportion thereof
according to the nature and extent of the damage sustained shall cease to be payable until the Premises or the affected part shall have
been rebuilt or reinstated so that the Premises are made wholly fit for occupation or use (or as the case may be access to and from the
Premises is restored) the amount of such proportion and the period during which the rents shall cease to be payable to be determined
by the Surveyor acting as an expert and not as an arbitrator and in conformity with similar arrangements as to his appointment as apply
to a Surveyor appointed under clause 6.
(4) In the event that the Premises or the means of access thereto and/or therefrom on the Centre or the Estate are so damaged or
destroyed by any of the Insured Risks so as to render the Premises or any part thereof unfit for occupation or use (and the policy of
insurance effected by the Landlord shall not have been vitiated or payment of the policy monies refused in whole or in part in
consequence of any act or default of the Tenant or of any under tenant or of any licensee of the Tenant or any undertenant or of any
person at the Premises with the consent of the Tenant or any undertenant) and the Landlord has despite using all reasonable
endeavours been unable to complete the reinstatement of the Premises or the means of access within 30 months from the date of the
damage or destruction then either party (but in the case of the Landlord only where it has used such reasonable endeavours aforesaid
and the damage prevents the use of the whole (or substantially the whole) of the Premises) may prior to the completion of such
reinstatement terminate this Lease by giving fourteen days written notice to the other and upon the expiry of such notice this Lease
shall absolutely cease and determine but without prejudice to the rights of any party in respect of any prior breach of the covenants and
conditions contained herein
(5) Nothing in this Lease shall impose upon the Tenant any obligation to make good or remediate any form of contamination to the
Premises the Centre the Estate or any other land and premises unless the contamination in question is caused directly by the Tenant its
undertenants or other occupiers of the Premises in their use of the Premises
6.1 The Market Rent may be agreed in writing at any time between the Landlord and the Tenant
RENT REVIEW
6.2 If the Landlord and the Tenant shall not have agreed the Market Rent by the date three months immediately before the relevant
Review Date either party may in its discretion require the Market Rent to be assessed by the Surveyor in the following manner:
(a) the Surveyor shall be appointed to assess the Market Rent by the Landlord and the Tenant or (if they fail to agree the appointment)
by or on behalf of the President for the time being the Royal Institution of Chartered Surveyors on the application of either the
Landlord or the Tenant
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(b) the surveyor shall act as an expert and not as an arbitrator (and shall give the Landlord and the Tenant the opportunity to make
written representations to him in such manner as he may direct but shall make the determination in accordance with his own opinion)
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6.3 If the Surveyor shall die delay or become incapable of acting or unwilling to act or if for any other reason the President or the
person acting on his behalf shall in his absolute discretion think fit the President may by writing discharge the Surveyor and appoint
another in his place
6.4 The cost of the reference to the Surveyor shall be apportioned between the Landlord and the Tenant as the Surveyor shall in his
discretion determine whose decision shall be final and binding on the Landlord and the Tenant
6.5 When the Market Rent as at the relevant Review Date has been ascertained in accordance with this Lease memoranda of the
Review Rent shall be signed by or on behalf of the Landlord and the Tenant (at their own cost) and annexed to this Lease and its
counterpart
6.6 If the Market Rent has not been ascertained by the relevant Review Date the Tenant will continue to pay the Current Rent and
when the Market Rent is ascertained the Tenant will on the quarter day immediately following the date on which the Market Rent is
ascertained pay the Landlord any amount which the Review Rent for the period commencing on the relevant Review Date and ending
on such quarter day exceeds the Current Rate plus Interest (but calculated at the relevant base rate) on the excess from time to time
from the Review Date calculated by reference to the relevant quarter day on which the appropriate proportion of the excess became
payable
7. ESTATE SERVICE RENT AND CENTRE SERVICE RENT
7.1 For the purposes of this Lease:
(a) "Account Date" means 30 September in every year of the Term or such other date as the Landlord may from time to time nominate
by notice in writing to the Tenant
(b) "Service Period" means the period:
(i) from the Account Date; and thereafter to (and including) the first
(ii) between two consecutive Account Dates (excluding the first and including the second); thereafter
