10Q Q3 2003 EXHIBIT 10.1





Exhibit 10.1







THIRD AMENDMENT TO NEW LEASE 



This Third Amendment to New Lease (this "Amendment")
is entered into as of the __5th__ day of _February_, 2003 (the
"Execution Date"), by and between Metropolitan Life Insurance Company,
a New York corporation ("Landlord") and Pharmacyclics, Inc., a Delaware
corporation ("Tenant").



Recitals:



A.Landlord and Tenant entered into that certain Lease
and Lease Termination Agreement dated as of June 14, 2000 (the "New
Lease") and that certain First Amendment to New Lease dated as of April 10,
2001 (the "First Amendment") and that certain Second Amendment to New
Lease dated as of June 29, 2001 for the premises more particularly described
therein ("Original Premises").  The New Lease as amended by the First
Amendment is referred to herein as the "Existing Lease."



B.Tenant desires to provide for an extension of the Lease
Term, surrender a portion of the Original Premises and other amendments of the
Existing Lease as more particularly set forth below.



Agreement:



Now, therefore, Landlord and Tenant hereby agree as
follows:



1.Scope of Amendment; Defined Terms.  Except as
expressly provided in this Amendment, the Existing Lease shall remain in full
force and effect.  Should any inconsistency arise between this Amendment and the
Existing Lease as to the specific matters which are the subject of this
Amendment, the terms and conditions of this Amendment shall control.  The term
"Lease" as used herein shall refer to the Existing Lease as modified
by this Amendment, except as expressly provided in this Amendment.  All
capitalized terms used in this Amendment and not defined herein shall have the
meanings set forth in the Existing Lease unless the context clearly requires
otherwise.



2.Surrender of portion of Original Premises.


(a)   Surrender Date.  On or before 11:59
p.m. on the date that is sixty (60) days after the Execution Date (the
"Surrender Date"), Tenant shall vacate and deliver to Landlord exclusive
possession of that portion of the Original Premises, shown on Exhibit A
pursuant to the same provisions and requirements of the Existing Lease as would
apply to surrender of the Premises upon expiration of the Existing Lease (the
"Surrender Space"), including, but not limited to the cabling plant,
network room and/or telephone closets (patch panels, racks, punch blocks,
Category 3-6 Cabling, jacks, face plates, etc.) used for voice and data
communications which must be left intact and ready for reuse.  In the event
cubicles are to be removed from the Surrender Space, any ends of the cabling
shall be left uncut and shall not be damaged in any way.  In the event that
cutting of the cables is necessary, Landlord shall be notified two (2) business
days prior to such intent to cut cables.  Landlord or its representative shall
inspect cabling in the Surrender Space at any time prior to, during or after the
de-installation process.  All such cut cables shall preserve length up to the
jack and preserve cable station identification numbering and/or lettering.
After the Surrender Date, the Existing Lease shall continue in full force and
effect for the remainder of the Lease Term upon and subject to all of the terms
and provisions of the Existing Lease with the following modifications of the
Existing Lease:


(i)The rentable area of the Original Premises is reduced
by 15,000 rentable square feet ("RSF") and the total remaining
Premises is amended to be 64,776 RSF (the "Remaining Premises")
located at 995 and 999 Arques Avenue.  All references in the Lease from and
after the Execution Date to "Premises" shall mean the Remaining
Premises.






(b)   Obligations Until Surrender; Proration.  Except
for the obligation to pay Monthly Installments of rent, and except as otherwise
set forth herein, all of the terms, covenants, agreements and conditions of the
Existing Lease remain in full force and effect with respect to the Surrender
Space through the Surrender Date.  Tenant must continue to pay all other
monetary obligations, including, without limitation, Additional Rent and charges
as they become due and payable under the Existing Lease applicable to the
Surrender Space through and including the Surrender Date.  As of 11:59 p.m.
on the Surrender Date, the surrender of the Surrender Space will be deemed
effective and the monetary obligations with respect to the Surrender Space must
be prorated, billed and payable in the manner provided in the Existing Lease, in
the same manner as would apply if the term of the Existing Lease expired on the
Surrender Date with respect to the Surrender Space.  



