<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q/A
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 0-27269
BREAKAWAY SOLUTIONS, INC.
(Exact name of registrant as specified in charter)
Delaware 04-3285165
(State of Incorporation) (I.R.S. Employer Identification No.)
50 Rowes Wharf, Boston, Massachusetts 02110
(Address of principal executive offices)
Registrant's telephone number, including area code: (617) 960-3400
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes |_| No |X|
--------------
17,417,161 shares of the registrant's common stock, par value $0.000125,
were outstanding as of October 31, 1999.
<PAGE>
BREAKAWAY SOLUTIONS, INC.
FORM 10-Q/A
TABLE OF CONTENTS
SEPTEMBER 30, 1999
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets .................................... 3
Consolidated Statements of Operations........................... 4
Consolidated Statements of Cash Flows .......................... 5
Notes to Consolidated Financial Statements ..................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations .......................................... 8
Item 3. Quantitative and Qualitative Disclosure About Market Risk ...... 20
PART II - OTHER INFORMATION
Signature .............................................................. 22
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BREAKAWAY SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
(Unaudited)
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 16,954 $ 7,747,165
Accounts receivable, net of allowance for doubtful accounts of $131,000 and
$225,000 in 1998 and 1999, respectively 1,445,994 4,790,175
Unbilled revenues on contracts 625,609 3,741,704
Prepaid expenses 46,211 1,741,716
Deferred offering costs -- 2,768,717
Advances to employees 13,273 566,759
--------------------------
Total current assets 2,148,041 21,356,236
Property and equipment, net 553,566 4,465,033
Intangible assets -- 13,731,600
Other assets 40,877 274,641
--------------------------
Total assets $ 2,742,484 $39,827,510
==========================
Liabilities and Stockholders' Equity
Current liabilities:
Line of credit $ 425,743 --
Due to stockholders - current portion -- $ 625,000
Notes payable -- 110,885
Capital lease obligation-current portion 148,391 --
Accounts payable 814,074 3,531,310
Accrued compensation and related benefits 178,191 1,581,162
Accrued expenses -- 3,965,977
Deferred revenue on contracts 196,225 117,523
Deferred tax liability-current portion -- 188,750
--------------------------
Total current liabilities 1,762,624 10,120,607
Due to stockholders - long-term portion -- 1,587,527
Capital lease obligation-long-term portion 67,040 45,833
Deferred tax liability -- 566,250
--------------------------
Total long-term liabilities 67,040 2,199,610
--------------------------
Total liabilities 1,829,664 12,320,217
--------------------------
Commitments and contingencies
Stockholders' equity:
Series A preferred stock $.0001 par value, 5,853,000 shares authorized,
none issued and outstanding in 1998 and 5,853,000 shares issued and
outstanding in 1999 (liquidation preference of $8,291,945) -- 585
Series B preferred stock $.0001 par value, 3,078,065 shares authorized,
2,931,849 shares issued and outstanding in 1999 (liquidation
preference of $19,057,018) -- 293
Common stock $.000125 par value, 80,000,000 shares authorized, 7,680,000
shares issued in 1998 and 8,409,198 shares issued in 1999, 6,124,800
and 6,853,998 shares outstanding in 1998 and 1999, respectively 960 1,049
Additional paid-in capital -- 34,759,778
Less: deferred compensation -- (271,042)
Less: Treasury stock, at cost (32) (32)
Retained earnings (deficit) 911,892 (6,983,338)
--------------------------
Total stockholders' equity 912,820 27,507,293
--------------------------
Total liabilities and stockholders' equity $ 2,742,484 $39,827,510
==========================
</TABLE>
See accompanying notes to consolidated financial statements
3
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BREAKAWAY SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30
------------- ------------
1998 1999 1998 1999
<S> <C> <C> <C> <C>
Revenues $2,749,852 $ 7,180,772 $7,478,539 $14,743,582
Operating expenses:
Project personnel costs 1,480,838 3,420,920 4,076,441 7,038,220
Selling, general and administrative expenses 1,561,325 8,260,831 3,338,381 14,722,350
---------- ----------- ---------- -----------
Total operating expenses 3,042,163 11,681,751 7,414,822 21,760,570
---------- ----------- ---------- -----------
Income (loss) from operations (292,311) (4,500,979) 63,717 (7,016,988)
Other income (expense):
Other income 160,000 7,045 160,000 24
Interest income 3,514 128,926 58 188,436
Interest expense (4,777) (100,870) -- (154,810)
Total other income 158,737 35,101 160,058 33,650
Net income (loss) $ (133,574) $(4,465,878) $ 223,775 $(6,983,338)
---------- ----------- --------- -----------
---------- ----------- --------- -----------
Net income (loss) per share -basic and diluted $(0.02) $(0.65) $0.04 $(1.31)
Weighted average common shares outstanding 6,124,800 6,848,956 6,124,800 5,349,475
Pro forma information:
Income (loss) before taxes, as reported (133,574) 223,775
Pro forma income taxes (benefit) (45,415) 89,510
---------- ----------- ---------- -----------
Pro forma net income (loss) (88,159) 134,265
========== =========== ========== ===========
Pro forma net income (loss) per share - basic
and diluted (0.01) 0.02
Pro forma weighted average common shares
outstanding 6,124,800 6,124,800
</TABLE>
See accompanying notes to consolidated financial statements
4
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BREAKAWAY SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended
September 30,
-------------
1998 1999
---- ----
(Unaudited)
<S> <C> <C>
Net income (loss) $223,775 $(6,983,338)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation expense 230,700 675,113
Amortization expense -- 1,205,954
Compensation expense for issuance of common stock options -- 223,050
Changes in operating assets and liabilities, net of
impact of acquisition of businesses:
Accounts receivable (1,133,301) (2,412,228)
Unbilled revenues on contracts (103,446) (3,116,095)
Prepaid and other assets 448 (1,976,766)
Accounts payable 429,553 2,519,413
Accrued compensation and related benefits 89,897 1,287,418
Accrued expenses -- 3,221,666
Deferred revenue on contracts 47,391 (78,702)
--------------------------
Net cash used in operating activities (214,983) (5,434,515)
Cash flows from investing activities:
Cash paid for acquired businesses net of cash acquired -- (2,103,165)
Purchases of property and equipment (316,233) (3,939,268)
--------------------------
Net cash used in investing activities (316,233) (6,042,433)
--------------------------
Cash flows from financing activities:
Proceeds from issuance of preferred stock -- 23,288,514
Proceeds from exercise of stock options -- 507,250
Increase in deferred offering costs -- (2,768,717)
Proceeds from notes payable to stockholder -- 4,000,000
Notes payable to stockholder -- (37,530)
Repurchase and retirement of common stock -- (4,468,980)
Advances to employees (30,092) (553,486)
Payments on current portion of long-term debt (10,417) (141,629)
Distribution to stockholders (434,843) --
Proceeds from (repayments of) credit line 330,000 (425,743)
Increase in other assets (31,279) --
Repurchase of treasury stock (6) --
Payments of capital lease obligations 163,166 (192,520)
-------------------------
Net cash (used in) provided by financing activities (343,471) 19,207,159
-------------------------
Net (decrease) increase in cash and cash equivalents (874,687) 7,730,211
-------------------------
Cash and cash equivalents at beginning of period 879,136 16,954
-------------------------
Cash and cash equivalents at end of period $4,449 $7,747,165
-------------------------
Supplemental disclosure of cash flow information:
Cash paid for interest $11,114 $98,927
--------- ----------
--------- ----------
Conversion of notes payable and accrued interest to
stockholder for common stock -- $4,053,425
--------- ----------
--------- ----------
Supplemental disclosures of non-cash investing and financing activities:
Capital lease obligations $(166,834) $99,849
-------------------------
Issuance of common stock in connection with acquisition
of businesses -- $9,192,785
Acquisition of businesses:
Assets acquired 16,358,192
Liabilities assumed and issued (4,298,840)
Common stock and stock options issued (9,956,187)
=========================
Net cash paid for acquisition of businesses $(2,103,165)
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
BREAKAWAY SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared by Breakaway Solutions, Inc. (the "Company") pursuant to the rules
and regulations of the Securities and Exchange Commission regarding interim
financial reporting. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements and should be read in conjunction with the
consolidated financial statements and notes thereto for the year ended
December 31, 1998 included in the Company's Form S-1 filed with the
Securities and Exchange Commission (Registration No. 333-83343). The
accompanying consolidated financial statements reflect all adjustments
(consisting solely of normal, recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of results for the
interim periods presented. The results of operations for the three and nine
month periods ended September 30, 1998 and 1999 are not necessarily
indicative of the results to be expected for any future period or the full
fiscal year.
Net Income (Loss) Per Share
In 1997, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 128 ("SFAS 128"), EARNINGS PER SHARE. SFAS 128
requires the presentation of basic and diluted net income (loss) per share
for all periods presented. There are no common stock equivalents outstanding
in 1998. As the Company has been in a net loss position for the three and
nine months ended September 30, 1999 common stock equivalents of 1,395,307
for the three months ended September 30, 1999 and 991,401 for the nine months
ended September 30, 1999 were excluded from the diluted loss per share
calculation as they would be antidilutive. As a result, diluted loss per
share is the same as basic loss per share, and has not been presented
separately.
Stock Split
In July 1999 the Board of Directors approved an increase in the number
of authorized common shares from 20,000,000 to 80,000,000, and in September
1999 approved a four-for-five stock split which became effective on October
5, 1999. All share data shown in the accompanying consolidated financial
statements have been retroactively restated to reflect this stock split.
2. Acquisitions
Subsequent to December 31, 1998, the Company entered into the following
acquisitions, which are accounted for under the purchase method of accounting:
Applica Corporation
In March, 1999, the Company entered into an agreement to acquire
all the outstanding stock of Applica Corporation, a provider of
application hosting services. The purchase price was comprised of
723,699 shares of common stock.
WPL Laboratories, Inc.
In May, 1999, the Company entered into an agreement to acquire
all the outstanding stock of WPL Laboratories, Inc., a provider of
advanced software development services. The purchase price was
comprised of $5,000,000 in cash, 1,364,140 shares of common stock
and the assumption of all outstanding WPL stock options, which
became exercisable for 314,804 shares of the Company's common stock
at a per share exercise price of $2.36 with a four-year vesting
period. The WPL stockholders received one half of their cash
consideration at closing and will receive the remainder
incrementally over a four-year period so long as the stockholder
does not voluntarily terminate his employment and is not terminated
for cause. Of the shares of common stock issued to the former WPL
stockholders, approximately fifty percent are subject to the
Company's right, which lapses incrementally over a four-year period,
to repurchase the shares of a particular stockholder, at their value
at the time of the acquisition, upon the stockholder's resignation
or the Company's termination of the stockholder for cause. In
connection with the stock issuance, in July 1999 the Company
provided approximately $1,200,000 in loans to stockholders. The
loans which bear interest at prime plus 1% are due at the earlier of
the sale of stock or four years.
Web Yes, Inc.
In June, 1999, the Company entered into an agreement to acquire
all the outstanding stock of Web Yes, Inc., a provider of web
hosting services. The purchase price was comprised of 492,491
6
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shares of common stock. Of the shares of common stock issued to the
former Web Yes stockholders, 342,680 are subject to the Company's
right, which lapses incrementally over a four-year period, to
repurchase the shares of the particular stockholder upon the
termination of his employment with the Company. The repurchase price
shall be either at the share value at the time of the acquisition if
the stockholder terminates employment or is terminated for cause, or
at the fair market value if the stockholder's employment is
terminated without cause.
In addition, of the 452,491 shares issued in the acquisition of
Web Yes, Inc., the Company issued 35,583 shares of common stock to
employees of Web Yes, Inc. The common stock is subject to
restrictions relating to employment. As a result, the fair value
of the stock issued has been recorded as deferred compensation and
will be recognized as compensation expense over the restriction
period of four years.
The results of operations of the acquisitions have been included
in the unaudited consolidated financial statements from their
respective dates of acquisition. The excess of the purchase price
and expenses associated with each acquisition over the estimated
fair value of the net assets acquired has been recorded as
intangible assets. Such costs are being amortized on a
straight-line basis over three to five years, the period expected
to be benefited.
The following unaudited pro forma results of operations give
effect to the acquisitions as if the transactions had occurred as
of January 1, 1998. Such pro forma financial information reflects
certain adjustments, including amortization of intangibles,
interest expense, income tax effects and an increase in the
weighted average shares outstanding. This pro forma information
does not necessarily reflect the results of operations that would
have occurred had the acquisitions taken place as of January 1,
1998 and is not necessarily indicative of results that may be
obtained in the future.
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
1998 1999
---- ----
<S> <C> <C>
Revenues 9,390,780 16,712,009
Net loss (1,337,264) (5,430,425)
Net loss per share (0.15) (0.84)
Weighted average shares outstanding 8,884,955 6,502,128
</TABLE>
3. Related Party Transactions
In January, 1999, Internet Capital Group ("ICG"), holder of the
Company's Series A Preferred Stock, entered into an option agreement with the
Company's Chief Executive Officer. The Option Agreement grants the Chief
Executive Officer the right to purchase all or part of an aggregate of
284,195 shares of the Series A Preferred Stock owned by ICG at an exercise
price of $1.42. The option vested immediately and expires seven years after
the date of grant.
In May 1999, ICG provided $4,000,000 in advances which were converted
into equity in July, 1999. In connection with this transaction, the Company
issued ICG a warrant to purchase 73,872 shares of common stock at an exercise
price of $8.13 per share. During 1999 the Company provided information
technology consulting services to companies in which ICG holds equity
interests ("ICG Partner Companies"). For the three months and nine months
ended September 30, 1999, revenues generated for services provided to ICG
Partner Companies amounted to approximately $1,171,000 and $1,296,000,
respectively.
4. Series B Preferred Stock Financing
In July 1999, the Company issued an aggregate of 2,931,849 shares of
Series B Preferred Stock at $6.50 per share. ICG purchased 769,514 shares of
Series B Preferred Stock in the transaction for consideration in the
aggregate of $4,999,994, $4,053,425 of which was paid by conversion of its
convertible promissory note issued by the Company in May 1999.
5. Initial Public Offering
On October 5, 1999 the Company issued 3,450,000 shares of its common
stock (450,000 shares of which represented the underwriters exercise of its
overallotment option), $0.000125 par value per share, for proceeds of
approximately $43,700,000 (net of underwriting discounts, commissions and
expenses). The Company intends to use the proceeds for working capital and
other general corporate purposes.
6. Income Taxes (Unaudited)
Effective January 1, 1999, the Company terminated its S Corporation
election and is subject to corporate-level federal and certain state income
taxes. Upon termination of the S Corporation status, deferred income taxes
are recorded for the tax effect of cumulative temporary differences between
the financial reporting and tax bases of certain assets and liabilities;
primarily deferred revenue that must be recognized currently for tax
purposes, accrued expenses that are not currently deductible, cumulative
differences between tax depreciation and financial reporting allowances, and
the impact of the conversion from the cash method to the accrual method of
reporting for tax purposes.
Pro forma income tax expense (benefit), assuming the Company had been a
C Corporation and applying the tax laws in effect during the periods
presented would have been as follows for the three and nine months ended
September 30, 1998:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
---------------------- ---------------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Federal tax (benefit) (45,415) 76,084
State taxes, net of federal -- 13,426
------- ---------- ------ ----------
(45,415) 89,510
======= ========== ====== ==========
</TABLE>
As of September 30, 1999, as a result of the acquisitions of Applica
Corporation, WPL Laboratories, Inc., and Web Yes, Inc., the Company has
recorded a net tax liability of $755,000. The net deferred tax liability is
primarily attributable to liabilities arising from cash-to-accrual
conversion and the recording of certain intangible assets offset by assets
relating to net operating losses.
7. Stock Plans
(a) 1999 Stock Incentive Plan
The 1999 Stock Incentive Plan was adopted by the board of directors on
July 15, 1999. The 1999 plan is intended to replace the 1998 plan. Up to
4,800,000 shares of common stock (subject to adjustment in the event of stock
splits and other similar events) may be issued pursuant to awards granted
under the 1999 plan.
The 1999 plan provides for the grant of incentive stock options,
nonstatutory stock options, restricted stock awards and other stock-based
awards.
(b) 1999 Employee Stock Purchase Plan
The 1999 Employee Stock Purchase Plan was adopted by the board of
directors on July 15, 1999. The purchase plan authorizes the issuance of up
to a total of 400,000 shares of common stock to participating employees.
The following employees, including directors who are employees and
employees of any participating subsidiaries, are eligible to participate in
the purchase plan
- Employees who are customarily employed for more than 20 hours per
week and for more than five months per year; and
- Employees employed for at least one month prior to enrolling in the
purchase plan.
Employees who would immediately after the grant own 5% or more of the
total combined voting power or value of the Company's stock or any subsidiary
are not eligible to participate.
8. Operating Segments
Historically, the Company has operated in a single segment. With the
acquisitions of Applica Corporation and Web Yes, Inc., the Company expanded
its operations to include a second segment, application and web hosting.
Revenues from application and web hosting services amounted to $700,000 for
the three and nine months ended September 30, 1999. Total assets related to
the application and web hosting business are approximately $6,300,000 as of
September 30, 1999, of which approximately $5,500,000 represents intangible
assets.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
Breakaway Solutions is a Delaware corporation. We incorporated in
Massachusetts under the name The Counsell Group, Inc. in 1992, and
reincorporated in Delaware in August 1995. In October 1998, we changed our name
to Breakaway Solutions, Inc.
We are a full service provider of e-business solutions that allow growing
enterprises to capitalize on the power of the Internet to reach and support
customers and markets. Our services consist of Breakaway strategy consulting,
Breakaway Internet solutions, Breakaway eCRM solutions and Breakaway Application
hosting. From our inception in 1992 through 1998, our operating activities
primarily consisted of providing Internet solutions and eCRM solutions services.
Prior to our acquisition of Applica, we derived no revenues from application
hosting. We believe, however, that application hosting will account for a
significantly greater portion of our total revenues in the future.
Three Months Ended September 30, 1999 Compared to Three Months Ended September
30, 1998
Revenues. Revenues for the three months ended September 30, 1999
increased by $4.5 million, or 166.7%, to $7.2 million from $2.7 million for
the three months ended September 30, 1998. The increase was due primarily to
additional service offerings in strategy, eCRM, and Internet, and the new
addition of our hosting line of business which gave us a greater market
presence. Additionally, we expanded geographically which increased our US
market presence. We were in a better position to meet that demand due to
increased hiring for all of our service offerings. Revenues for our hosting
line of business were $0.7 million for the three months ended September 30,
1999 which increased from a negligible amount for the three months ended
September 30, 1998.
Project personnel costs. Project personnel costs for the three months
ended September 30, 1999 increased by $1.9 million, or 126.7%, to $3.4
million from $1.5 million for the three months ended September 30, 1998.
Project personnel costs represented 47.6% of revenues for the three months
ended September 30, 1999, as compared to 53.8% of revenues for the three
months ended September 30, 1998. The increase in absolute dollars was due
primarily to an increase in the number of employees hired to perform the
client services delivered. Project personnel costs decreased as a percentage
of revenues for the three months ended September 30, 1999 due primarily to an
increase in the average hourly billable rate of our professionals over the
comparable period in 1998 and, to a lesser extent, due to an increase in
average employee utilization rate.
