Document:

exv10w4

 

Exhibit 10.4

Loan No. 1686410

LIEN-FREE COMPLETION GUARANTY

     THIS LIEN-FREE COMPLETION GUARANTY (“Guaranty”) is made as of September
25, 2003, by the undersigned NEUROCRINE BIOSCIENCES, INC., a Delaware
corporation (“Guarantor”), in favor of SAN DIEGO NATIONAL BANK, a national
banking association (“Lender”), with reference to the following facts and
circumstances.

     A.     Guarantor is executing this Guaranty as a material inducement to
Lender to make a construction loan in the amount of up to $60,600,000.00
(“Loan”) to SCIENCE PARK CENTER LLC, a California limited liability company
(“Borrower”).

     B.     The Loan shall be advanced to Borrower upon and subject to the
provisions and conditions of a Construction Loan Agreement, of even date
herewith, between Lender and Borrower (“Loan Agreement”), and shall be
evidenced by a Promissory Note made by Borrower (“Note”) and secured by a
Construction Deed of Trust, Security Agreement and Fixture Filing (“Deed of
Trust”), executed by PEONY ACQUISITIONS LLC, a Delaware limited liability
company (“Peony”) as Trustor thereunder, both of even date herewith. Initially
capitalized terms not otherwise defined herein shall have the same meanings as
set forth in the Loan Agreement.

     C.     The Loan is to be used by Borrower for the Improvements to be
constructed in accordance with the Plans upon the Property and certain other
purposes provided in the Loan Agreement, and is to be secured by the Property.

     D.     As an essential inducement of the making of the Loan and in
consideration therefor, Guarantor has agreed to execute this Guaranty. The
obligations guaranteed pursuant to Section 1 below are referred to collectively
herein as the “Guaranty Obligations”.

     E.     Guarantor will obtain substantial direct and indirect benefits from
the making of the Loan.

     NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, and to induce and in consideration for the making of
the Loan, Guarantor agrees as set forth below.

     1.     Guaranty of Lien-Free Completion.

          (a) Guarantor hereby irrevocably, absolutely and unconditionally
guarantees to Lender the following: (i) that construction of the Improvements
shall be undertaken and completed in a diligent, orderly and workmanlike manner
and, except for minor deviations that comply with applicable laws, ordinances
and regulations, substantially in accordance with the Plans and Construction
Schedule and the Loan Agreement, so that the construction will be completed
lien-free (meaning, no contractors’, vendors’, mechanics’ or materialmens’
liens, claims or demands for labor or materials, including stop notices), other
than Permitted Encumbrances, and in accordance with all applicable laws,
ordinances and

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regulations and the Loan Agreement, except where the failure to so comply with
applicable laws, ordinances and regulations could not reasonably be expected to
have a material adverse effect; provided, however, Guarantor shall correct such
failure within sixty (60) days thereafter; (ii) the discharge and satisfaction
of all contractors’, vendors’, mechanics’ or materialmens’ liens and(or) claims
or demands for labor or materials, including stop notices, arising in
connection with the construction of the Improvements (subject to the same right
to contest such liens and claims as Borrower has under the Loan Documents), so
that the construction will be completed lien-free and shall be and remain free
and clear of all liens, other
than Permitted Encumbrances; and (iii) the construction of the Improvements
shall have been completed and conducted in accordance with all applicable
Environmental Laws, and the Improvements and the underlying Land shall be free
and clear of Hazardous Substances in violation of Environmental Laws, and all
remedial work, if any, that shall be required shall have been completed in
accordance with all Environmental Laws and any written plan therefor approved
by any public agencies having jurisdiction, and all costs and expenses of the
foregoing shall have been paid in full, including, without limitation, any
fines or penalties imposed in connection with any required remedial work and
the cost of testing or monitoring resulting from any such remedial work or the
existence at any time of Hazardous Substances on, under or about the
Improvements and the underlying Land except in strict compliance with all
applicable Environmental Laws.

          (b) If for any reason Borrower abandons or fails to diligently pursue
and complete to Lender’s reasonable satisfaction the construction of the
Improvements, fails to pay all costs of such construction, or in any other
manner defaults under the Loan Documents, Guarantor unconditionally agrees that
it shall, within fifteen (15) calendar days after written demand by Lender,
immediately assume at its expense all responsibility for: (i) the timely and
lien-free completion of the Improvements and commence performance of all
obligations of Borrower under all of the Loan Documents and any modifications,
renewals and extensions thereof and supplements thereto; (ii) the payment and
discharge of all liens not permitted under the Loan Documents (subject to the
same right to contest such liens and claims as Borrower has under the Loan
Documents); and (iii) the payment of any Loan proceeds Lender is compelled by
law to pay to any laborers or suppliers on the Improvements.

          (c) Guarantor shall pay all costs and expenses of performing its
obligations hereunder.

          (d) If Guarantor does not timely perform as required by Section 1(b)
above, or at any time fails to continue its performance:

               (i) Lender may elect, at its option and without any obligation to do so,
without further notice to Guarantor, to take any actions it believes necessary
to complete the Improvements or perform Guarantor’s obligations hereunder,
including appointment of a receiver, making such changes to the Plans as it
deems reasonably necessary to do so, but with the right to suspend or terminate
such actions at any time, and no such actions by Lender will release or limit
the liability of Guarantor;

               (ii) Guarantor shall repay Lender upon demand all sums expended by it in
undertaking to so complete the Improvements or perform Guarantor’s obligations
hereunder, including any sums expended in excess of the principal amount of the
Loan, together with

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interest at the rate set forth in the Note, whether or not the Improvements are
actually completed; and

               (iii) Lender shall have direct cause of action against Guarantor for all
loss, costs, damage, injury and expense sustained or incurred by Lender as a
consequence of any failure or refusal of Guarantor to so perform.

     2.     Indemnity. Guarantor shall indemnify and hold harmless Lender from
and against any and all losses, damages, claims, liabilities, costs, and
expenses, including, but not limited to, all costs and expenses resulting from
or arising out of any misrepresentation, breach or default (collectively
“Claims”) arising out of the failure of Borrower or Guarantor to perform,
observe or otherwise satisfy, any or all of the Guaranteed Obligations or the
provisions of this Guaranty, regardless of whether Lender has enforced or taken
any steps to enforce any rights against Borrower or any other Person and
regardless of any other contingency, event or condition; provided, however,
Guarantor shall not be required to indemnify or hold harmless Lender from and
against any Claims that arise out of Lender’s gross negligence or willful
misconduct.

     3.     Scope and Duration of Guarantor Liability. Guarantor represents and
warrants to Lender that Guarantor is the manager of Borrower, and that as such
Guarantor expects to materially benefit from Lender’s extension of the Loan to
Borrower and the funds made available thereby to pay for the costs and expenses
of the Improvements. Accordingly, Guarantor agrees that Lender’s agreement to
make the Loan to Borrower is of substantial and material benefit to Guarantor.
Guarantor further agrees as follows:

          (a) This is a continuing guaranty, and Guarantor shall continue to be
liable under this Guaranty and the provisions hereof shall remain in full force
and effect notwithstanding: (i) any modification, agreement or stipulation
between Borrower and Lender, or their respective successors and assigns, with
respect to the Loan Documents or the obligations encompassed thereby,
including, without limitation, the Guaranteed Obligations; (ii) any
modification of or amendments or addenda to the Plans, the General Contract or
any subcontract; (iii) Lender’s waiver of or failure to enforce any of the
terms, covenants or conditions contained in the Loan Documents or in any
modification thereof; (iv) any discharge or release of Borrower or any other
guarantor from any liability with respect to the Guaranteed Obligations (other
than on satisfaction of Borrower’s obligations with respect to the Loan and
otherwise with respect to the Loan Documents); (v) any discharge, release,
exchange or subordination of any real or personal property then held by Lender
as security for the performance of the Guaranteed Obligations; (vi) any
additional security taken for the Guaranteed Obligations, whether real or
personal property; (vii) any foreclosure or other realization of any security
for the Guaranteed Obligations, regardless of the effect upon Guarantor’s
subrogation, contribution or reimbursement rights against Borrower or any other
guarantor; and (viii) any additional loans or financial accommodations to
Borrower.