(c)   Holding Over.  In the event that
Tenant fails timely to vacate and deliver exclusive possession of the Surrender
Space to Landlord by the Surrender Date as required under this Amendment and the
Existing Lease without Landlord's express written consent, then:


(i)Tenant shall be deemed to be holding over with respect
to the Surrender Space and shall be liable to Landlord for rent for the
Surrender Space at the holdover rate provided in the Existing Lease and shall
indemnify Landlord against loss or liability resulting from any delay of Tenant
in not surrendering the Surrender Space on the Surrender Date, including, but
not limited to, any amounts required to be paid to third parties who were to
have occupied the Surrender Space and any attorneys' fees related thereto;
and



(ii)Tenant shall pay to Landlord for each month or
portion thereof that Tenant retains possession of the Surrender Space, or any
portion thereof, after the Surrender Date One Hundred Fifty Percent (150%) of
the Monthly Installment of rent for the Surrender Space (Sixty One Thousand
Eight Hundred Seventy Five Dollars ($61,875.00) payable for the month
immediately preceding the holding over.






(d)   Surrender Fee.  Upon the Execution Date Tenant
shall pay to Landlord the amount of Five Hundred Twenty Thousand Four
Hundred Ninety Five Dollars ($520,495.00) in immediately available funds (the
"Surrender Fee").



(e)   Demising Wall & Related Construction &
Costs.


(i)Demising Wall.  Within sixty (60)
days after the Surrender Date, Landlord shall commence construction to remove
the door existing in the presently constructed demising wall and close up the
demising wall in the location shown and designated "Demising Wall" on Exhibit B
to this Amendment (the "Demising Wall") and related modifications to the
heating, ventilating and air conditioning distribution ("HVAC"), electrical
facilities and any other Building systems to the extent necessary in order to
separate the Surrender Space from the rest of the Premises.  Notwithstanding the
foregoing, the Demising Wall shall comply with all applicable building codes and
laws and restoration requirements pursuant to the Existing Lease.



(ii)Right of Entry; Tenant's
Responsibilities.  To the extent that design and construction of
any or all of the work pursuant to this Section 2(e) will require access, work
or construction within or through the Remaining Premises, Landlord and
Landlord's representatives and contractors shall have the right to enter the
Remaining Premises during normal business hours and at all times upon 24-hour
prior oral or written notice to perform such work, and Tenant agrees that such
entry and work shall not constitute an eviction of Tenant in whole or in part
and that Monthly Installments and other sums due and payable by Tenant under the
Existing Lease with respect to the Remaining Premises shall in no way be abated
or reduced by reason of inconvenience, annoyance, disturbance or injury to the
business of Tenant due to such access, work or construction.  Landlord agrees to
use good faith efforts not to interfere with the conduct of Tenant's business.
Tenant shall cooperate with Landlord and Landlord's contractors(s) to allow
design and construction during normal business hours upon 24-hour prior oral or
written notice.  In the course of such design and construction, Landlord shall
make good faith efforts to cooperate with Tenant so as not unreasonably to
disrupt Tenant's business. Tenant agrees to cooperate with Landlord in showing
the Surrender Space to prospective tenants and/or brokers.



(iii)Work at Landlord's Cost.  All of
the work pursuant to Section 2(e)(i) shall be designed and performed by Landlord
or its contractors and consultants at Landlord's sole cost and expense. 



(iv)General Provisions Re Construction.  
All improvements constructed by Landlord hereunder shall be the property of
Landlord.






(f)   No Release.  Notwithstanding any provision of
the foregoing to the contrary, neither this Amendment nor the acceptance
by Landlord of the Surrender Space shall in any way be deemed to excuse or
release Tenant from any obligation or liability with respect to the Surrender
Space (including, without limitation, any obligation or liability under
provisions of the Lease to indemnify, defend and hold harmless Landlord or other
parties, or with respect to any breach or breaches of the Lease) which
obligation or liability (i) first arises on or prior to the date on which Tenant
delivers to Landlord possession of the Surrender Space or (ii) arises out of or
is incurred in connection with events or other matters which took place on or
prior to such date, or (iii) affect any obligation under the Existing Lease
which by its terms is to survive the expiration or sooner termination of the
Existing Lease.



(g)   Right of Negotiation. 


(i)Landlord hereby grants Tenant an ongoing right of
negotiation to re-lease all or a portion of the Surrender Space (the
"Negotiation Space"), upon and subject to the terms and conditions of this
Section (the "Negotiation Right"), and provided that at the time of exercise of
such right:  (a) Tenant must be in occupancy of the entire Remaining Premises;
and (b) there has been no material adverse change in Tenant's financial position
from such position as of the Execution Date, as certified by Tenant's
independent certified public accountants, and as supported by Tenant's certified
financial statements, copies of which shall be delivered to Landlord with
Tenant's written notice exercising its right hereunder.  Without limiting the
generality of the foregoing, Landlord may reasonably conclude there has been a
material adverse change if Tenant's independent certified public accountants do
not certify there has been no such change.