Selling, general and administrative expenses. Selling, general and
administrative expenses for the three months ended September 30, 1999 increased
by $6.7 million, or 418.8%, to $8.3 million from $1.6 million for the three
months ended September 30, 1998. As a percentage of revenues, selling, general
and administrative expenses increased from 56.8% in the 1998 period to 115.0% in
the 1999 period. The increase in 1999 was due primarily to increases in
personnel-related expenses to support increased administrative employees,
outside professional fees for recruiting, the recruiting and hiring of a senior
executive management team, the hiring of dedicated sales and marketing
employees, a brand name marketing campaign, the investment in our hosting
service line infrastructure, and the continued development of our regional
offices.
Interest income, net. Interest income, net, for the three months ended
September 30, 1999 increased to $28,000 from a negligible amount for the
three months ended September 30, 1998. The increase in 1999 was due primarily
to interest income earned on the invested portion of proceeds from our
preferred stock financing in January 1999 and July 1999.
Nine Months Ended September 30, 1999 Compared to Nine Months Ended September 30,
1998
Revenues. Revenues for the nine months ended September 30, 1999 increased
by $7.2 million, or 96.0%, to $14.7 million from $7.5 million for the nine
months ended September 30, 1998. The increase was due primarily
8
<PAGE>
to increased market demand for Internet professional services and the new
addition of our hosting line of business, which was 5% of our total revenues for
the nine months ended September 30, 1999. Additionally, we expanded
geographically, which increased our US market presence.
Project personnel costs. Project personnel costs for the nine months ended
September 30, 1999 increased by $2.9 million, or 70.7%, to $7.0 million from
$4.1 million for the nine months ended September 30, 1998. Project personnel
costs represented 47.7% of revenues for the nine months ended September 30,
1999, as compared to 54.5% of revenues for the nine months ended September 30,
1998. The increase in absolute dollars was due primarily to an increase in the
number of employees hired to perform the client services delivered. Project
personnel costs decreased as a percentage of revenues for the nine months ended
September 30, 1999 due primarily to an increase in the average hourly billable
rate of our professionals over the comparable period in 1998 and, to a lesser
extent, due to an increase in average employee utilization rate.
Selling, general and administrative expenses. Selling, general and
administrative expenses for the nine months ended September 30, 1999 increased
by $11.4 million, or 345.5%, to $14.7 million from $3.3 million for the nine
months ended September 30, 1998. As a percentage of revenues, selling, general
and administrative expenses increased from 44.6% in the 1998 period to 99.9% in
the 1999 period. The increase in 1999 was due primarily to increases in
personnel-related expenses to support increased administrative employees,
outside professional fees for recruiting, the recruiting and hiring of a senior
executive management team, the hiring of dedicated sales and marketing
employees, a brand name marketing campaign, the investment in our hosting
service line infrastructure, and the opening of a new regional office in Dallas.
Interest income, net. Interest income, net, for the nine months ended
September 30, 1999 increased to $33,600 from a negligible amount for the nine
months ended September 30, 1998. The increase in 1999 was due primarily to
interest income earned on the invested portion of proceeds from our preferred
stock financings in January 1999 and July 1999.
Liquidity and Capital Resources
From inception through December 31, 1998, we funded our operations
primarily through cash provided by operations and a line of credit. In 1999 we
have funded our operations through the issuance of preferred stock and, to a
lesser extent, through a line of credit and equipment leases.
At December 31, 1998, our cash balance was $17,000. Our cash balance
was $7.7 million at September 30, 1999. Our working capital was $385,000 at
December 31, 1998 and $11.2 million at September 30, 1999.
Our operating activities used cash of $215,000 and $5.5 million in the
nine months ended September 30, 1998 and 1999, respectively. The increase in
cash used in 1999 primarily resulted from costs we incurred in connection
with hiring a new management team and implementing a new business model. In
addition, we experienced an increase in our receivables resulting from both
increased days outstanding and the extended payment terms of fixed-fee
contracts which we entered into accounted for approximately 40% of our
revenue for the period. The continued increase in cash used in operating
activities for the nine months ended September 30, 1999 resulted from
continued recruiting and hiring costs, and building our sales and marketing
capabilities.
We used cash for capital expenditures of $316,000 and $3.9 million in
the nine months ended September 30, 1998 and 1999, respectively. These
expenditures were primarily for computer equipment, telecommunications
equipment and furniture and fixtures to support our growth, and to build our
application hosting capabilities. In addition, in the first nine months of
1999, we used $2.1 million in cash for acquired businesses.
We have various equipment lease financing facilities. The terms of these
equipment lease financings average two years. The annual interest rates on
borrowings ranged from 5.4% or 15.7%.
9
<PAGE>
In January 1999, we issued 5,853,000 shares of Series A Preferred Stock
for $8.3 million. We used the proceeds to purchase common stock from an
existing stockholder and to fund operations.
In May 1999, we borrowed $4,000,000 from Internet Capital Group and issued
Internet Capital Group a promissory note for $4,000,000 bearing interest at the
prime interest rate plus one percent. This promissory note converted into shares
of the Company's Series B Preferred Stock in the Company's July 1999 Series B
Preferred Stock Financing. We used the proceeds to help finance our acquisition
of WPL and to fund operations.
In July 1999, we issued 2,931,849 shares of Series B Preferred Stock for
approximately $19.0 million. We intend to use the proceeds for working capital
and other general corporate purposes.
In September 1999, we entered into a Master Lease Agreement with Silicon
Valley Bank to finance up to $4 million of equipment and software. Leases under
the Master Lease Agreement will have terms of 36 months. Payments under the
leases will be determined based on an annual interest rate equal to the annual
rate on U.S. Treasury securities of a comparable term plus 2.5%. In
connection with the Master Lease Agreement we issued Silicon Valley Bank
warrants to purchase 10,909 shares of our common stock for $11.00 per share.
The warrants are exercisable until September 21, 2002.
In October 1999, we consummated an initial public offering and issued
3,450,000 shares of common stock for approximately $43.7 million, net of
underwriter's discounts, commissions and expenses. We intend to use the
proceeds for working capital and other general corporate purposes.
We believe that the proceeds of our initial public offering and funds
that are available under our line of credit will be sufficient to finance our
capital requirements for at least the next 12 months. There can be no
assurance, however, that our actual needs will not exceed expectations or
that we will be able to fund our operations in the absence of other sources.
There also can be no assurance that any additional required financing will be
available through additional bank borrowings, debt or equity offerings or
otherwise, or that if such financing is available, that it will be available
on terms acceptable to us.
Market Risk
To date, we have not utilized derivative financial instruments or
derivative commodity instruments. We do not expect to employ these or other
strategies to hedge market risk in the foreseeable future. We invest our cash in
money market funds, which are subject to minimal credit and market risk. We
believe the market risks associated with these financial instruments are
immaterial.
Year 2000 Readiness Disclosure
Year 2000 Issue. The year 2000 issue is a result of computer programs or
systems which store or process date-related information using only the last two
digits to refer to a year. These programs or systems may not be able to
distinguish properly between a year in the 1900's and a year in the 2000's.
Failure of these programs or systems to distinguish between the two centuries
could cause the programs or systems to create erroneous results or even to fail.
Our State of Readiness. We have established a year 2000 readiness team to
carry out a program for the assessment of our vulnerability to the year 2000
issue and remediation of identified problems. The team consists of senior
information technology and business professionals and meets on a regular basis.
An outside consultant is also working with the readiness team on a temporary
basis to assist them in carrying out their tasks.
The readiness team has developed a program with the following key phases
to assess our state of year 2000 readiness:
o Develop a complete inventory of our hardware and software, and
assess whether that hardware and software is year 2000 ready;
o Test our internal hardware and software which we believe have a
significant impact on our daily operations to assess whether it is
year 2000 ready;
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o Upgrade, remediate or replace any of our hardware or software that
is not year 2000 ready; and
o Develop a business continuity plan to address possible year 2000
consequences which we cannot control directly or which we have not
been able to test or remediate; and
We have completed a number of the tasks which our program requires, as
follows:
o We have completed the inventory of hardware and software at all of
our locations and have determined that all of the inventoried
hardware and software which we believe have a significant impact on
our daily operations are year 2000 ready or can be made ready with
minimal changes or replacements, based on our vendors' web site
certification statements and commercially available year 2000
testing products; and have determined that such operations are Year
2000 ready.
o We have implemented internal policies to require that a senior
information technology professional approves as year 2000 ready any
hardware or software that we plan to purchase;
o We have developed a list of all vendors which we deem to have a
significant business relationship with us. Of the approximately 20
vendors we have identified, we have obtained web site certifications
or made written inquiries for information or assurances with respect
to the year 2000 readiness of products or services that we purchase
from those vendors;
o We have completed test plans for date sensitive applications which
we have determined to be Year 2000 ready and which we believe will
have a significant impact on our daily operations.
o We have completed an internal review to determine the commitments we
have made to our customers with respect to the year 2000 readiness
of solutions which we have provided to those customers; and
o We have reviewed evaluations of questionnaires regarding year 2000
readiness to our critical vendors.
o We have formulated a business continuity plan that encompasses
Breakaway's strategy for preparation, notification and recovery in
the event of a failure due to the year 2000 issue. The plan includes
procedures to minimize downtime and expedite resumption of business
operations and other solutions for responding to internal failures
in our internal information technology department as well as
widespread external failures related to the year 2000 issue.
We have specific tasks to complete with respect to our year 2000 program,
including;
o Testing of our internal hardware and software which we believe have
a significant impact on our daily operations to confirm its year
2000 readiness; and
o Implementation of any necessary changes, identified as a result of
testing, to our internal software and hardware.
Costs. To date, we have not incurred material expenses in connection
with our year 2000 readiness program. We may need to purchase replacement
products, hire additional consultants or other third parties to assist us,
although we do not currently expect that we will need to take such steps. We
currently estimate that the cost of our year 2000-readiness program will be
approximately $100,000. This amount includes internal labor costs, legal and
outside consulting costs and additional hardware and software purchases. We
expect that we will refine this estimate as we complete the final phase of
our year 2000 readiness program.
Risks. If we fail to solve a year 2000 problem with respect to any of our
systems, we could experience a significant interruption of our normal business
operations. We believe that the most reasonably likely worst case scenarios
related to the year 2000 issue for our business are as follows:
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o If a solution which we provided to a client causes damage or injury
to that client because the solution was not year 2000 compliant, we
could be liable to the client for breach of warranty. In a number of
cases, our contracts with clients do not limit our liability for
this type of breach;
o If there is a significant and protracted interruption of
telecommunication services to our main office, we would be unable to
conduct business because of our reliance on telecommunication
systems to support daily operations, such as internal communications
through e-mail; and
o If there is a significant and protracted interruption of electrical
power or telecommunications services to our application hosting
facilities, we would be unable to provide our application hosting
services. This failure could significantly slow the growth of our
application hosting business which is an important part of our
strategic plan. We have sought to locate our application hosting
facilities in leased space in co-location facilities which have
back-up power systems and redundant telecommunications services.
Factors That May Affect Future Results
This Quarterly Report on Form 10Q includes or incorporates forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Act of 1934. Forward-looking statements give our
current expectations or forecasts of future events. You can identify these
statements by the fact that they do not relate strictly to historical or current
facts. Words such as "expects," "may," "anticipates," "intends," "would,"
"will," "plans," "believes," "estimates," "should," and similar words and
expressions are intended to identify forward-looking statements. These
statements are based on estimates, projections, beliefs, and assumptions of the
Company and its management, and are not guarantees of future performance. From
time to time, we also may provide oral or written forward-looking statements in
other materials we release to the public.
Any or all of our forward-looking statements in this report, and in any
other public statements we make may turn out to be wrong. They can be affected
by inaccurate assumptions we might make or by known or unknown risks and
uncertainties. Many factors mentioned in the discussion below will be important
in determining future results. Consequently, no forward-looking statement can be
guaranteed. Actual future results may vary materially. We undertake no
obligation to publicly update any forward-looking statements, whether as a
result of new information, future events or otherwise. You are advised, however,
to consult any further disclosures we make in our reports filed with the
Securities and Exchange Commission.
The Company cautions that the following important factors, among others,
in the future could cause the Company's actual results to differ materially from
those expressed in forward-looking statements made by or on behalf of the
Company in filings with the Securities and Exchange Commission, press releases,
communications with investors, and oral statements.
Our Future Success is Uncertain Because We Have Significantly Changed Our
Business
Prior to 1999, we primarily provided traditional systems integration
services along with limited strategic planning and Internet systems integration
services. In 1999, we added application hosting to our service offerings and
substantially increased our capacity to provide strategic planning and Internet
systems integration services through three acquisitions and significant hiring
of professionals. Due to these recent significant changes, we are subject to the
risk that we will fail to implement our business model and strategy. This risk
is heightened because we are operating in the new and rapidly evolving
e-business solutions market. Our historical results of operations do not reflect
our new service offerings.
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Our Business Will Suffer if Growing Enterprises Do Not Adopt and Accept
Application Hosting Services
Our ability to increase revenues and achieve profitability depends on the
adoption and acceptance of third-party application hosting services by our
target market of growing enterprises. Information technology service providers,
including Breakaway Solutions, only recently have begun to offer third-party
application hosting services. The market for these services has only recently
begun to develop and is evolving rapidly.
Our Business Will Suffer if Growing Enterprises Do Not Accept E-Business
Solutions
Our ability to increase revenues and achieve profitability depends on the
widespread acceptance of e-business solutions by commercial users, particularly
growing enterprises. The market for e-business solutions is relatively new and
is undergoing significant change. The acceptance and growth of e-business
solutions will be limited if the Internet does not prove to be a viable
commercial market.
We Have a History of Operating Losses, Expect to Incur Losses in the Future and
Will Not be Successful Unless We Can Reverse This Trend
We expect to continue to incur increasing and substantial sales and
marketing, infrastructure development and general and administrative expenses.
As a result, we will need to generate significant revenues to achieve
profitability. We cannot be certain whether or when this will occur because of
the significant uncertainties with respect to our business model. We experienced
a net loss of $575,175 for the fiscal year ended December 31, 1998 and of
$6,983,338 for the nine months ended September 30, 1999. We expect to continue
to incur significant operating losses in the near term. If we do achieve
profitability, we may not be able to sustain or increase profitability on a
quarterly or annual basis in the future.
We Plan to Expand Rapidly; if We Cannot Manage Our Growth Successfully, Our
Growth May Slow or Stop
Since November 1998, we have rapidly expanded our operations. Our growth
has placed, and will continue to place, a significant strain on our management,
operating and financial systems, and sales, marketing and administrative
resources. If we cannot manage our expanding operations, we may not be able to
continue to grow or we may grow at a slower pace. Furthermore, our operating
costs may escalate faster than planned. In order to manage our growth
successfully we must:
o Improve our management, financial and information systems and
controls;
o Expand, train and manage our employee base effectively; and
o Enlarge our infrastructure for application hosting services.
We Rely on a Small Number of Clients for Most of Our Revenues; Our Revenues Will
Decline Significantly if We Cannot Keep or Replace These Clients
In 1998, revenues from a single client accounted for approximately
27.0% of our total revenues, and revenues from our five largest clients
accounted for 54.0% of total revenues. During the nine months ended September
30, 1999, revenues from a single client accounted for approximately 9.2% of
our total revenues and revenues from our five largest clients accounted for
approximately 43.7% of our total revenues. If these clients do not need or
want to engage us to perform additional services for them and we are not able
to sell our services to new clients at comparable or greater levels, our
revenues will decline.
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Our Quarterly Revenues and Operating Results Are Likely to Vary Which May Cause
the Market Price of Our Common Stock to Decline
Our quarterly revenues and operating results are volatile and difficult to
predict. Our quarterly operating results have varied in the past and are likely
to vary significantly from quarter to quarter in the future. It is likely that
in some future quarter or quarters our operating results will be below the
expectations of public market analysts or investors. If so, the market price of
our common stock may decline significantly.
Factors that may cause our results to fluctuate include:
o The amount and timing of demand by our clients for e-business
solution services;
o Our ability to obtain new and follow-on client engagements;
o The number, size and scope of our projects;
o Cancellations or reductions in the scope of major consulting and
systems integration projects;
o Our ability to enter into multiyear contracts with application
hosting clients;
o Cancellations of month-to-month application hosting contracts;
o The length of the sales cycle associated with our service offerings;
o The introduction of new services by us or our competitors;
o Changes in our pricing policies or those of our competitors;
o Our ability to attract, train and retain skilled personnel in all
areas of our business;
o Our ability to manage costs, including personnel costs and support
services costs; and
o The timing and cost of anticipated openings or expansions of new
regional offices and new Solution Centers.
We derive a substantial portion of our revenues from providing
professional services. We generally recognize revenues as we provide services.
Personnel and related costs constitute the substantial majority of our operating
expenses. Because we establish the levels of these expenses in advance of any
particular quarter, underutilization of our professional services employees may
cause significant reductions in our operating results for a particular quarter.
Our Growth Could be Limited if We Are Unable to Attract and Retain Qualified
Personnel
We believe that our success depends largely on our ability to attract
and retain highly skilled technical, consulting, managerial, sales and
marketing personnel. We may not be able to hire or retain the necessary
personnel to implement our business strategy. In addition, we may need to pay
higher compensation for employees than we currently expect due to intense
competition for qualified employees. Individuals with e-business solutions
skills, particularly those with the significant experience which we generally
require, are in very short supply. Competition to hire from this limited pool
is intense.
We May Lose Money on Fixed-Fee Contracts and Performance-Based Contracts
We derive a portion of our revenues from fixed-fee contracts. We also have
begun a program in some client engagements to make a portion of our fees
contingent on meeting performance objectives. If we misjudge the time and
resources necessary to complete a project, or if a client does not achieve the
agreed upon performance
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objectives, we may incur a loss in connection with the project. This risk is
heightened because we work with complex technologies in compressed time frames.
Our Growth Strategy Will Fail if We Are Unable to Open Successfully New Regional
Offices
A key component of our growth strategy is to open regional offices in new
geographic locations. If we do not implement this strategy successfully we will
not grow. We devote substantial financial and management resources to launch
these offices. We may not select appropriate locations for these regional
offices. We also may not be able to open these offices efficiently or manage
them profitably.
If Our Efforts to Develop Brand Awareness Are Not Successful We Will Not
Increase Revenues As Planned
An important element of our business strategy is to develop and maintain
widespread awareness of the Breakaway Solutions name in our target market. To
promote our name and brand image, we incur substantial marketing expenses. These
expenditures may cause our operating margins to decline. If our efforts are not
successful, we will not experience any increase in revenues to offset the
increase in marketing expenses. We may nonetheless continue to incur these
expenses, possibly at higher levels. Moreover, our name may be closely
associated with the business difficulties of some of our clients, many of whom
are pursuing unproven business models in competitive markets. As a result, the
difficulties or failure of one of our clients could damage our name and brand
image.
Our Failure to Meet Client Expectations or Deliver Error-Free Services Could
Result in Losses and Negative Publicity
Many of our engagements involve information technology solutions that are
critical to our clients' businesses. Any defects or errors in these solutions or
failure to meet clients' specifications or expectations could result in:
o Delayed or lost revenues due to adverse client reaction;
o Requirements to provide additional services to a client at no
charge;
o Refunds of monthly application hosting fees for failure to meet
service level obligations;
o Negative publicity about us and our services, which could adversely
affect our ability to attract or retain clients; and
o Claims for substantial damages against us, regardless of our
responsibility for such failure, which may not be covered by our
insurance policies and which may not be limited by the contractual
terms of our engagement.