(iii) commencing immediately after the last Account Date of the Term and ending on the expiration of the Term
7.2 The Landlord shall as soon as convenient after each Account Date prepare an account showing the Estate Service Expenditure and
the Centre Service Expenditure for the year ended on that Account Date and containing a fair summary of the expenditure referred to
and upon the account being certified by the Landlord's managing agents it shall be
conclusive evidence for the purposes of this Lease of all matters of fact referred to except in case of manifest error
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7.3 The Tenant shall pay the Landlord on account of Estate Service Rent and Centre Service Rent the Provisional Sum in relation to
each Service Period the first payment (being a proportionate sum in respect of the period commencing on and ending immediately
before the quarter day next after the Lease Date ) to be made on the Lease Date and the subsequent payments to be made by equal
instalments in advance on the usual quarter days
7.4 If the Estate Service Rent or the Centre Service Rent for any Service Period:
(a) exceeds the Provisional Sum for that Service Period the excess shall be due to the Landlord within 14 days of demand; or
(b) is less than the Provisional Sum for that Service Period the overpayment shall be credited to the Tenant against subsequent
payments on account of the Estate Service Expenditure or the Centre Service Expenditure (as the case may be) until the overpayment
is balanced or until the expiry of the Term when a cash repayment will be made to the Tenant
7.5 Any omission by the Landlord to include in the Estate Service Expenditure or Centre Service Expenditure a sum expended or
liability incurred in the relevant Service Period shall not preclude it from including such sum or the amount of such liability in any
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subsequent period
7.6 Any sum accounted for as part of the Estate Service Expenditure shall not be accounted for as part of the Centre Service
Expenditure and vice versa
7.7 The provisions of this clause 7 shall continue to apply notwithstanding the expiration or sooner determination of the Term but only
for the purposes of calculations and payment of the Estate Service Rent and the Centre Service Rent for the period down to such
expiration or sooner determination
8. RIGHT TO DETERMINE
The Tenant may subject to it having given not less than 12 months notice in writing ("the Break Notice") to the Landlord determine the
Term on the 10th anniversary of the Term Date ("the Break Date") PROVIDED ALWAYS the Tenant's right to determine shall be
further subject to the following:
(a) the Tenant yielding up the Premises with full vacant possession on the Break Date
(b) the Tenant having materially complied with all its covenants and obligations under this Lease at the Break Date
(c) The Tenant shall pay to the Landlord a sum equivalent to the Principal Rent the Estate Service Rent the Centre Service Rent and
the Insurance Rent calculated for a period of 12 months (such calculation to be based on the amount of such rents for the year ending
on the Break Date) and such sum (estimated in the case of the
Estate Service Rent the Centre Service Rent and the Insurance Rent (where relevant) and balanced by the appropriate payment when
the precise sums due are known) is received by means of cleared funds into the account of the Landlord no later than one day before
the Break Date
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9. GUARANTOR'S COVENANTS
At the request of the Tenant and in consideration of the grant of this lease made at its request the Guarantor enters with the covenants
set out in Part VII of the Schedule
THE SCHEDULE
PART I
("THE PREMISES)
The land and buildings and appurtenances thereto known as 88 Milton Park Abingdon Oxfordshire shown edged red on Plan I
PART II
EXCEPT AND RESERVED to the Landlord (and all other persons authorised by the Landlord or having like rights) the free and
uninterrupted rights:
(1) to the passage and running of water soil gas electricity telephone and other services or supply to and from any Adjoining Premises
through the Conduits in or under the Premises
(2) for the Landlord to enter the Premises for the purposes mentioned in and subject to the provisions of this Lease
(3) of light air and protection now or after the date of this Lease enjoyed by any Adjoining Premises
(4) at any time hereafter to alter rebuild make connections to or demolish any building on any Adjoining Premises in such manner as
the person exercising the right shall think fit notwithstanding the same may obstruct affect or interfere with (but in each case not
materially) the amenity of or the passage of light and air to the Premises or have an insubstantial effect on the means of access to them
PROVIDED THAT if the Landlord exercises any of the above rights by carrying out work on the Premises it shall forthwith make
good any damage caused to the reasonable satisfaction of the Tenant and shall use all reasonable endeavours to minimise any
disruption or inconvenience to the Tenant and other occupiers of the Premises
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TOGETHER WITH the benefit of the rights -
