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Item 1.01.
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Entry into a Material Definitive Agreement.
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On December 7, 2016, Intercept Pharmaceuticals, Inc. (the “Company”)
entered into lease agreements relating to the Company’s new global corporate headquarters in the Hudson Yards development
site in New York, New York. As described in more detail below, the leases will provide the Company with shorter term office space
in 10 Hudson Yards (the “10 Building”) and longer term office space in 55 Hudson Yards (the “55 Building”).
The 10 Lease
The lease for the 10 Building between the Company, as tenant,
and Legacy Yards Tenant LP, as landlord, will initially provide the Company with approximately 49,000 square feet of space consisting
of the entire 37
th
floor and a portion of the 40
th
floor of the 10 Building (the “10 Lease”).
The expiration date of the 10 Lease as it relates to the 37
th
floor premises is June 30, 2021. The expiration date of 10 Lease as it relates to the 40
th
floor premises (the “40
th
Floor Expiration Date”) shall be the earlier to occur of (a) the date that is 285 days after the possession date under the
55 Lease (as defined below), which may be extended pursuant to the terms of the 55 Lease; (b) the date that the Company legally
occupies the premises in the 55 Building (as defined below); and (c) June 30, 2021. The 10 Lease contains customary default provisions,
including, without limitation, those relating to payment defaults, performance defaults, events of bankruptcy and customary indemnification
provisions.
The 10 Lease provides for annual fixed rental payments of approximately
(i) $5.2 million per year for the period commencing in April 2017 and ending on the day immediately preceding the 40
th
Floor Expiration Date and (ii) $3.5 million per year commencing on the 40
th
Floor Expiration Date and ending on June
30, 2021. In addition to its fixed rent obligations, the Company is obligated to pay its percentage share for customary escalations
for operating expenses attributable to the 10 Building and the Hudson Yards development, taxes and tax-related payments. As security
for the 10 Lease, the Company will provide the landlord with a letter of credit in the amount of approximately $3.5 million.
The Company expects that its premises in the 10 Building will
serve as the temporary location of its new headquarters until its premises in the 55 Building are ready for occupancy.
The 55 Lease
The lease for the 55 Building between the Company, as tenant,
and Hudson Yards Owner LLC, as landlord, will provide the Company with approximately 85,000 square feet of space consisting of
the 23
rd
through 25
th
floors of the 55 Building (the “55 Lease”).
The 55 Lease will expire on the last day of the calendar month
in which the 15
th
anniversary of the day preceding the Rent Commencement Date (as defined below) falls. Under the 55
Lease, the Company has an option to renew the term of the 55 Lease either for (i) two additional terms of five years each or (ii)
one additional ten-year term. In addition, the 55 Lease contains customary default provisions, including, without limitation, those
relating to payment defaults under the 55 Lease, performance defaults under the 55 Lease, events of bankruptcy and customary indemnification
provisions.
The 55 Lease provides for annual fixed rental payments of approximately
(i) $7.9 million per year for the period commencing on the date that is 12 months after the Company takes possession of its premises
in the 55 Building (the “Rent Commencement Date”) and ending on the day immediately preceding the 5
th
anniversary
of the Rent Commencement Date; (ii) $8.7 million per year for the period commencing on 5
th
anniversary of the Rent Commencement
Date and ending on the day immediately preceding the 10
th
anniversary of the Rent Commencement Date; and (iii) $9.6
million per year for the period commencing on 10
th
anniversary of the Rent Commencement Date and ending upon the expiration
date of the 55 Lease.
In addition to its fixed rent obligations, the Company is obligated
to pay (x) certain incremental construction costs incurred by the landlord on behalf of the Company and (y) its percentage share
for customary escalations for operating expenses attributable to the 55 Building and the Hudson Yards development, taxes and tax-related
payments. As security for the 55 Lease, the Company will provide the landlord with a letter of credit in the amount of approximately
$8.7 million, which will be subject to periodic reduction under the terms of the 55 Lease.
The foregoing description does not constitute a complete summary
of the terms of the 10 Lease and the 55 Lease, and is qualified in its entirety by reference to the full text of the 10 Lease and
the 55 Lease, which will be filed as exhibits to the Company’s Annual Report on Form 10-K for the year ending December 31,
2016.