We Generate a Significant Portion of Our Revenues From Services Related to
Packaged Software Applications of a Limited Number of Vendors; We Would
Experience A Reduction in Revenues if Any of Those Vendors Ceased Doing Business
with Us
We derive a significant portion of our revenues from projects in which we
customize, implement or host packaged software applications developed by third
parties. We do not have contractual arrangements with some of these software
vendors. As a result, those software vendors with whom we do not have
contractual arrangements can cease making their products available to us at
their discretion. Even in the case of software vendors with whom we do have
contractual arrangements, those arrangements are either terminable at will by
either party or are for terms of one year or less. In addition, these software
vendors may choose to compete against us in providing strategic consulting,
systems integration or application hosting services. In addition, the terms of
various agreements with third party software vendors may require cash outlays
prior to our deriving revenue from transactions with out customers. Moreover,
our success is dependent upon the continued popularity of the product offerings
of these vendors and on our ability to establish relationships with new vendors
in the future. If we are unable to obtain
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packaged applications from these or comparable vendors or, if our vendors choose
to compete with us or the popularity of their products declines, our business
may be adversely affected.
Our Markets Are Highly Competitive and Our Failure to Compete Successfully Will
Limit Our Ability to Retain and Increase Our Market Share
Our markets are new, rapidly evolving and highly competitive. We expect
this competition to persist and intensify in the future. Our failure to maintain
and enhance our competitive position will limit our ability to maintain and
increase our market share, which would result in serious harm to our business.
Many of our competitors are substantially larger than we are and have
substantially greater financial, infrastructure and personnel resources than we
have. Furthermore, many of our competitors have well established, large and
experienced marketing and sales capabilities and greater name recognition than
we have. As a result, our competitors may be in a stronger position to respond
quickly to new or emerging technologies and changes in client requirements. They
may also develop and promote their services more effectively than we do.
Moreover, barriers to entry, particularly in the strategic consulting and
systems integration markets, are low. We therefore expect additional competitors
to enter these markets.
If We Are Unable to Reuse Software Code and Methodologies, We May Not be Able to
Deliver Our Services Rapidly and Cost-Effectively
Our business model depends to a significant extent on our ability to reuse
software code and methodologies that we develop in the course of client
engagements. If we are unable to negotiate contracts to permit us to reuse code
and methodologies, we may be unable to provide services to our growing
enterprise clients at a cost and within time frames that these clients find
acceptable. Our clients may prohibit us from such reuse or may severely limit
reuse.
We Depend on a Limited Number of Key Personnel Who Have Recently Joined Us and
Who We May Not be Able to Retain
All of our senior management joined Breakaway Solutions in 1998 and 1999.
Many of these individuals have not previously worked together, and are becoming
integrated as a management team. As a result, our senior managers may not work
together effectively as a team. In addition, due to the competitive nature of
our industry, we may not be able to retain all of our senior managers.
We May Need Additional Capital, Which May Not be Available to Us, and Which, if
Raised, May Dilute Your Ownership Interest in Us
We may need to raise additional funds through public or private equity or
debt financings in order to:
o Support additional capital expenditures;
o Take advantage of acquisition or expansion opportunities;
o Develop new services; or
o Address additional working capital needs.
If we cannot obtain financing on terms acceptable to us or at all, we may be
forced to curtail some or all of these activities. As a result, we could grow
more slowly or stop growing. Any additional capital raised through the sale of
equity will dilute your ownership interest in us and may be on terms that are
unfavorable to holders of our common stock.
We May Undertake Additional Acquisitions Which May Limit Our Ability to Manage
and Maintain Our Business, May Result in Adverse Accounting Treatment and May Be
Difficult to Integrate Into Our Business
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Since March 1999, we have acquired three companies. We may undertake
additional acquisitions in the future. Acquisitions involve a number of risks,
including:
o Diversion of management attention;
o Amortization of substantial goodwill, adversely affecting our
reported results of operations;
o Inability to retain the management, key personnel and other
employees of the acquired business;
o Inability to establish uniform standards, controls, procedures and
policies;
o Inability to retain the acquired company's customers; and
o Exposure to legal claims for activities of the acquired business
prior to acquisition.
Client satisfaction or performance problems with an acquired business also could
affect our reputation as a whole. In addition, any acquired business could
significantly underperform relative to our expectations.
We May Not be Able to Deliver Our Application Hosting Services if Third Parties
Do Not Provide Us With Key Components of Our Hosting Infrastructure
We depend on other companies to supply key components of the computer and
telecommunications equipment and the telecommunications services which we use to
provide our application hosting services. Some of these components are available
only from sole or limited sources in the quantities and quality we demand.
Although we lease redundant capacity from multiple suppliers, a disruption in
our ability to provide hosting services could prevent us from maintaining the
required standards of service, which would cause us to incur contractual
penalties.
Intellectual Property Infringement Claims Against Us, Even Without Merit, Could
Cost a Significant Amount of Money to Defend and May Divert Management's
Attention
As the number of e-business applications in our target market increases
and the functionality of these applications overlaps, we may become subject to
infringement claims. We cannot be certain that our services, the solutions that
we deliver or the software used in our solutions do not or will not infringe
valid patents, copyrights or other intellectual property rights held by third
parties. If there is infringement, we could be liable for substantial damages.
Any infringement claims, even if without merit, can be time consuming and
expensive to defend. They may divert management's attention and resources and
could cause service implementation delays. They also could require us to enter
into costly royalty or licensing agreements.
We May Not be Able to Protect Our Intellectual Property and Proprietary Rights
If third parties infringe or misappropriate our trade secrets, copyrights,
trademarks or other proprietary information, our business could be seriously
harmed. The steps that we have taken to protect our proprietary rights may not
be adequate to deter misappropriation of our intellectual property. In addition,
we may not be able to detect unauthorized use of our intellectual property and
take appropriate steps to enforce our rights. Also, protection of intellectual
property in many foreign countries is weaker and less reliable than in the
United States. Accordingly, if our business expands into foreign countries,
risks associated with protecting our intellectual property will increase.
Failure of Computer Systems and Software to be Year 2000 Compliant Could
Increase Our Costs, Disrupt Our Service and Reduce Demand from Our Clients
We confront the year 2000 problem in three contexts.
Our clients. The failure of our clients to ensure that their operations
are year 2000 compliant could have an adverse effect on them, which in turn
could limit their ability to retain third party service providers such as
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Breakaway. In addition, clients or potential clients may delay purchasing
software and related products and services including those of Breakaway, due to
concerns related to the Year 2000 problem.
Our suppliers. Our business could be adversely affected if we cannot
obtain products, services or systems that are year 2000 compliant when we need
them.
Our services. The solutions which we provide to our clients integrate
software and other technology from different providers. If there is a year 2000
problem with respect to a solution provided by us, it may be difficult to
determine whether the problem relates to services which we have performed or is
due to the software, technology or services of other providers. Furthermore, in
the past, the Company entered into a number of our contracts, including
contracts with some of our largest clients, which have express or implied
warranties with respect to year 2000 readiness without limitation as to our
liability. As a result, we may be subjected to year 2000-related lawsuits,
whether or not the services that we have performed are year 2000 compliant. We
cannot be certain what the outcomes of these types of lawsuits may be.
Our Business May Suffer if Growth in the Use of the Internet Declines
Our business is dependent upon continued growth in the use of the Internet
by our clients, prospective clients and their customers and suppliers. If the
number of users on the Internet does not increase and commerce over the Internet
does not become more accepted and widespread, demand for our services may
decrease and, as a result, our revenues would decline. Factors that may affect
Internet usage or electronic commerce adoption include:
o Actual or perceived lack of security of information;
o Lack of access and ease of use;
o Congestion of Internet traffic;
o Inconsistent quality of service;
o Increases in access costs to the Internet;
o Excessive governmental regulation or the imposition of taxes on
e-commerce transactions;
o Uncertainty regarding intellectual property ownership;
o Reluctance to adopt new business methods; and
o Costs associated with the obsolescence of existing infrastructure.
Our Stock Price Is and Will Likely Remain Volatile. This Volatility Could Result
in Substantial Losses for Investors
The trading price of our common stock has been and is likely to continue
to be volatile. The stock market in general, and the market for technology and
Internet-related companies in particular, has experienced extreme volatility.
This volatility has often been unrelated to the operating performance of
particular companies. Prices for the common stock will be determined in the
marketplace and may be influenced by many factors, including variations in our
financial results, changes in earnings estimates by industry research analysts,
investors' perceptions of us and general economic, industry and market
conditions.
Our Existing Principal Stockholders, Executive Officers and Directors Hold
Equity Allowing them Control Breakaway Solutions. This Control Could Delay or
Prevent a Change in Corporate Control That Stockholders May Believe Will Improve
Management and Could Depress Our Stock Price Because Purchasers Cannot Acquire a
Controlling Interest
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Our executive officers, directors and stockholders who beneficially own
more than 5.0% of our stock, in the aggregate beneficially own shares
representing approximately 75.2% of our capital stock. As a result, these
persons, acting together, will be able to control all matters submitted to our
stockholders for approval and to control our management and affairs. For
example, these persons, acting together, will control the election and removal
of directors and any merger, consolidation or sale of all or substantially all
of our assets. This control could have the effect of delaying or preventing a
change of control of Breakaway that stockholders may believe would result in
better management. In addition, this control could depress our stock price
because purchasers will not be able to acquire a controlling interest in
Breakaway.
Our Stock Price Could be Adversely Affected by Shares Becoming Available for
Sale
Upon the expiration of lock-up agreements with many of our stockholders
in April 2000, and as the availability of exemptions from registration
afforded by Rules 144 of the Securities Act of 1933 become available sales
of a substantial number of shares of our common stock in the public market
after this offering could depress the market price of our common stock and
could impair our ability to raise capital through the sale of additional
equity securities.
We Are at Risk of Securities Class Action Litigation Which Could Result in
Substantial Costs and Divert Management's Attention and Resources
In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. Due to the potential volatility of our stock price, we may be the
target of securities litigation in the future. Securities litigation could
result in substantial costs and divert management's attention and resources.
We Have Antitakeover Defenses That Could Delay or Prevent an Acquisition and
Could Adversely Affect the Price of Our Common Stock
Provisions of our certificate of incorporation and bylaws and provisions
of Delaware law could delay, defer or prevent an acquisition or change of
control of Breakaway Solutions or otherwise adversely affect the price of our
common stock. For example, our board of directors is staggered in three classes,
so that only one-third of the directors can be replaced at any annual meeting.
Additionally, our bylaws limit the ability of stockholders to call a special
meeting. Our certificate of incorporation also permits our board to issue shares
of preferred stock without stockholder approval. In addition to delaying or
preventing an acquisition, the issuance of a substantial number of preferred
shares could adversely affect the price of the common stock.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
Not Applicable.
PART II. OTHER INFORMATION
ITEMS 1, 3 AND 5 - Not Applicable
ITEM 2. See notes 1, 4 and 5 to the Notes to the Consolidated Financial
Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On August 8, 1999, the holders of the Company's capital stock approved an
amendment to the Company's Amended and Restated Certificate of Incorporation to
provide for:
o an increase in the number of authorized shares of Common Stock to
100,000,000 shares;
o an increase in the number of authorized shares of Preferred Stock to
5,000,000 shares;
o the indemnification of, and limitation of liability of, officers and
directors of the Company under certain circumstances;
o the elimination of all references to the terms of the Series A
Preferred Stock and the Series B Preferred Stock,
o the designation by the board of directors of the Company, without
further stockholder action, of one or more series of the Company's
Preferred Stock having the powers, preferences, rights,
qualifications, limitations and restrictions determined by the board
of directors;
o the classification of the board of directors into three classes;
o a provision that the stockholders may not take action by written
consent and may not call special meetings of stockholders;
o certain procedures for the introduction of business at stockholders'
meetings;
o a vote of at least two-thirds of the outstanding stock is necessary
to remove directors for cause;
o a vote of at least seventy-five percent of the outstanding stock of
the Company is necessary to change the foregoing provisions;
o approval of the Amended and Restated By-Laws of the Company;
o the election of the following individuals to the board of directors:
Christopher H. Greendale
Gordon Brooks
Walter W. Buckley, III; and
Frank Selldorff.
In addition, the Stockholders approved the 1999 Stock Incentive Plan and the
1999 Employee Stock Purchase Plan.
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ITEM 5. OTHER INFORMATION
On October 5, 1999 the Securities and Exchange Commission declared effective the
Company's Registration Statement on Form S-1 (File number 333-83343), relating
to the initial public offering of the Company's Common Stock, $0.000125 par
value. The proceeds to the Company, net of underwriting discounts and costs, was
approximately $39.6 million.
On October 6, 1999, the Company's Common Stock began trading on the Nasdaq
National Market under the ticker symbol "BWAY."
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
10.1 Lease Agreement dated as of October 7, 1999, by and between
the Company and East Office Operating Limited Partnership, relating
to the premises located at World Trade Center East, Boston,
Massachusetts.
27.1 Financial Data Schedule (nine months ended September 30, 1999).
B. Reports on Form 8-K
Not Applicable
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BREAKAWAY SOLUTIONS, INC.
Date: December 1, 1999 By: /s/ Kevin Comerford
--------------------------------------
Name: Kevin Comerford
Title: Vice President, Administration,
Chief Financial Officer, Treasurer,
(Principal Financial Officer and
Principal Accounting Officer), and
Secretary
22
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F7/6/99
WTCEGAWL
Exhibit 10.1
WORLD TRADE CENTER EAST
L E A S E
by and between
EAST OFFICE OPERATING
LIMITED PARTNERSHIP,
as Landlord
and
BREAKAWAY SOLUTIONS, INC.,
as Tenant
dated as of
October 7, 1999
<PAGE>
WORLD TRADE CENTER EAST
L E A S E
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 -- REFERENCE DATA
1.1 Subjects Referred To.....................................................................................1
1.2 Exhibits.................................................................................................5
1.3 Definitions .............................................................................................5
ARTICLE 2 -- PREMISES AND TERM
2.1 Premises................................................................................................10
2.2 Right of First Offer....................................................................................11
2.3 Term....................................................................................................11
2.4 Extension Option........................................................................................12
ARTICLE 3 -- IMPROVEMENTS
3.1 Construction of Building and Performance of Landlord's Work.............................................14
3.2 Substantial Completion..................................................................................15
3.3 Plans and Specifications................................................................................16
3.4 Tenant's Contractor.....................................................................................18
3.5 Funding of Allowance....................................................................................18
3.6 Mechanic's Liens........................................................................................19
ARTICLE 4 -- RENT
4.1 Fixed Rent..............................................................................................20
4.2 Additional Rent.........................................................................................20
4.2.1 Real Estate Taxes..............................................................................20
4.2.2 Personal Property Taxes........................................................................23
4.2.3 Operating Costs................................................................................23
4.2.4 Insurance......................................................................................26
4.2.5 Utilities......................................................................................27
4.3 Late Payment of Rent....................................................................................28
</TABLE>
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<TABLE>
<S> <C>
ARTICLE 5 -- LANDLORD'S COVENANTS
5.1 Affirmative Covenants...................................................................................28
5.1.1 Heat and Air Conditioning......................................................................28
5.1.2 Electricity....................................................................................29
5.1.3 Cleaning; Water................................................................................29
5.1.4 Elevator Service...............................................................................29
5.1.5 Security.......................................................................................29
5.1.6 Repairs........................................................................................29
5.1.7 Shuttle Service................................................................................29
5.1.8 Indemnification................................................................................29
5.2 Interruption............................................................................................30
5.3 Outside Services........................................................................................30
ARTICLE 6 -- TENANT'S ADDITIONAL COVENANTS
6.1 Affirmative Covenants...................................................................................30
6.1.1 Perform Obligations............................................................................30
6.1.2 Use............................................................................................31
6.1.3 Repair and Maintenance.........................................................................31
6.1.4 Compliance with Law............................................................................31
6.1.5 Indemnification................................................................................31
6.1.6 Landlord's Right to Enter......................................................................32
6.1.7 Personal Property at Tenant's Risk.............................................................32
6.1.8 Yield Up.......................................................................................32
6.1.9 Rules and Regulations.............................................................................33
6.1.10 Estoppel Certificate.............................................................................33
6.1.11 Non-Discrimination and Affirmative Action .....................................................33
6.2 Negative Covenants......................................................................................34
6.2.1 Assignment and Subletting......................................................................34
6.2.2 Nuisance.......................................................................................37
6.2.3 Hazardous Wastes and Materials.................................................................37
6.2.4 Floor Load; Heavy Equipment....................................................................38
6.2.5 Installation, Alterations or Additions.........................................................38
6.2.6 Abandonment....................................................................................40
6.2.7 Signs..........................................................................................40
ARTICLE 7 -- CASUALTY OR TAKING
7.1 Termination.............................................................................................40
7.2 Restoration.............................................................................................40
7.3 Award...................................................................................................41
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE 8 -- DEFAULTS
8.1 Events of Default.......................................................................................41
8.2 Remedies................................................................................................42
8.3 Remedies Cumulative.....................................................................................43
8.4 Landlord's Right to Cure Defaults.......................................................................43
8.5 Effect of Waivers of Default............................................................................43
8.6 No Waiver, etc..........................................................................................44
8.7 No Accord and Satisfaction..............................................................................44
ARTICLE 9 -- RIGHTS OF RIGHTS OF MORTGAGEES AND GROUND LESSORS
9.1 Rights of Mortgagees and Ground Lessors ................................................................44
9.2 Modifications...........................................................................................45
ARTICLE 10 - APPRAISAL OF FAIR RENTAL VALUE
10.1 Dispute as to Fair Rental Value.........................................................................46
10.1.1 Appointment of Appraisers......................................................................46
10.1.2 Decision by Two Appraisers.....................................................................46
10.1.3 Decision by Three Appraisers...................................................................47
10.2 Binding Effect; Costs...................................................................................47
ARTICLE 11 -- MISCELLANEOUS PROVISIONS
11.1 Notices From One Party to the Other.....................................................................47
11.2 Quiet Enjoyment.........................................................................................47
11.3 Lease Not to be Recorded................................................................................48
11.4 Limitation of Landlord's Liability......................................................................48
11.5 Acts of God.............................................................................................48
11.6 Landlord's Default......................................................................................48
11.7 Brokerage...............................................................................................49
11.8 Applicable Law and Construction.........................................................................49
11.9 Litigation Expenses.....................................................................................49
11.10 Roof Space..............................................................................................49
ARTICLE 12 - SECURITY DEPOSIT
12.1 Initial Security Deposit................................................................................52
12.2 Reduction Schedule......................................................................................52
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE 13 - TENANT'S EMERGENCY GENERATOR
13.1 Tenant's Emergency Generator............................................................................53
13.2 Terms of Use............................................................................................53
13.3 Installation, Operation, Maintenance and Removal........................................................53
13.4 Access to Generator and Tank Areas......................................................................54
</TABLE>
EXHIBITS:
<TABLE>
<S> <C>
EXHIBIT A..................Legal Description
EXHIBIT B..................Plan Showing the Premises
EXHIBIT C..................Commencement Date Agreement
EXHIBIT D..................Building Description
EXHIBIT E..................Base Building Specifications
EXHIBIT F..................Office Space Cleaning Specifications
EXHIBIT G..................Rules and Regulations
EXHIBIT H..................Tenant Estoppel Certificate
EXHIBIT I..................Nondiscrimination and Affirmative Action Covenants
EXHIBIT J..................Rentable Area Definition and Measurement Method
EXHIBIT K..................Landlord'sWiring Instructions
</TABLE>
<PAGE>
ARTICLE 1
REFERENCE DATA
1.1 SUBJECT REFERRED TO.
Each reference in this Lease to any of the following subjects shall be
construed to incorporate the data stated for that subject in this
Section 1.1.
