-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F5t5ztiAymktrKci0Ua06G//PNxBL8axbT0qbZ7HWbsrs32fs8DHS8Cw7eSXKU26 fMSlK+Ip6IjjbyZy0z5+Dg== 0000936392-98-001146.txt : 19980814 0000936392-98-001146.hdr.sgml : 19980814 ACCESSION NUMBER: 0000936392-98-001146 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LA JOLLA PHARMACEUTICAL CO CENTRAL INDEX KEY: 0000920465 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 330361285 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-24274 FILM NUMBER: 98684940 BUSINESS ADDRESS: STREET 1: 6455 NANCY RIDGE DR CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 6194526600 MAIL ADDRESS: STREET 1: 6455 NANCY RIDGE DR CITY: SAN DIEGO STATE: CA ZIP: 92121 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q MARK ONE [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 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: 0-24274 LA JOLLA PHARMACEUTICAL COMPANY (Exact Name of Registrant as Specified in its Charter) DELAWARE 33-0361285 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 6455 NANCY RIDGE DRIVE 92121 SAN DIEGO, CA (Zip Code) (Address of Principal Executive Offices) Registrant's Telephone Number, Including Area Code: (619) 452-6600 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] The number of shares of the Registrant's common stock, $.01 par value, outstanding at June 30, 1998 was 18,188,948. 2 LA JOLLA PHARMACEUTICAL COMPANY FORM 10-Q QUARTERLY REPORT INDEX COVER PAGE....................................................................................... 1 INDEX ........................................................................................... 2 PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Balance Sheets as of June 30, 1998 (Unaudited) and December 31, 1997 ...................... 3 Statements of Operations (Unaudited) for the three months and six months ended June 30, 1998 and 1997 .................................................................. 4 Statements of Cash Flows (Unaudited) for the six months ended June 30, 1998 and 1997...... 5 Notes to Financial Statements (Unaudited) ................................................. 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ............................................................ 7 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk ....................... * PART II. OTHER INFORMATION ITEM 1. Legal Proceedings ................................................................ * ITEM 2. Changes in Securities ............................................................ * ITEM 3. Defaults upon Senior Securities .................................................. * ITEM 4. Submission of Matters to a Vote of Security Holders .............................. 10 ITEM 5. Other information ................................................................ * ITEM 6. Exhibits and Reports on Form 8-K ................................................. 10 SIGNATURE ....................................................................................... 12
* No information provided due to inapplicability of item. 2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS LA JOLLA PHARMACEUTICAL COMPANY BALANCE SHEETS (in thousands)
June 30, December 31, 1998 1997 ----------- ------------ (Unaudited) (Note) ASSETS Current assets: Cash and cash equivalents ....................................... $ 15,708 $ 11,999 Short-term investments .......................................... 6,902 14,979 Other current assets............................................. 507 658 -------- -------- Total current assets ....................................... 23,117 27,636 Property and equipment, net ........................................... 665 946 Patent costs and other assets, net .................................... 1,219 1,064 -------- -------- Total assets ............................................... $ 25,001 $ 29,646 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ................................................ $ 385 $ 1,256 Accrued expenses ................................................ 513 880 Accrued payroll and related expenses ............................ 440 377 Deferred revenue - related party ................................ 1,907 1,277 Current portion of obligations under capital leases ............. 37 133 -------- -------- Total current liabilities .................................. 3,282 3,923 Noncurrent portion of obligations under capital leases ................ -- 8 Commitments Stockholders' equity: Common stock .................................................... 182 182 Additional paid-in capital ...................................... 80,368 80,304 Deferred compensation ........................................... (5) (30) Accumulated deficit ............................................. (58,826) (54,741) -------- -------- Total stockholders' equity ................................. 21,719 25,715 -------- -------- Total liabilities and stockholders' equity ................. $ 25,001 $ 29,646 ======== ========
Note: The balance sheet at December 31, 1997 has been derived from audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See accompanying notes. 3 4 LA JOLLA PHARMACEUTICAL COMPANY STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share amounts)
Three Months Ended Six Months Ended June 30, June 30, ----------------------- ----------------------- 1998 1997 1998 1997 -------- -------- -------- -------- Revenue from collaborative agreement - related party ............................................... $ 2,263 $ 2,130 $ 4,166 $ 4,494 Expenses: Research and development .................................... 3,721 3,337 7,245 6,474 General and administrative .................................. 933 766 1,651 1,546 -------- -------- -------- -------- Total expenses .......................................... 4,654 4,103 8,896 8,020 -------- -------- -------- -------- Loss from operations .......................................... (2,391) (1,973) (4,730) (3,526) Interest expense .............................................. (2) (16) (5) (40) Interest income ............................................... 299 355 650 710 -------- -------- -------- -------- Net loss and comprehensive net loss ........................... $ (2,094) $ (1,634) $ (4,085) $ (2,856) ======== ======== ======== ======== Basic and diluted net loss per share .......................... $ (.12) $ (.09) $ (.22) $ (.17) ======== ======== ======== ======== Shares used in computing basic and diluted net loss per share .................................... 18,169 17,284 18,165 17,284 ======== ======== ======== ========
See accompanying notes. 4 5 LA JOLLA PHARMACEUTICAL COMPANY STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Six Months Ended June 30, ----------------------- 1998 1997 -------- -------- OPERATING ACTIVITIES Net loss .................................................................... $ (4,085) $ (2,856) Adjustments to reconcile net loss to net cash (used for) provided by operating activities: Depreciation and amortization ........................................... 202 321 Deferred compensation amortization ...................................... 17 65 Change in operating assets and liabilities: Receivable - related party .......................................... -- 4,000 Other current assets ................................................ 151 352 Accounts payable and accrued expenses ............................... (1,238) (1,886) Accrued payroll and related expenses ................................ 63 119 Deferred revenue - related party .................................... 630 2,547 -------- -------- Net cash (used for) provided by operating activities ........................ (4,260) 2,662 INVESTING ACTIVITIES Decrease (increase) in short-term investments ............................... 8,077 (32) Deletions (additions) to property and equipment ............................. 96 (38) Increase in patent costs and other assets.................................... (172) (152) -------- -------- Net cash provided by (used for) investing activities ........................ 8,001 (222) FINANCING ACTIVITIES Net proceeds from issuance of common stock .................................. 72 58 Payments on obligations under capital leases................................. (104) (478) -------- -------- Net cash used for financing activities ...................................... (32) (420) Net increase in cash and cash equivalents ................................... 3,709 2,020 Cash and cash equivalents at beginning of period ............................ 11,999 6,613 -------- -------- Cash and cash equivalents at end of period .................................. $ 15,708 $ 8,633 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid ............................................................... $ 5 $ 40 ======== ======== SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Adjustment to deferred compensation for terminations ........................ $ 8 $ 16 ======== ========