          (b) Guarantor’s liability under this Guaranty shall continue until all
sums due under the Note and the other Loan Documents have been paid in full and
until all Guaranteed Obligations to Lender have been satisfied, and shall not
be reduced by virtue of any payment by

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Borrower of any amount due under the Note or under any of the Loan Documents
(other than payment in full, as so provided) or by Lender’s recourse to any
collateral or security.

          (c) Guarantor warrants and represents to Lender that Guarantor now has
and will continue to have full and complete access to any and all information
concerning the transactions contemplated by the Loan Documents or referred to
therein, the value of the assets owned or to be acquired by Borrower,
Borrower’s financial status and its ability to pay and perform the Guaranteed
Obligations owed to Lender. Guarantor further warrants and represents that
Guarantor has reviewed and approved copies of the Loan Documents and is fully
informed of the remedies Lender may pursue, with or without notice to Borrower,
in the event of default under the Note or other Loan Documents. So long as any
of the Guaranteed Obligations remains unsatisfied or owing to Lender, Guarantor
shall keep fully informed as to all aspects of Borrower’s financial condition
and the performance of the Guaranteed Obligations.

          (d) Guarantor acknowledges and agrees that Guarantor may be required to
perform the Guaranteed Obligations in accordance with the terms hereof
notwithstanding the fact that the Loan has fully matured, that the outstanding
principal balance thereof is fully due and payable and that Borrower is in
default of its obligation to pay the full amount due under the Note on the
maturity thereof.

     4.     Nature of Guaranty. The liability of Guarantor under this Guaranty is
a guaranty of payment and performance and not of collectibility, and is not
conditioned or contingent upon the genuineness, validity, regularity or
enforceability of the Loan Documents or other instruments relating to the
creation or performance of the Guaranteed Obligations or the pursuit by Lender
of any remedies which it now has or may hereafter have with respect thereto
under the Loan Documents, at law, in equity or otherwise. Guarantor agrees that
Guarantor shall be liable even if Borrower had no liability at the time of
execution of any of the Loan Documents or thereafter ceases to be liable.
Guarantor agrees that Guarantor’s liability may be larger in amount and more
burdensome than that of Borrower. Guarantor’s liability hereunder shall
not be limited or affected in any way by any impairment or any diminution or
loss of value of any security or collateral for the Loan, whether caused by
Hazardous Substances or otherwise, Lender’s failure to perfect a security
interest in such security or collateral, or any disability or other defense of
Borrower or any other guarantor.

     5.     Waivers and Agreements.

          (a) Guarantor waives to the extent permitted by law: (i) all notices
(other than those expressly provided in the Loan Documents) to Guarantor, to
Borrower or to any other Person, including, but not limited to, notices of the
acceptance of this Guaranty or the creation, renewal, extension, modification,
or accrual of any of the Guaranteed Obligations owed to Lender and, except to
the extent set forth in Paragraph 5(d) hereof, enforcement of any right or
remedy with respect thereto, and notice of any other matters relating thereto;
(ii) diligence and demand of payment, presentment, protest, dishonor and notice
of dishonor; (iii) any statute of limitations affecting Guarantor’s liability
hereunder or the enforcement thereof; and (iv) all principles or provisions of
law which conflict with the terms of this Guaranty. Guarantor further agrees
that Lender may enforce this Guaranty upon the occurrence of an Event of
Default under

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the Note or the Loan Documents (as Event of Default is defined therein),
notwithstanding the existence of any dispute between Borrower and Lender with
respect to the existence of the Event of Default or performance of the
Guaranteed Obligations or any counterclaim, set-off or other claim which
Borrower may allege against Lender with respect thereto. Moreover, Guarantor
agrees that Guarantor’s obligations shall not be affected by any circumstances
which constitute a legal or equitable discharge of a guarantor or surety.
Guarantor agrees that Lender may enforce this Guaranty without the necessity of
resorting to or exhausting any security or collateral and without the necessity
of proceeding against Borrower or any other guarantor. Guarantor waives the
right to require Lender to proceed against Borrower, to proceed against any
other guarantor, to foreclose any lien on any real or personal property, to
exercise any right or remedy under the Loan Documents, or to pursue any other
remedy or to enforce any other right.

          (b) Nothing contained herein shall prevent Lender from suing on the Note
or from exercising any rights available to it thereunder or under any of the
Loan Documents and the exercise of any of Lender’s rights shall not constitute
a legal or equitable discharge of Guarantor. Guarantor understands that the
exercise by Lender of certain rights and remedies contained in the Loan
Documents may affect or eliminate Guarantor’s right of subrogation against
Borrower and that Guarantor may therefore incur a partially or totally
non-reimbursable liability hereunder; nevertheless, Guarantor authorizes and
empowers Lender to exercise, in its sole discretion, any rights and remedies,
or any combination thereof, which may then be available to Lender, since it is
the intent and purpose of Guarantor that the obligations hereunder shall be
absolute, independent and unconditional under any and all circumstances.
Notwithstanding any foreclosure of the lien of any deed of trust or security
agreement with respect to any or all of the real or personal property secured
thereby, whether by the exercise of the power of sale contained therein, by an
action for judicial foreclosure or by an acceptance of a deed in lieu of
foreclosure, Guarantor shall remain bound under this Guaranty. Guarantor waives
all rights and defenses arising out of an election of remedies by the creditor,
even though that election of remedies, such as a non-judicial foreclosure with
respect to security for a guaranteed obligation, has destroyed Guarantor’s
rights of subrogation and reimbursement against the principal by operation of
California Code of Civil Procedure (“CCP”)ss. 580d or otherwise. Guarantor
expressly waives any defense which, if it had not given this waiver, it might
otherwise have to a judgment against it following a non-judicial foreclosure
sale, for any portion of the indebtedness guaranteed herein. Without limiting
the generality of the foregoing, Guarantor expressly waives any and all
benefits and defenses under (i) CCPss. 580a, which if it had not given this
waiver, would otherwise limit its liability after a non-judicial foreclosure
sale to the difference between the obligations guaranteed herein and the fair
market value of the property or interest sold at such non-judicial foreclosure
sale; (ii) CCPss.ss. 580b and 580d, which if it had not given this waiver,
would otherwise limit Lender’s right to recover a deficiency judgment with
respect to purchase money obligations and after a non-judicial foreclosure
sale,
respectively; and (iii) CCPss. 726 which, if it had not given this waiver,
among other things, would otherwise require Lender to exhaust all of its
security before personal judgment may be obtained for deficiency.

          (c) Guarantor agrees that Guarantor shall have no right of subrogation
against Borrower, no right of subrogation against any collateral or security
provided for in the Loan Documents and no right of contribution against any
other guarantor unless and until all Guaranteed Obligations have been
satisfied, and Lender has released, transferred or disposed

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of all of its rights, title and interest in any collateral or security. To the
extent the waiver of Guarantor’s rights of subrogation, reimbursement and
contribution as set forth herein is found by a court of competent jurisdiction
to be void or voidable for any reason, Guarantor further agrees that
Guarantor’s rights of subrogation and reimbursement against Borrower and
Guarantor’s rights of subrogation against any collateral or security shall be
junior and subordinate to any rights Lender may have against Borrower and to
all rights, title and interest Lender may have in such collateral or security,
and Guarantor’s rights of contribution against any other guarantor shall be
junior and subordinate to any rights Lender may have against such other
guarantor. Lender may use, sell or dispose of any item of collateral or
security as it sees fit without regard to Guarantor’s subrogation and
contribution rights, and upon disposition or sale, Guarantor’s rights of
subrogation and contribution shall terminate. With respect to the foreclosure
of any security interest in any personal property collateral then securing the
Guaranteed Obligations, Lender agrees to give Guarantor five (5) days’ prior
written notice, in the manner set forth in Paragraph 9 hereof, of any sale or
disposition of any such personal property collateral, other than collateral
which is perishable, threatens to decline speedily in value, is of a type
customarily sold on a recognized market, or is cash, cash equivalents,
certificates of deposit or the like.