<TABLE>
<S> <C>
Date of this Lease: October , 1999
----
Building: The 16 story building in the City of
Boston being constructed on a parcel
of land described in Exhibit A
attached hereto and known as World
Trade Center East, Two Seaport Lane
(the Building and such parcel of
land hereinafter being collectively
referred to as the "Property").
Specifically excluded from the
Building is the Garage.
Landlord: East Office Operating
Limited Partnership
Original Notice
Address of Landlord: Suite 75
World Trade Center Boston
Boston, MA 02210
With a copy to:
General Counsel
FMR Corp.
82 Devonshire Street
Boston, MA 02109
Tenant: Breakaway Solutions, Inc.
(a Delaware corporation)
Original Notice
Address of Tenant: 50 Rowes Wharf
Boston, Massachusetts 02110
Premises: The aggregate of (1) the Initial
Space and the Additional Space
commencing as of the Commencement
Date therefor and (2) the Expansion
Space commencing on the Commencement
Date therefor.
</TABLE>
1
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<TABLE>
<S> <C>
Initial Space and
Additional Space: The entire 8th Floor, the entire 7th
Floor of the Building and a portion
of the 6th Floor of the Building,
substantially as shown on Exhibit B
attached hereto.
Initial Space: An undesignated portion of the
Initial Space and Additional Space
containing approximately 60,000
square feet of Rentable Area.
Additional Space: An undesignated portion of the
Initial Space and Additional Space
containing approximately 10,179
square feet of Rentable Area.
Expansion Space: A portion of the 6th Floor of the
Building, substantially as shown on
Exhibit B attached hereto.
Rentable Area
of the Premises: Initial Space: approximately 60,000
square feet of
Rentable Area;
Additional Space: approximately
10,179 square feet of
Rentable Area; and
Expansion Space: approximately
9,891 square feet of
of Rentable Area.
--------------------
Total Premises: approximately
80,070 square feet
of Rentable Area.
Rentable Area
of the Building: Approximately 503,989 square feet.
Office Area: All areas of the Building designated
by Landlord from time to time for
leasing for office use.
Rentable Area of
The Office Area: Approximately 490,882 square feet.
Original Term: The period commencing on the
Commencement Date for the Initial
Space and ending on the last day of
the 7th Lease Year.
Commencement Dates: The Commencement Date for the
Initial Space and the Additional
Space shall be the Substantial
Completion Date for the Initial
Space and the Additional Space.
The Commencement Date for the
Expansion Space shall be the later
of (a) the Substantial Completion
Date for the Expansion Space or (b)
July 15, 2001.
</TABLE>
2
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<TABLE>
<S> <C>
Extension Option: Tenant has the right to extend the
Original Term for 1 additional
period of 5 years in accordance with
and subject to Section 2.4 hereof.
Scheduled Delivery Dates: The Scheduled Delivery Date for the
Initial Space and the Additional
Space shall be August 7, 2000.
The Scheduled Delivery Date for the
Expansion Space shall be July 15,
2001.
Allowance: $3,158,055 for the Initial Space and
the Additional Space, and $445,095
for the Expansion Space, totaling
$3,603,150 for the entire Premises.
Annual Fixed Rent Rate and
Monthly Fixed Rent Rate:
</TABLE>
The following rates shall apply for the Initial Space and the
Additional Space:
<TABLE>
Fixed Rent Period Annual Fixed Rent Rate Monthly Fixed Rent Rate
----------------- ---------------------- -----------------------
<S> <C> <C>
1st $2,610,000.00 $217,500.00
2nd $3,052,786.50 $254,398.88
3rd $3,105,420.75 $258,785.06
4th $3,333,502.50 $277,791.88
</TABLE>
In addition to the above, the following rates shall apply for the
Expansion Space from and after the Fixed Rent Commencement Date
therefor (which is scheduled to occur during the 2nd Fixed Rent Period
at the beginning of the 2nd Lease Year):
<TABLE>
<CAPTION>
Fixed Rent Period Annual Fixed Rent Rate Monthly Fixed Rent Rate
----------------- ---------------------- -----------------------
<S> <C> <C>
2nd $430,258.50 $35,854.88
3rd $437,676.75 $36,473.06
4th $469,822.50 $39,151.88
</TABLE>
<TABLE>
<S> <C>
1st Fixed Rent Period: The period from the Fixed Rent Commencement
Date for the Initial Space through the day
before the Fixed Rent Commencement Date for
the Additional Space.
2nd Fixed Rent Period: The period from the Fixed Rent Commencement
Date for the Additional Space through the
end of the 2nd Lease Year.
</TABLE>
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<TABLE>
<S> <C>
3rd Fixed Rent Period: The period from the beginning of the 3rd
Lease Year through the end of the 4th Lease
Year.
4th Fixed Rent Period: The period from the beginning of the 5th
Lease Year through the end of the 7th Lease
Year.
Fixed Rent
Commencement Dates: The Fixed Rent Commencement Date for the
Initial Space shall be the date 100 days
after the Commencement Date for the Initial
Space and the Additional Space.
The Fixed Rent Commencement Date for the
Additional Space shall be the date 281 days
after the Commencement Date for the Initial
Space and the Additional Space.
The Fixed Rent Commencement Date for the
Expansion Space shall be the date 120 days
after the Commencement Date for the
Expansion Space.
Base Operating Costs: An amount equal to the greater of (a) $7.50
times the Rentable Area of the Office Area
(i.e., $3,681,615.00) based upon the
currently anticipated Rentable Area of the
Office Area), or (b) the actual amount of
Operating Costs incurred during calendar
year 2001.
Base Taxes: An amount equal to $3.18 times the total
Rentable Area of the Building (i.e.,
$1,602,685.02 based upon the currently
anticipated total Rentable Area of the
Building).
Tenant's Tax Percentage: The ratio of the Rentable Area of the
Premises to the total Rentable Area of the
Building, which shall be deemed to be as
follows:
Initial Space: 11.91%
Additional Space: 2.02%
Expansion Space: 1.96%
-----------------------
Total Premises: 15.89%
</TABLE>
4
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<TABLE>
<S> <C>
Tenant's Office Percentage: The ratio of the
Rentable Area of the Premises to the total
Rentable Area of the Office Area, which
shall initially be deemed to be as follows:
Initial Space: 12.22%
Additional Space: 2.07%
Expansion Space: 2.02%
-----------------------
Total Premises: 16.31%
Permitted Uses: General business offices.
Commercial General
Liability Insurance Limits: $3,000,000 per occurrence
$5,000,000 general aggregate.
Broker: Spaulding & Slye and Cresa Partners
Security Deposit Amount: $2,000,000.00
</TABLE>
1.2 EXHIBITS
The Exhibits listed in the Table of Contents and attached hereto are
incorporated in this Lease by reference and are to be construed as a
part of this Lease.
1.3 DEFINITIONS
For the purposes of this Lease, the following terms shall be as defined
below or as defined in the Section of this Lease referenced below:
"ABATEMENT THRESHOLD" shall be as defined in Section 4.2.5.
"ADA" shall mean the Americans With Disabilities Act of 1990 and all
rules and regulations promulgated thereunder.
"AIR CONDITIONING DESIGN CONDITIONS" shall be as defined in Section
5.1.1(a).
"ALLOWANCE" shall be as defined in Section 1.1.
"ANNUAL FIXED RENT RATE" shall be as defined in Section 1.1.
"ARCHITECT" shall be as defined in Section 3.3.
"BASE BUILDING WORK" shall be as defined in Section 3.1.
"BASE OPERATING COSTS" shall be as defined in Section 1.1.
5
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"BASE TAXES" shall be as defined in Section 1.1.
"BROKER" shall be the broker or brokers listed in Section 1.1.
"BUILDING" shall be as defined in Section 1.1.
"BUILDING HOLIDAYS" shall mean New Year's Day, Martin Luther King's
Day, Presidents' Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and the Friday thereafter, and Christmas Day, or such
weekday as may be generally observed when any such holiday occurs on a
weekend.
"CAPITAL EXPENDITURES" shall be as defined in Section 4.2.3(d).
"CHANGE ORDER COSTS" shall be as defined in Section 3.6.
"COMMENCEMENT DATE" shall be as defined in Section 2.2.
"COMMUNICATIONS EQUIPMENT" shall be as defined in Section 11.10(a).
"CONSTRUCTION DOCUMENTS" shall be as defined in Section 3.3(a).
"DEFAULT RATE" shall mean a fluctuating rate per annum equal to the
lesser of (a) 4% above the Prime Rate, or (b) the maximum legally
permitted rate.
"DOCUMENTS" shall be as defined in Section 3.3(a).
"ENVIRONMENTAL LAWS" "shall be as defined in Section 6.2.3.
"EXTENSION TERM" shall be as defined in Section 2.3(a).
"EXPANSION SPACE" shall be as defined in Section 1.1.
"FAA" shall be as defined in Section 11.10(f).
"FAIR RENTAL VALUE" shall be as defined in Section 2.4(c).
"FCC" shall be as defined in Section 11.10(f).
"1ST FIXED RENT PERIOD" shall be as defined in Section 1.1.
"FIXED RENT COMMENCEMENT DATE" shall be as defined in Section 1.1.
"FIXED RENT PERIOD" shall mean each of the 1st Fixed Rent Period, 2nd
Fixed Rent Period, 3rd Fixed Rent Period and 4th Fixed Rent Period.
6
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"4TH FIXED RENT PERIOD" shall be as defined in Section 1.1.
"GARAGE" shall mean the underground parking garage serving the Building
and the complex of which the Building will be a part.
"GENERATOR" shall be as defined in Section 13.1.
"HAZARDOUS MATERIALS" shall be as defined in Section 6.2.3.
"HAZARDOUS MATERIALS ACTIVITIES" shall be as defined in Section 6.2.3.
"INITIAL SPACE" shall be as defined in Section 1.1.
"LANDLORD" shall be as defined in Sections 1.1 and 11.4.
"LANDLORD AFFILIATE" shall mean any entity controlled by, controlling
or under common control with Landlord.
"LANDLORD'S ENGINEERS" shall be as defined in Section 3.3(a).
"LANDLORD PLAN NOTICE" shall be as defined in Section 3.3(b).
"LANDLORD'S RESTORATION WORK" shall be as defined in Section 7.2.
"LANDLORD'S WORK" shall be as defined in Section 3.1.
"LEASE YEAR" shall mean any 12 month period beginning on the Fixed Rent
Commencement Date for the Initial Space or on any anniversary of the
Fixed Rent Commencement Date for the Initial Space, except that the
last Lease Year shall end on the expiration or earlier termination of
the term.
"MASSPORT" shall be as defined in Section 9.1(a).
"MASSPORT LEASE" shall be as defined in Section 9.1(a).
"MEASUREMENT METHOD" shall be as defined in Exhibit J.
"MONTHLY FIXED RENT RATE" shall be as defined in Section 1.1.
"NON-DISTURBANCE AGREEMENT" shall be as defined in Section 9.1(a).
"NORMAL BUSINESS HOURS" shall mean from 8:00 a.m. to 6:00 p.m. Monday
through Friday and from 9:00 a.m. to 1:00 p.m. on Saturdays, except on
Building Holidays.
7
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"NORMAL OFFICE CHEMICALS" shall be as defined in Section 6.2.2.
"OFFICE AREA" shall be as defined in Section 1.1.
"121A OWNER" shall be as defined in Section 4.2.1(f).
"OPERATING COSTS" shall be as defined in Section 4.2.3(b).
"ORIGINAL NOTICE ADDRESS OF LANDLORD" shall be as defined in Section
1.1.
"ORIGINAL NOTICE ADDRESS OF TENANT" shall be as defined in Section 1.1.
"ORIGINAL TERM" shall be as defined in Section 1.1.
"OUTSIDE SERVICES" shall be as defined in Section 5.3.
"PART OF THE PREMISES" shall mean each of the Initial Space, the
Additional Space and the Expansion Space.
"PERMITTED TRANSFER" shall be as defined in Section 6.2.1(f).
"PERMITTED USES" shall be as defined in Section 1.1.
"PREMISES" shall be as defined in Section 1.1
"PRIME RATE" shall mean the prime rate published (or the highest
published prime rate if more than one is published) by the Wall Street
Journal (or if such publication ceases, a comparable substitute
reasonably designated by Landlord).
"PROPERTY" shall be as defined in Section 1.1.
"RENTABLE AREA" shall be as defined in Exhibit J.
"RENTABLE AREA OF THE PREMISES" shall be as defined in Section 1.1.
"RETAIL AREA" shall mean all areas of the Building designated by
Landlord from time to time for leasing for retail use.
"ROOF SPACE" shall be as defined in Section 11.10(a).
"SCHEDULED DELIVERY DATE" shall be as defined in Section 1.1.
"SECURITY DEPOSIT" shall be as defined in Section 12.1.
8
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"SECURITY DEPOSIT AMOUNT" shall be as defined in Section 1.1, as the
same may be reduced in accordance with and subject to Section 12.02.
"6A CONTRACT" shall be as defined in Section 4.2.1(f).
"6A PAYMENT" shall be as defined in Section 4.2.1(e).
"2ND FIXED RENT PERIOD" shall be as defined in Section 1.1.
"STAIRWAY" shall be as defined in Section 3.3(f).
"SUBSTANTIALLY COMPLETED" shall be as defined in Section 3.2.
"SUBSTANTIAL COMPLETION DATE FOR THE INITIAL SPACE AND THE ADDITIONAL
SPACE" shall be as defined in Section 3.2(a).
"SUBSTANTIAL COMPLETION DATE FOR THE EXPANSION SPACE" shall be as
defined in Section 3.2(a).
"SUCCESSOR LANDLORD" shall be as defined in Section 9.1(b)
"SUPERIOR LEASE" shall be as defined in Section 9.1(a).
"SUPERIOR LESSOR" shall be as defined in Section 9.1(a).
"SUPERIOR MORTGAGE" shall be as defined in Section 9.1(a).
"SUPERIOR MORTGAGEE" shall be as defined in Section 9.1(a).
"TANK" shall be as defined in Section 13.1.
"TAXES" shall be as defined in Section 4.2.1(d).
"TAX OBLIGATION" shall be as defined in Section 4.2.1.
"TAX YEAR" shall mean any calendar year all or part of which occurs
during the term.
"TENANT" shall be as defined in Section 1.1.
"TENANT AFFILIATE" shall be as defined in Section 6.2.1(f)(1).
"TENANT DELAY" shall be as defined in Section 3.2(b).
"TENANT'S MARKET VALUE OF EQUITY" shall be as defined in Section
6.2.1(e).
9
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"TENANT'S OFFICE PERCENTAGE" shall be as defined in Section 1.1.
"TENANT'S SHARE OF OPERATING COSTS" shall be as defined in Section
4.2.3(a).
"TENANT'S SHARE OF TAXES" shall be as defined in Section 4.2.1(a).
"TENANT SUCCESSOR" shall be as defined in Section 6.2.1(f)(2).
"TENANT'S TAX PERCENTAGE" shall be as defined in Section 1.1.
"TERM" shall be as defined in Section 2.3(a).
"TERMINATION DEADLINE" shall be as defined in Section 3.1(c).
"3RD FIXED RENT PERIOD" shall be as defined in Section 1.1.
"TIW" shall be as defined in Section 3.1.
ARTICLE 2
PREMISES AND TERM
2.1 PREMISES. (a) Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord, subject to and with the benefit of the terms, covenants,
conditions and provisions of this Lease, the Premises, excluding the
roof, exterior faces of exterior walls, the common stairways,
stairwells, elevators and elevator shafts, and pipes, ducts, conduits,
wires, and appurtenant fixtures serving exclusively or in common other
parts of the Building, and if the Premises includes less than entire
rentable area of any floor, excluding the central core area of such
floor.
(b) Tenant shall have, as appurtenant to the Premises, rights to use in
common, subject to reasonable rules of general applicability to tenants
of the Building from time to time made by Landlord of which Tenant is
given notice: (1) the common lobbies, hallways, stairways, and
elevators of the Building, (2) common walkways necessary for access to
the Building, and (3) if the Premises include less than the entire
rentable area of any floor, the common toilets and other common
facilities in the central core area of such floor.
(c) Landlord shall make available to the Tenant during the term of this
lease up to 70 parking spaces in the Garage, on an unassigned basis and
subject to the reasonable rules and regulations from time to time in
force. Tenant shall pay for such spaces monthly at the prevailing rate
in effect from time to time. Tenant shall notify Landlord on or before
the Commencement Date for the Initial Space and the Additional Space
how many of
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<PAGE>
such parking spaces Tenant desires to use and the amount so elected
shall remain fixed for the term of this Lease.
(d) Landlord reserves the right from time to time, upon reasonable
notice (except in the case of emergency) and without unreasonable
interference with Tenant's use of the Premises: (1) to install, use,
maintain, repair, replace and relocate for service to the Premises
and/or other parts of the Building, pipes, ducts, conduits, wires and
appurtenant fixtures, wherever located in the Premises or Building, (2)
to alter or relocate any other common facility, (3) to make any repairs
and replacements to the Premises which Landlord may reasonably deem
necessary, and (4) in connection with any excavation made upon adjacent
land of Landlord or others, to enter, and to license others to enter,
upon the Premises to do such work as the person causing such excavation
deems necessary to preserve the wall of the Building from injury or
damage and to support the same.
2.2 RIGHT OF FIRST OFFER. If any space on the 6th floor of the Building
that is not subject to any rights of the first tenant thereof or the
first expansion rights granted by Landlord to another tenant with
regard to such space nor previously occupied by nor previously offered
to Tenant pursuant to this Section 2.2 becomes available during the
Original Term of this Lease, prior to marketing such space, other than
to the then tenant thereof, Landlord shall first offer to Tenant the
opportunity to lease such space, provided that (a) the initial Tenant
named herein (and/or the transferee in a Permitted Transfer) occupies
at least 70% of the Premises, and (b) Tenant is not in default
hereunder beyond any applicable grace period at such time. The rent,
length of term and other terms and conditions offered to Tenant shall
be the same as Landlord would then offer for such to the general
market, including market tenant improvements (if any), leasing
commissions, rents and other terms on which Landlord would offer
comparable space in the Building. Such offer may be for a term that is
not coterminous with the term hereof. Tenant shall have 10 business
days to accept or reject such offer with respect to the entirety of
such space. If Tenant accepts such offer, Landlord and Tenant shall
both negotiate in good faith an amendment to this Lease with respect to
such space, acceptable to both parties. If Tenant rejects such offer,
or fails to accept such offer in writing to Landlord within such 10
business day period, Landlord will then be free to offer such space to
the general market, but Landlord may not lease such space at a net
effective rent (taking into account any tenant improvements, free rent
or other concessions) which is less than 90% of that offered to Tenant
without again offering such space to Tenant at such lesser rent in
accordance herewith.
2.3 TERM. The Original Term shall begin with regard to each of the Initial
Space, Additional Space and Expansion Space on the respective
Commencement Date therefor and shall continue for the Original Term,
unless sooner terminated as hereinafter provided. When the dates of the
beginning and end of the term have been determined for each of the
Initial Space, Additional Space and Expansion Space, such dates shall
be evidenced by a document, in the form attached hereto as Exhibit C,
executed by Landlord and Tenant and delivered each to the other.