(ii)Nothing herein shall be deemed to limit or prevent
Landlord from marketing, discussing or negotiating with any other party for a
lease of, or rights of any nature as to, all or any part of such space, but
before Landlord makes any written proposal to any other party for Negotiation
Space or written response to any proposal received by Landlord, or
contemporaneously with making or responding to any such proposal, Landlord shall
give Tenant written notice ("Landlord's Notice"), which notice identifies the
space to be leased or on which rights or options are to be granted.  For a
period of five (5) business days after Landlord gives Landlord's Notice (the
"Election Notice Period"), Tenant shall have the right to initiate negotiations
in good faith for the lease of all (and not less than all) the space identified
in Landlord's Notice by giving Landlord written notice ("Election Notice") of
Tenant's election to exercise its Negotiation Right to lease such space



(iii)If Tenant timely gives the Election Notice, Landlord
and Tenant shall, during the five (5) business day period following Landlord's
receipt of the Election Notice, negotiate in good faith for the lease of the
Negotiation Space.  Any lease by Tenant of the Negotiation Space shall be for a
term expiring on the Expiration Date of the Lease and upon and subject to all
the terms, covenants and conditions provided in the Lease except as otherwise
expressly negotiated by Landlord and Tenant, including the following terms to be
negotiated with respect to the applicable Negotiation Space:  (i) any
improvements or alterations or allowance therefor, if any, and if none are
agreed upon, the Negotiation Space shall be leased in its "AS-IS" condition
without any obligation of Landlord to improve or alter the Negotiation Space or
to provide Tenant any allowance therefor and (ii) Monthly Installment of rent.
The foregoing obligation of Landlord to negotiate with Tenant is an exclusive
right during the five (5) business day period following Landlord's receipt of
the Election Notice; thereafter, the right shall be non-exclusive and nothing
herein shall be deemed to prevent Landlord from negotiating with any other party
for the Negotiation Space, whether or not Landlord and Tenant continue
negotiating for the same. 



(iv)If Tenant either fails or elects not to exercise its
Negotiation Right as to the Negotiation Space covered by Landlord's Notice by
not giving its Election Notice within the Election Notice Period, or if Tenant
gives Tenant's Election Notice but Tenant and Landlord do not execute (i) a
written letter of intent reflecting the significant business terms for the lease
of the Negotiation Space within five (5) business days after delivery of the
Election Notice, and (ii) a corresponding form prepared by Landlord of lease or
amendment to the Lease within fifteen (15) business days after Landlord gives
Tenant such form, then in any such event Tenant's Negotiation Right shall be
null and void as to the particular space identified in the applicable Landlord's
Notice (but not as to any space subject to this Negotiation Right which has not
yet been covered by any Landlord's Notice), and at any time thereafter Landlord
shall be free to lease and/or otherwise grant options or rights to such space on
any terms and conditions whatsoever free and clear of the Negotiation Right.



(v)This Negotiation Right is personal to Pharmacyclics,
Inc. and Tenant Affiliate and may not be used by, and shall not be transferable
or assignable (voluntarily or involuntarily) to any person or entity.



(vi)Upon the occurrence of any of the following events,
Landlord shall have the option, exercisable at any time prior to the time the
Negotiation Space is to be added to the Premises, to terminate all of the
provisions of this Section with respect to the Negotiation Right, with the
effect of canceling and voiding any prior or subsequent exercise so this
Negotiation Right is of no force or effect:



(a)   Tenant's failure to timely exercise the Negotiation
Right in accordance with the provisions of this Section.



(b)   The existence at the time Tenant exercises the
Negotiation Right or at the time the Negotiation Space is to be added to the
Premises of any default, beyond any applicable notice and cure periods, on the
part of Tenant under the Lease or of any state of facts which with the passage
of time or the giving of notice, or both, would constitute such a default.



(c)   Tenant's third default under the Lease prior to the
date the Negotiation Space is to be added to the Premises, notwithstanding that
all such defaults may subsequently be cured.