          (d) Guarantor’s sole right with respect to any such foreclosure of real
or personal property collateral shall be to bid at such sale in accordance with
applicable law. Guarantor acknowledges and agrees that Lender may also bid at
any such sale and in the event such collateral is sold to Lender in whole or in
partial satisfaction of the Guaranteed Obligations (or any portion thereof),
Guarantor shall have no further right or interest with respect thereto.
Notwithstanding anything to the contrary contained herein, no provision of this
Guaranty shall be deemed to limit, decrease, or in any way to diminish any
rights of set-off that Lender may have with respect to any cash, cash
equivalents, certificates of deposit, letters of credit or the like which may
now or hereafter be deposited with Lender by Borrower.

          (e) To the extent any dispute exists at any time between Guarantor and
any other guarantor as to Guarantor’s right to contribution or otherwise,
Guarantor agrees to indemnify, defend and hold Lender harmless from and against
any loss, damage, claim, demand, cost or any other liability (including
attorneys’ fees and costs) Lender may suffer as a result of such dispute.

          (f) So long as any Guaranteed Obligations shall be owing to Lender,
Guarantor shall not, without the prior written consent of Lender, commence or
join with any other party in commencing any bankruptcy, reorganization or
insolvency proceedings of or against Borrower. The obligations of Guarantor
under this Guaranty shall not be altered, limited or affected by any case,
voluntary or involuntary, involving the bankruptcy, insolvency, receivership,
reorganization, liquidation of Borrower or by any defense which Borrower may
have by reason of the order, decree or decision of any court or administrative
body resulting from any such case. Lender shall have the sole right to accept
or reject any plan on behalf of Guarantor proposed in such case and to take any
other action which Guarantor would be entitled to take, including, without
limitation, the decision to file or not file a claim. Guarantor acknowledges
and agrees that any interest on the Guaranteed Obligations which accrues after
the commencement of any such proceeding (or, if interest on any portion of the
Guaranteed Obligations ceases to accrue by operation of law by reason of the
commencement of any

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such proceeding, such interest as would have accrued on any such portion of the
Guaranteed Obligations if the proceedings had not been commenced) shall be
included in the Guaranteed Obligations because it is the intention of the
parties that the Guaranteed Obligations should be determined without regard to
any rule or law or order which may relieve Borrower of any portion of such
Guaranteed Obligations. Guarantor expressly permits any trustee in bankruptcy,
receiver, debtor in possession, assignee for the benefit of creditors or
similar Person with respect to such case to pay Lender, or allow the claim of
Lender in respect of, any such interest accruing after the date on which such
proceeding is commenced. Guarantor assigns to Lender Guarantor’s right to
receive any payments from any such trustee in bankruptcy, receiver, debtor in
possession, assignee for the benefit of creditors or similar Person by way of
dividend, adequate protection payment or otherwise. If all or any portion of
the Guaranteed Obligations is paid or performed by Borrower, the obligations of
Guarantor hereunder shall continue and remain in full force and effect in the
event that all or any part of such payment(s) or performance(s) is avoided or
recovered directly or indirectly from Lender as a preference, fraudulent
transfer or otherwise in such case irrespective of payment in full of all
obligations under the Loan Documents.

     6.     Financial Reporting.

          (a) Guarantor warrants and represents that any financial statements of
Guarantor previously delivered to Lender are true and correct in all material
respects. Such statements were prepared in accordance with generally accepted
accounting principles consistently applied, and fairly present the financial
position of Guarantor as of the date thereof. Guarantor further warrants and
represents that no material adverse change has occurred in Guarantor’s
financial position since the date of such statements.

          (b) Guarantor shall provide Lender with financial information in a
format acceptable to Lender, at least quarterly, delivered within forty-five
(45) days of the end of each such quarter, or as otherwise requested by Lender.
All financial statements of Guarantor delivered annually shall be delivered
within ninety (90) days of the end of each such fiscal year and shall be
audited and certified. Quarterly financial statements of Guarantor may be
internally prepared on a consolidated basis and certified to Lender by the
senior management of Guarantor. Guarantor further covenants and agrees to
immediately notify Lender of any material adverse change in Guarantor’s
financial status.

          (c) So long as the Guarantor is subject to the reporting provisions of
the Securities Exchange Act, as amended (the “Exchange Act”), the timely filing
(including all permissible extension periods provided under Rule 12b-25 under
the Exchange Act) on the Securities and Exchange Commission’s EDGAR system of
the Guarantor’s quarterly report on Form 10-Q for such period and annual report
on Form 10-K for such period will be deemed to satisfy all of the foregoing
requirements of this Section 6. Guarantor further covenants and agrees to
immediately notify Lender in writing of Guarantor’s filing of such reports.

     7.     Notices. All notices and demands relating to this Guaranty shall be
in writing, and shall be deemed served upon delivery, or if mailed, upon the
first to occur of receipt thereof or three (3) days after deposit thereof in
the United States Postal Service, certified mail, postage

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prepaid, addressed to the address set forth below. Notices of change of address
may be given in the same manner.

	 	 	 	 	 
	 	 	
To Guarantor:
	 	Neurocrine Biosciences, Inc.
	 	 	 	 	10555 Science Center Drive
	 	 	 	 	San Diego, California 92121
	 	 	 	 	Attention: Paul Hawran
	 	 	 	 	 
	 	 	
With a copy to:
	 	Neurocrine Biosciences, Inc.
	 	 	 	 	10555 Science Center Drive
	 	 	 	 	San Diego, California 92121
	 	 	 	 	Attention: Margaret E. Valeur-Jensen
	 	 	 	 	 
	 	 	
To Lender:
	 	San Diego National Bank
	 	 	 	 	1420 Kettner Boulevard
	 	 	 	 	San Diego, California 92101
	 	 	 	 	Attention: Jim Holliman

     8.     Representations and Warranties of Guarantor. Guarantor represents and
warrants to Lender as follows:

          (a) No consent of any other Person, including, without limitation, any
creditors of Guarantor, and no license, permit, approval or authorization of,
exemption by, notice or report to, or registration, filing or declaration with,
any Governmental Authority is required by Guarantor in connection with this
Guaranty or the execution, delivery, performance, validity or enforceability of
this Guaranty and all obligations required hereunder. This Guaranty has been
duly executed and delivered by Guarantor, and constitutes the legally valid and
binding obligation of Guarantor enforceable against Guarantor in accordance
with its terms.

          (b) The execution, delivery and performance of this Guaranty will not
violate any provision of any existing law or regulation binding on Guarantor,
or any order, judgment, award or decree of any court, arbitrator or
governmental authority binding on Guarantor, or of any mortgage, indenture,
lease, contract or other agreement, instrument or undertaking to which
Guarantor is a party or by which Guarantor or any of Guarantor’s assets are
bound, and will not result in, or require, the creation or imposition of any
lien on any of Guarantor’s property, assets or revenues pursuant to the
provisions of any such mortgage, indenture, lease, contract or other agreement,
instrument or undertaking.

     9.     Other Provisions.

          (a) Lender may assign this Guaranty with any Loan Document, without in
anyway affecting Guarantor’s liability hereunder. This Guaranty shall be
binding upon Guarantor, Guarantor’s heirs, representatives, administrators,
executors, successors and assigns and shall inure to the benefit of and shall
be enforceable by Lender, its successors, endorsees and assigns.

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          (b) As used herein, the singular shall include the plural, and the
masculine shall include the feminine and neuter and vice versa, if the context
so requires.

          (c) In the event of any dispute or litigation regarding the enforcement
or validity of this Guaranty, Guarantor shall be obligated to pay all charges,
costs and expenses (including attorneys’ fees) incurred by Lender, whether or
not any action or proceeding is commenced regarding such dispute and whether or
not such litigation is prosecuted to judgment.

          (d) This Guaranty shall be governed by and construed in accordance with
the laws of the State of California.

          (e) No provision of this Guaranty may be changed, waived, revoked or
amended without Lender’s prior written consent. No failure or omission by
Lender to enforce any provision or condition hereof shall be construed as a
waiver by Lender of any right it may have to thereafter enforce said provision
or condition, and to pursue all rights and remedies with respect thereto. Every
provision of this Guaranty is intended to be severable. In the event any term
or provision hereof is declared to be illegal or invalid for any reason
whatsoever by a court of competent jurisdiction, such illegality or invalidity
shall not affect the balance of the terms and provisions hereof, which terms
and provisions shall remain binding and enforceable.