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2.4 EXTENSION OPTION. (a) Provided that as of the date of the notice
specified below and at the commencement of the Extension Term, as
defined below, Tenant is not in default beyond any applicable grace
period and has not previously been in default of its obligations under
this Lease beyond any applicable grace period during the immediately
preceding 12 months and that Tenant has not assigned this Lease or
sublet more than 30% of the Premises (excluding Permitted Transfers),
Tenant shall have the right to extend the term of this Lease for 1
additional period of 5 years, such period to begin immediately upon the
expiration of the then current term of this Lease (the "Extension
Term"). All of the terms, covenants and provisions of this Lease shall
apply to such Extension Term except that the Annual Fixed Rent Rate for
such Extension Term shall be the Fair Rental Value of the Premises at
the commencement of such Extension Term, as designated by Landlord. If
Tenant shall elect to exercise any of the aforesaid options, it shall
do so by giving Landlord notice in writing of its intention to do so
not later than 15 months prior to the expiration of the then current
term of this Lease. It is agreed that time is of the essence of this
Section 2.3. Accordingly, if Tenant fails timely to exercise its option
for any Extension Term on or before the applicable exercise date
specified above, Tenant shall have no further right or option to extend
the term of this Lease hereunder or otherwise. The Original Term and
the Extension Term are herein together called the "term."
(b) If Tenant timely and properly gives such notice with regard to the
Extension Term, the term of this Lease shall be automatically extended
for the Extension Term without the execution of any additional
documents.
(c) (1) For the purposes hereof, the "Fair Rental Value" of the
Premises shall mean the fair rental value thereof that that
would be agreed upon between a landlord and a tenant executing
a lease with respect to comparable space in a comparable
building located in Boston, Massachusetts for a comparable
term, upon all of the other business terms of this Lease
assuming the following:
(A) the landlord and tenant are well informed and well advised
and each is acting in what it considers to be its own best
interests;
(B) the rental shall reflect the condition of the Premises and
all residual value of any improvements to the Premises; and
(C) the transaction takes into consideration the additional
rent to be paid by Tenant and all applicable brokerage
commissions.
(2) In no event, however, shall the Fair Rental Value be less
than the Annual Fixed Rent Rate in effect immediately prior to
the Extension Term.
(3) Notwithstanding anything to the contrary herein contained,
the parties hereby agree that in connection with any
determination of Fair Rental Value hereunder, Landlord shall
have the right, exercisable by written notice to Tenant
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on or before the time that Landlord gives Tenant its
designation of Fair Rental Value hereunder :
(A) to change Base Operating Costs from the amount stated
in Section 1.1 to an amount equal to the actual
amount of Operating Costs for the immediately
preceding Lease Year; and/or
(B) to change the Base Taxes from the amount stated in
Section 1.1 to an amount equal to the actual amount
of the 6A Payment or Taxes for the immediately
preceding fiscal/tax year for which Landlord has
actual data.
If Landlord exercises such right, such new base amounts shall
then apply for the Extension Term and shall be taken into
account in determining the Fair Rental Value.
(d) If Tenant disagrees with Landlord's designation of the Fair Rental
Value, and the parties cannot agree thereon, then the Fair Rental Value
shall be determined by the appraisal process set forth in Article 10
hereof.
(e) If Tenant exercises its right of appraisal and the appraisal has
not been concluded at the commencement of the Extension Term, Tenant
shall pay annual Fixed Rent as so determined by Landlord and additional
rent as provided in Section 4.2 hereof. If the Fair Rental Value as
determined by appraisal is greater than or less than Fair Rental Value
as determined by Landlord, then any adjustment required to correct the
amount previously paid shall be made by payment by the appropriate
party 10 days after such determination of Fair Rental Value.
(f) Notwithstanding any contrary provision of this Section 2.4 or any
other provision of this Lease, any purported exercise by Tenant of its
rights hereunder shall be void and of no effect unless on the date of
Tenant's notice to Landlord exercising its right to extend the term for
the Extension Term and on the date of commencement of the Extension
Term: (i) this Lease is in full force and effect; (ii) Tenant is not in
default of any of its obligations under this Lease beyond any
applicable grace period; and (iii) the original Tenant hereunder
(and/or the transferee in a Permitted Transfer) continues in occupancy
of at least 70% of the Premises; provided, however, that Landlord
reserves the right to waive by written notice the provisions of this
paragraph with respect to any Extension Term.
(g) In the event Tenant elects to exercise the extension option as set
forth in this Section 2.4, Landlord and Tenant agree to enter into an
amendment to this Lease to confirm such exercise and to document all
changes to this Lease resulting from any exercise of such option;
provided, however, the execution of any such amendment shall not be a
condition precedent to the valid exercise by Tenant of the extension
option granted herein.
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ARTICLE 3
IMPROVEMENTS
3.1 CONSTRUCTION OF BUILDING AND PERFORMANCE OF LANDLORD'S WORK. (a) The
Building will be constructed substantially in accordance with Exhibit
D, the Building Description. Landlord shall cause to be performed the
work required by Exhibit D and Exhibit E, Base Building Specifications
(collectively, referred to as the "Base Building Work" or "Landlord's
Work"). The parties acknowledge and agree that Landlord's Work in the
Premises will be performed in two phases, the first being Landlord's
Work in the Initial Space and the Additional Space and the second being
Landlord's Work in the Expansion Space, and that the provisions of this
Article 3 shall apply to each of such phases separately except as
otherwise expressly provided or implied by the context. All work other
than Landlord's Work that is necessary or desirable to prepare the
Premises for Tenant's occupancy shall be performed by Tenant in
accordance with and subject to the requirements of this Lease (such
work being referred to herein as the "TIW"). All such Landlord's Work
shall be done in a good and workmanlike manner employing new first
quality materials and in compliance with all applicable zoning,
building, fire, health and other codes, regulations, ordinances and
laws. Without limiting the foregoing, Landlord agrees that Landlord's
Work (including construction of the common areas and all Base Building
Work within each part of the Premises) shall be performed in compliance
with the ADA. Landlord shall have the right, for the purpose of
reducing costs or insuring availability, to substitute materials of at
least equal kind and quality for those specified in Exhibit E. Subject
to the provisions of Section 11.5 hereof and to delay caused by Tenant
Delay, Landlord shall use diligence (1) to cause Landlord's Work in the
Initial Space and the Additional Space to be substantially completed by
the Scheduled Delivery Date therefor, and (2) to cause Landlord's Work
in the Expansion Space to be performed on or before the Scheduled
Delivery Date therefor; provided, however that Landlord shall have no
responsibility or liability for failing to do so except to the extent
otherwise expressly provided in Sections 3.1(b) and 3.1(c) below.
(b) Notwithstanding Section 3.1(a) above, if the Substantial Completion
Date for the Initial Space and the Additional Space has not occurred on
or before the Scheduled Delivery Date therefor, which date shall be
extended for any delays in the performance of Landlord's Work caused by
Tenant Delay or causes beyond Landlord' reasonable control, then Tenant
shall be entitled to a credit against the Fixed Rent and Additional
Rent first payable after the Fixed Rent Commencement Date for the
Initial Space and the Additional Space in the amount of 1 day's Fixed
Rent for the Initial Space for each day of such delay until the
Substantial Completion Date for the Initial Space and the Additional
Space occurs.
(c) Notwithstanding Section 3.1(a) above, if the Commencement Date has
not occurred on or before December 31, 2000, which date shall be
extended for any delays caused by Tenant Delay (as so extended the
"Termination Deadline"), Tenant may terminate this Lease by giving
Landlord written notice of its election to do so on or
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before the earlier of the Commencement Date or 1 month after the
Termination Deadline. In such event, if Tenant timely gives such
notice, this Lease shall terminate unless the Commencement Date occurs
within 30 days thereafter, in which case this Lease shall continue in
full force and effect and Tenant's termination notice shall be void. If
Tenant fails timely to give such notice, Tenant shall have no further
right to terminate this Lease under this Section 3.1(c), time being of
the essence hereof.
3.2 SUBSTANTIAL COMPLETION. (a) The term "substantially completed" as used
herein with regard to any part of the Premises shall mean that (1)
Landlord's architect has certified that Landlord's Work therein has
been completed, with the exception of minor items which can be fully
completed without material interference with Tenant and other items
which because of the seasonal nature of the item (such as HVAC
balancing) are not practicable to do at the time, and (2) a certificate
of occupancy has been issued for so much of the Base Building Work as
is necessary to obtain a certificate of occupancy for the Premises,
which may be issued on a temporary basis so long as Tenant may occupy
the Premises for the performance of the TIW and any requirements for
obtaining a permanent certificate of occupancy may be satisfied by
Landlord without material interference with the performance of the TIW.
If Landlord's Work in any part of the Premises is delayed due to Tenant
Delay, then, for the purposes of determining the Commencement Date
therefor, the Landlord's Work shall be deemed to be substantially
completed on the date that such work would have been substantially
completed but for such Tenant Delay. If the Landlord's Work is deemed
substantially completed, pursuant to the foregoing (and the term shall
have commenced by reason thereof), but the Landlord's Work is not in
fact substantially completed, Tenant shall not (except with Landlord's
consent) be entitled to take possession of the Premises for any purpose
until the Landlord's Work is in fact substantially completed. Any of
Landlord's Work not fully completed on the date when Landlord's work is
in fact substantially completed shall thereafter be so completed within
60 days thereafter by Landlord. The date when Landlord's Work in the
Initial Space and the Additional Space has been (or is deemed to have
been) substantially completed in accordance herewith is referred to
herein as the "Substantial Completion Date for the Initial Space and
the Additional Space." The date when Landlord's Work in the Expansion
Space has been (or is deemed to have been) substantially completed in
accordance herewith is referred to herein as the "Substantial
Completion Date for the Expansion Space."
(b) For the purposes hereof "Tenant Delay" shall be defined as any
delay in the performance of Landlord's Work caused in fact by (i)
special work, long lead-time items, changes, alterations or additions
to Landlord's Work requested by Tenant and agreed to by Landlord (in
its sole discretion), (ii) delay and/or default on the part of Tenant
or its contractors including, without limitation, the utility companies
or other entities furnishing communications, data processing or other
service or equipment to Tenant who may have been granted access to the
Premises by Landlord prior to the Commencement Date, (iv) any
interference with the performance of Landlord's Work by Tenant,
Tenant's Architect or any of its agents, employees, engineers or
contractors, or (v) any other action or inaction by Tenant or any of
its agents, employees or contractors.
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(c) On or about the date when Landlord's Work is in fact substantially
completed, Landlord's Project Manager and Tenant's Architect shall
conduct a joint walkthough of the Premises and Tenant's Architect shall
prepare a mutually acceptable punchlist setting forth any items of
Landlord's Work which are uncompleted or do not conform to Exhibit E
based on such walkthrough, and deliver the same to Landlord's Project
Manager, and Landlord's Project Manager shall give Tenant's Architect
its final comments thereon within 10 business days after receipt
thereof. Any dispute concerning the items to be included on such
punchlist shall be resolved by Landlord's architect for the Building,
subject to Tenant's right to dispute the same by written notice to
Landlord within 10 business days of after receipt of notice thereof.
Landlord's Work shall be deemed approved by Tenant when Tenant occupies
the Premises for the performance of the TIW, except for items on such
punchlist, and any defects in materials or workmanship or seasonal
adjustments not reasonably observable on the Commencement Date of which
Tenant shall give Landlord written notice within 1 year after the
Commencement Date (or as to any punchlist items, 1 year after their
completion).
3.3 PLANS AND SPECIFICATIONS. (a) Tenant agrees to prepare, at Tenant's
sole cost and expense, and furnish to Landlord, architectural,
mechanical, electrical, plumbing, fire protection and structural
engineering schematic design documents, design development documents
and final construction documents for the TIW (such documentation and
the constituent items thereof are referred to herein collectively and
respectively as the "Documents"; and the final construction documents
approved by Landlord hereunder are referred to herein as the
"Construction Documents"). The Documents shall be prepared by an
architect ("Tenant's Architect") experienced in the construction of
tenant improvements in first-class buildings in the Boston area,
retained by Tenant and approved by Landlord in advance. Landlord hereby
approves Gensler and Associates as Tenant's Architect. There shall be
no requirement for Tenant to use any particular building standard
materials or items; however, the TIW shall be consistent with tenant
improvements typically installed in comparable first-class office
buildings in Boston. Tenant shall also retain at market rates the
services of the mechanical, electrical, plumbing and structural
engineers engaged by Landlord for the Base Building Work ("Landlord's
Engineers") to assist in the preparation of the Documents. Tenant shall
cause Tenant's Architect to perform all architectural services
typically and reasonably required under typical construction contracts
for similar leasehold improvements and shall be solely responsible for
the cost of all architectural and engineering services required for the
TIW. The Construction Documents shall comply with all applicable laws,
ordinances and regulations (including, without limitation, the
applicable requirements of the ADA) and shall be in a form satisfactory
to appropriate governmental authorities responsible for issuing the
permits, approvals and licenses required for construction. Tenant's
interior furnishings (i.e., specifications, coordination, supply and
installation of furniture, furnishings, telephone and moveable
equipment) will also be the responsibility of Tenant.
(b) The Documents (and each item thereof, e.g., Tenant's design
documents, design development documents, and final construction
documents) shall require Landlord's
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approval, which approval shall not be unreasonably withheld,
conditioned or delayed. Landlord will give Tenant notice ("Landlord
Plan Notice") of any objections it may have with respect to any
Documents promptly after Landlord's receipt thereof. Landlord shall not
be deemed unreasonable for withholding approval of such plans and
specifications which (i) involve or affect any structural or exterior
element of the Building or any portion thereof, (ii) would require
changes in the Base Building, (iii) might, in Landlord's reasonable
opinion, materially adversely affect the value of the Building or any
portion thereof, (iv) materially adversely affect the proper
functioning of the Building systems or other facilities, or (v) will
increase the cost of construction or insurance or Taxes on the Building
or any portion thereof, unless Tenant first gives assurances acceptable
to Landlord for payment of such increased cost.
(c) Tenant shall cause the Documents to be revised in a manner
sufficient to remedy Landlord's objections and/or respond to Landlord's
concerns and redelivered to Landlord as soon as reasonably possible
after Tenant is given a Landlord Plan Notice and shall use diligence to
complete the Construction Documents.
(d) Landlord's approval of any plans and specifications furnished to
and approved by Landlord, or of any changes thereto, shall in no way be
deemed an agreement by Landlord that the work contemplated therein
fulfills the requirements of Section 3.3(a) hereof. Tenant shall be
responsible for the design of the TIW.
(e) Core drilling for the TIW shall be permitted, subject to prior
review and approval by Landlord's Engineers and scheduling with
Landlord so as not to disturb other Tenants.
(f) Landlord agrees that the TIW may include an internal stairway (the
"Stairway") between the Premises on the 7th and 8th floors provided
that:
(1) the location of the Stairway and all other particulars
thereof shall be set forth in the Documents which shall be
subject to Landlord's approval in accordance herewith;
(2) there shall not be more than 1 Stairway in the Premises;
(3) the Stairway shall comply with all applicable building
code requirements and the slab around the stair opening
penetration in the 8th floor shall be reinforced to the
extent reasonably required by Landlord; and
(4) unless otherwise agreed by Landlord in writing, upon the
expiration or earlier termination of the term hereof,
Tenant shall be required to remove the Stairway and
restore the area in which it was located to the condition
it was in before the installation thereof, including,
without limitation, in-filling the stair opening
penetration and reinforcing the same so that the in-filled
slab has the load bearing capacity and other
characteristics set forth in Section H of Exhibit D
attached hereto.
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3.4 TENANT'S CONTRACTOR. (a) Tenant agrees to employ for the TIW a
responsible general contractor reasonably approved by Landlord who
shall (1) employ, and hire subcontractors who employ, union labor to do
all union trade work, (2) employ, and hire subcontractors who employ,
labor which will work without interference with other labor working on
the Premises or Building for any work that is not union trade work, and
(3) carry builder's risk insurance covering Landlord and Tenant as
their interest may appear, against loss or damage by fire, vandalism,
malicious mischief and such risks as are customarily covered by a
so-called "extended coverage endorsement" to the full insurable value
of the TIW, in addition to all other insurance required by Section
6.2.5 and submit certificates evidencing such coverage to Landlord
prior to the commencement of the TIW. Tenant shall obtain Landlord's
approval of the Construction Documents for the TIW and all necessary
governmental licenses and permits therefor and deliver to Landlord the
statements and insurance certificates required under Section 6.2.5 on
or before the Commencement Date for the part of the Premises in
question and promptly thereafter Tenant shall commence and diligently
prosecute to completion the TIW in accordance with the Construction
Documents in a good and workmanlike manner employing materials of good
quality and in compliance with all applicable zoning, building, fire,
health and other codes, regulations, ordinances and laws. Any changes
in the Construction Documents shall require Landlord's prior written
approval, which shall not be unreasonably withheld, conditioned or
delayed. The TIW shall otherwise be performed in accordance with the
applicable provisions of this Lease, including, without limitation,
Section 6.2.5 hereof.
(b) With Landlord's prior written consent (which may be withheld
without challenge for unreasonableness), Tenant may enter the Premises
prior to the Commencement Date in order to commence the TIW therein but
only if in Landlord's judgement it can be done without interference
with Landlord's Work. Any such entry shall be upon all of the terms and
conditions of this Lease except that no rent shall be payable therefor.
Tenant shall have the right to enter each part of the Premises from and
after the Commencement Date therefor to perform the TIW therein, and
shall have the right to occupy any part of the Premises for the
Permitted Uses prior to the Fixed Rent Commencement Date therefor (and
without triggering an obligation to pay Fixed Rent) upon satisfaction
of the requirements for the final advance of the Allowance for such
part of the Premises under Section 3.5 below. Tenant shall provide a
project manager who will be the point of contact with Landlord's
Project Manager for all matters dealing with the design and
construction of the TIW.
3.5 FUNDING OF ALLOWANCE. (a) Landlord shall pay to Tenant a contribution
toward the cost of the TIW in the Initial Space, the Additional Space
and the Expansion Space, in an amount not to exceed the Allowance for
the Initial Space, Additional Space and Expansion Space, respectively,
in accordance with and subject to the requirements of this Section 3.5.
When Tenant has incurred costs for the TIW in any part of the Premises,
Tenant shall submit to Landlord from time to time (but not more
frequently than monthly) requisitions for payment, in the form of AIA
Document G702 setting forth any
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costs incurred for the TIW in such part of the Premises, together with
a partial lien waiver executed by Tenant's general contractor, and
within 30 days following Landlord's receipt thereof, Landlord shall pay
to Tenant the amount of each such requisition, provided that the last
requisition hereunder shall not be paid until 30 days after Tenant's
requisition accompanied by a written statement from Tenant's Architect
that such TIW has been completed in accordance with Tenant's
Construction Documents, a final lien waiver executed by Tenant's
general contractor and a final certificate of occupancy and other
required governmental approvals for such TIW. The costs of the TIW
shall include all costs incurred by Tenant for architectural and
engineering fees, hard construction, telecommunications equipment and
for purchase and installation of improvements (but excluding any trade
fixtures or personal property); provided, however, that the amount of
the Allowance for any part of the Premises that shall be available for
architectural and engineering services and other soft costs and
relocation expenses shall be limited to $7 per square foot of Rentable
Area of such part of the Premises. Landlord shall be entitled to deduct
from the Allowance an amount sufficient to reimburse Landlord for its
actual costs in connection with the TIW including additional security
if reasonably required as a result of TIW, the costs of any freight
elevator operation in excess of normal use and a construction
management fee equal to 1% of TIW hard costs and general conditions.