See accompanying notes. 5 6 LA JOLLA PHARMACEUTICAL COMPANY NOTES TO FINANCIAL STATEMENTS (Unaudited) JUNE 30, 1998 1. BASIS OF PRESENTATION The accompanying unaudited financial statements of La Jolla Pharmaceutical Company (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 1998 are not necessarily indicative of the results that may be expected for other quarters or the year ended December 31, 1998. For more complete financial information, these financial statements, and the notes thereto, should be read in conjunction with the audited financial statements for the year ended December 31, 1997 included in the Company's Form 10-K filed with the Securities and Exchange Commission. 2. ACCOUNTING POLICIES USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and disclosures made in the accompanying notes to the financial statements. Actual results could differ from those estimates. COMPREHENSIVE INCOME On January 1, 1998, the Company adopted Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 requires that all components of comprehensive income, including net income, be reported in the financial statements in the period in which they are recognized. Comprehensive income is defined as the change in equity during the period from transactions and other events and circumstances from non-owner sources. Net income and other comprehensive income, including unrealized gains and losses on investments, shall be reported, net of their related tax effect, to arrive at comprehensive income. The Company's comprehensive net loss and net loss are the same and therefore the adoption of SFAS 130 did not have an impact on the financial statements. SEGMENT INFORMATION On January 1, 1998, the Company adopted Statement of Financial Accounting Standard No. 131, "Segment Information" ("SFAS 131"). SFAS 131 redefines segments and requires companies to report financial and descriptive information about their operating segments. The Company has determined that it operates in one business segment and therefore the adoption of SFAS 131 did not affect the Company's financial statements. 6 7 LA JOLLA PHARMACEUTICAL COMPANY PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The discussion below includes forward-looking statements, including without limitation those dealing with the Company's drug development plans and clinical trials, its relationship with Abbott Laboratories ("Abbott"), and other matters described in terms of the Company's plans and expectations. The forward-looking statements involve risks and uncertainties and a number of factors, both foreseen and unforeseen, could cause actual results to differ from the Company's current expectations. The Company's ongoing Phase II/III clinical trial of LJP 394, the Company's drug candidate for the treatment of lupus, could result in a finding that LJP 394 is not effective in producing a sustained reduction of dsDNA antibodies in large patient populations or does not provide a meaningful clinical benefit. The Company's other potential drug candidates are at earlier stages of development and involve comparable risks. Payments by Abbott to the Company are contingent upon progress of clinical trials and the Company's achievement of certain other milestones that might not be met. The relationship with Abbott could be terminated by either party for various reasons. Clinical trials could be delayed and could have negative or inconclusive results. Additional risk factors include the uncertainty of future revenue from product sales or other sources such as collaborative relationships, the uncertainty of future profitability, the Company's dependence on patents and other proprietary rights, the Company's limited manufacturing capabilities and the Company's lack of marketing experience. Readers are cautioned not to place undue reliance upon forward-looking statements, which speak only as of the date hereof, and the Company undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date hereof. Interested parties are urged to review the risks described below and in other reports and registration statements of the Company filed with the SEC from time to time. OVERVIEW Since its inception in May 1989, the Company has devoted substantially all of its resources to the research and development of technology and potential drugs to treat antibody-mediated diseases. The Company has never generated any revenue from product sales and has relied upon private and public investors, revenues from collaborative agreements, equipment lease financings and interest income on invested cash balances for its working capital. The Company has been unprofitable since inception and expects to incur substantial additional operating losses for at least the next several years as it increases expenditures on research and development and allocates significant and increasing resources to its manufacturing, clinical trials, and marketing activities. The Company's activities to date are not as broad in depth or scope as the activities it must undertake in the future, and the Company's historical operations and the financial information reported below are not indicative of its future operating results or financial condition. The Company expects that losses will fluctuate from quarter to quarter as a result of differences in the timing of expenses incurred and potential revenues from collaborative arrangements. Some of these fluctuations may be significant. The Company's research and development expenses are expected to increase significantly in the future as the Company increases its development efforts. As of June 30, 1998, the Company's accumulated deficit was approximately $58.8 million. The Company's business is subject to significant risks including, but not limited to, the risks inherent in its research and development efforts, including clinical trials, uncertainties associated with both obtaining and enforcing its patents and with the patent rights of others, the lengthy, expensive and uncertain process of seeking regulatory approvals, uncertainties regarding government reforms and of product pricing and reimbursement levels, technological change and competition, manufacturing uncertainties and dependence on its collaborative relationship with Abbott. Even if the Company's product 7 8 LA JOLLA PHARMACEUTICAL COMPANY candidates appear promising at an early stage of development, they may not reach the market for numerous reasons. Such reasons include the possibilities that the products will be ineffective or unsafe during clinical trials, will fail to receive necessary regulatory approvals, will be difficult to manufacture on a large scale, will be uneconomical to market or will be precluded from commercialization by proprietary rights of third parties. All of the Company's product development efforts are based upon technologies and therapeutic approaches that are unproven. There can be no assurance that LJP 394 will reliably induce or sustain suppression of disease-causing antibodies, or that LJP 394 will prove to be safe or effective. Furthermore, clinical trials of LJP 394 may be viewed as a test of the Company's entire Tolerance Technology approach. If these clinical trials are unsuccessful, the applicability of the Company's Tolerance Technology to other antibody-mediated