(vii)Without limiting the generality of any provision of
the Lease, time shall specifically be of the essence with respect to all of the
provisions of this Section.








3.Extension of Term.  Landlord and
Tenant acknowledge and agree that notwithstanding any provision of the Existing
Lease to the contrary, the Lease Term of the Existing Lease will expire on
December 31, 2002, and that the Term is hereby extended for the "Extended Term"
commencing on January 1, 2003 (the "Extended Term Commencement Date") and
expiring sixty (60) months after the Extended Term Commencement Date, unless
sooner terminated pursuant to the terms of the Existing Lease.  This extension
is further upon and subject to the same conditions, terms, covenants and
agreements contained in the Existing Lease except as otherwise provided in this
Amendment.  Landlord and Tenant acknowledge and agree that this Amendment
provides all rights and obligations of the parties with respect to extension of
the current Lease Term, whether or not in accordance with any other provisions,
if any, of the Existing Lease regarding renewal or extension, and any such
provisions, options or rights for renewal or extension provided in the Existing
Lease are hereby deleted as of the Execution Date. 



4.Amendment of Monthly Installment for the Extended
Term.  


(a)   Notwithstanding any provision of the Existing Lease to
the contrary, effective on and after the Extended Term Commencement Date, the
amount of Monthly Installment due and payable by Tenant for the Remaining
Premises is hereby amended as follows:





	
Months (of Extended
Term)
	
Monthly Rate
	
Monthly Installment

	
01-12
	
$1.42/NNN
	
  $91,981.92

	
13-24
	
$1.47/NNN
	
  $95,220.72

	
25-36
	
$1.52/NNN
	
  $98,459.52

	
37-60
	
$1.57/NNN
	
$101,698.32







(b)   Landlord acknowledges that Tenant has paid the Monthly
Installment for January 2003 at the rate set forth in the Existing Lease prior
to the Execution Date in the amount of Two Hundred Sixty Two Thousand One
Hundred Twenty Two and 08/100 Dollars ($262,122.08).  Landlord agrees that upon
the Execution Date, the amount to be paid by Tenant to Landlord shall be
adjusted such that any amounts paid by Tenant for Monthly Installments of rent
after the Extended Term Commencement Date shall be credited towards the amount
due upon Execution Date.  For example, if the Execution Date occurs in January
2003, the Monthly Installment for initial year of the Extended Term is
$91,981.92 and the Surrender Fee is $520,495.00 for a total of $612,476.92.
Therefore, Tenant shall be credited with the total amount of $262,122.08 and the
balance due from Tenant shall be $350,354.84 plus any Additional Rent due from
Tenant pursuant to the Lease.





5.Security Deposit.  Landlord acknowledges that it currently holds
a Security Deposit composed of cash in the amount of Seventy Three Thousand Four
Hundred Ten Dollars ($73,410.00) and the letter of credit in the amount of Four
Hundred Fifty Thousand Dollars ($450,000.00) (the "Letter of Credit").
Upon the Execution Date, Tenant agrees to extend the Letter of Credit for the
benefit of Landlord for the Extended Term.



6.Construction; Other Provisions.
Notwithstanding any provision of the Existing Lease to the contrary, the
following provisions shall govern the Extended Term:


(a)   Condition; Construction.  Except to the extent
of any Landlord Work described below or Section 2(e)(i) above: (i) Tenant
acknowledges that is presently occupies the Premises and accepts the Premises in
its then AS IS condition, without any express or implied representations or
warranties of any kind by Landlord, its brokers, manager or agents, or the
employees of any of them; and (ii) Landlord shall not have any obligation to
construct or install any tenant improvements or alterations or to pay for any
such construction or installation.



(b)   Landlord Work.  At Landlord's option, (i)
Landlord will install a new roof, at Landlord's sole cost and expense (the
"Landlord Work"), to be amortized, as a Capital Expenditure as set
forth in the Lease, over the new roof's estimated useful life, as measured by
GAAP at the time the Landlord Work is completed, and passed through to Tenant
based on Tenant's pro-rata share of the rentable area of the Remaining Premises
covered by the new roof or (ii) Landlord will maintain the existing roof and all
costs of roof maintenance will be paid at Landlord's sole cost and expense, and
not passed through as an Operating Expense.





7.Tenant Affiliates.  Notwithstanding anything to
the contrary in the New Lease, Landlord agrees that Section 25(B)(2) of the New
Lease regarding excess rents to be paid in the case of a Transfer shall not
apply to any Transfer to a Tenant Affiliate. 