Subject to the limitation in the second preceding sentence, in the
event Tenant does not use the entire Allowance for any part of the
Premises as described above, such unused Allowance may be applied by
Tenant toward such reasonable costs incurred in connection with any
other portion of the Premises or for its relocation to the Premises,
payable by Landlord to Tenant within 30 days of receipt of appropriate
third party invoices or paid receipts. Tenant shall not be entitled to
any payment or credit for any portion of the Allowance that is not used
for the purposes permitted hereunder. If any lien is filed against the
Property or any part thereof or interest therein arising out of or in
connection with any TIW and such lien or encumbrance is not discharged,
insured or bonded over or otherwise disposed of to Landlord's
reasonable satisfaction within 10 days after the filing or
establishment thereof, then Landlord shall have no further obligation
to disburse any funds from the Allowance to Tenant unless and until the
same is so discharged or otherwise disposed, in addition to, and not in
lieu of, Landlord's rights and remedies and Tenant's obligations on
account thereof under Section 3.6 or otherwise.
(b) If Landlord fails to pay Tenant any portion of the Allowance
properly payable by Landlord to Tenant under Section 3.5(a) hereof and
such failure continues for 30 days after written notice thereof from
Tenant to Landlord and any Superior Mortgagee, then Tenant shall have,
as Tenant's sole and exclusive remedy, the right to set-off the amount
thereof against the rent next payable by Tenant hereunder until the
aggregate amount so set-off by Tenant shall equal the amount due from
Landlord.
3.6 MECHANIC'S LIENS. Tenant hereby indemnifies Landlord against liability
for any and all mechanic's and other liens filed in connection with the
TIW or any other work performed by Tenant under this Lease. Tenant, at
its expense, shall procure the discharge of, or shall bond over, all
such liens within 10 days after the filing of any such lien against the
Premises or the Property. If Tenant shall fail to cause any such lien
to be discharged or
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bonded over within the period aforesaid, then, in addition to any other
right or remedy, Landlord may, but shall not be obligated to, discharge
the same either by paying the amount claimed to be due or by deposit or
bonding proceedings, and in any such event Landlord shall be entitled,
if it elects, to compel the prosecution of an action for the
foreclosure of such lien and to pay the amount of the judgment in favor
of the lienor with interest, costs and allowances. Any amount so paid
by Landlord, and all costs and expenses reasonably incurred by Landlord
in connection therewith, shall constitute additional rent and shall be
paid by Tenant to Landlord on demand.
ARTICLE 4
RENT
4.1 FIXED RENT. (a) From and after the Fixed Rent Commencement Date for
each part of the Premises, Tenant covenants and agrees to pay rent to
Landlord at the Original Address of Landlord or at such other place or
to such other person or entity as Landlord may by notice in writing to
Tenant from time to time direct, at the Annual Fixed Rent Rate, in
equal installments at the Monthly Fixed Rent Rate (which is 1/12th of
the Annual Fixed Rent Rate), for the applicable Fixed Rent Period, in
advance, on the first day of each calendar month thereafter included in
the term without abatement, offset, deduction or counterclaim except as
otherwise expressly provided herein; and for any portion of a calendar
month at the beginning or end of the term, at that rate prorated on a
daily basis payable in advance for such portion.
(b) Tenant acknowledges and agrees that the Annual Fixed Rent Rate may
not be reduced by agreement of Landlord and Tenant without the prior
written consent of Massport, except pursuant to the express provisions
of this Lease.
4.2 ADDITIONAL RENT. Tenant covenants and agrees to pay the following,
as additional rent:
4.2.1 REAL ESTATE TAXES. (a) Tenant shall pay the following amounts
as additional rent during the following periods:
(1) during the period from the Fixed Rent Commencement Date
for the Initial Space through the day before the Fixed
Rent Commencement Date for the Expansion Space, Tenant
shall pay to Landlord, as additional rent, Tenant's Tax
Percentage for the Initial Space of the amount if any by
which the Tax Obligation for such period exceeds Base
Taxes;
(2) during the period from the Fixed Rent Commencement Date
for the Initial Space through the day before the Fixed
Rent Commencement Date for the Additional Space, Tenant
shall pay to Landlord, Tenant's Tax Percentage for the
Additional Space of the Tax Obligation for such period;
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(3) during the period from the Fixed Rent Commencement Date
for the Additional Space through the day before the Fixed
Rent Commencement Date for the Expansion Space, Tenant
shall pay Landlord, Tenant's Tax Percentage for the
Additional Space of the amount (if any) by which the Tax
Obligation for such period exceeds Base Taxes;
(4) during the period from the Fixed Rent Commencement Date
for the Initial Space through the day before the Fixed
Rent Commencement Date for the Expansion Space, Tenant
shall pay Landlord Tenant's Tax Percentage for the
Expansion Space of the Tax Obligation for such period; and
(5) from and after the Fixed Rent Commencement Date for the
Expansion Space, Tenant shall pay to Landlord Tenant's Tax
Percentage for the entire Premises of the amount (if any)
by which the Tax Obligation for each Tax Year or part
thereof exceeds the Tax Base.
The additional rent payable by Tenant under the preceding
sentence is referred to herein as "Tenant's Share of Taxes."
In calculating Tenant's Share of Taxes for any period that is
less than 12 months, the Tax Base shall be prorated on a daily
basis. For so long as the 6A Contract remains in effect, the
"Tax Obligation" for any Tax Year shall be defined as the 6A
Payment for such Tax Year; and if the 6A Contract is
terminated or expires at any time during the term and Taxes
are assessed on the Property, the "Tax Obligation" for all or
part of any Tax Year thereafter shall mean such Taxes. Tenant
shall remit to Landlord, on the first day of each calendar
month, estimated payments on account of Tenant's Share of
Taxes, such monthly amounts to be sufficient to provide
Landlord, by the time real estate tax payments are due and
payable to any governmental authority responsible for
collection of same, a sum equal to the Tenant's Share of
Taxes, as reasonably estimated by Landlord from time to time
on the basis of the most recent tax data available. If the
total of such monthly remittances for any Tax Year is greater
than the actual Tenant's Share of Taxes for such Tax Year,
Landlord shall promptly pay to Tenant, or credit against the
next accruing payments to be made by Tenant pursuant to this
subsection 4.2.1, the difference; if the total of such
remittances is less than the actual Tenant's Share of Taxes
for such Tax Year, Tenant shall pay the difference to Landlord
at least 10 days prior to the date or dates within such Tax
Year that any Taxes become due and payable to the governmental
authority (but in any event no earlier than 10 business days
following a written notice to Tenant, which notice shall set
forth the manner of computation of Tenant's Share of Taxes).
(b) If, after Tenant shall have made reimbursement to
Landlord pursuant to this subsection 4.2.1, Landlord shall
receive a refund of any portion of Taxes paid by Tenant with
respect to any Tax Year during the term hereof as a result of
an abatement of such Taxes by legal proceedings, settlement or
otherwise (without Landlord having any obligation to undertake
any such proceedings), Landlord
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shall promptly pay to Tenant, or credit against the next
accruing payments to be made by Tenant pursuant to this
subsection 4.2.1, the Tenant's Tax Percentage of the refund
(less the proportional, pro rata expenses, including
attorneys' fees and appraisers' fees, incurred in connection
with obtaining any such refund), as relates to Tenant's Share
of Taxes paid by Tenant to Landlord with respect to any Tax
Year for which such refund is obtained.
(c) In the event this Lease shall commence, or shall
end (by reason of expiration of the term or earlier
termination pursuant to the provisions hereof), on any date
other than the first or last day of the Tax Year, or should
the Tax Year or period of assessment of real estate taxes be
changed or be more or less than 1 year, as the case may be,
then the amount of Tenant's Share of Taxes which may be
payable by Tenant as provided in this subsection 4.2.1 shall
be appropriately apportioned and adjusted.
(d) The term "Taxes" shall mean all taxes, assessments,
betterments and other charges and impositions (including, but
not limited to, fire protection service fees and similar
charges) levied, assessed or imposed at any time during the
term by any governmental authority upon or against the
Property, or taxes in lieu thereof, and additional types
of taxes to supplement real estate taxes due to legal limits
imposed thereon. If, at any time during the term of this
Lease, any tax or excise on rents or other taxes, however
described, are levied or assessed against Landlord with
respect to the rent reserved hereunder, either wholly or
partially in substitution for, or in addition to, real estate
taxes assessed or levied on the Property, such tax or excise
on rents shall be included in Taxes; however, Taxes shall not
include franchise, estate, inheritance, succession, capital
levy, transfer, income or excess profits taxes assessed on
Landlord. Taxes shall include any estimated payment made by
Landlord on account of a fiscal tax period for which the
actual and final amount of taxes for such period has not been
determined by the governmental authority as of the date of
any such estimated payment.
(e) The term "6A Payment" shall mean an amount equal
to the product of (1) the rate per square foot under Exhibit A
of the 6A Contract applicable to the period in question for
occupied and vacant space, if applicable, times (2) the Total
Rentable Area of the Building that is occupied and vacant, if
applicable, respectively.
(f) The term "6A Contract" shall mean a certain contract dated
June 30, 1998 between the City of Boston and Commonwealth
Flats Development 121A East Limited Partnership, a
Massachusetts limited partnership ("121A Owner") which has
leased the Property to Landlord, pursuant to Section 6A of
Chapter 121A of the Massachusetts General Laws, a copy of
which has been delivered to Tenant, pursuant to which certain
payments provided for thereunder are to be made in lieu of
real estate taxes on the Property.
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4.2.2 PERSONAL PROPERTY TAXES. Tenant shall pay all taxes charged,
assessed or imposed upon the personal property of Tenant in or
upon the Premises.
4.2.3 OPERATING COSTS. (a) Tenant shall pay Landlord, as additional
rent, the following amounts during the following periods:
(1) during the period from the Fixed Rent Commencement Date
for the Initial Space through the day before the Fixed
Rent Commencement Date for the Expansion Space, Tenant
shall pay to Landlord, as additional rent, Tenant's Office
Percentage for the Initial Space of the amount if any by
which the Operating Costs for such period exceed Base
Operating Costs;
(2) during the period from the Fixed Rent Commencement Date
for the Initial Space through the day before the Fixed
Rent Commencement Date for the Additional Space, Tenant
shall pay to Landlord, Tenant's Office Percentage for the
Additional Space of Operating Costs for such period;
(3) during the period from the Fixed Rent Commencement Date
for the Additional Space through the day before the Fixed
Rent Commencement Date for the Expansion Space, Tenant
shall pay Landlord, Tenant's Office Percentage for the
Additional Space of the amount (if any) by which Operating
Costs for such period exceed Base Operating Costs;
(4) during the period from the Fixed Rent Commencement Date
for the Initial Space through the day before the Fixed
Rent Commencement Date for the Expansion Space, Tenant
shall pay Landlord Tenant's Office Percentage for the
Expansion Space of Operating Costs for such period; and
(5) from and after the Fixed Rent Commencement Date for the
Expansion Space, Tenant shall pay to Landlord Tenant's
Office Percentage for the entire Premises of the amount
(if any) by which Operating Costs for any calendar year or
part thereof exceed Base Operating Costs for such period.
The additional rent payable by Tenant under the preceding
sentence is referred to herein as "Tenant's Share of Operating
Costs." In calculating Tenant's Share of Operating Costs for
any period that is less than 12 months, Base Operating Costs
shall be prorated on a daily basis. Tenant shall remit to
Landlord, on the first day of each calendar month, estimated
payments on account of Tenant's Share of Operating Costs, such
monthly amounts to be sufficient to provide Landlord, by the
end of the calendar year, a sum equal to the Tenant's Share of
Operating Costs, as reasonably estimated by Landlord from time
to time. If, at the expiration of the year in respect of which
monthly installments of Tenant's Share of Operating Costs
shall have been made as aforesaid, the total of such monthly
remittances is greater than the actual Tenant's Share of
Operating Costs for such year, Landlord shall promptly pay to
Tenant, or credit against the next accruing
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payments to be made by Tenant pursuant to this subsection
4.2.3, the difference; if the total of such remittances is
less than the Tenant's Share of Operating Costs for such year,
Tenant shall pay the difference to Landlord within 20 days
from the date Landlord shall furnish to Tenant an itemized
statement of the Tenant's Share of Operating Costs, prepared,
allocated and computed in accordance with generally accepted
accounting principles. Any reimbursement for Operating Costs
due and payable by Tenant with respect to periods of less than
12 months shall be equitably prorated.
(b) The term "Operating Costs" shall mean all costs or
expenses incurred for the operation, cleaning, maintenance,
repair and upkeep of the Property, including, without
limitation, all costs of maintaining and repairing the
Property (including snow removal, security, operation and
repair of heating and air-conditioning equipment, elevators,
lighting and any other Building equipment or systems) and of
all repairs and replacements (other than repairs or
replacements for which Landlord has received full
reimbursement from contractors, other tenants of the Building
or from others) necessary to keep the Property in good working
order, repair, appearance and condition; all costs, including
material and equipment costs, for cleaning and janitorial
services to the Building (including window cleaning of the
Building); all costs of any reasonable insurance carried by
Landlord relating to the Property; all costs related to
provision of heat (including oil, electric, steam and/or gas),
air-conditioning, ventilation, and water (including sewer
charges) and other utilities to the Building (exclusive of
reimbursement to Landlord for any of same received as a result
of direct billing to any tenant of the Building); payments
under all service contracts relating to the foregoing; all
compensation, fringe benefits, payroll taxes and worker's
compensation insurance premiums related thereto with respect
to any employees of Landlord or its affiliates or manager
directly engaged in security and maintenance of the Property
at or below the grade of general manager; attorneys' fees and
disbursements (exclusive of any such fees and disbursements
incurred in tax abatement proceedings or the preparation or
enforcement of leases) and auditing and other professional
fees and expenses; shuttle services; a management fee which
shall not exceed the market rate for owner managed buildings;
fire protection service fees and similar governmental charges;
and the portion fairly allocable to the Property of any and
all of the foregoing costs incurred with regard to the
operation, maintenance and repair of the structural support
system and other elements and facilities which are shared by
the Property and the Garage.
(c) There shall not be included in such Operating Costs (1)
brokerage fees (including rental fees) related to the
operation of the Building; (2) interest and depreciation
charges incurred on the Property; (3) expenditures made by
Tenant with respect to (x) cleaning, maintenance and upkeep of
the Premises, or (y) the provision of electricity to the
Premises, (3) costs and expenses incurred with respect to or
fairly allocable to the Retail Area, (4) ground lease
payments, (5) costs to repair any item of Landlord's Work
which was not constructed in
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accordance with the plans and specifications therefor or any
item of the Base Building Work that was not designed in
accordance with applicable laws as of the Commencement Date,
(6) costs for which Landlord is reimbursed by insurance,
taking awards, warranties or as direct charges to other
tenants (as opposed to their share of Operating Costs), (7)
any payments to any affiliates of Landlord (other than the
management fee provided for above) for services in excess of
the costs of arms-length, third-party providers for services
of comparable quality and scope, and (8) legal and other fees
for financing, sale or ownership organizational matters of
Landlord.
(d) If, during the term of this Lease, Landlord shall replace
any capital items or make any capital expenditures
(collectively called "capital expenditures") the total amount
of which is not properly included in Operating Costs for the
calendar year in which they were made, there shall
nevertheless be included in Operating Costs for each calendar
year in which and after such capital expenditure is made the
annual charge-off of such capital expenditure. The annual
charge-off shall be determined by (i) dividing the original
cost of the capital expenditure by the number of years of
useful life thereof (the useful life shall be reasonably
determined by Landlord in accordance with generally accepted
accounting principles and practices in effect at the time of
acquisition of the capital item.); and (ii) adding to such
quotient an interest factor computed on the unamortized
balance of such capital expenditure based upon an interest
rate reasonably determined by Landlord as being the interest
rate then being charged for long-term mortgages by
institutional lenders on like properties within the locality
in which the Building is located. Provided, further, that if
Landlord reasonably concludes on the basis of engineering
estimates that a particular capital expenditure will effect
savings in Operating Costs and that such annual projected
savings will exceed the annual charge-off of capital
expenditure computed as aforesaid, then and in such event, the
annual charge-off shall be determined by dividing the amount
of such capital expenditure by the number of years over which
the projected amount of such savings shall fully amortize the
cost of such capital item or the amount of such capital
expenditure; and by adding the interest factor, as aforesaid.
(e) If during any portion of any year for which Operating
Costs are being computed, the Building was less than 95%
occupied by tenants, or if less than 95% of the Building is
occupied by tenants paying fixed rent, or if Landlord was
supplying the services being supplied hereunder to tenants
occupying less than 95% of the Building, then actual Operating
Costs incurred shall be reasonably extrapolated by Landlord to
the estimated Operating Costs that would have been incurred if
95% of the Building were occupied by tenants, tenants
occupying 95% of the Building were then paying fixed rent, and
such services were being supplied to tenants occupying 95% of
the Building, and such extrapolated amount shall, for the
purposes of this Section 4.2.3, be deemed to be the Operating
Costs for such year.
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(f) The parties acknowledge and agree that once the MBTA
Silver Line is complete and operational the shuttle service
component of Operating Costs and Base Operating Costs
thereafter will be reduced appropriately to the extent that
Landlord reasonably determines to reduce the frequency of or
eliminate such service in response to a reduction in demand
therefor.
4.2.4 INSURANCE. Tenant shall, at its expense, take out and maintain
throughout the term the following insurance protecting
Landlord and all Landlord Affiliates requested by Landlord:
4.2.4.1 Commercial general liability insurance naming
Landlord, Tenant, and Landlord's managing agent,
Landlord Affiliates and any mortgagee of which Tenant
has been given notice as additional insureds and
indemnifying the parties so named on an occurrence
basis against all claims and demands for death or any
injury to person or damage to property which may be
claimed to have occurred on the Premises (or the
Property, insofar as used by customers, employees,
servants or invitees of the Tenant), in amounts which
shall, at the beginning of the term, be at least
equal to the limits set forth in Section 1.1, and,
which, from time to time during the term, shall be
for such higher limits, if any, as are customarily
carried in the area in which the Premises are located
on property similar to the Premises and used for
similar purposes; and worker's compensation insurance
with statutory limits covering all of Tenant's
employees working on the Premises.
4.2.4.2 Fire insurance with the usual extended coverage
endorsements covering all Tenant's furniture,
furnishings, fixtures and equipment.
4.2.4.3 All such policies shall be obtained from responsible
companies qualified to do business and in good
standing in Massachusetts, which companies and the
amount of insurance allocated thereto shall be
subject to Landlord's approval, not to be
unreasonably withheld. Tenant agrees to furnish
Landlord with certificates evidencing all such
insurance prior to the beginning of the term hereof
and evidencing renewal thereof at least 30 days prior
to the expiration of any such policy. Each such
policy shall be non-cancelable with respect to the
interest of Landlord without at least 10 days' prior
written notice thereto. In the event provision for
any such insurance is to be by a blanket insurance
policy, the policy shall allocate a specific and
sufficient amount of coverage to the Premises.
4.2.4.4 All insurance which is carried by either party with
respect to the Building, the Premises or furniture,
furnishings, fixtures, or equipment therein or
alterations or improvements thereto, whether or not
required, shall include provisions which either
designate the other party as one of the insured or
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deny to the insurer acquisition by subrogation of
rights of recovery against the other party to the
extent such rights have been waived by the insured
party prior to occurrence of loss or injury, insofar
as, and to the extent that, such provisions may be
effective without making it impossible to obtain
insurance coverage from responsible companies
qualified to do business in the state in which the
Premises are located (even though extra premium may
result therefrom). In the event that extra premium is
payable by either party as a result of this
provision, the other party shall reimburse the party
paying such premium the amount of such extra premium.