diseases will be highly uncertain. RESULTS OF OPERATIONS The Company earned $2.3 million and $4.2 million in revenue from its collaborative agreement with Abbott in the three and six months ended June 30, 1998, respectively, and earned $2.1 million and $4.5 million in revenue for the same periods in 1997. Payments received in advance under the collaborative agreement with Abbott are recorded as deferred revenue until earned. Total revenue payments of approximately $4.8 million were received in advance under the collaborative agreement with Abbott during the first six months of 1998, of which approximately $2.1 million was received in the three months ended June 30, 1998. As of June 30, 1998, deferred revenue was approximately $1.9 million. The receipt of payments and the recognition of revenue from the collaborative agreement with Abbott may vary significantly from quarter to quarter and from year to year depending on the level of research effort expended and the timing of milestone payments. There can be no assurance that the Company will realize any further revenue from the Abbott arrangement or any other collaborative arrangement. Research and development expenses increased to $3.7 million for the second quarter of 1998 from $3.3 million for the same period in 1997. For the six months ended June 30, 1998, research and development expense increased to $7.2 million from $6.5 million for the same period in 1997. The increase was due primarily to the expansion of the Company's research and development programs, an increase in manufacturing scale-up activities and increased facilities expenditures. The Company's research and development expenses are expected to increase significantly in the future as the organization grows, efforts to develop additional drug candidates are intensified and potential products progress into and through clinical trials. General and administrative expenses increased to $933,000 for the second quarter of 1998 from $766,000 for the same period in 1997. For the six months ended June 30, 1998, general and administrative expense increased to $1.7 million from $1.5 million for the same period in 1997. Several factors contributed to this increase, including expanded business development and investor relations activities. The Company expects general and administrative expenses to increase in the future in order to support increased research and development and manufacturing scale-up activities. Interest income decreased to $299,000 for the second quarter of 1998 from $355,000 for the same period in 1997. For the six months ended June 30, 1998, interest income decreased to $650,000 from $710,000 for the same period in 1997. The decrease was due to lower investment balances. Interest expense decreased to $2,000 for the second quarter of 1998 from $16,000 for the same period in 1997. For the six months ended June 30, 1998, interest expense decreased to $5,000 from $40,000 for the same period in 1997. The decrease was the result of decreases in the Company's capital lease obligations as compared to the same period in 1997. 8 9 LA JOLLA PHARMACEUTICAL COMPANY LIQUIDITY AND CAPITAL RESOURCES As of June 30, 1998, the Company had incurred a cumulative net loss since inception OF approximately $58.8 million, and had financed its operations through private and public offerings of its securities, payments under collaborative agreements, capital and operating lease transactions, and interest income on its invested cash balances. As of June 30, 1998, the Company had raised $79.5 million in net proceeds since inception from sales of equity securities. At June 30, 1998, the Company had $22.6 million in cash, cash equivalents and short-term investments, as compared to $27.0 million at December 31, 1997. The Company's working capital at June 30, 1998 was $19.8 million, as compared to $23.7 million at December 31, 1997. The decrease in cash, cash equivalents and short-term investments resulted from the continued use of the Company's cash toward expenses of ongoing clinical and research and development programs and related general and administrative expenses. The decrease in working capital is primarily due to the use of cash for net operating expenses in the first two quarters of 1998. The Company invests its cash in corporate and United States government-backed debt instruments. As of June 30, 1998, the Company had acquired an aggregate of $4.0 million in property and equipment, of which approximately $196,000 of total fixed assets costs remains financed under capital lease obligations. In addition, the Company leases its office and laboratory facilities and certain property and equipment under operating leases. The Company has no material commitments for the acquisition of property and equipment but anticipates increasing investment in property and equipment in connection with the enhancement of its research and development and manufacturing facilities and capabilities. The Company intends to use its financial resources to fund manufacturing scale-up activities including the production of LJP 394 for clinical trials, research and development efforts, and for working capital and other general corporate purposes. The amounts actually expended for each purpose may vary significantly depending upon numerous factors, including the results of clinical trials, the timing of regulatory applications and approvals, and technological developments. Expenditures will also depend upon the establishment and progress of collaborative arrangements, contract research and the availability of other financing. There can be no assurance that these funds will be available on acceptable terms, if at all. The Company anticipates that its existing capital and interest earned thereon and anticipated funding from the Abbott collaboration will be sufficient to fund the Company's operations as currently planned through 1999. The Company's future capital requirements will depend on many factors including continued scientific progress in its research and development programs, the size and complexity of these programs, the scope and results of clinical trials, the time and costs involved in applying for regulatory approvals, the costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims, competing technological and market developments, the ability of the Company to maintain its collaborative arrangement with Abbott and to establish and maintain additional collaborative relationships and the cost of manufacturing scale-up and effective commercialization activities and arrangements. The Company expects to incur significant net operating losses each year for at least the next several years as it expands its current research and development programs and increases its general and administrative expenses to support a larger, more complex organization. It is possible that the Company's cash requirements will exceed current projections and that the Company will therefore need additional financing sooner than currently expected. The Company has no current means of generating cash flow from operations, and its lead drug candidate, LJP 394, will not generate revenues, if at all, until it has been proven safe and effective, has received regulatory approval, and has been successfully commercialized, a process that is expected to take at least the next several years. The Company's other drug candidates are much less developed than 9 10 LA JOLLA PHARMACEUTICAL COMPANY LJP 394. There can be no assurance that the Company's product development efforts with respect to LJP 394 or any other drug candidate will be successfully completed, that required regulatory approvals will be obtained, or that any product, if introduced, will be successfully marketed or achieve commercial acceptance. Accordingly, the Company must continue to rely upon outside sources of financing to meet its capital needs for the foreseeable future. Abbott's funding of the development costs for LJP 394 and milestone payments are expected to continue to enhance the Company's short-term liquidity by minimizing the expenditure of the Company's own funds on further development of LJP 394. However, the Company