PART III
(1) to the passage and running of water soil gas electricity telephone and other services or supply to and from the Premises through the
Conduits in or under the Adjoining Premises
(2) of support and protection as is now enjoyed from the Adjoining, Premises
20
(3) now set out in the Property register of the Landlord"s title at H M Land Registry as may be relevant
(4) at convenient times and upon reasonable notice (except in emergency) to enter the Adjoining Premises of the Landlord (as at the
date hereof) if it shall be necessary to do so in order to view the state and condition of the Premises and to make good all damage
caused
(5) (in common with the Landlord and all other persons having a like right) to pass and repass to and from the Premises at all times
and for all purposes connected with the Permitted Use (but not otherwise) over and along those parts of the Estate which are designed
and intended for those purposes including (without prejudice to the generality of the foregoing) the Estate roads
(6) to the exclusive use of the car parking areas shown edged and hatched yellow on Plan 1 for the purpose of parking private cars and
light commercial vehicles and not for any other purpose (save for gaining access to and from the Premises) and to use such other 39
additional car parking spaces for such purposes as aforesaid within the car parking area serving the Centre as the Landlord may from
time to time reasonably designate
(7) subject to the Landlord's prior written consent (such consent not to be unreasonably withheld) to install the corporate sign of the
Tenant on the signboard provided by the Landlord
PART IV
SECTION A
(CENTRE SERVICES)
(a) Repairing resurfacing cleaning lighting maintaining and (where necessary) renewing replacing and improving the estate roads
within the Centre and the forecourts car parking areas loading bays landscaped areas boundary walls fences hedges gates entrances and
signs now or at any time during the Term constructed on the Centre including any drains sewers pipes cables gutters inspection
chambers or any other services or fittings relating thereto over in or under the Centre which in each case are not the responsibility of
any individual tenant or occupier to maintain
(b) Retaining and providing the services of all staff necessary for the efficient maintenance and management of the Centre together
with any working accommodation for such staff
(c) Maintaining security services in respect of the Centre which are sufficient in the Landlord's reasonable opinion
(d) Compliance by the Landlord with every notice regulation or order of any competent local or other authority in relation to the
Centre or its appurtenances
(e) Effecting and maintaining in force an insurance policy or policies against any and every liability of the Landlord for injury to or
death of any person (including every agent servant
and workman of the Landlord) and damage to or destruction of the property of any such person arising out of the maintenance of the
Centre
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(f) Carrying out all other work or providing services of any kind whatsoever which the Landlord may from time to time reasonably
consider necessary or desirable and which are in accordance with the principles of good estate management of the Centre
Section B
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(a) all reasonable and proper fees charges expenses and commissions incurred in the administration and management of the Centre or
payable to any solicitor accountant surveyor valuer agent or architect or any of them whom the Landlord may from time to time
employ in connection with the management or maintenance of the Centre including the cost of preparing or causing to be prepared
statements of said costs charges and expenses and auditing the same but excluding any fees charges expenses and commission paid for
the collection of rent from the tenants of and the letting or reletting of any premises on the Centre
(b) a charge equivalent to ten per centum of the aggregate costs expenses and outgoings referred to in Section A of this part of this
Schedule such sum to be in respect of the general administration and supervision costs of the Landlord relating to or in connection with
the matters specified or referred to in Section A of this part of this Schedule or any of them
(c) such reasonable and proper sum as the Landlord shall in its reasonable discretion think fit as being a reasonable provision for
expenditure likely to be incurred in the future in connection with the matters mentioned in Section A of this part of this Schedule
PART V
SECTION A
(ESTATE SERVICES)
(a) Repairing resurfacing cleaning lighting maintaining and (where necessary) renewing replacing and improving the estate roads
serving the Estate and the forecourts car parking areas loading bays landscaped areas boundary walls fences hedges gates entrances
and signs now or at any time during the Term constructed on the Estate including any drains sewers pipes cables gutters inspection
chambers or any other services or fittings relating thereto over in or under the Estate which in each case are not the responsibility of