8.Brokers.  Notwithstanding any other provision of
the Existing Lease to the contrary, Tenant represents that Tenant's Broker is
CRESA Partners and except for Tenant's Broker and Landlord's Broker (defined
below), it has not dealt with any real estate broker, sales person, or finder in
connection with this Amendment, and no such person initiated or participated in
the negotiation of this Amendment, or showed the Premises to Tenant.  Tenant
hereby agrees to indemnify, protect, defend and hold Landlord and the Landlord's
Parties, harmless from and against any and all liabilities and claims for
commissions and fees arising out of a breach of the foregoing representation.
Landlord represents that Landlord's broker is South Bay Development Company
("Landlord's Broker") and, except for Landlord's Broker and Tenant's
Broker it has not dealt with any real estate broker, sales person, or finder in
connection with this Amendment, and no such person initiated or participated in
the negotiation of this Amendment.  Landlord agrees to pay the commission in the
amount of Five Hundred Sixty Five Thousand Six Hundred Twenty Four and 56/100
Dollars ($565,624.56) to which Landlord's Broker is entitled in connection with
this Amendment pursuant to Landlord's written agreement with such broker within
five (5) business days of receipt of a request for payment.  Tenant agrees that
any commission payable to Tenant's Broker shall be paid by Landlord's Broker to
the extent that Landlord's Broker and Tenant's Broker have entered into a
separate agreement between themselves to share the commission paid to Landlord's
Broker by Landlord. 



9.Applicable Law.  This Amendment shall be
governed and construed in accordance with the laws of the State of California
and each party hereby irrevocably submits to jurisdiction and service of process
of the California courts.  Landlord and Tenant agree that the provisions of this
Section 8 shall survive the expiration or earlier termination of the Lease.



10.Attorneys' Fees.  Each party to this
Amendment shall bear its own attorneys' fees and costs incurred in connection
with the discussions preceding, negotiations for and documentation of this
Amendment.  In the event any party brings any suit or other proceeding with
respect to the subject matter or enforcement of this Amendment or the Lease, the
prevailing party (as determined by the court, agency or other authority before
which such suit or proceeding is commenced) shall, in addition to such other
relief as may be awarded, be entitled to recover attorneys' fees, expenses and
costs of investigation as actually incurred, including court costs, expert
witness fees, costs and expenses of investigation, and all attorneys' fees,
costs and expenses in any such suit or proceeding (including in any action or
participation in or in connection with any case or proceeding under the
Bankruptcy Code, 11 United States Code Sections 101 et seq., or any
successor statutes, in establishing or enforcing the right to indemnification,
in appellate proceedings, or in connection with the enforcement or collection of
any judgment obtained in any such suit or proceeding).



11.Effect of Headings; Exhibits.  The
titles or headings of the various parts or sections hereof are intended solely
for convenience and are not intended and shall not be deemed to or in any way
be used to modify, explain or place any construction upon any of the
provisions of this Amendment.  Exhibits, schedules, plats and riders hereto
which are referred to herein are a part of this Amendment.



12.Entire Agreement; Amendment.  This
Amendment taken together with the Existing Lease, together with all exhibits,
schedules, riders and addenda to each, constitutes the full and complete
agreement and understanding between the parties hereto and shall supersede all
prior communications, representations, understandings or agreements, if any,
whether oral or written, concerning the subject matter contained in this
Amendment and the Existing Lease, as so amended, and no provision of the Lease
as so amended may be modified, amended, waived or discharged, in whole or in
part, except by a written instrument executed by all of the parties hereto. 



13.Authority.  Each party represents and warrants
to the other that it has full authority and power to enter into and perform its
obligations under this Amendment, that the person executing this Amendment is
fully empowered to do so, and that no consent or authorization is necessary from
any third party.



In witness whereof, the parties have executed this Amendment
as of the date first above written.



 
LANDLORD



METROPOLITAN LIFE INSURANCE COMPANY,

a New York corporation



By:/s/  JOEL R. REDMON



Name:Joel R. Redmon



Title:Assistant Vice-President



 

 

TENANT



PHARMACYCLICS, INC.,

a Delaware corporation



By:/s/  RICHARD A. MILLER



Name:Richard A. Miller



Title:President & CEO



 

 

 

By:/s/  LEIV LEA



Name:Leiv Lea



Title:VP, Finance & Administration and
CFO