anticipates increasing expenditures on the development of other drug candidates, and over time, the Company's consumption of cash will necessitate additional sources of financing. Furthermore, the Company has no internal sources of liquidity, and termination of the Abbott arrangement would have a serious adverse effect on the Company's ability to generate sufficient cash to meet its needs. The Company will continue to seek capital through any appropriate means, including issuance of its securities and establishment of additional collaborative arrangements. However, there can be no assurance that additional financing will be available on acceptable terms, and the Company's negotiating position in its capital-raising efforts may worsen as it continues to use its existing resources. Financing through collaborative arrangements is uncertain because payments under the Company's collaborative agreement with Abbott are subject to certain termination rights, including those related to progress in clinical trials for LJP 394, and there is no assurance that the Company will be able to enter into further collaborative relationships. IMPACT OF YEAR 2000 The "Year 2000 Issue" is the result of computer programs written in the past that used two digits rather than four to define the applicable year. As a result, these computer programs may not properly recognize calendar dates beginning in the year 2000. This problem may cause systems to fail or miscalculate causing disruptions of operations, including a temporary inability to process transactions or engage in similar normal business activities. The Company believes that its total internal Year 2000 Issue costs will be minimal and that its Year 2000 conversion requirements will be achieved through routine upgrades to its software programs. The Company expects these upgrades to be completed by the end of 1998. These costs and the expected completion date are based on management's best estimates; there can be no assurance that these estimates will be achieved and actual results could differ materially from those anticipated. The Company has also initiated communications with all of its significant suppliers to determine the extent to which the Company's systems are vulnerable to those third parties' failure to remediate their own Year 2000 Issues. There can be no assurance that the systems of other companies on which the Company's systems rely will be timely converted and will not have an adverse effect on the Company's systems. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of Stockholders was held on May 13, 1998. All of the Company's directors were re-elected. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS 10 11 - ------- ---------------------------------------------------------------- Exhibit Number Description - ------- ---------------------------------------------------------------- 3.1 Intentionally omitted 3.2 Bylaws of the Company (1) 3.3 Restated Certificate of Incorporation of the Company (2) 10.38 Master Lease Agreement No. 2 dated June 23, 1998 by and between the Company and Transamerica Business Credit Corporation (3) 27 Financial Data Schedule (3) - ---------------- (1) Previously filed with the Company's Registration Statement on Form S-1 (No. 33-76480) as declared effective by the Securities and Exchange Commission on June 3, 1994. (2) Previously filed with the Company's annual report on Form 10-K for the fiscal year ended December 31, 1994 and incorporated by reference herein (3) Filed herein. (B) REPORTS ON FORM 8-K None 11 12 LA JOLLA PHARMACEUTICAL COMPANY SIGNATURE JUNE 30, 1998 Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. La Jolla Pharmaceutical Company Date: August 12, 1998 By: /s/ Wood C. Erwin ------------------------------------- Wood C. Erwin Vice President Finance Chief Financial Officer Signed both on behalf of the Registrant and as Principal Accounting Officer. 12 13 LA JOLLA PHARMACEUTICAL COMPANY INDEX TO EXHIBITS
Exhibit Number Exhibit - ------- ------- 10.38 Master Lease Agreement No. 2 dated June 23, 1998 by and between the Company and Transamerica Business Credit Corporation 27 Financial Data Schedule
13 EX-10.38 2 EXHIBIT 10.38 1 EXHIBIT 10.38 MASTER LEASE AGREEMENT NO. 2 Lessor: TRANSAMERICA BUSINESS CREDIT CORPORATION RIVERWAY II WEST OFFICE TOWER WEST HIGGINS ROAD ROSEMONT, ILLINOIS 60018 Lessee: LA JOLLA PHARMACEUTICAL COMPANY 6455 NANCY RIDGE DRIVE SAN DIEGO, CALIFORNIA 92121 The lessor pursuant to this Master Lease Agreement ("Agreement") dated June 29, 1998 is Transamerica Business Credit Corporation ("Lessor"). All equipment, together with all present and future additions, parts, accessories, attachments, substitutions, repairs, improvements and replacements thereof or thereto, which are the subject of a Lease (as defined in the next sentence) shall be referred to as "Equipment." Simultaneously with the execution and delivery of this Agreement, the parties are entering into one or more Lease Schedules (each, a "Schedule") which refer to and incorporate by reference this Agreement, each of which constitutes a lease (each, a "Lease") for the Equipment specified therein. Additional details pertaining to each Lease are specified in the applicable Schedule. Each Schedule that the parties hereafter enter into shall constitute a Lease. Lessor has no obligation to enter into any additional leases with, or extend any future financing to, Lessee. 1. LEASE. Subject to and upon all of the terms and conditions of this Agreement and each Schedule, Lessor hereby agrees to lease to Lessee and Lessee hereby agrees to lease from Lessor the Equipment for the Term (as defined in Paragraph 2 below) thereof. 2. TERM. Each Lease shall be effective and the term of each Lease ("Term") shall commence on the commencement date specified in the applicable Schedule and, unless sooner terminated (as hereinafter provided), shall expire at the end of the term specified in such Schedule; provided, however, that obligations due to be performed by the Lessee during the Term shall continue until they have been performed in full. Schedules will only be executed after the delivery of the Equipment to Lessee or upon completion of deliveries of items of such Equipment with aggregate cost of not less than $50,000.00. 3. RENT. Lessee shall pay as rent to Lessor, for use of the Equipment during the Term or Renewal Term (as defined in Paragraph 8), rental payments equal to the sum of all rental payments including, without limitation, security deposits, advance rents and interim rents payable in the amounts and on the dates specified in the applicable Schedule ("Rent"). If any Rent or other amount payable by Lessee is not paid within three days after the day on which it becomes payable, Lessee will pay on demand, as a late charge, an amount equal to 5% of such unpaid Rent or other amount but only to the extent permitted by applicable law. All payments provided for herein shall be payable to Lessor at its address specified above, or at any other place designated by Lessor. 4. LEASE NOT CANCELABLE; LESSEE'S OBLIGATIONS ABSOLUTE. No Lease may be canceled or terminated except as expressly provided herein. Lessee's obligation to pay all Rent due or to become due hereunder shall be absolute and unconditional and shall not be subject to any delay, reduction, set-off, defense, counterclaim or recoupment for any reason whatsoever, including any failure of the Equipment or any representations by the manufacturer or the vendor thereof. If the Equipment is unsatisfactory for any reason, Lessee shall make any claim solely against the manufacturer or the vendor thereof and shall, nevertheless, pay Lessor all Rent payable hereunder. 2 5. SELECTION AND USE OF EQUIPMENT. Lessee agrees that it shall be responsible for the selection, use of, and results obtained from, the Equipment and any other associated equipment or services. 