any individual tenant or occupier to maintain
(b) Retaining and providing the services of all staff necessary for the efficient maintenance and management of the Estate together with
any working accommodation for such staff
(c) Maintaining security services in respect of the Estate which are sufficient in the Landlord's reasonable opinion
(d) The maintenance replacement renewal and improvement of the sewerage pumping station and drainage and sewerage system
serving the Estate
22
(e) Compliance by the Landlord with every notice regulation or order of any competent local or other authority in relation to the Estate
or its appurtenances
(f) Effecting and maintaining in force an insurance policy or policies against any and every liability of the Landlord for injury to or
death of any person (including every agent servant and workman of the Landlord) and damage to or destruction of the property of any
such person arising out of the maintenance of the Estate
(g) Carrying out all other work or providing services of any kind whatsoever which the Landlord may from time to time reasonably
consider necessary or desirable and which are in accordance with the principles of good estate management of the Estate
Section B
(a) all reasonable and proper fees charges expenses and commissions incurred in the administration and management of the Estate or
payable to any solicitor accountant surveyor valuer agent or architect or any of them whom the Landlord may from time to time
employ in connection with the management or maintenance of the Estate including the cost of preparing or causing to be prepared
statements of said costs charges and expenses and auditing the same but excluding any fees charges expenses and commission paid for
the collection of rent from the tenants of and the letting or reletting of any premises on the Estate
(b) a charge equivalent to ten per centum of the aggregate costs expenses and outgoings referred to in Section A of this part of this
Schedule such sum to be in respect of the general administration and supervision costs of the Landlord relating to or in connection with
the matters specified or referred to in Section A of this part of this Schedule or any of them
(c) such reasonable and proper sum as the Landlord shall in its reasonable discretion think fit as being a reasonable provision for
expenditure likely to be incurred in the future in connection with the matters mentioned in Section A of this part of this Schedule
(SPECIFICATION AND PLANS FOR NOTIONAL OFFICE BUILDING
PART VI
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FOR RENT REVIEW PURPOSES)
See annexure
23
88 MILTON PARK HYPOTHETICAL OFFICE
SPECIFICATION
VERTEX [FOR RENT REVIEW
PURPOSES]
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EXPLANATORY NOTE:
The purpose of this specification is to describe the premises to be valued on rent review as outlined in the lease.
Broadly "the Centre" and the external parts of "the Premises" (as described in the lease) are as outlined in the Agreement for Lease.
However, it is assumed for rent review that the Premises have been fitted out on both ground and first floors as comfort cooled open
plan offices. Both core areas are fitted to the developer's specification, as outlined in the Agreement for Lease.
GENERAL
Building 88 is a two storey building comprising C 2,300 sq m. The building forms part of a development of three similar buildings
orientated in an 'H' shape around a central courtyard. Building 88 has a third storey which has been designed to accommodate plant,
both in an enclosed central area and on open 'balconies' at both ends of the building. The building has two entrance areas both forming
a core containing a stair and lift to the first floor, fitted separate male, female and disabled toilet areas, riser cupboards and doors into
the comfort cooled open plan office areas.
The core areas will be finished to a normal developers specification including plastered and painted walls, carpeted first floor landing
and stairs, non-slip ceramic tile finish to ground floor entrance with plasterboard ceilings and feature lighting. Perimeter radiators
provide space heating and WC areas have fully tiled walls, non slip ceramic tiles floors and are fitted with usual sanitary provision.
The ground and first floors of the building are finished as high quality comfort cooled open plan offices. There is a raised computer
floor, suspended ceiling with Cat II lighting, antistatic carpets throughout, floor sockets and air cooling system with associated filtered
fresh air ventilation. All plant serving the premises is housed within the third storey plant room area.
The thermal performance of the external building envelope will comply in all respects with the Building Regulations for England and
Wales, Part L, 1995.
1 FOUNDATIONS
Mass concrete trench fill and pad foundations on vibro-compacted sub-grade, designed in accordance with the recommendations of the
site investigation report No 31095/01 dated June 1997.
2 STRUCTURAL FRAME
Steel frame with intumescent paint or boarding to achieve as required fire protection.
Hot rolled structural steel trusses, shot blasted and zinc phosphate primed finish supporting cold rolled galvanised steel purlins.