          (f) This Guaranty may be executed in any number of counterparts each of
which shall be deemed an original and all of which shall constitute one and the
same guaranty with the same effect as if all parties had signed the same
signature page. Any signature page of this Guaranty may be detached from any
counterpart of this Guaranty and re-attached to any other counterpart of this
Guaranty identical in form hereto but having attached to it one or more
additional signature pages.

          (g) This Guaranty embodies the entire agreement among the parties hereto
with respect to the matters set forth herein, and supersedes all prior
agreements among the parties with respect to the matters set forth herein. No
course of prior dealing among the parties, no usage of trade, and no parol or
extrinsic evidence of any nature shall be used to supplement, modify or vary
any of the terms hereof. There are no conditions to the full effectiveness of
this Guaranty. No failure or delay on the part of Lender to exercise any power,
right or privilege under this Guaranty shall impair any such power, right or
privilege, or be construed to be a waiver of any default or an acquiescence
therein, nor shall any single or partial exercise of such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.

          (h) This Guaranty is in addition to all other guarantees of Guarantor
and any other guarantors of Borrower’s obligations to Lender.

          (i) The rights and remedies of Lender hereunder are cumulative and not
exclusive.

          (j) GUARANTOR ACKNOWLEDGES THAT IT HAS BEEN AFFORDED THE OPPORTUNITY TO
READ THIS DOCUMENT CAREFULLY AND TO REVIEW IT WITH AN ATTORNEY OF GUARANTOR’S
CHOICE BEFORE SIGNING IT.

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GUARANTOR ACKNOWLEDGES HAVING READ AND UNDERSTOOD THE MEANING AND EFFECT OF
THIS DOCUMENT BEFORE SIGNING IT.

          (k) This Guaranty and the Guarantor’s performance of its obligations
hereunder are secured by that certain Security Agreement (the “Security
Agreement”), of even date herewith, executed by Guarantor in favor of Lender.
Reference is made to the Security Agreement for a specific description of the
security given to Lender by Guarantor thereunder.

          (l) Borrower is obligated to acquire the Property from Peony on or
before November 26, 2003. Notwithstanding Borrower’s acquisition of the
Property and the assumption by Borrower of certain obligations of Peony under
certain Loan Documents evidencing the Loan, all of the Guarantor’s obligations
hereunder will continue to remain in full force and effect and for the benefit
of Lender.

	 	 	 	 	 
	 	 	NEUROCRINE BIOSCIENCES, INC.,

a Delaware corporation
	 	 	 	 	 
	 	 	
By:	 	/s/ Margaret Valeur-Jensen
	 	 	 	 	

	 	 	
Name:	 	Margaret Valeur-Jensen
	 	 	 	 	

	 	 	
Its:	 	Senior Vice President, Gen. Counsel & Secretary
	 	 	 	 	

	 	 	 	 	 
	 	 	
By:	 	 
	 	 	 	 	

	 	 	
Name:	 	 
	 	 	 	 	

	 	 	
Its:	 	 
	 	 	 	 	

10exv10w5

 

Exhibit 10.5

Loan No. 1686410

PROMISSORY NOTE

NOTICE TO BORROWER: THIS DOCUMENT CONTAINS PROVISIONS

FOR A VARIABLE INTEREST RATE

$60,600,000.00

San Diego, California

Date: September 25, 2003

     For value received, the undersigned (“Borrower”) promises to pay to the
order of SAN DIEGO NATIONAL BANK (“Lender”) at 1420 Kettner Boulevard, San
Diego, California 92101, or at such other place as the holder hereof (“Holder”)
may from time to time designate in writing, in lawful money of the United
States, the principal sum of up to Sixty Million Six Hundred Thousand and
No/100 Dollars ($60,600,000.00) or so much thereof as may be advanced, with
interest at the rate, and due and payable, as follows:

ARTICLE 1 — DEFINITIONS

     Terms with initial capital letters used in this Note shall have the
following meanings, whether used in the singular or the plural:

	1.1	 	“Base Rate”: The annual rate of seventy-five (75) basis points per
annum in excess of the Base Rate Index, as it may change from time to
time; provided, however, in no event shall the Base Rate fall below
5.00% during the term of this Loan.
	 
	1.2	 	“Base Rate Index”: The annual rate of interest equal to the “Prime
Rate” as quoted under the “Money Rates” column of the Wall Street
Journal, as it may change from time to time, or such other rate as is
substituted therefor as hereafter set forth. Changes in the Base Rate
Index shall become effective as of the date of the change. The Base
Rate Index is not necessarily the lowest rate charged by Lender on its
loans, and Borrower understands that Lender may make loans based on
other rates as well. The Base Rate Index is currently 4.00%.

	 	1.2.1	 	If publication of the Wall Street Journal or quotation
of the Prime Rate therein is discontinued, then Holder
may, in its reasonable discretion, select another
source for ascertaining the Prime Rate. If Holder
determines, in its reasonable discretion, that the
rate of interest that otherwise would be the Base Rate
Index under this Note is no longer established, is
unverifiable or cannot be ascertained by adequate and
reasonable means, or is no longer calculated in
substantially the same manner or upon the same
economic basis, or that calculation of interest with
respect to such rate would violate or is made
impractical due to any existing or future law, rule
regulation, directive or treaty, then Holder may
designate, in its reasonable discretion, a substitute
reference rate of interest as a new Base Rate Index
and(or) may change the differential between the Base
Rate and the Base Rate Index (a “Spread Adjustment”).
The new Base Rate Index so designated by Holder shall
be a floating rate of interest, and shall be
verifiable, ascertainable by adequate and reasonable
means, established in a manner not under Holder’s
direct control, and, to the extent reasonably
possible, calculated in substantially the same manner
and upon the same economic basis as the most recent
Base Rate Index, taking into account any Spread
Adjustment made.

1

 

	1.3	 	“Call and Put Option”: The Call and Put Option Agreement dated May 30,
2003 between Peony and Borrower.
	 
	1.3	 	“Business Day”: Any day, other than a Saturday or Sunday, on which
national banks in San Diego, California are not authorized or required
by governing law or regulation to be closed.
	 
	1.5	 	“Deed of Trust”: The Construction Deed of Trust, Security Agreement
and Fixture Filing executed by Peony Acquisitions LLC, a Delaware
limited liability company (“Peony”), in favor of Lender of even date
herewith; it being acknowledged, that certain other instruments and
documents, including deeds of trust, have been executed and delivered
pursuant to the Loan Agreement and secure this Note.
	 
	1.6	 	“Leasehold Deed of Trust”: The Leasehold Deed of Trust, Security
Agreement and Fixture Filing executed by Neurocrine International LLC,
a Delaware limited liability company (“NI”), in favor of Lender of
even date herewith; it being acknowledged that certain other
instruments and documents, including deeds of trust, have been
executed and delivered pursuant to the Loan Agreement and secure this
Note.
	 
	1.7	 	“LIBOR Period”: A period of one (1) month which commences on the
twenty-sixth (26th) day of the applicable calendar month, commencing
no earlier than October 26, 2003, subject to prior notice and ending
on the twenty-fifth (25th) day of the following calendar month.
Borrower reserves the right to apply to Lender for a different date
upon which to have the LIBOR period commence; Lender may act or not
act upon such application in its sole discretion.

	 	1.7.1	 	If Lender changes the applicable commencement date of
the LIBOR Period, as set forth above, in its sole
discretion, and such change would cause the last day
of such LIBOR period to occur in the next following
calendar month, the last day of such LIBOR period
shall occur on the next preceding Business Day in the
preceding calendar month.
	 
	 	1.7.2	 	Notwithstanding the foregoing, in no event shall any
LIBOR period be extended beyond the Maturity Date.

	1.8	 	“LIBOR Rate”: The annual rate of three hundred fifty (350) basis
points per annum in excess of the LIBOR Rate Index; provided, however,
in no event shall the LIBOR Rate fall below 5.00% during the term of
this Loan.