6. WARRANTIES. LESSOR MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE DESIGN OR CONDITION OF THE EQUIPMENT OR ITS MERCHANTABILITY, SUITABILITY, QUALITY OR FITNESS FOR A PARTICULAR PURPOSE, AND HEREBY DISCLAIMS ANY SUCH WARRANTY. LESSEE SPECIFICALLY WAIVES ALL RIGHTS TO MAKE A CLAIM AGAINST LESSOR FOR BREACH OF ANY WARRANTY WHATSOEVER. LESSEE LEASES THE EQUIPMENT "AS IS." IN NO EVENT SHALL LESSOR HAVE ANY LIABILITY FOR, NOR SHALL LESSEE HAVE ANY REMEDY AGAINST LESSOR FOR, ANY LIABILITY, CLAIM, LOSS, DAMAGE OR EXPENSE CAUSED DIRECTLY OR INDIRECTLY BY THE EQUIPMENT OR ANY DEFICIENCY OR DEFECT THEREOF OR THE OPERATION, MAINTENANCE OR REPAIR THEREOF OR ANY CONSEQUENTIAL DAMAGES AS THAT TERM IS USED IN SECTION 2-719(3) OF THE MODEL UNIFORM COMMERCIAL CODE OR SIMILAR STATUTE ("UCC"). Lessor grants to Lessee, for the sole purpose of prosecuting a claim, the benefits of any and all warranties made available by the manufacturer or the vendor of the Equipment to the extent assignable. 7. DELIVERY. Lessor hereby appoints Lessee as Lessor's agent for the sole and limited purpose of accepting delivery of the Equipment from each vendor thereof. Lessee shall pay any and all delivery and installation charges. Lessor shall not be liable to Lessee for any delay in, or failure of, delivery of the Equipment. 8. RENEWAL. So long as no Event of Default or event, which with the giving of notice, the passage of time, or both, would constitute an Event of Default, shall have occurred and be continuing, or the Lessee shall not have exercised its purchase option under Paragraph 9 hereof, the Lease will automatically renew for a term of twelve months (the "Renewal Term") on the terms and conditions set forth in the applicable Schedule, provided, however, that obligations due to be performed by the Lessee during the Renewal Term shall continue until they have been performed in full. The monthly rental payments for the Renewal Term shall be equal to 1.00% of the equipment cost plus any monthly sales or use tax. 9. PURCHASE OPTION. So long as no Event of Default or event which, with the giving of notice, the passage of time, or both, would constitute an Event of Default, shall have occurred and be continuing, Lessee may, upon written notice to Lessor received at least one hundred eighty days before the expiration of a Term, purchase all, but not less than all, the Equipment covered by the applicable Lease on the date specified therefor in the applicable Schedule ("Purchase Date"). The purchase price for such Equipment shall be its fair market value on an "In-place, In-use" basis, as mutually agreed by Lessor and Lessee, or, if they cannot agree, as determined by an independent appraiser selected by Lessor and approved by Lessee, which approval will not be unreasonably delayed or withheld. Lessee shall pay the cost of any such appraisal. Notwithstanding the generality of the foregoing, Lessor and Lessee agree that on the Purchase Date, the fair market value of the Equipment shall not be less than 10% of equipment cost. So long as no Event of Default or event which, with the giving of notice, the passage of time, or both, would constitute an Event of Default, shall have occurred and be continuing, Lessee may, upon written notice to Lessor received at least one hundred eighty days prior to the expiration of the Renewal Term, purchase all, but not less than all, the Equipment covered by the applicable Schedule by the date specified therein (the "Second Purchase Date") at a purchase price equal to its then fair market value on an "In-place, In- use" basis. On the Purchase Date or the Second Purchase Date, as the case may be, for any Equipment, Lessee shall pay to Lessor the applicable purchase price, together with all sales and other taxes applicable to the transfer of such Equipment and any other amount payable hereunder, in immediately available funds, whereupon Lessor shall transfer to Lessee, without recourse or warranty of any kind, express or implied, all of the Lessor's right, title and interest in and to such Equipment on an "As Is, Where Is" basis. 10. OWNERSHIP; INSPECTION; MARKING; FINANCING STATEMENTS. Lessee shall affix to the Equipment any labels supplied by Lessor indicating ownership of such Equipment. The Equipment is and shall be the sole property of Lessor. Lessee shall have no right, title or interest therein, except as lessee under a Lease. The Equipment is and shall at all times be and remain personal property and shall not become a fixture, 2 3 other than Equipment cosisting of tenant improvements. Lessee shall obtain and record such instruments and take such steps as may be necessary to prevent any Person from acquiring any rights in the Equipment, other than Equipment consisting of tenant improvements, by reason of the Equipment being claimed or deemed to be real property. Upon request by Lessor, Lessee shall obtain and deliver to Lessor valid and effective waivers, in recordable form, by the owners, landlords and mortgagees of the real property upon which the Equipment is located or certificates of Lessee that it is the owner of such real property or that such real property is neither leased nor mortgaged. Lessee shall make the Equipment and its maintenance records available for inspection by Lessor at reasonable times and upon reasonable notice. Lessee shall execute and deliver to Lessor for filing any UCC financing statements or similar documents Lessor may request. 11. EQUIPMENT USE. Lessee agrees that the Equipment will be operated by competent, qualified personnel in connection with Lessee's business for the purpose for which the Equipment was designed and in accordance with applicable operating instructions, laws and government regulations, and that Lessee shall use every reasonable precaution to prevent loss or damage to the Equipment from fire and other hazards. Lessee shall procure and maintain in effect all orders, licenses, certificates, permits, approvals and consents required by federal, state or local laws or by any governmental body, agency or authority in connection with the delivery, installation, use and operation of the Equipment. 12. MAINTENANCE. Lessee, at its sole cost and expense, shall keep the Equipment in a suitable environment as specified by the manufacturer's guidelines or the equivalent and meet all recertification requirements, and shall maintain the Equipment in its original condition and working order, ordinary wear and tear excepted. At the request of Lessor, Lessee shall furnish all proof of maintenance. 13. ALTERATION; MODIFICATIONS; PARTS. Lessee may alter or modify the Equipment only with the prior written consent of Lessor. Any alteration shall be removed and the Equipment restored to its normal, unaltered condition at Lessee's expense (without damaging the Equipment's originally intended function or its value) prior to its return to Lessor. Any part installed in connection with warranty or maintenance service or which cannot be removed in accordance with the preceding sentence shall be the property of Lessor. 14. RETURN OF EQUIPMENT. Except for Equipment that has suffered a Casualty Loss (as defined in Paragraph 15 below) and is not required to be repaired pursuant to Paragraph 15 below or Equipment purchased by Lessee pursuant to Paragraph 9 above, upon expiration or termination of the Term or the Renewal Term of a Lease, or upon demand by Lessor pursuant to Paragraph 22 below, Lessee shall contact Lessor for shipping instructions and, at Lessee's own risk, immediately return the Equipment, freight prepaid, to a location in the continental United States specified by Lessor. At the time of such return to Lessor, the Equipment shall (i) be in the operating order, repair and condition as required by or specified in the original specifications and warranties of each manufacturer and vendor thereof, ordinary wear and tear excepted, and meet all recertification requirements and (ii) be capable of being immediately assembled and operated by a third party purchaser or third party lessee without further repair, replacement, alterations or improvements, and in accordance and compliance with any and all statutes, laws, ordinances, rules and regulations of any governmental authority or any political subdivision thereof applicable to the use and operation of the Equipment. Except as otherwise provided under Paragraph 9 hereof, at least one hundred eighty days before the expiration of the Renewal Term, Lessee shall give Lessor notice of its intent to return the Equipment at the end of such Renewal Term. During the one hundred eighty-day period prior to the end of a Term or the Renewal Term, Lessor and its prospective purchasers or lessees shall have the right of access to the premises on which the Equipment is located to inspect the Equipment, and Lessee shall cooperate in all other respects with Lessor's remarketing of the Equipment. The provisions of this Paragraph 14 are of the essence of the Lease, and upon application to any court of equity having jurisdiction in the premises, Lessor shall be entitled to a decree against Lessee requiring specific performance of the covenants of Lessee set forth in this Paragraph 14. If Lessee fails to return Equipment when required, the terms and conditions of the Lease shall continue to be applicable and Lessee shall continue to pay Rent until the Equipment is received by Lessor. 