If at the request of one party, this non-subrogation
provision is waived, then the obligation of
reimbursement shall cease for such period of time as
such waiver shall be effective, but nothing contained
in this subsection shall derogate from or otherwise
affect releases elsewhere herein contained of either
party for claims. Each party shall be entitled to
have certificates of any policies containing such
provisions. Each party hereby waives all rights of
recovery against the other for loss or injury against
which the waiving party is protected by insurance
containing said provisions, reserving, however, any
rights with respect to any excess of loss or injury
over the amount covered by such insurance. Tenant
shall not acquire as insured under any insurance
carried on the Premises any right to participate in
the adjustment of loss or to receive insurance
proceeds and agrees upon request promptly to endorse
and deliver to Landlord any checks or other
instruments in payment of loss in which Tenant is
named as payee.
4.2.5 UTILITIES. Tenant shall pay to Landlord all charges for
electricity supplied by Landlord and separately metered (which
shall include electricity for lights, outlets and heating,
ventilation and cooling, including reheat coils, fan boxes,
compressors and refrigerating units serving the Premises), and
to the appropriate third party all charges for telephone and
other utilities or services not supplied by Landlord pursuant
to Subsections 5.1.1, 5.1.2, and 5.1.3, whether designated as
a charge, tax, assessment, fee or otherwise, all such charges
to be paid as the same from time to time become due. Except as
otherwise provided in Article 5, it is understood and agreed
that Tenant shall make its own arrangements for the
installation or provision of all such utilities and that
Landlord shall be under no obligation to furnish any utilities
to the Premises and shall not be liable for any interruption
or failure in the supply of any such utilities to the
Premises, except to the extent expressly provided in Section
5.2 below. Notwithstanding the foregoing, if Landlord fails to
provide any service that it is required to provide above so
that Tenant cannot reasonably continue to operate its business
in the Premises and such failure continues for the Abatement
Threshold after written notice thereof from Tenant to Landlord
and each Superior Mortgagee and Superior Lessor of which
Tenant has been given notice hereunder, then, provided that
such failure or Landlord's inability to cure such condition is
not due to the fault or negligence of Tenant or any of its
agents, employees or contractors or a fire or other casualty
or taking (which shall be governed by Article 7 below), then
the Fixed Rent and Additional Rent shall be equitably abated
based
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upon the impact thereof on Tenant's ability to conduct
business in the Premises until such service(s) is completely
restored. The "Abatement Threshold" shall mean 5 consecutive
business days, unless such failure or Landlord's inability to
cure such condition is due to a cause beyond Landlord's
reasonable control generally affecting other buildings in the
vicinity of the Premises (such as a neighborhood power outage)
in which case the "Abatement Threshold" shall be 30
consecutive days.
4.3 LATE PAYMENT OF RENT. If any installment of rent is paid after the date
the same was due, and if on 2 or more prior occasions in the 12 month
period prior to the date such installment was due an installment of
rent was paid after the same was due, then Tenant shall pay Landlord a
late payment fee equal to 5% percent of the overdue payment.
ARTICLE 5
LANDLORD'S COVENANTS
5.1 AFFIRMATIVE COVENANTS. Landlord covenants with Tenant:
5.1.1 HEAT AND AIR-CONDITIONING. (a) To furnish condenser water to
the air handling units serving the Premises (reserving the
right, at any time, to change energy sources) sufficient to
enable Tenant to maintain the Premises at comfortable
temperatures (subject to all federal, state, and local
regulations relating to the provision of heat and the Air
Conditioning Design Conditions) during Normal Business Hours
by the operation of the system of air handling units,
refrigerating units, VAV boxes and reheat coils that serve the
Premises which are connected to Tenant's separately metered
electrical system, the charges for which Tenant is responsible
under Section 5.1.2 below. The "Air Conditioning Design
Conditions" shall be 78 degrees F dry bulb and 50% relative
humidity with outside conditions of 91 degrees F dry bulb and
75 degrees F wet bulb, based upon an occupancy within each
separately partitioned area in the Premises of not more than 1
person per 150 feet of Rentable Area and a combined lighting
and standard electrical load not to exceed 6 watts per square
foot of Rentable Area.
(b) If Tenant shall require condenser water outside Normal
Business Hours, Landlord shall, upon the written request of
Tenant received at least 24 hours prior to the time such
additional air conditioning or heat is required, but only to
the extent it is reasonably able to do so, furnish such
service or cause such service to be furnished and Tenant shall
pay therefor such reasonable charges as may from time to time
be established by Landlord and be in effect to cover
Landlord's incremental costs of providing such service.
Landlord currently estimates that the initial rate for such
service will be $25 per floor per hour, but the actual rate
may vary or be changed at any time and from time to time in
accordance with and subject to the preceding sentence.
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5.1.2 ELECTRICITY. To furnish to the Premises, separately metered
and at the direct expense of Tenant as provided in Section
4.2.5, up to 6 watts per square foot of Rentable Area of the
Premises of electricity for Tenant's Permitted Uses (i.e., 2
watts for lighting and 4 watts for general power). If Tenant
shall require electricity in excess of such 6 watts per square
foot of Rentable Area of the Premises for Tenant's Permitted
Uses, an additional 3 watts per square foot of Rentable Area
of the Premises is available at the floor electrical room,
which may be brought to the Premises at Tenant's expense.
5.1.3 CLEANING; WATER. To provide cleaning to the Premises and the
common areas of the Building substantially in accordance with
Exhibit F, Office Space Cleaning Specifications; and to
furnish water for ordinary cleaning, lavatory and toilet
facilities.
5.1.4 ELEVATOR SERVICE. To furnish 24 hour elevator service from the
lobby to the Premises.
5.1.5 SECURITY. To furnish at least 1 lobby attendant in the
Building 24 hours per day, and a card access control system
for access to the Building and Premises after Normal Business
Hours, which, in conjunction with the elevator system, will be
capable of limiting floor by floor access in the Building
after Normal Business Hours.
5.1.6 REPAIRS. Except as otherwise expressly provided herein, to
make such repairs and replacements to the roof, exterior
walls, floor slabs and other structural components of the
Building, and to the common areas, facilities and plumbing,
electrical, heating, ventilating and air-conditioning systems
of the Building as may be necessary to keep them in good
repair and condition (exclusive of equipment installed by
Tenant and except for those repairs required to be made by
Tenant pursuant to Section 6.1.3 hereof and repairs or
replacements occasioned by any act or negligence of Tenant,
its servants, agents, customers, contractors, employees,
invitees, or licensees). Landlord will provide and maintain
fire extinguishers in the common areas of the Building as
required by law and Tenant shall provide and maintain them in
the Premises as required by law. Landlord shall also maintain
the fire alarm speakers, strobes and alarms within the
Premises.
5.1.7 SHUTTLE SERVICE. To cause shuttle service to and from the
Boston Financial District to be provided with frequent
headways scheduled (at least every 15 minutes during Normal
Business Hours) until the MBTA Silver Line is available to the
Building whereupon service will be reduced in frequency or
eliminated to reflect any reduction in demand therefor as
reasonably determined by Landlord.
5.1.8 INDEMNIFICATION. To save Tenant harmless, and to exonerate and
indemnify Tenant from and against any and all claims,
liabilities or penalties asserted by or
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on behalf of any person, firm, corporation or public authority
on account of injury, death, damage or loss to person or
property in or upon the common areas of the Building and the
Property to the extent caused by the negligence, fault or
misconduct of Landlord or any of its agents, employees or
contractors. The foregoing indemnity shall include all costs,
expenses (including reasonable attorneys' fees), and
liabilities incurred by Tenant in or in connection with any
such claim. In case of any action or proceeding brought
against Tenant by reason of any such claim, Tenant shall give
Landlord prompt notice thereof and Landlord, upon notice from
Tenant and at Landlord's expense, shall resist or defend such
action or proceeding.
5.2 INTERRUPTION. Landlord shall be under no responsibility or liability
for failure or interruption of any of the above-described services,
repairs or replacements caused by breakage, accident, strikes, repairs,
inability to obtain supplies, labor or materials, or for any other
causes beyond the reasonable control of the Landlord, and in no event
for any indirect or consequential damages to Tenant; and failure or
omission on the part of the Landlord to furnish any of same for any of
the reasons set forth in this paragraph shall not be construed as an
eviction of Tenant, actual or constructive, nor entitle Tenant to an
abatement of rent, nor render the Landlord liable in damages, nor
release Tenant from prompt fulfillment of any of its covenants under
this Lease, except to the extent provided in Section 4.2.5.
5.3 OUTSIDE SERVICES. In the event Tenant wishes to provide outside
services for the Premises over and above those services to be provided
by Landlord as set forth herein, Tenant shall first obtain the prior
written approval of Landlord for the installation and/or utilization of
such services ("outside services" shall include, but shall not be
limited to, cleaning services, television, so-called "canned music"
services, security services, catering services and the like), such
approval not to be unreasonably withheld or delayed. In the event
Landlord approves the installation and/or utilization of such services,
such installation and utilization shall be at Tenant's sole cost, risk
and expense.
ARTICLE 6
TENANT'S ADDITIONAL COVENANTS
6.1 AFFIRMATIVE COVENANTS. Tenant covenants at all times during the term
and for such further time (prior or subsequent thereto) as Tenant
occupies the Premises or any part thereof:
6.1.1 PERFORM OBLIGATIONS. To perform promptly all of the
obligations of Tenant set forth in this Lease; and to pay when
due the Fixed Rent and additional rent and all charges, rates
and other sums which by the terms of this Lease are to be paid
by Tenant.
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6.1.2 USE. To use the Premises only for the Permitted Uses, and from
time to time to procure all licenses and permits necessary
therefor, at Tenant's sole expense, except that building
permits for Landlord's Work and the certificate of occupancy
for the base building shall be obtained by Landlord. All
licenses, permits and approvals required for the TIW
(including, without limitation, the building permit and
certificate of occupancy) shall be obtained by Tenant. With
respect to any licenses or permits for which Tenant may apply,
pursuant to this subsection 6.1.2 or any other provision
hereof, Tenant shall furnish Landlord copies of applications
therefor on or before their submission to the governmental
authority.
6.1.3 REPAIR AND MAINTENANCE. To maintain the Premises in neat order
and condition and to perform all routine and ordinary repairs
to the Premises and to any plumbing, heating, electrical,
ventilating and air-conditioning systems located within the
Premises and installed by Tenant such as are necessary to keep
them in good working order, appearance and condition, as the
case may require, reasonable use and wear thereof and damage
by fire or casualty only excepted; to keep all glass in
windows and doors of the Premises (except glass in the
exterior walls of the Building) whole and in good condition
with glass of the same quality as that injured or broken; and
to make as and when needed as a result of misuse by, or
neglect or improper conduct of Tenant or Tenant's servants,
employees, agents, invitees or licensees or otherwise, all
repairs necessary, which repairs and replacements shall be in
quality and class equal to the original work. (Landlord, upon
default of Tenant hereunder and upon prior notice to Tenant,
may elect, at the expense of Tenant, to perform all such
cleaning and maintenance and to make any such repairs or to
repair any damage or injury to the Building or the Premises
caused by moving property of Tenant in or out of the Building,
or by installation or removal of furniture or other property,
or by misuse by, or neglect, or improper conduct of, Tenant or
Tenant's servants, employees, agents, contractors, customers,
patrons, invitees, or licensees.)
6.1.4 COMPLIANCE WITH LAW. To make all repairs, alterations,
additions or replacements to the Premises required by any law
or ordinance or any order or regulation of any public
authority; to keep the Premises equipped with all safety
appliances (other than those to be maintained by Landlord
under Section 5.1.6 above) so required; and to comply with the
orders and regulations of all governmental authorities with
respect to zoning, building, fire, health and other codes,
regulations, ordinances or laws applicable to the Premises,
except that Tenant may defer compliance so long as the
validity of any such law, ordinance, order or regulations
shall be contested by Tenant in good faith and by appropriate
legal proceedings, if Tenant first gives Landlord appropriate
assurance or security against any loss, cost or expense on
account thereof.
6.1.5 INDEMNIFICATION. To save Landlord and all Landlord Affiliates
harmless, and to exonerate and indemnify Landlord from and
against any and all claims, liabilities or penalties asserted
by or on behalf of any person, firm, corporation or public
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authority on account of injury, death, damage or loss to
person or property in or upon the Premises or the negligence
or willful misconduct of Tenant or any of its agents,
employees or contractors outside of the Premises, except to
the extent the same was caused by the willful negligence,
fault or misconduct of Landlord, its agents, employees or
contractors. In respect of all of the foregoing, Tenant shall
indemnify Landlord from and against all costs, expenses
(including reasonable attorneys' fees), and liabilities
incurred in or in connection with any such claim, action or
proceeding brought thereon; and, in case of any action or
proceeding brought against Landlord by reason of any such
claim, Tenant, upon notice from Landlord and at Tenant's
expense, shall resist or defend such action or proceeding.
6.1.6 LANDLORD'S RIGHT TO ENTER. To permit Landlord and its agents
to enter into and examine the Premises at reasonable times
upon reasonable advance notice (except in emergencies) and to
show the Premises, and to make repairs to the Premises, and,
during the last 12 months prior to the expiration of this
Lease, to keep affixed in suitable places notices of
availability of the Premises.
6.1.7 PERSONAL PROPERTY AT TENANT'S RISK. All of the furnishings,
fixtures, equipment, effects and property of every kind,
nature and description of Tenant and of all persons claiming
by, through or under Tenant which, during the continuance of
this Lease or any occupancy of the Premises by Tenant or
anyone claiming under Tenant, may be on the Premises, shall be
at the sole risk and hazard of Tenant and if the whole or any
part thereof shall be destroyed or damaged by fire, water or
otherwise, or by the leakage or bursting of water pipes, steam
pipes, or other pipes, by theft or from any other cause, no
part of said loss or damage is to be charged to or to be borne
by Landlord, except that Landlord shall in no event be
indemnified or held harmless or exonerated from any liability
to Tenant or to any other person, for any injury, loss, damage
or liability to the extent prohibited by law.
6.1.8 YIELD UP. (a) At the expiration of the term or earlier
termination of this Lease: to surrender all keys to the
Premises; to remove all of its trade fixtures and personal
property in the Premises; to remove such installations made by
it as Landlord may request (which Landlord will make upon
Tenant's request at the time Landlord approves thereof ) and
all Tenant's signs wherever located,; to repair all damage
caused by such removal and to yield up the Premises (including
all installations and improvements made by Tenant except for
trade fixtures and such of said installations or improvements
as Landlord shall request Tenant to remove), broom-clean and
in the same good order and repair in which Tenant is obliged
to keep and maintain the Premises by the provisions of this
Lease. Any property not so removed shall be deemed abandoned
and, if Landlord so elects, deemed to be Landlord's property,
and may be retained or removed and disposed of by Landlord in
such manner as Landlord shall determine and Tenant shall pay
Landlord the entire cost and expense incurred by it in
effecting such removal and disposition and in making any
incidental repairs and replacements to the Premises and for
use
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and occupancy during the period after the expiration of
the term and prior to its performance of its obligations under
this subsection 6.1.8. Tenant shall further indemnify Landlord
against all loss, cost and damage resulting from Tenant's
failure and delay in surrendering the Premises as above
provided.
(b) If the Tenant remains in the Premises beyond the
expiration or earlier termination of this Lease, such holding
over shall be without right and shall not be deemed to create
any tenancy, but the Tenant shall be a tenant at sufferance
only at a daily rate of rent (1) during the first 30 days
after the termination of the term equal to the greater of (x)
1.5 times the rent and other charges in effect under this
Lease as of the day prior to the date of expiration of this
Lease, or (y) the fair market value of the Premises, and (2)
thereafter, 2 times the rent and other charges in effect under
this Lease as of the day prior to the date of expiration
hereof.
6.1.9 RULES AND REGULATIONS. To comply with the Rules and
Regulations set forth in Exhibit G, and with all reasonable
Rules and Regulations of general applicability to all tenants
of the Building hereafter made by Landlord, of which Tenant
has been given notice; Landlord shall not be liable to Tenant
for the failure of other tenants of the Building to conform to
such Rules and Regulations.
6.1.10 ESTOPPEL CERTIFICATE. Upon not less than 15 days' prior
written request by Landlord, to execute, acknowledge and
deliver to Landlord a statement in writing in the form
attached hereto as Exhibit H, certifying all or any of the
following: (i) that this Lease is unmodified and in full force
and effect (or, if there have been any modifications stating
such modifications), (ii) whether the term has commenced and
Fixed Rent and additional rent have become payable hereunder
and, if so, the dates to which they have been paid, (iii)
whether or not Landlord is in default in performance of any of
the terms of this Lease, and, if so, specifying such defaults,
(iv) whether Tenant has accepted possession of the Premises,
(v) whether Tenant has made any claim against Landlord under
this Lease and, if so, the nature thereof and the dollar
amount, if any, of such claim, (vi) whether there exist any
offsets or defenses against enforcement of any of the terms of
this Lease upon the part of Tenant to be performed, and, if
so, setting them forth in reasonable detail, and (vii) such
further information with respect to the Lease or the Premises
as Landlord may reasonably request. Landlord shall provide
similar statements to Tenant upon not less than 15 days' prior
written request by Tenant. Any such statement delivered
pursuant to this subsection 6.1.10 may be relied upon by any
prospective purchaser or mortgagee of the Premises, or any
prospective assignee of such mortgage or any prospective
lender, subtenant, assignee or other successor to Tenant.
Tenant shall also deliver to Landlord such financial
information as may be reasonably required by Landlord to be
provided to any mortgagee or prospective purchaser of the
Property.
6.1.11 NON-DISCRIMINATION AND AFFIRMATIVE ACTION. Tenant agrees to
comply with the Non-Discrimination and Affirmative Action
Covenants set forth in Section 14.1
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of the Massport Lease, as copy of which is attached hereto as
Exhibit I, wherein the term "Tenant" shall mean Tenant
hereunder and "Landlord" shall mean the Landlord under the
Massport Lease.