2

 

	1.9	 	“LIBOR Rate Index”: For any LIBOR Period, the “London Interbank Offered Rate
(LIBOR)” for a term equal in length to the term of the designated LIBOR Period as
quoted under the “Money Rates” column of the Wall Street Journal on the first day of
the LIBOR Period (or if the Wall Street Journal is not published on that day or the
London Interbank Offered Rate (LIBOR) for such LIBOR Period is not quoted therein on
that day, then as quoted on the next preceding Business Day on which the Wall Street
Journal is published and the London Interbank Offered Rate (LIBOR) for such LIBOR
Period is quoted therein), rounded to three decimal places, all as determined by
Holder. The published LIBOR rates include a specified effective date, but the
effective date shall be disregarded for purposes of this Note, and LIBOR Periods
shall commence and terminate only as provided in this Note. If the Wall Street
Journal is no longer published or the “London Interbank Offered Rate (LIBOR)” shall
no longer be quoted therein, another publication, report or source selected by
Holder in its reasonable discretion containing such information shall be used.
	 
	1.10	 	“Loan”: The loan evidenced by this Note, to be made pursuant to the Loan Agreement.
	 
	1.11	 	“Loan Agreement”: The Loan Agreement between Lender and Borrower of even date
herewith, as the same may be amended, modified or supplemented from time to time.
	 
	1.12	 	“Maturity Date”: September 25, 2005, subject to extension as provided in Section 2.4.
	 
	1.13	 	“Note”: This Promissory Note.
	 
	1.14	 	“Property”: As defined in Section 3.1 below.
	 
	1.15	 	“Subleasehold Deed of Trust”: Subleasehold Deed of Trust, Security Agreement and
Fixture Filing executed by Peony in favor of Lender of even date herewith; it being
acknowledged that certain other instruments and documents, including deeds of trust,
have been executed and delivered pursuant to the Loan Agreement and secure this
Note.

ARTICLE 2 — INTEREST AND PAYMENTS

	2.1	 	Rate of Interest. The principal balance outstanding from time to time
shall bear interest from and after the date of each advance (subject
to Section 3.7 below), determined as follows:

	 	2.1.1	 	Base Rate. During any period in which the LIBOR Rate
is not applicable to amounts owing, as provided in
Section 2.1.2 below, the principal balance outstanding
from time to time shall bear interest at the Base
Rate.

3

 

	 	2.1.2	 	LIBOR Rate.

	 	(a)	 	Election of LIBOR Rate. Provided that there has not occurred an “Event of Default” as defined herein,
Borrower may at any time and from time to time irrevocably elect, by written notice received by not
later than 11:00 a.m. on the second (2nd) Business Day prior to the date on which the LIBOR period would
commence pursuant to such election, and not earlier than the fourth (4th) Business Day prior to the date
on which the LIBOR period would commence pursuant to such election, application of the LIBOR Rate for
the LIBOR period, subject to the following:

	 	(1)	 	The first advance under the Loan shall bear interest initially at the Base Rate. No such
election may be made if the applicable LIBOR period would end after the Maturity Date. No
election may be made if, as a result, there would be more than one (1) LIBOR period in
effect at any one time.
	 
	 	(2)	 	Each such election shall irrevocably specify in writing:

	 	(A)	 	that Borrower elects application of the LIBOR rate; and
	 
	 	(B)	 	the date on which the applicable LIBOR period shall
commence, which shall be a Business Day.

	 	(3)	 	Such election shall apply to all amounts then outstanding and any additional amounts
advanced prior to or during the LIBOR period.
	 
	 	(4)	 	The LIBOR Rate shall apply only to the extent that Borrower has made proper elections
thereof as provided in this Section 2.1.2(a), and only for the LIBOR periods commenced by
each such election, and except to that extent the Base Rate shall automatically apply as
provided in Section 2.1.1 above.

	 	(b)	 	Application of LIBOR Rate. Upon the making of a valid election as provided in Section 2.1.2(a) above,
this Note shall bear interest at the LIBOR Rate for the applicable LIBOR period.
	 
	 	(c)	 	Suspension of Interest Rate. Holder may suspend the availability of the LIBOR Rate and the entire
principal balance outstanding from time to time shall immediately upon such suspension bear interest at
the Base Rate, if Holder determines, in its reasonable discretion, that the rate of interest that
otherwise would be the LIBOR Rate Index under this Note is no longer established, is unverifiable or
cannot be ascertained by adequate and reasonable means, or is no longer calculated in substantially the
same manner or upon the same economic basis, or that calculation of interest with respect to such rate
would violate or is made impractical due to any existing or future law, rule, regulation, directive or
treaty.

4

 

	2.2	 	Interest. Interest shall be calculated on the basis of a 360-day year
multiplied by the actual number of days that principal is outstanding.
	 
	2.3	 	Installment Payments.

	 	2.3.1	 	Interest Only. Commencing on the twenty-fifth (25th)
calendar day of each month commencing October 25,
2003 (“Start Date”), and continuing thereafter on the
same day of each calendar month until the Maturity
Date, all accrued interest for the previous calendar
month, or portion thereof, shall be due and payable
in monthly interest-only installments.
	 
	 	2.3.2	 	Interest and Principal. On the Maturity Date, the
entire unpaid principal balance and all accrued
interest shall be due and payable, subject to Section
2.4 below.

	2.4	 	Extension of Maturity Date. The Maturity Date may be extended (and
such later date shall then be the “Maturity Date” for purposes of this
Note) upon and subject to the provisions and conditions set forth in
Section 3.7 of the Loan Agreement (which terms and conditions are
incorporated herein by reference). From and after the extension of the
Maturity Date of this Note in accordance with Section 3.7 of the Loan
Agreement (if so extended), interest shall be payable upon the same
provisions and conditions set forth in Section 2.3.1 above, and the
entire principal balance hereof and all accrued interest shall be due
and payable on the Maturity Date, as so extended upon the same
provisions and conditions set forth in Section 2.3.2 above.

ARTICLE 3 — ADDITIONAL TERMS AND CONDITIONS

	3.1	 	Loan Agreement; Security. This Note is secured, without limitation, by
the Deed of Trust, which encumbers certain real property described in
such Deed of Trust and improvements located or to be located thereon,
and certain personal property (collectively, the “Property”). This
Note is secured, without limitation, by the Leasehold Deed of Trust,
which encumbers NI’s interests in certain real property described in
such Deed of Trust and improvements located or to be located thereon,
and in certain personal property (collectively, the “Leasehold
Property”). This Note is also secured, without limitation, by the
Subleasehold Deed of Trust, which encumbers Peony’s subleasehold
interests in certain real property described in such Subleasehold Deed
of Trust and improvements located or to be located thereon, and in
certain personal property (collectively, the “Subleasehold Property”).
Advances of the principal balance of this Note shall be made upon and
subject to the provisions and conditions of the Loan Agreement. It is
acknowledged that the Property is not the only security for the
performance of this Note, and is intended solely for purposes hereof,
to refer to only that real and personal property encumbered by the
Deed of Trust.
	 
	3.2	 	Application of Payments. All payments received shall be applied first
to charges other than interest and principal, if any, owing hereunder,
then to accrued interest, then to principal, except that, after the
occurrence and during the continuation of any default under this Note,
all amounts received shall be applied in such order as Holder, in its
sole discretion, may elect.

5

 

	3.3	 	No Waiver. The acceptance by Holder of any payment under this Note after the date that
such payment is due shall not constitute a waiver of the right to require prompt
payment when due of future or succeeding payments or to declare a default as herein
provided for any failure to so pay. The acceptance by Holder of the payment of a
portion of any installment at any time that such installment is due and payable in its
entirety shall neither cure nor excuse the default caused by the failure to pay the
whole of such installment and shall not constitute a waiver of Holder’s right to
require full payment when due of all future or succeeding installments.
	 
	3.4	 	Prepayments. Borrower shall have the right to prepay all or any part of the principal
balance of this Note at any time without charge.
	 