15. CASUALTY INSURANCE; LOSS OR DAMAGE. Lessee will maintain, at its own expense, liability and property damage insurance relating to the Equipment, insuring against such risks as are 3 4 customarily insured against on the type of equipment leased hereunder by businesses in which Lessee is engaged in such amounts, in such form, and with insurers satisfactory to Lessor; provided, however, that the amount of insurance against damage or loss shall not be less than the greater of (a) the replacement value of the Equipment and (b) the stipulated loss value of the Equipment specified in the applicable Schedule ("Stipulated Loss Value"). Each liability insurance policy shall provide coverage (including contractual and personal injury coverage) of not less than $1,000,000 for each occurrence, name Lessor as an additional insured and be primary as respects of any other insurance. Each property damage policy shall name Lessor as sole loss payee and all policies shall contain a clause requiring the insurer to give Lessor at least thirty days prior written notice of any alteration in the terms or cancellation of the policy. Lessee shall furnish a copy of each insurance policy (with endorsements) or other evidence satisfactory to Lessor that the required insurance coverage is in effect; provided, however, Lessor shall have no duty to ascertain the existence of or to examine the insurance policies to advise Lessee if the insurance coverage does not comply with the requirements of this Paragraph. If Lessee fails to insure the Equipment as required, Lessor shall have the right but not the obligation to obtain such insurance, and the cost of the insurance shall be for the account of Lessee due as part of the next due Rent. Lessee consents to Lessor's release, upon its failure to obtain appropriate insurance coverage, of any and all information necessary to obtain insurance with respect to the Equipment or Lessor's interest therein. Until the Equipment is returned to and received by Lessor as provided in Paragraph 14 above, Lessee shall bear the entire risk of theft or destruction of, or damage to, the Equipment including, without limitation, any condemnation, seizure or requisition of title or use ("Casualty Loss"). No Casualty Loss shall relieve Lessee from its obligations to pay Rent except as provided in clause (b) below. When any Casualty Loss occurs, Lessee shall immediately notify Lessor and, at the option of Lessor, shall promptly (a) place such Equipment in good repair and working order; or (b) pay Lessor an amount equal to the Stipulated Loss Value of such Equipment and all other amounts (excluding Rent) payable by Lessee hereunder, together with a late charge on such amounts at a rate per annum equal to the rate imputed in the Rent payments hereunder (as reasonably determined by Lessor) from the date of the Casualty Loss through the date of payment of such amounts , whereupon Lessor shall transfer to Lessee, without recourse or warranty (express or implied), all of Lessor's interest, if any, in and to such Equipment on an "AS IS, WHERE IS" basis. The proceeds of any insurance payable with respect to the Equipment shall be applied, at the option of Lessor, either towards (i) repair of the Equipment or (ii) payment of any of Lessee's obligations hereunder. Lessee hereby appoints Lessor as Lessee's attorney-in-fact to make claim for, receive payment of, and execute and endorse all documents, checks or drafts issued with respect to any Casualty Loss under any insurance policy relating to the Equipment. 16. TAXES. Lessee shall pay when due, and indemnify and hold Lessor harmless from, all sales, use, excise and other taxes, charges, and fees (including, without limitation, income, franchise, business and occupation, gross receipts, sales, use, licensing, registration, titling, personal property, stamp and interest equalization taxes, levies, imposts, duties, charges or withholdings of any nature), and any fines, penalties or interest thereon, imposed or levied by any governmental body, agency or tax authority upon or in connection with the Equipment, its purchase, ownership, delivery, leasing, possession, use or relocation of the Equipment or otherwise in connection with the transactions contemplated by each Lease or the Rent thereunder, excluding taxes on or measured by the net income of Lessor. Upon request, Lessee will provide proof of payment. Unless Lessor elects otherwise, Lessor will pay all property taxes on the Equipment for which Lessee shall reimburse Lessor promptly upon request. Lessee shall timely prepare and file all reports and returns which are required to be made with respect to any obligation of Lessee under this Paragraph 16. Lessee shall, to the extent permitted by law, cause all billings of such fees, taxes, levies, imposts, duties, withholdings and governmental charges to be made to Lessor in care of Lessee. Upon request, Lessee will provide Lessor with copies of all such billings. 17. LESSOR'S PAYMENT. If Lessee fails to perform its obligations under Paragraph 15 or 16 above, or Paragraph 23 below, Lessor shall have the right to substitute performance, in which case, Lessee shall immediately reimburse Lessor therefor. 18. GENERAL INDEMNITY. Each Lease is a net lease. Therefore, Lessee shall indemnify Lessor and its successors and assigns against, and hold Lessor and its successors and assigns harmless from, any and 4 5 all claims, actions, damages, obligations, liabilities and all costs and expenses, including, without limitation, legal fees, incurred by Lessor or its successors and assigns arising out of each Lease including, without limitation, the purchase, ownership, delivery, lease, possession, maintenance, condition, use or return of the Equipment, or arising by operation of law. Lessee agrees that upon written notice by Lessor of the assertion of any claim, action, damage, obligation, liability or lien, Lessee shall assume full responsibility for the defense thereof. Any payment pursuant to this Paragraph (except for any payment of Rent) shall be of such amount as shall be necessary so that, after payment of any taxes required to be paid thereon by Lessor, including taxes on or measured by the net income of Lessor, the balance will equal the amount due hereunder. The provisions of this Paragraph with regard to matters arising during a Lease shall survive the expiration or termination of such Lease. 19. ASSIGNMENT BY LESSEE. Lessee shall not, without the prior written consent of Lessor, (a) assign, transfer, pledge or otherwise dispose of any Lease or Equipment, or any interest therein; (b) sublease or lend any Equipment or permit it to be used by anyone other than Lessee and its employees; or (c) move any Equipment from the location specified for it in the applicable Schedule, except that Lessee may move Equipment to another location within the United States provided that Lessee has delivered to Lessor (A) prior written notice thereof and (B) duly executed financing statements and other agreements and instruments (all in form and substance satisfactory to Lessor) necessary or, in the opinion of the Lessor, desirable to protect Lessor's interest in such Equipment. Notwithstanding anything to the contrary in the immediately preceding sentence, Lessee may keep any Equipment consisting of motor vehicles or rolling stock at any location in the United States. 