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88 MILTON PARK HYPOTHETICAL OFFICE
SPECIFICATION
VERTEX [FOR RENT REVIEW
PURPOSES]
--------------------------------------------------------------------------------
3 GROUND FLOOR SLAB
In-situ mesh reinforced concrete slab on granular sub-base to core
areas, wide bay reinforced concrete slab and granular sub-base to
office areas designed for uniformly distributed load of 20kN/mTO THE
POWER OF2 (400lb per sq ft). Insulation 'U' value is to be 0.45W/mTO
THE POWER OF2 or better.
4 EXTERNAL WALLS
Masonry-cavity wall with 'Red Bank Gobelin' or similar external facing
brick skin, 160mm cavity with 75mm rockwool partial cavity fill, and
140mm non-load bearing dense blockwork.
Insulation 'U' Value is to be 0.45W/mTO THE POWER OF2 or better.
Precast reconstituted stone lintels above first floor windows.
Aluminium Pvf2 coated BS 18B 25 Dark Grey RAL 7037 Light Grey flat
composite Luxalon cladding panels in window bays and Kingspan cladding
panels fixed horizontally with proprietary fixings at the plant room
and gable ends.
5 UPPER FLOORS
Precast concrete floor slabs to first floor 260mm deep, designed for
uniformly distributed load of 6kN/mTO THE POWER OF2 (120 lbs/sq ft).
Precast concrete floor slabs to plant rooms 150mm deep, designed for
uniformly distributed load of 5.0KN/mTO THE POWER OF2.
6 ROOF
Aluminum mill finish standing seam Kalzip roof cladding with 170mm
insulation, vapour barrier and steel liner tray, to achieve 'U' value
of 0.45W/mTO THE POWER OF2. Concealed aluminium gutters and exposed
downpipes.
Precast concrete floor planks to flat roof areas 150mm deep with
screed
to falls and Sarnafil single ply inverted flat roof system.
7 GLAZING
Double glazed polyester powder coated, colour Dark Grey BS 18 B 25
external and white RAL 9016 internal, thermally broken Hunter Douglas
aluminium windows with approximately 50% top hung opening lights.
Polyester powder coated aluminium doors and external fire exit doors.
All ground floor windows to south and west elevations and first floor
windows to west elevations to have external aluminium Kingfisher sun
louvres.
Glazed rebated entrance doors, letter box and conduit for entry
control.
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88 MILTON PARK HYPOTHETICAL OFFICE
SPECIFICATION
VERTEX [FOR RENT REVIEW
PURPOSES]
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8 INTERNAL WALLS
Blockwork generally to underside of floors or roof structure, with a
plaster finish to core areas.
Blockwork to W.C cubicles.
9 STAIRCASES
Precast concrete staircases to front entrances.
Mild steel painted balustrading and maple handrail to front staircases
and landing.
Ladder access to plant rooms.
Glavanised mild steel painted external spiral fire escape stair to
east
and west elevation. Galvanised mild steel painted external spiral fire
escape stair to south elevation.
10 INTERNAL FITTINGS
DOORS
Internal entrance doors to be solid core maple veneered with vision
panels, with maple linings and architraves.
All other doors off entrance areas to be solid core maple veneered
flush doors, maple linings and architraves.
Toilet cubicle doors to be maple with maple linings and architraves.
Riser duct doors to be painted MDF.
DOOR FURNITURE
Pull handles and kick/push plates to be stainless steel, and other
ironmongery satin anodised aluminium by Newman Tonks.
JOINERY
Skirtings to entrance and office to be maple areas. Window boards to
office areas to be maple.
TOILETS
Toilet areas to have white china sanitaryware, laminate panels to
concealed WC and urinal cisterns, solid acrylic resin vanity units to
wash hand basins, toilet roll holders, mirrors, coat hooks and fused
spur outlets for hand dryers.
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88 MILTON PARK HYPOTHETICAL OFFICE
SPECIFICATION
VERTEX [FOR RENT REVIEW
PURPOSES]
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11 INTERNAL FINISHES
WALLS
Front entrance, staircase, landing and office areas to be plastered and finished with emulsion paint finish.
Toilet walls to be plastered and have full height Langley ceramic tiles.
FLOORS
Staircase, landing and office areas to have Escopallas Excell carpet tiles anti-static to IBM Standard for general office use with nosings
to staircase tread.