	3.5	 	Late Payment Charge. Borrower acknowledges that late payment to Holder of any sums due
hereunder will cause Holder to incur costs not contemplated hereunder, the exact
amount of which will be impracticable or extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges. Accordingly, if
any installment, payment or any other sum due from Borrower shall not be received by
Holder or Holder’s designee within ten (10) calendar days after it is due, Borrower
shall then pay to Holder a late payment charge equal to six percent (6%) of such
overdue amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Holder will incur by reason of late payment. This
provision shall not, however, be construed as extending the time for payment of any
amount hereunder, and acceptance of such late charge by Holder shall in no event
constitute a waiver of Borrower’s default with respect to such overdue amount nor
prevent Holder from exercising any of the other rights and remedies with respect to
such default.
	 
	3.6	 	Default. The following shall constitute defaults under this Note:

	 	3.6.1	 	Borrower’s failure to pay when due any sum
payable under this Note within ten (10) days
after the due date thereof;
	 
	 	3.6.2	 	Borrower’s failure to perform any of its
non-monetary obligations under any covenant or
agreement set forth in this Note, if such
failure is not cured within thirty (30) days
after written notice from Holder (or such
longer period as is reasonably determined by
Holder to be necessary for completion of the
cure, so long as Borrower begins promptly and
thereafter diligently continues to cure the
failure).
	 
	 	3.6.3	 	any “Event of Default” under the Loan Agreement.

6

 

	3.7	 	Acceleration Rights; Interest After Acceleration or Maturity. Upon the
occurrence of a default hereunder, Holder may, at its election,
declare the entire balance of principal and interest thereon
immediately due and payable, together with all costs of collection,
including reasonable attorneys’ fees and all expenses incurred in
connection with protection of, or realization on, the Property. At
such time as this Note becomes due in full, whether by acceleration
(upon default or otherwise), by the occurrence of the Maturity Date or
otherwise, if Borrower fails to pay all amounts due, the unpaid
principal balance, accrued interest and costs incurred shall
thereafter bear interest until paid at a rate equal to eighteen
percent (18%) per annum.
	 
	3.8	 	Default in Payment of Interest. Interest not paid when due shall then
be added to the principal (which shall not cure the default in
payment), and shall thereafter bear like interest.
	 
	3.9	 	Acceleration on Sale or Transfer of Property.

	 	3.9.1	 	Borrower understands that in making the
loan evidenced by the Note, Holder is
relying to a material extent upon the
business expertise and net worth of
Borrower and Neurocrine (defined below)
and upon the continuing interest which
Borrower has in the Property.
Accordingly, except as expressly provided
herein to the contrary, in the event that
Peony, or after Peony conveys the
Property to Borrower, Borrower, without
the prior written consent of Holder,
directly or indirectly, voluntarily or
involuntarily, sells, assigns, transfers,
disposes of or agrees to sell, assign,
transfer or dispose of all or any portion
of or any interest in the Property
whether by outright sale, deed,
installment sale contract, land contract,
contract for deed, ground lease or any
other leases that is not that certain
lease by and between Neurocrine
Biosciences, Inc. (“Neurocrine”), as
tenant, and Borrower, as landlord, and
that is not permitted by the Loan
Agreement, lease-option contract, or by
sale, assignment, or transfer of any
beneficial interest in or to any land
trust holding title to the Property, or
by any other method of conveyance of an
interest in the Property, or in the event
that any member of Borrower sells,
assigns, transfers or disposes of any
such member’s interest in Borrower
(except as permitted in the Loan
Agreement), then the same shall be deemed
to increase the risk of Holder, and
Holder may then, or at any time
thereafter, declare all principal,
accrued and unpaid interest and all other
charges and fees under the Note
immediately due and payable, and may
exercise all rights and remedies provided
in the Loan Documents. Pursuant to that
certain Call and Put Option Agreement,
dated May 30, 2003, Borrower has an
option to acquire the Property from Peony
Acquisitions LLC, a Delaware limited
liability company (“Peony”). Borrower
shall be obligated by Holder to acquire
the Property from Peony on or before
November 26, 2003, and any failure to
satisfy such obligation shall be an
immediate default under the Loan
Documents, including, without limitation,
the Deed of Trust. Upon the acquisition
of the Property, the Deed of Trust shall
be assigned and assumed by Borrower from
Peony in accordance with the specific
provisions set forth in the Loan
Agreement, which are hereby incorporated
herein by this reference. Holder
acknowledges and agrees that neither
Borrower’s exercise of its option under
the Call and Put Option Agreement nor
Borrower’s acquisition of the Property
from Peony nor Peony’s conveyance of the
Property to Borrower shall be deemed to
be a sale or transfer under this Section
3.9 or Section 5.1 of the Deed of Trust.

7

 

	 	3.9.2	 	For purposes of this Section, Peony and Borrower shall not sell or
transfer any ownership interest in Peony or Borrower during the term
of the Loan evidenced by the Loan Documents (except as permitted in
the Loan Agreement), and (i) the terms “sell” and “transfer” shall
include, in addition to the common and ordinary meaning of those
terms and without limiting their generality, transfers made to
subsidiary or affiliated entities, transfers made to a reconstituted
limited liability company, transfers by any limited liability
company (at any tier) to the individual members or vice versa,
transfers by any corporation (at any tier) to its shareholders or
vice versa, any corporate merger or consolidation; and (ii) the term
“transferee” shall mean a purchaser, assignee, grantee or subsequent
owner of all or any part of the Property or of any interest in Peony
or Borrower. Holder’s rights pursuant to Section 3.9.1 above may be
exercised at any time after the occurrence of any such event, and
the acceptance of one or more payments under the Loan Documents from
any person or entity thereafter shall not constitute a waiver of
Holder’s rights. Holder’s approval of any sale, assignment,
transfer, pledge or disposition or failure to exercise said rights
with respect thereto shall not be construed as a waiver of the
provisions hereof with regard to any subsequent transaction.
	 
	 	3.9.3	 	Holder may condition its consent to a sale or transfer for which
consent is reserved hereunder upon the fulfillment of certain
requirements, including, but not limited to, the following
(collectively, “Conditions of Transfer”): (i) that the proposed
transferee meet Holder’s then-existing credit and other standards
with respect to similar loans; (ii) that the transferee specifically
assume personal liability for the outstanding balance of the secured
indebtedness and the obligations to be performed under the Deed of
Trust; (iii) that an assumption fee be paid to Holder at the time of
the transfer; (iv) that the interest rate payable under the Note be
increased; (v) that a new policy title insurance in favor of Holder
be issued; (vi) that new financing statements be filed; (vii) that
the proposed transferee agree to restrictions on further transfers;
(viii) that endorsements to existing insurance policies or new
insurance policies be obtained; (ix) that Neurocrine reaffirms all
of its existing guaranties and indemnities given in connection with
the Loan evidenced by the Loan Documents; (x) that the proceeds of
the sale or transfer are applied in conformity with Holder’s
instructions, given in Holder’s sole and absolute discretion; (xi)
that all construction of the Improvements (as defined in the Loan
Agreement) on the Property have been completed; (xii) that the lease
by and between Neurocrine, as tenant, and Borrower, as landlord, has
been executed and is in full force and effect; and (xiii) that all
fees of Holder’s legal counsel have been paid. Holder shall in no
event be obligated to consent to any transfer of less than the
entire Property, or to any transfer in any form, including, but not
limited to, a sale and leaseback, which has the effect of creating
additional expenses to or charges against the Property.

8

 

	3.10	 	Acceleration on Insolvency of Peony. In the event (i) Peony fails to pay its
debts generally as they come due or files any petition or action for relief under
any bankruptcy, reorganization, insolvency or moratorium law, or any other law or
laws for the relief of, or relating to, debtors; (ii) an involuntary petition is
filed against Peony under any bankruptcy or similar statute and such petition is
not set aside or withdrawn or is still in effect within thirty (30) days from the
date of such filing (or such longer period as is reasonably necessary, provided
Peony promptly commences, and diligently and continuously pursues thereafter, its
efforts to have the petition set aside or withdrawn); (iii) a custodian, receiver
or trustee (or other similar official) is appointed to take possession, custody
or control of any of the properties of Peony; (iv) the Property becomes subject
to the jurisdiction of a Federal Bankruptcy Court or successor to that court, or
any similar state court; (v) Peony makes a general assignment for the benefit of
Peony’s creditors; or (vi) any portion of Peony’s assets is attached, executed
upon or judicially seized in any manner, and such seizure is not discharged
within thirty (30) days, Holder at its option and to the extent permitted by
applicable law may, without prior notice, declare all sums secured by the Deed of
Trust, irrespective of their stated due date(s), immediately due and payable and
may exercise all rights and remedies provided in the Deed of Trust.
	 