20. ASSIGNMENT BY LESSOR. Lessor may assign its interest or grant a security interest in any Lease and the Equipment individually or together, in whole or in part. If Lessee is given written notice of any such assignment, it shall immediately make all payments of Rent and other amounts hereunder directly to such assignee. Each such assignee shall have all of the rights of Lessor under each Lease assigned to it. Lessee shall not assert against any such assignee any set-off, defense or counterclaim that Lessee may have against Lessor or any other person. 21. DEFAULT; NO WAIVER. Lessee or any guarantor of any or all of the obligations of Lessee hereunder (together with Lessee, the "Lease Parties") shall be in default under each Lease upon the occurrence of any of the following events (each, an "Event of Default"): (a) Lessee fails to pay when due any amount required to be paid by Lessee under or in connection with any Lease; (b) any of the Lease Parties fails to perform any other provisions under or in connection with a Lease or violates any of the covenants or agreements of such Lease Party under or in connection with a Lease; (c) any representation made or financial information delivered or furnished by any of the Lease Parties under or in connection with a Lease shall prove to have been inaccurate in any material respect when made; (d) any of the Lease Parties makes an assignment for the benefit of creditors, whether voluntary or involuntary, or consents to the appointment of a trustee or receiver, or if either shall be appointed for any of the Lease Parties or for a substantial part of its property without its consent and, in the case of any such involuntary proceeding, such proceeding remains undismissed or unstayed for forty-five days following the commencement thereof; (e) any petition or proceeding is filed by or against any of the Lease Parties under any Federal or State bankruptcy or insolvency code or similar law and, in the case of any such involuntary petition or proceeding, such petition or proceeding remains undismissed or unstayed for forty-five days following the filing or commencement thereof, or any of the Lease Parties takes any action authorizing any such petition or proceeding; (f) any of the Lease Parties fails to pay when due any indebtedness for borrowed money or under conditional sales or installment sales contracts or similar agreements, leases or obligations evidenced by bonds, debentures, notes or other similar agreements or instruments to any creditor (including Lessor under any other agreement) after any and all applicable cure periods therefor shall have elapsed; (g) any judgment shall be rendered against any of the Lease Parties which shall remain unpaid or unstayed for a period of sixty days; (h) any of the Lease Parties shall dissolve, liquidate, wind up or cease its business, sell or otherwise dispose of all or substantially all of its assets, make any material change in its capital structure or lines of business, amend or modify its name, merge or consolidate with any other entity, suffer any loss or suspension of any license, permit or other right or asset necessary to the profitable conduct of its business, fail to pay its debts as they mature, or call a meeting for purposes of compromising its debts; (i) any of the Lease Parties shall deny or disaffirm its obligations hereunder or under any of the documents delivered in connection herewith; (j) there is a change in the ownership of any equity or ownership interest of any of the Lease Parties or any such interest becomes subject to any contractual, judicial or statutory lien, 5 6 charge, security interest or encumbrance; or (k) Lessor, in its reasonable judgment, shall deem itself insecure. 22. REMEDIES. Upon the occurrence and continuation of an Event of Default, Lessor shall have the right, in its sole discretion, to exercise any one or more of the following remedies: (a) terminate each Lease; (b) declare any and all Rent and other amounts then due and any and all Rent and other amounts to become due under each Lease immediately due and payable; (c) take possession of any or all items of Equipment, wherever located, without demand, notice, court order or other process of law, and without liability for entry to Lessee's premises, for damage to Lessee's property or otherwise; (d) demand that Lessee return any or all Equipment to Lessor in accordance with Paragraph 14 above, and, for each day that Lessee shall fail to return any item of Equipment, Lessor may demand an amount equal to the Rent payable for such Equipment in accordance with Paragraph 14 above; (e) lease, sell or otherwise dispose of the Equipment in a commercially reasonable manner, with or without notice and on public or private bid; (f) recover the following amounts from the Lessee (as damages, including reimbursement of costs and expenses, liquidated for all purposes and not as a penalty): (i) all costs and expenses of Lessor reimbursable to it hereunder, including, without limitation, expenses of disposition of the Equipment, legal fees and all other amounts specified in Paragraph 23 below; (ii) an amount equal to the sum of (A) any accrued and unpaid Rent through the later of (1) the date of the applicable default or (2) the date that Lessor has obtained possession of the Equipment or such other date as Lessee has made an effective tender of possession of the Equipment to Lessor (the "Default Date") and (B) if Lessor resells or re-lets the Equipment, Rent at the periodic rate provided for in each Lease for the additional period that it takes Lessor to resell or re-let all of the Equipment; (iii) the present value of all future Rent reserved in the Leases and contracted to be paid over the unexpired Term of the Leases discounted at five percent simple interest per annum; (iv) the residual value of the Equipment as of the expiration of the Term of the applicable Lease, which the parties agree to be twenty-five percent (25%) of the original cost of the Equipment; and (v) any indebtedness for Lessee's indemnity under Paragraph 18 above, plus a late charge at the rate specified in Paragraph 3 above, less the amount received by Lessor, if any, upon sale or re-let of the Equipment; and (g) exercise any other right or remedy to recover damages or enforce the terms of the Leases. Lessor may pursue any other rights or remedies available at law or in equity, including, without limitation, rights or remedies seeking damages, specific performance and injunctive relief. Any failure of Lessor to require strict performance by Lessee, or any waiver by Lessor of any provision hereunder or under any Schedule, shall not be construed as a consent or waiver of any other breach of the same or of any other provision. Any amendment or waiver of any provision hereof or under any Schedule or consent to any departure by Lessee herefrom or therefrom shall be in writing and signed by Lessor. No right or remedy is exclusive of any other provided herein or permitted by law or equity. All such rights and remedies shall be cumulative and may be enforced concurrently or individually from time to time. 23. LESSOR'S EXPENSE. Lessee shall pay Lessor on demand all and expenses in protecting and enforcing Lessor's rights and interests in each Lease and the Equipment, including, without limitation, legal, collection and remarketing fees and expenses incurred by Lessor in enforcing the terms, conditions or provisions of each Lease upon the occurrence and continuation of an Event of Default. 24. LESSEE'S WAIVERS. To the extent permitted by applicable law, Lessee hereby waives any and all rights and remedies conferred upon a lessee by Sections 2A-508 through 2A-522 of the UCC. To the extent permitted by applicable law, Lessee also hereby waives any rights now or hereafter conferred by statute or otherwise which may require Lessor to sell, lease or otherwise use any Equipment in mitigation of Lessor's damages as set forth in Paragraph 22 above or which may otherwise limit or modify any of Lessor's rights or remedies under Paragraph 22. Any action by Lessee against Lessor for any default by Lessor under any Lease shall be commenced within one year after any such cause of action accrues. 