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Commitments and Contingencies
12 Months Ended
Dec. 31, 2015
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

11. Commitments and Contingencies

Operating Lease

New Lease Agreement

On December 10, 2015, the Company entered into a lease (the “New Lease”) with HCP Oyster Point III LLC (the “Landlord”) to lease approximately 76,173 rentable square feet of office and laboratory space located in South San Francisco, California for the Company’s new corporate headquarters. The Company currently leases office and laboratory space located in South San Francisco, California, pursuant to a lease agreement which expires in 2019. On March 1, 2016, the Company entered into an agreement to terminate the current lease, which provides for early termination effective November 30, 2016 – see Note 21 for more information.

The term of the New Lease commences on the later of (i) the date that the Landlord’s construction and tenant improvements have been completed pursuant to the New Lease and (ii) October 1, 2016. The New Lease has an initial term of ten years from the commencement date, and the Company has an option to extend the initial term for an additional five years at the then fair rental value as determined pursuant to the New Lease.

The New Lease provides for annual base rent of approximately $3.1 million in the first year of the lease term, which will increase on an annual basis beginning from the 25th month to approximately $5.5 million for the tenth year of the lease. The Company will be entitled to a one-time improvement allowance of up to $12.6 million.

In addition, the Company obtained a standby letter of credit (the “Letter of Credit”) in an amount of approximately $0.9 million, which may be drawn by the Landlord to be applied for certain purposes upon the Company’s breach of any provisions under the New Lease. The Company has recorded the $0.9 million Letter of Credit in restricted cash, non-current within its balance sheet at December 31, 2015.

Rent expense is recognized on a straight-line basis over the term of the lease and accordingly the Company records the difference between cash rent payments and the recognition of rent expense as a deferred rent liability.

The future minimum lease payments for all of the Company’s facility leases are as follows (in thousands):

 

Year Ending December 31:

 

 

 

 

2016

 

$

1,369

 

2017

 

 

4,251

 

2018

 

 

5,268

 

2019

 

 

4,582

 

2020 and beyond

 

 

34,144

 

Total

 

$

49,614

 

 

Rent expense during the years ended December 31, 2015, 2014 and 2013 was $940,000, $836,000 and $529,000, respectively.

Legal Proceedings

The Company is subject to claims and assessments from time to time in the ordinary course of business but do not believe that any such matters, individually or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Indemnifications

In the ordinary course of business, the Company enters into agreements that may include indemnification provisions.

Pursuant to such agreements, the Company may indemnify, hold harmless and defend an indemnified party for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. The Company has never incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. The Company has also entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers to the fullest extent permitted by Delaware corporate law. The Company currently has directors’ and officers’ insurance.