Cleaners room to be sand/cement screed with sheet vinyl flooring.
Toilet areas to be sand/cement screed with slip resistant 300 x 300mm Langley ceramic tiling.
Front entrance to have non-slip Langley ceramic tile finish with matwell and aluminum/polypropylene entrance matting.
Entrance, staircase and landing areas generally to have Gyproc MF plasterboard ceiling.
CEILINGS
Toilet areas to have exposed narrow grid Armstrong Microlux Dune suspended ceiling with 600 x 600mm moisture resisting tiles.
Office areas to have exposed narrow grid Armstrong Microlux Dune suspended ceiling with 600 x 600 tiles.
12 LIFT
2 No Eight person Schindler 100 hydraulic passenger lift.
Lift car door and returns are finished in stainless steel. Full height carpet tiles to side walls, half height carpet with tinted mirror to rear
wall and handrail below. Carpet tiles to floor. Concealed lighting to ceiling.
13 ELECTRICAL INSTALLATION
The incoming electrical supply will be provided by the local electricity supply authority, and will be delivered and metered at low
voltage, maximum anticipated load allowance of 290 KVA.
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SPECIFICATION
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Separate cable risers shall be provided 1 per each building core.
Electrical risers to be fitted out with lighting and small power
distribution systems for first floor only. Data/communication risers
to
be provide space for tenant fit out.
13.1 LIGHTING
Emergency lighting, based on integral or remote battery units shall be
provided to all relevant escape route areas in accordance with BS5266
and as required by the local authority.
Lighting installation shall comprise of the following areas and the
artificial average illumination level will be:-
i) Entrance:- 200-300 Lux; wall mounted low energy Marlin
luminaires.
ii) Staircases and landing areas:- 150 Lux; Marlin recessed low
energy compact fluorescent luminaires.
iii) Toilets:- 150 Lux; low energy recessed compact fluorescent
Marlin luminaires to cubicles and circulation areas, low
voltage Marlin downlighters or pelmet lighting over the
vanity
units.
iv) Plant rooms :- 200-250 Lux; linear fluorescent luminaires
with metal reflectors or compact fluorescent bulkhead
luminaires surface fixed.
v) Open plan office : 400 Lux; recessed modular fluorescent
luminaires in 600 x 600mm modules with 2 x 40W 2L lamps
(mains
frequency) and LG3 Cat 2 louvre within full accessible
suspended ceiling. Facility for automatic lighting control
system.
13.2 POWER DISTRIBUTION
Single and double outlet switched 13 amp socket outlets shall be
positioned within the core areas and plantrooms to provide for routine
maintenance, cleaning and general services.
13.3 FIRE ALARM
A "break glass" fire alarm installation and automatic smoke detection
system shall be provided to all core and office areas of the building
designed in accordance with BS5839, protection category L2. The alarm
and detection system shall have the facility to be extended to
accommodate tenant requirements. Fire alarm sounders are provided to
give coverage to the whole of the building based on an open plan
basis.
13.4 LIGHTNING PROTECTION
The building shall be provided with its own lightning protection
system
designed in accordance with BS6651.
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88 MILTON PARK HYPOTHETICAL OFFICE
SPECIFICATION
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PURPOSES]
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13.5 ACCESS SYSTEM PROVISION
An access conduit system shall be provided from external doors to
above
suspended ceiling to all external doors for the installation of a
security system by a future tenant.
14 HEATING, PLUMBING AND VENTILATION
14.1 GAS - GENERAL
2 No low pressure 65mm dia. gas connections shall be provided from the
local supply authority mains to the gas meter enclosures. Both gas
mains rising to serve two gas fired low pressure hot water (LPHW)
'Ideal CXD 70' boilers at roof level in the plant room which provide
hot water distribution (14.4 below) and space heating (14.6 below) and
shall be provided to comply with local gas board regulations.
14.2 WATER - GENERAL
2 No dedicated 35 mm dia. water connection will be provided from the
local supply authority mains to 2 No cold water storage tanks in the
plant room.
14.3 COLD WATER DISTRIBUTION
Cold water distribution within the 2 core areas of toilet/cleaners
accommodation is provided from the storage tanks. Cold water connected
to all sanitary fittings in both core areas.