25. NOTICES; ADMINISTRATION. Except as otherwise provided herein, all notices, approvals, consents, correspondence or other communications required or desired to be given hereunder shall be given in writing and shall be delivered by overnight courier, hand delivery or certified or registered mail, postage prepaid, if to Lessor, then to Technology Finance Division, 406 Farmington Avenue, Farmington, Connecticut 06032, Attention: Assistant Vice President, Lease Administration, with a copy to Lessor at Riverway II, West Office Tower, 9399 West Higgins Road, Rosemont, Illinois 60018, Attention: Legal Department, if to Lessee, then 6 7 to La Jolla Pharmaceutical Company, 6455 Nancy Ridge Drive, San Diego, California 92121, Attention: Vice President and Chief Financial Officer or such other address as shall be designated by Lessee or Lessor to the other party. All such notices and correspondence shall be effective when received. 26. REPRESENTATIONS. Lessee represents and warrants to Lessor that (a) Lessee is duly organized, validly existing and in good standing under the laws of the State of its incorporation; (b) the execution, delivery and performance by Lessee of this Agreement are within Lessee's powers, have been duly authorized by all necessary action, and do not contravene (i) Lessee's organizational documents or (ii) any law or contractual restriction binding on or affecting Lessee; (c) no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by Lessee of this Agreement; and (d) each Lease constitutes the legal, valid and binding obligations of Lessee enforceable against Lessee in accordance with its terms. 27. FURTHER ASSURANCES. Lessee, upon the request of Lessor, will execute, acknowledge, record or file, as the case may be, such further documents and do such further acts as may be reasonably necessary, desirable or proper to carry out more effectively the purposes of this Agreement. Lessee hereby appoints Lessor as its attorney-in-fact to execute on behalf of Lessee and authorizes Lessor to file without Lessee's signature any UCC financing statements and amendments Lessor deems advisable. 28. FINANCIAL STATEMENTS. Lessee shall deliver to Lessor: (a) as soon as available, but not later than 120 days after the end of each fiscal year of Lessee and its consolidated subsidiaries, the consolidated balance sheet, income statement and statements of cash flows and shareholders equity for Lessee and its consolidated subsidiaries (the "Financial Statements") for such year, reported on by independent certified public accountants without an adverse qualification; and (b) as soon as available, but not later than 60 days after the end of each of the first three fiscal quarters in any fiscal year of Lessee and its consolidated subsidiaries, the Financial Statements for such fiscal quarter, together with a certification duly executed by a responsible officer of Lessee that such Financial Statements have been prepared in accordance with generally accepted accounting principles and are fairly stated in all material respects (subject to normal year-end audit adjustments). 29. CONSENT TO JURISDICTION. Lessee irrevocably submits to the jurisdiction of any Illinois state or federal court sitting in Illinois for any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, and Lessee irrevocably agrees that all claims in respect of any such action or proceeding may be heard and determined in such Illinois state or federal court. 30. WAIVER OF JURY TRIAL. LESSEE AND LESSOR IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 31. FINANCE LEASE. Lessee and Lessor agree that each Lease is a "Finance Lease" as defined by Section 2A-103(g) of the UCC. Lessee acknowledges that Lessee has reviewed and approved each written Supply Contract (as defined by UCC 2A-103(y)) covering Equipment purchased from each "Supplier" (as defined by UCC 2A-103(x)) thereof. 32. NO AGENCY. Lessee acknowledges and agrees that neither the manufacturer or supplier, nor any salesman, representative or other agent of the manufacturer or supplier, is an agent of Lessor. No salesman, representative or agent of the manufacturer or supplier is authorized to waive or alter any term or condition of this Agreement or any Schedule and no representation as to the Equipment or any other matter by the manufacturer or supplier shall in any way affect Lessee's duty to pay Rent and perform its other obligations as set forth in this Agreement or any Schedule. 33. SPECIAL TAX INDEMNIFICATION. Lessee acknowledges that Lessor, in determining the Rent due hereunder, has assumed that certain tax benefits as are provided to an owner of property under the Internal Revenue Code of 1986, as amended (the "Code"), and under applicable state tax law, including, without limitation, depreciation deductions under Section 168(b) of the Code, and deductions under Section 163 of 7 8 the Code in an amount at least equal to the amount of interest paid or accrued by lessor with respect to any indebtedness incurred by Lessor in financing its purchase of the Equipment, are available to Lessor as a result of the lease of the Equipment. In the event Lessor is unable to obtain such tax benefits for any reason, is required to include in income any amount other than the Rent or is required to recognize income in respect of the Rent earlier than anticipated pursuant to this Agreement, Lessee shall pay Lessor additional rent ("Additional Rent") in a lump sum in an amount needed to provide Lessor with the same after-tax yield and after-tax cash flow as would have been realized by Lessor had Lessor (i) been able to obtain such tax benefits, (ii) not been required to include any amount in income other than the Rent and (iii) not been required to recognize income in respect of the Rent earlier than anticipated pursuant to this Agreement. The Additional Rent shall be computed by Lessor, which computation shall be binding on Lessee. The Additional Rent shall be due immediately upon written notice by Lessor to Lessee of Lessor's inability to obtain tax benefits, the inclusion of any amount in income other than the rent or the recognition of income in respect of the Rent earlier than anticipated pursuant to this Agreement. The provisions of this Paragraph 33 shall survive the termination of this Agreement. 34. GOVERNING LAW; SEVERABILITY. EACH LEASE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS. IF ANY PROVISION SHALL BE HELD TO BE INVALID OR UNENFORCEABLE, THE VALIDITY AND ENFORCEABILITY OF THE REMAINING PROVISIONS SHALL NOT IN ANY WAY BE AFFECTED OR IMPAIRED. LESSEE ACKNOWLEDGES THAT LESSEE HAS READ THIS AGREEMENT AND THE SCHEDULE HERETO, UNDERSTANDS THEM, AND AGREES TO BE BOUND BY THEIR TERMS AND CONDITIONS. FURTHER, LESSEE AND LESSOR AGREE THAT THIS AGREEMENT AND THE SCHEDULES DELIVERED IN CONNECTION HEREWITH FROM TIME TO TIME ARE THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN THE PARTIES, SUPERSEDING ALL PROPOSALS OR PRIOR AGREEMENTS, ORAL OR WRITTEN, AND ALL OTHER COMMUNICATIONS BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF. IN WITNESS WHEREOF, the parties hereto have executed or caused this Master Lease Agreement to be duly executed by their duly authorized officers as of this 23 day of June, 1998. LA JOLLA PHARMACEUTICAL COMPANY By: /s/ Wood C. Erwin -------------------------------------- Name: Wood C. Erwin Title: Vice President and Chief Financial Officer FED ID NO. ###-##-#### TRANSAMERICA BUSINESS CREDIT CORPORATION By: /s/ Gary P. Moro -------------------------------------- Name: Gary P. Moro Title: Vice President 8 EX-27 3 FINANCIAL DATA SCHEDULE
5 0000920465 LA JOLLA PHARMACEUTICAL COMPANY 1,000 3-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 15,708 6,902 0 0 0 507 3,972 (3,307) 25,001 3,282 0 0 0 182 21,537 25,001 0 4,166 0 0 8,896 0 5 (4,085) 0 (4,085) 0 0 0 (4,085) (.22) (.22)
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