	3.11	 	Acceleration on Sale or Transfer of Property — Neurocrine International LLC.

	 	3.11.1	 	Borrower understands that in making
the loan evidenced by the Note,
Holder is relying to a material
extent upon the business expertise
and net worth of Borrower and
Neurocrine and upon the continuing
interest which NI has in the
Leasehold Property. Accordingly,
except as expressly provided herein
to the contrary and except for that
certain Ground Lease, dated as of May
30, 2003, executed by and between NI
as landlord thereunder, and Peony, as
tenant thereunder (the “Sublease”),
and without any other exception, in
the event that NI, without the prior
written consent of Holder, directly
or indirectly, voluntarily or
involuntarily, assigns, or sublets or
agrees to assign or sublet all or any
portion of or any interest in the
Leasehold Property whether by ground
lease or any other leases that is not
a lease-option contract, or by
assignment or sublease of any
beneficial interest in or to any land
trust holding a leasehold interest in
and to the Leasehold Property, or by
any other method of conveyance of an
interest in the Leasehold Property,
or in the event that any member of NI
sells, assigns, transfers or disposes
of any such member’s interest in NI
(except as permitted in the Loan
Agreement), then the same shall be
deemed to increase the risk of
Holder, and Holder may then, or at
any time thereafter, declare all
principal, accrued and unpaid
interest and all other charges and
fees under the Note immediately due
and payable, and may exercise all
rights and remedies provided in the
Loan Documents. Pursuant to that
certain Call and Put Option
Agreement, dated May 30, 2003,
Borrower has an option to acquire the
Property from Peony. Borrower shall
be obligated to acquire the Property
from Peony on or before November 26,
2003 and any failure to satisfy such
obligation shall be an immediate
default under the Loan Documents,
including, without limitation, the
Leasehold Deed of Trust. Upon the
acquisition of the Property, the
Leasehold Deed of Trust shall
continue in full force and effect in
accordance with the specific
provisions set forth in the Loan
Agreement, which are hereby
incorporated herein by this
reference. Holder acknowledges and
agrees that Borrower’s exercise of
its option under the Call and Put
Option Agreement shall not be deemed
to be a sale or transfer under
Section 5.1 of the Leasehold Deed of
Trust.

9

 

	 	3.11.2	 	For purposes of this Section, NI and Borrower shall
not sell or transfer any ownership interest in NI or
Borrower during the term of the Loan evidenced by the
Loan Documents (except as permitted in the Loan
Agreement), and (i) the terms “sell” and “transfer”
shall include, in addition to the common and ordinary
meaning of those terms and without limiting their
generality, transfers made to subsidiary or
affiliated entities, transfers made to a
reconstituted limited liability company, transfers by
any limited liability company (at any tier) to the
individual members or vice versa, transfers by any
corporation (at any tier) to its shareholders or vice
versa, any corporate merger or consolidation; and
(ii) the term “transferee” shall mean a purchaser,
assignee, grantee or subsequent owner of all or any
part of the Leasehold Property or of any interest in
NI. Holder’s rights pursuant to Section 3.11.1 above
may be exercised at any time after the occurrence of
any such event, and the acceptance of one or more
payments under the Loan Documents from any person or
entity thereafter shall not constitute a waiver of
Holder’s rights. Holder’s approval of any sale,
assignment, transfer, pledge or disposition or
failure to exercise said rights with respect thereto
shall not be construed as a waiver of the provisions
hereof with regard to any subsequent transaction.
	 
	 	3.11.3	 	Holder may condition its consent to a sale or
transfer for which consent is required hereunder upon
the fulfillment of certain requirements in Holder’s
sole and absolute discretion.

	3.12	 	Acceleration on Insolvency of NI. In the event (i) NI fails to pay
its debts generally as they come due or files any petition or action
for relief under any bankruptcy, reorganization, insolvency or
moratorium law, or any other law or laws for the relief of, or
relating to, debtors; (ii) an involuntary petition is filed against
NI under any bankruptcy or similar statute and such petition is not
set aside or withdrawn or is still in effect within thirty (30) days
from the date of such filing (or such longer period as is reasonably
necessary, provided NI promptly commences, and diligently and
continuously pursues thereafter, its efforts to have the petition set
aside or withdrawn); (iii) a custodian, receiver or trustee (or other
similar official) is appointed to take possession, custody or control
of any of the properties of NI; or (iv) the Leasehold Property
becomes subject to the jurisdiction of a Federal Bankruptcy Court or
successor to that court, or any similar state court; (v) NI makes a
general assignment for the benefit of NI’s creditors; or (vi) any
portion of NI’s assets is attached, executed upon or judicially
seized in any manner, and such seizure is not discharged within
thirty (30) days, Holder at its option and to the extent permitted by
applicable law may, without prior notice, declare all sums secured by
the Leasehold Deed of Trust, irrespective of their stated due
date(s), immediately due and payable and may exercise all rights and
remedies provided in the Leasehold Deed of Trust.

10

 

	3.13	 	Acceleration on Sale or Transfer of Property — Peony Ground Lease.

	 	3.13.1	 	Borrower understands that in
making the loan evidenced by the
Note, Holder is relying to a
material extent upon the
business expertise and net worth
of Borrower and Neurocrine and
upon the continuing interest
which Peony has in the
Subleasehold Property.
Accordingly, except as expressly
provided herein or in the Loan
Agreement to the contrary, in
the event that Peony, without
the prior written consent of
Holder, directly or indirectly,
voluntarily or involuntarily,
assigns or sublets or agrees to
assign or sublet all or any
portion of or any interest in
the Subleasehold Property
whether by ground lease or any
other leases that is not that
certain lease by and between
Neurocrine, as tenant, and
Borrower, as landlord, and that
is not permitted by the Loan
Agreement, a lease-option
contract, or by assignment or
sublease of any beneficial
interest in or to any land trust
holding a sublease interest in
and to the Subleasehold
Property, or by any other method
of conveyance of an interest in
the Subleasehold Property, or in
the event that any member of
Peony sells, assigns, transfers
or disposes of any such member’s
interest in Trustor after the
Subleasehold Deed of Trust is
assumed by Borrower and Borrower
becomes the trustor hereunder
(except as permitted in the Loan
Agreement), then the same shall
be deemed to increase the risk
of Holder, and Holder may then,
or at any time thereafter,
declare all principal, accrued
and unpaid interest and all
other charges and fees under the
Note immediately due and
payable, and may exercise all
rights and remedies provided in
the Loan Documents. Pursuant to
that certain Call and Put Option
Agreement, dated May 30, 2003,
Borrower has an option to
acquire the Property from Peony.
Borrower shall acquire the
Subleasehold Property from
Peony. Upon the acquisition of
the Subleasehold Property, the
Subleasehold Deed of Trust
continue in full force and
effect in accordance with the
specific provisions set forth in
the Loan Agreement, which are
hereby incorporated herein by
this reference. Holder
acknowledges and agrees that
Borrower’s exercise of its
option under the Call and Put
Option Agreement, the exercise
or the deemed exercise of
Peony’s put option to transfer
the Subleasehold Property under
the Call and Put Option
Agreement, the exercise or the
deemed exercise of Peony’s put
option to transfer the
Subleasehold Property under the
Call and Put Option Agreement or
Borrower’s acquisition of the
Subleasehold Property, and
Peony’s conveyance of the
Subleasehold Property to Holder
shall not be deemed to be a sale
or transfer under this Section
3.13 or Section 5.1(a) of the
Subleasehold Deed of Trust. From
and after Peony conveys its
interests in the Subleasehold
Property to Borrower and
Borrower assumes the obligations
of Peony under the Subleasehold
Deed of Trust, whether pursuant
to the terms of the Call and Put
Option Agreement or otherwise,
whether pursuant to the terms of
the Call and Put Option
Agreement or otherwise, the term
Peony as used in Sections 3.13
and 3.14 shall mean and refer to
Borrower, and Peony shall be
automatically deemed released
from any and all of all
obligations under the
Subleasehold Deed of Trust.