14.4 HOT WATER DISTRIBUTION
The building shall be provided with four gas fired boilers in the
plant
room (as in 14.1 above) capable of serving hot water to all
appropriate
sanitary fittings in both core areas and space heating requirements in
all areas. Two hot water systems will be provided with each system
comprising of two gas fired boiler units, pressurisation set, primary
and secondary pipework and hot water treatment equipment located
within
the dedicated plant room.
14.5 COOLING
Ceiling mounted localised cooling units with individual condenser
plant mounted externally on flat roof areas. Each cooling unit will
have a wall mounted over-ride controller for manual on/off and
temperature adjustment.
14.6 HEATING
Heating will be provided by gas fired boilers (as at 14.1 above)
feeding pressed steel perimeter panel radiators in all areas.
14.7 VENTILATION
Fresh air will be provided to all open plan office areas by means of
roof mounted packaged air handling units containing filters, heating
and cooling elements and a fan.
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88 MILTON PARK HYPOTHETICAL OFFICE
SPECIFICATION
VERTEX [FOR RENT REVIEW
PURPOSES]
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The filtered fresh air then being delivered at room temperature to the
space from ceiling mounted grills.
Toilet/cleaners extract ventilation will be provided to serve the
cores
by central extract fan units in the plantroom. Supply air shall be
introduced from the adjacent circulation areas. Toilet and cleaners
areas shall be maintained at a negative pressure with respect to
surrounding areas to control migration of odours etc.
Ventilation to the roof plant rooms shall be provided to meet local
authority requirements via louvres in the external walls.
14.8 General
The sanitary and plumbing systems to serve the toilet and cleaner
accommodation shall be designed in accordance with current Codes of
Practice and to suit requirements of local authority.
1 INCOMING SERVICES
Services to be installed to the buildings as follows:-
FOUL AND SURFACE WATER SEWERS - Connected to existing main drainage
system.
ELECTRICITY - Cables to be laid to existing SEB low voltage system.
GAS - Pipes to be laid to British Gas main supply.
BT, MERCURY AND COMTEL - Ducts to be installed for BT, Mercury
Communications and Comtel.
WATER SUPPLY - Pipework to be laid to existing Thames Water mains
supply.
2 EXTERNAL LIGHTING
Lighting to pedestrian access, car parking, utility and amenity space
with low level bollards and 5m columns with amenity luminaires, Thorn
Johanna or similar with 150W high pressure SON lamp in a decorative
housing with a dished reflector above, to achieve average illuminance
of 3-5 Lux.
PART VII
GUARANTEE PROVISIONS
2002. EDGAR Online, Inc.
(1). The Guarantor guarantees to the Landlord the due and punctual payment
and performance by the Tenant of all the tenant's obligations and
liabilities under this Lease and shall indemnify the Landlord against
all losses damages costs and expenses arising or incurred by the
Landlord as a result of the non-payment or non-performance of those
obligations or liabilities
(2). The obligations of the Guarantor under this Lease:-
(a) constitute a direct primary and unconditional liability to pay on
demand to the Landlord any sum which the Tenant is liable to pay
under
this Lease and to perform on demand by the Landlord any obligation of
the Tenant under this Lease without the need for any recourse on the
part of the Landlord against the Tenant;
2.(b) will not be affected by:
2.(b)1 any time or indulgence granted to the Tenant by the Landlord;
2.(b)2 any legal limitation disability or other circumstances relating to
the
Tenant or any irregularity unenforceability or invalidity of any
obligations of the Tenant under this Lease;
2.(b)3 any licence or consent granted to the Tenant or any variation in the
terms of this Lease save as provided in Section 18 of the Landlord
and
tenant (Covenants) Act 1995;
2.(b)4 the release of one or more of the parties defined as the Guarantor
(if
more than one); or
2.(b)5 any other act omission matter event or thing whereby (but for this
provision) the Guarantor would be exonerated in whole or in part from
the guarantee other than a release by deed given by the Landlord.
(3) So long as this guarantee remains in force the Guarantor shall not:-
3.(a) in the event of any bankruptcy liquidation rehabilitation, moratorium
or other insolvency proceedings relating to the Tenant claim or prove
as creditor in competition with the Landlord; or
3.(b) be entitled to claim or participate in any security held by the
Landlord in respect of the obligations of the Tenant under this
Lease;
or
3.(c) exercise any right of set-off against the Tenant
(4). If:-
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2002. EDGAR Online, Inc.
4.(a) the Tenant (being a company) enters into liquidation and the
liquidator
disclaims this Lease; or
4.(b) the Tenant (being a company) is dissolved and the Crown disclaims this
Lease; or
4.(c) the Tenant (being an individual) becomes bankrupt and
the trustee in bankruptcy disclaims this Lease; or
4.(d) this Lease is forfeited
then within six months after the disclaimer or forfeiture the
Landlord may require the Guarantor by notice to accept a lease of
the Premises for a term equivalent to the residue which would have
remained of the Term if there had been no disclaimer or forfeiture at
the same rents and subject to the same covenants and conditions
(including those as to the review of rent) as are reserved by and
contained in this Lease
(5). The new lease and the rights and liabilities under it shall take
effect
as from the date of the disclaimer or forfeiture and the Guarantor
shall be liable for all payments due under the new lease as from the
date of disclaimer or forfeiture as if the new lease had been granted
on the date of disclaimer or forfeiture.
(6). The Guarantor or his personal representatives shall pay the Landlord's
costs of and accept the new lease and shall execute and deliver to the
Landlord a counterpart of it.
(7). If the Landlord does not require the Guarantor to take a lease of the
Premises the Guarantor shall pay to the Landlord on demand a sum equal
to the rents that would have been payable under this Lease but for the
disclaimer or forfeiture in respect of the period from the date of the
disclaimer or forfeiture until the date which is six months after the
date of the disclaimer or forfeiture or the date on which the Premises
have been re-let by the Landlord whichever first occurs
EXECUTED as a DEED
)
by MILTON PARK LIMITED
)
acting by:-
)
Director
Secretary
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2002. EDGAR Online, Inc.
EXECUTED as a DEED
)
by VERTEX PHARMACEUTICALS
)
(EUROPE) LIMITED acting by:-
)
Director
Secretary
EXECUTED AS A DEED
)
by VERTEX PHARMACEUTICALS
)
INCORPORATED acting by:-
)
26
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements of Vertex Pharmaceuticals Incorporated on Form S-8 (File
Nos. 33-48030, 33-48348, 33-65742, 33-93224, 33-12325, 333-27011 and 333-56179) of our report dated February 25, 1999 on our
audits of the consolidated financial statements of Vertex Pharmaceuticals Incorporated, as of December 31, 1998 and 1997, and for
years ended December 31, 1998, 1997 and 1996, which report is included in this annual report on Form 10-K.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 29, 1999
ARTICLE 5
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S YEAR END REPORT ON FORM 10-K, FOR THE TWELVE
MONTHS ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
MULTIPLIER: 1,000
CURRENCY: U.S. DOLLARS
PERIOD TYPE
FISCAL YEAR END
PERIOD START
PERIOD END
EXCHANGE RATE
CASH
SECURITIES
RECEIVABLES
ALLOWANCES
INVENTORY
CURRENT ASSETS
PP&E
DEPRECIATION
TOTAL ASSETS
CURRENT LIABILITIES
BONDS
PREFERRED MANDATORY
PREFERRED
COMMON
OTHER SE
TOTAL LIABILITY AND EQUITY
12 MOS
DEC 31 1998
JAN 31 1998
DEC 31 1998
1.0
24,169
221,483
0
0
0
248,708
42,621
(28,145)
266,346
13,102
0
0
0
254
245,958
0
2002. EDGAR Online, Inc.
SALES
TOTAL REVENUES
CGS
TOTAL COSTS
OTHER EXPENSES
LOSS PROVISION
INTEREST EXPENSE
INCOME PRETAX
INCOME TAX
INCOME CONTINUING
DISCONTINUED
EXTRAORDINARY
CHANGES
NET INCOME
EPS PRIMARY
EPS DILUTED
0
44,398
0
76,803
0
0
681
(33,086)
0
(33,086)
0
0
0
(33,086)
(1.31)
(1.31)
End of Filing
2002. EDGAR Online, Inc.