11

 

	 	3.13.2	 	For purposes of this Section, Peony and Borrower
shall not sell or transfer any ownership interest in
Peony or Borrower during the term of the Loan
evidenced by the Loan Documents (except as permitted
in the Loan Agreement or the Call and Put Option
Agreement), and (i) the terms “sell” and “transfer”
shall include, in addition to the common and ordinary
meaning of those terms and without limiting their
generality, transfers made to subsidiary or
affiliated entities, transfers made to a
reconstituted limited liability company, transfers by
any limited liability company (at any tier) to the
individual members or vice versa, transfers by any
corporation (at any tier) to its shareholders or vice
versa, any corporate merger or consolidation; and
(ii) the term “transferee” shall mean purchaser,
assignee, grantee or subsequent owner of all or any
part of the Subleasehold Property or of any interest
in Peony. Holder’s rights pursuant to Section 3.13.1
above may be exercised at any time after the
occurrence of any such event, and the acceptance of
one or more payments under the Loan Documents from
any person or entity thereafter shall not constitute
a waiver of Holder’s rights. Holder’s approval of any
sale, assignment, transfer, pledge or disposition or
failure to exercise said rights with respect thereto
shall not be construed as a waiver of the provisions
hereof with regard to any subsequent transaction.
	 
	 	3.13.3	 	Holder may condition its consent to a sale or
transfer for which consent is required hereunder upon
the fulfillment of certain requirements in Holder’s
sole and absolute discretion.

	3.14	 	Acceleration on Insolvency of Peony. In the event (i) Peony fails to
pay its debts generally as they come due or files any petition or
action for relief under any bankruptcy, reorganization, insolvency or
moratorium law, or any other law or laws for the relief of, or
relating to, debtors; (ii) an involuntary petition is filed against
Peony under any bankruptcy or similar statute and such petition is
not set aside or withdrawn or is still in effect within thirty (30)
days from the date of such filing (or such longer period as is
reasonably necessary, provided Peony promptly commences, and
diligently and continuously pursues thereafter, its efforts to have
the petition set aside or withdrawn); (iii) a custodian, receiver or
trustee (or other similar official) is appointed to take possession,
custody or control of any of the properties of Peony; (iv) the
Subleasehold Property becomes subject to the jurisdiction of a
Federal Bankruptcy Court or successor to that court, or any similar
state court; (v) Peony makes a general assignment for the benefit of
Peony’s creditors; or (vi) any portion of Peony’s assets is attached,
executed upon or judicially seized in any manner, and such seizure is
not discharged within thirty (30) days, Holder at its option and to
the extent permitted by applicable law may, without prior notice,
declare all sums secured by the Subleasehold Deed of Trust,
irrespective of their stated due date(s), immediately due and payable
and may exercise all rights and remedies provided in the Subleasehold
Deed of Trust.
	 
	3.15	 	Attorneys’ Fees and Costs. In the event Holder takes any action to
enforce this Note or any of its terms, either through legal
proceedings or otherwise, Holder shall be reimbursed immediately by
Borrower for attorneys’ fees (including fees for Holder’s in-house
attorneys) and all other costs and expenses so incurred. Borrower
shall also immediately reimburse Holder for all attorneys’ fees and
costs incurred in connection with the representation of Holder in any
bankruptcy, insolvency, reorganization or other debtor relief or
similar proceeding of or relating to Borrower, any guarantor, or the
Property.

12

 

	3.16	 	Waivers. The makers, endorsers, guarantors and sureties of this Note hereby waive diligence,
demand, presentment, notice of non-payment or dishonor, protest and notice of protest, and
expressly agree that the time for performance of any obligation under this Note may be extended
from time to time, consent to the release of any party liable hereon or herefor, consent to the
acceptance or release of security for this Note, including other types of security, all without
in any way affecting their liability, and waive the right to plead any and all statutes of
limitations as a defense to any demand on this Note, or any guaranty thereof, or to any
agreement to pay the same, to the full extent permissible by law.
	 
	3.17	 	Governing Law. This Note shall be governed by and construed under the internal laws of the
State of California, except to the extent that federal law applies.
	 
	3.18	 	Severability. Every provision hereof is intended to be several. If any provision of this Note is
determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, such
illegality, invalidity or unenforceability shall not affect the other provisions hereof, which
shall remain binding and enforceable.
	 
	3.19	 	Limitation Upon Interest. All agreements between the Borrower and Holder, now existing or
hereafter arising, are hereby expressly limited so that in no event whatsoever shall the amount
paid, or agreed to be paid, to Holder hereof for the use, forbearance or detention of money to
be loaned hereunder or otherwise, or for the performance or payment of any covenant or
obligation contained herein, exceed the maximum amount permissible under applicable law. If
from any circumstance whatsoever fulfillment of any provision hereof exceeds the limit of
validity prescribed by law, then, ipso facto, the obligation to be fulfilled shall be reduced
to the limit of such validity, and if from any such circumstance Holder hereof shall ever
receive as interest under this Note or otherwise an amount that would exceed the highest lawful
rate, such amount that would be excessive interest shall be applied to the reduction of the
principal amount owing hereunder (without charge for prepayment) and not to the payment of
interest, or if such excessive interest exceeds the unpaid balance of principal, such excess
shall be refunded to Borrower.
	 
	3.20	 	Headings. Headings herein are used for convenience of reference only and do not define or limit
the scope of provisions of this Note.
	 
	3.21	 	Joint and Several Liability. The liability of multiple makers of this Note is joint and several.

13

 

	3.22	 	WAIVER OF RIGHT OF TRIAL BY JURY. EACH OF BORROWER AND HOLDER (BY
ITS ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY,
INTENTIONALLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO
HAVE A JURY PARTICIPATE (INCLUDING BY WAY OF JURY TRIAL) IN
RESOLVING ANY DISPUTE OR LITIGATION (WHETHER BASED UPON CONTRACT,
TORT OR OTHERWISE) BETWEEN OR AMONG BORROWER AND HOLDER ARISING
OUT OF OR IN ANY WAY RELATED TO THIS NOTE, THE LOAN (AS DEFINED IN
THE LOAN AGREEMENT), THE LOAN DOCUMENTS (AS DEFINED IN THE LOAN
AGREEMENT) OR ACTIONS OF BORROWER OR HOLDER RELATING TO THE LOAN
AND/OR THE LENDING RELATIONSHIP WHICH IS THE SUBJECT OF THIS
AGREEMENT. THIS PROVISION AND THE WAIVER SET FORTH HEREIN ARE
MATERIAL INDUCEMENTS TO LENDER TO PROVIDE THE FINANCING DESCRIBED
HEREIN AND IN THE LOAN DOCUMENTS.

	 	 	 	 	 	 	 
	 	 	BORROWER:
	 	 	 	 	 	 	 
	 	 	SCIENCE PARK CENTER LLC,
	 	 	a California limited liability company
	 	 	 	 	 	 	 
	 	 	By:	 	Neurocrine Biosciences, Inc.,
	 	 	 	 	a Delaware corporation
	 	 	Its:	 	Manager
	 	 	 	 	 	 	 
	 	 	 	 	By:	 	/s/ Paul W.
Hawran
	 	 	 	 	 	 	

	 	 	 	 	Name:	 	Paul W. Hawran
	 	 	 	 	 	 	

	 	 	 	 	Its:	 	Executive Vice President
& CFO
	 	 	 	 	 	 	

	 	 	 	 	 	 	 
	 	 	 	 	By:	 	 
	 	 	 	 	 	 	

	 	 	 	 	Name:	 	 
	 	 	 	 	 	 	

	 	 	 	 	Its:	 	 
	 	 	 	 	 	 	

14

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