6.2 NEGATIVE COVENANTS. Tenant covenants at all times during the term and
such further time (prior or subsequent thereto) as Tenant occupies the
Premises or any part thereof:
6.2.1 ASSIGNMENT AND SUBLETTING. (a) Except for a Permitted
Transfer, not to assign, transfer, mortgage or pledge this
Lease or to sublease (which term shall be deemed to include
the granting of concessions and licenses and the like) all or
any part of the Premises or suffer or permit this Lease or the
leasehold estate hereby created or any other rights arising
under this Lease (including, without limitation, the use of
the parking spaces provided by Landlord pursuant to Section
2.1(c) hereof ) to be assigned, transferred or encumbered, in
whole or in part, whether voluntarily, involuntarily or by
operation of law, or permit the occupancy of the Premises by
anyone other than Tenant without the prior written consent of
Landlord. Except for a Permitted Transfer, in the event Tenant
desires to assign this Lease or sublet any portion or all of
the Premises, Tenant shall notify Landlord in writing of
Tenant's intent to so assign this Lease or sublet the Premises
and the proposed effective date of such subletting or
assignment, and shall request in such notification that
Landlord consent thereto. Except for transactions which are
Permitted Transfers, Landlord may terminate this Lease in the
case of a proposed assignment, or suspend this Lease pro tanto
for the period and with respect to the space involved in the
case of a proposed subletting, by giving written notice of
termination or suspension to Tenant within 15 business days
after Tenant's notice to Landlord hereunder, with such
termination or suspension to be effective as of the effective
date of such assignment or subletting. If Landlord does not so
terminate or suspend within such 15 business day period,
Landlord's consent shall not be unreasonably withheld to an
assignment during the initial term or to a subletting during
the term of this Lease (including, without limitation, the use
by the assignee or subtenant of parking spaces provided by
Landlord under Section 2.1(c)) , provided that the following
conditions are met:
(i) the proposed assignee or subtenant has a net worth and
creditworthiness reasonably acceptable to Landlord;
(ii) the proposed assignee or subtenant is not then, and has
not within the 12 months immediately preceding such
request been, a tenant in the Building or an entity
with whom Landlord is dealing or has dealt regarding
the possibility of leasing space in the Building,
unless Landlord does not have competing space for lease
in the Building;
(iii) Tenant is not in default beyond any applicable grace
period under this Lease;
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(iv) the assignee or subtenant shall use the Premises only
for the Permitted Uses;
(v) with respect to a subletting during an Extension Term
of this Lease, after such subletting the initial Tenant
named herein shall occupy at least 50% percent of the
Rentable Area of the Premises.
Tenant shall furnish Landlord with any information reasonably
requested by Landlord to enable Landlord to determine whether
the proposed assignment or subletting complies with the
requirements contained herein, including without limitation,
financial statements relating to the proposed assignee or
subtenant.
(b) Notwithstanding Section 6.2.1(a), if the aggregate amount
of space sublet by Tenant previously and taking into account
the currently proposed sublease will be less than 30% of the
Premises, then Landlord shall not have the right under Section
6.2.1(a) to suspend this Lease for the period and with respect
to the proposed space to be sublet except to lease such space
to another tenant in the Building. However, any such proposed
subletting shall be subject to the other provisions of this
Section 6.2.1 (including, without limitation, the requirement
for Landlord's consent in accordance with and subject to the
provisions of Section 6.2.1(a)), except that the proposed
subtenant or assignee may then be, or may have been during the
immediately preceding 12 months, a tenant in the Building,
notwithstanding anything to the contrary contained in Section
6.2.1(a)(ii).
(c) Tenant shall, as additional rent, reimburse Landlord
promptly for Landlord's reasonable legal expenses incurred in
connection with any request by Tenant for such consent. If
Landlord consents thereto, no such subletting or assignment
shall in any way impair the continuing primary liability of
Tenant hereunder, and no consent to any subletting or
assignment in a particular instance shall be deemed to be a
waiver of the obligation to obtain the Landlord's written
approval in the case of any other subletting or assignment. If
Tenant has not entered into an assignment or sublease within
90 days after Landlord's election not to terminate or suspend
the term hereof pursuant to Section 6.2.1(a) above, then
Landlord shall again have the right to terminate the term in
the case of a proposed assignment, or suspend this Lease pro
tanto for the period and with respect to the space involved in
the case of a proposed subletting in accordance with Section
6.2.1(a) as if Landlord's prior election not to do so had not
been made.
(d) If for any assignment or sublease consented to by Landlord
hereunder Tenant receives rent or other consideration, either
initially or over the term of the assignment or sublease, in
excess of the rent called for hereunder, or in case of
sublease of part, in excess of such rent fairly allocable to
the part, after appropriate adjustments to assure that all
other payments called for hereunder are appropriately taken
into account and after deduction for reasonable expenses of
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Tenant in connection with, and amortized over the term of, the
assignment or sublease (including, without limitation,
reasonable attorneys' fees, brokerage commissions, tenant
improvements and rent concessions in lieu of tenant
improvements), to pay to Landlord as additional rent 50%
percent of the excess of each such payment of rent or other
consideration received by Tenant promptly after its receipt.
(e) If, at any time during the term of this Lease, there is a
transfer of a controlling interest in the stock, membership or
general partnership interests of Tenant, Tenant shall so
notify Landlord and such transfer shall not be deemed to be an
assignment of this Lease which shall be subject to the
provisions of this Section 6.2.1 unless Tenant's Market Value
of Equity is reduced below an amount equal to the lesser of
(1) Tenant's Market Value of Equity immediately prior to such
transfer, or (2) $20,000,000. "Tenant's Market Value of
Equity" shall be defined as the product of the number of
outstanding shares of publicly traded stock of Tenant on the
date in question, multiplied by the closing price for shares
of Tenant on such date.
(f) Notwithstanding the foregoing, Tenant shall have the right
to do the following (a "Permitted Transfer") without
Landlord's consent or right to terminate or suspend this Lease
under Section 6.2.1(a) or share in any excess proceeds thereof
under Section 6.2.1(d):
(1) assign this Lease or sublet all or any part of the
Premises to any entity ("Tenant Affiliate") which
controls, is controlled by or under common control with
Tenant ("control" being defined as ownership of more than
50% of the beneficial interest of the entity in question)
, provided that (a) Tenant shall give Landlord at least 5
business days prior notice thereof, together with a copy
of the assignment or sublease instrument, and (b) the
Tenant Affiliate enters into an agreement with Landlord in
which it agrees to assume, perform and be bound by all of
the obligations of Tenant under this Lease with regard to
the space involved in the transaction in question; or
(2) assign or transfer its entire interest in this Lease to
any "Tenant Successor" being defined as: (a) a corporation
into which or with which Tenant is merged or consolidated,
or (b) a corporation, partnership or other business entity
acquiring this Lease and all or substantially all of the
other property and assets of Tenant, or (c) any successor
to any Tenant Successor which becomes such by either of
the methods described in (a) or (b) above or otherwise,
provided that in all cases ((a), (b) and (c)) the Tenant
Successor (1) enters into an agreement with Landlord in
which the Tenant Successor agrees to assume, perform and
be bound by all of the obligations of Tenant under this
Lease, and (2) has a Market Value of Equity after such
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assignment at least equal to the lesser of (x) Tenant's
Market Value of Equity immediately prior to such transfer,
or (y) $20,000,000.
6.2.2 NUISANCE. Not to injure, deface or otherwise harm the Premises
or the Property, nor to commit any nuisance; nor permit in the
Premises any vending machine (except such as is used for the
sale of merchandise to employees of Tenant) or kerosene,
gasoline, or inflammable or combustible or explosive fluid or
chemical substance other than limited quantities of such
materials or substances reasonably necessary for the operation
or maintenance of office equipment or limited quantities of
cleaning fluids and solvents required in Tenant's normal
operations in the Premises (collectively, "Normal Office
Chemicals"); nor permit any cooking to such extent as requires
special exhaust venting or in violation of the Rules and
Regulations set forth in Exhibit G; nor permit the emission of
any objectionable noise or odor; nor permit use of any
telecommunications or other equipment which interferes with
any other Building tenant's use and employment of its demised
premises; nor make, allow or suffer any waste; nor make any
use of the Premises which is improper, offensive or contrary
to any law or ordinance or which will invalidate any of
Landlord's insurance or cause any increase above normal
insurance premiums on the Building; nor conduct any auction,
fire, "going out of business" or bankruptcy sales.
6.2.3 HAZARDOUS WASTES AND MATERIALS. Subject to Section 6.2.2 above
concerning use of Normal Office Chemicals, Not to cause or
permit any hazardous or toxic wastes, hazardous or toxic
substances or hazardous or toxic materials, (collectively,
"Hazardous Materials") to be used, generated, stored or
disposed of on, under or above, or transported to or from, the
Premises (collectively, "Hazardous Materials Activities")
without first receiving Landlord's written consent, which may
be withheld for any reason and revoked at any time, if in
Landlord's judgment such use shall be harmful or detrimental
to any person or property on or about the Building or
Property. If Landlord consents to any such Hazardous Materials
Activities, Tenant shall conduct them in strict compliance (at
Tenant's sole cost and expense) with all applicable laws, and
use all necessary and appropriate precautions to prevent any
spill, discharge, release or exposure to persons or property.
Landlord shall not be liable to Tenant for any loss, cost,
expense, claims, damage or liability arising out of any
Hazardous Materials Activities by Tenant, Tenant's employees,
agents, contractors, licensees, customers or invitees, whether
or not consented to by Landlord. Tenant shall indemnify,
defend with counsel acceptable to Landlord, and hold Landlord
and all Landlord Affiliates harmless from and against any and
all loss, costs, expenses, claims, damages or liabilities
arising out of: (i) any Hazardous Materials Activities on the
Premises, whether or not consented to by Landlord; and (ii)
any Hazardous Materials Activities by Tenant, Tenant's
employees, agents, contractors, licensees, customers or
invitees at the Building. For purposes hereof, "Hazardous
Materials" shall include but not be limited to substances
defined as "hazardous substances," "toxic substances" or
"hazardous wastes" or "oil" in any
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local, state or federal law, rule, regulation or ordinance
(collectively, "Environmental Law(s)"). If Landlord consents
to any Hazardous Materials Activities, prior to using, storing
or maintaining any Hazardous Materials on or about the
Premises (other than Normal Office Chemicals), Tenant shall
provide Landlord with a list of the types and quantities
thereof, and shall update such list as necessary for continued
accuracy. Tenant shall also provide Landlord with a copy of
any Hazardous Materials inventory statement for Hazardous
Materials other than Normal Office Chemicals and any updates
thereof required by any applicable Environmental Laws. If
Tenant's activities violate or create a risk of violation of
any Environmental Law or cause a spill, discharge, release or
exposure to any persons or property, Tenant shall cease such
activities immediately upon notice from Landlord. Tenant shall
immediately notify Landlord both by telephone and in writing
of any spill, discharge, release or exposure of Hazardous
Materials in or about the Premises or of any condition in or
about the Premises constituting an "imminent hazard" under any
Environmental Laws. Landlord, Landlord's representatives and
employees may enter the Premise during the term to inspect
Tenant's compliance herewith, and may disclose any spill,
discharge, release, or exposure or any violation of any
Environmental Laws to any governmental agency with
jurisdiction.
6.2.4 FLOOR LOAD; HEAVY EQUIPMENT. Not to place a load upon any
floor of the Premises exceeding the floor load per square foot
area which Landlord reasonably determines the floor is
adequate to carry, and in no event, in excess of that allowed
by law. Landlord reserves the right to prescribe the weight
and position of all heavy business machines and equipment,
including safes, which shall be placed so as to distribute the
weight. Business machines and mechanical equipment which cause
vibration or noise shall be placed and maintained by Tenant at
Tenant's expense in settings sufficient to absorb and prevent
vibration, noise and annoyance. Tenant shall not move any
safe, heavy machinery, heavy equipment, freight or fixtures
into or out of the Premises except in such manner and at such
time as Landlord shall in each instance authorize.
6.2.5 INSTALLATION, ALTERATIONS OR ADDITIONS. (a) Not to make any
installations, alterations or additions in, to or on the
Premises nor to permit the making of any holes in the walls,
partitions, ceilings or floors (other than to hang artwork and
the like) nor the installation or modification of any locks or
security devices without on each occasion obtaining the prior
written consent of Landlord (which shall not be unreasonably
withheld, conditioned or delayed), and then only pursuant to
plans and specifications reasonably approved by Landlord in
advance in each instance and with contractors reasonably
approved by Landlord whose labor will work without
interference with other labor working on the Premises or the
Building. Any plans submitted for Landlord's approval
hereunder shall be deemed approved if Landlord does not
request more information or specify its reasonable objections
thereto in writing to Tenant within 10 business days after
submission. Tenant shall pay promptly when due the entire cost
of any work to
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the Premises undertaken by Tenant so that the Premises shall
at all times be free of liens for labor and materials, and at
Landlord's request if the work costs over $100,000 Tenant
shall furnish to Landlord a bond or other security acceptable
to Landlord assuring that any work commenced by Tenant will be
completed in accordance with the plans and specifications
theretofore approved by Landlord and assuring that the
Premises will remain free of any mechanics' lien or other
encumbrance arising out of such work. All such work shall be
done in a good and workmanlike manner employing materials of
good quality and so as to conform with all applicable zoning,
building, fire, health and other codes, regulations,
ordinances and laws. Tenant shall save Landlord and all
Landlord Affiliates harmless and indemnified from all injury,
loss, claims or damage to any person or property occasioned by
or growing out of such work.
(b) Before Tenant begins any work, Tenant shall (i) secure all
licenses and permits necessary therefor at Tenant's sole
expense, (ii) deliver to Landlord a statement of the names of
all its contractors and subcontractors and the estimated cost
of all labor and material to be furnished by them and (iii)
cause each contractor to carry (A) workers' compensation
insurance in statutory amounts and employer's liability
insurance with limits not less than $500,000 per accident
covering all the contractor's and subcontractor's employees,
(B) commercial general liability insurance, including
completed operations coverage for a period of 2 years beyond
completion of the work that the contractor/subcontractor
performs with such limits as Landlord may reasonably require,
but in no event less than $2,000,000 per occurrence, and (C)
automobile liability insurance with such limits as Landlord
may reasonably require, but in no event less than $2,000,000
combined single limit per accident. All such insurance (i) is
to be written by companies reasonably approved by Landlord,
(ii) shall name Landlord, all Landlord Affiliates requested by
Landlord and Tenant as additional insureds, as their
respective interests may appear, as well as their respective
contractors and subcontractors, (iii) shall contain a waiver
of subrogation provision in favor of Landlord and all such
Landlord Affiliates, and (iv) shall be primary coverage as to
any other coverage maintained by any insured other than
Tenant). Tenant shall deliver to Landlord certificates of all
such insurance before Tenant begins any work. Tenant agrees to
promptly pay when due the entire cost of any work done in the
Premises by Tenant, its agents, employees or contractors, and
within 5 business days upon receipt of notice of the same to
discharge or bond off any such liens which may attach to the
Premises by reason of such work.
(c) Landlord may inspect the work in progress at reasonable
times, provided, however, Landlord shall, except in case of
emergency, (i) give Tenant reasonable prior notice of such
inspections and (ii) conduct such inspections so as to
minimize interference with the construction work of Tenant.
All work shall be done so as to minimize unreasonable
interference with other tenants or lawful occupants of the
Building and with Landlord's operation of the Building or
other construction work being done by Landlord.
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(d) At Landlord's request, Tenant shall, promptly after such
work is completed, provide Landlord with a full set of as
built plans for the portions of the Premises affected by such
work, unless such work did not change anything that would be
shown on as built plans.
6.2.6 ABANDONMENT. Not to abandon the Premises during the term.
6.2.7 SIGNS. Not without Landlord's prior written approval, to paint
or place any signs or place any curtains, blinds, shades,
awnings, aerials, or the like, visible from outside the
Premises. Landlord agrees that Tenant may have its name in the
Building directory and Tenant's Office Percentage of the space
therein for names of Tenant's personnel, at Landlord's
expense. Landlord will also pay up to $1,000 for an
identification sign for Tenant on any multi-tenant floor upon
which part of the Premises is located that complies with
Landlord's design standards therefor.
ARTICLE 7
CASUALTY OR TAKING
7.1 TERMINATION. In the event that the Premises or the Building, or any
material part thereof, shall be taken by any public authority or for
any public use, or shall be destroyed or damaged by fire or casualty,
or by the action of any public authority, then this Lease may be
terminated at the election of Landlord. Such election, which may be
made notwithstanding the fact that Landlord's entire interest may have
been divested, shall be made by the giving of notice by Landlord to
Tenant within 60 days after the date of the taking or casualty.
7.2 RESTORATION. If Landlord does not elect to so terminate within 60 days
after the date of the taking or casualty, this Lease shall continue in
force and a just proportion of the rent reserved, according to the
nature and extent of the damages sustained by the Premises, shall be
suspended or abated until the Premises, or what may remain thereof,
shall be put by Landlord in proper condition for use, which Landlord
covenants to do with reasonable diligence to the extent permitted by
the net proceeds of insurance recovered or damages awarded for such
taking, destruction or damage and subject to zoning and building laws
or ordinances then in existence (such work being referred to as
"Landlord's Restoration Work"). "Net proceeds of insurance recovered or
damages awarded" refers to the gross amount of such insurance or
damages less the reasonable expenses of Landlord incurred in connection
with the collection of the same, including without limitation, fees and
expenses for legal and appraisal services. If Landlord's Restoration
Work hereunder has not been substantially completed within 9 months
after the date of damage (which date shall be extended for up to 60
days of delays resulting from causes set forth in Section 11.5 or and
the length of any delays resulting from Tenant or any of its agents,
employees
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or contractors), then Tenant shall have the right to terminate this
Lease by giving Landlord written notice of its election to do so within
30 days after the end of such 11 month period, and if Tenant timely
gives such notice, this Lease shall terminate 30 days after the date
thereof unless Landlord's Restoration Work is substantially completed
within such 30 day period, in which event such termination notice shall
be void and this Lease shall continue in full force and effect.
7.3 AWARD. Irrespective of the form in which recovery may be had by law,
all rights to damages or compensation shall belong to Landlord in all
cases. Tenant hereby grants to Landlord all of Tenant's rights to such
damages and covenants to deliver such further assignments thereof as
Landlord may from time to time request. The foregoing shall not apply,
however, to any separate award for Tenant's personalty and moving
expenses in the case of a taking.
ARTICLE 8
DEFAULTS
8.1 EVENTS OF DEFAULT. If any of the following occurs:
(a) Tenant shall default in the payment when due of any Fixed Rent or
additional rent, and such default shall continue for 10 days after
notice thereof from Landlord; or
(b) Tenant shall have previously defaulted more than twice in any 12
month period in the payment when due of any Fixed Rent or additional
rent, Tenant defaults in the payment when due of any Fixed Rent or
additional rent, and such default shall continue for 5 days after
notice thereof from Landlord; or
(c) Tenant shall default in the timely performance or observance of any
of the other covenants contained in this Lease on the Tenant's part to
be performed or observed and shall fail, within 30 days after notice
from Landlord of such default, to cure such default or if such default
is not reasonably susceptible of cure within 30 days, if Tenant shall
fail to commence to cure within said 30 days after notice of such
default from Landlord or shall thereafter fail diligently to prosecute
such cure to completion; or
(d) the estate hereby created shall be taken on execution, or by other
process of law; or
(e) Tenant commences a voluntary case under Title 11 of the United
States Code as from time to time in effect, or it authorizes, by
appropriate proceedings of trustees or other governing body the
commencement of such a voluntary case; or
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(f) Tenant files an answer or other pleading admitting or failing to
deny the material allegations of a petition filed against it commencing
an involuntary case under said Title 11, or if it seeks, consents to or
acquiesces in the relief therein provided, or if it fails to controvert
timely the material allegations of any such petition; or
(g) there is entered an order for relief in any involuntary case
commenced under said Title; or
(h) Tenant seeks relief as a debtor under any applicable law, other
than said Title 11, of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration of the
rights of creditors, or by Tenant's consent to or acquiescence in such
relief; or
(i) there is entered an order by a court of competent jurisdiction (i)
finding Tenant to be bankruptcy or insolvent, (ii) ordering or
approving Tenant's liquidation, reorganization or any modification or
alteration of the rights of its creditors, or (iii) assuming custody
of, or appointing a receiver or other custodian for, all or a
substantial part of Tenant's property; or
(j) Tenant makes an assignment for the benefit of, or enters into a
composition with, its creditors, or appoints or consents to the
appointment of a receiver or other custodian for all or a substantial
part of its property; or
(k) Tenant rejects this Lease and a court of competent jurisdiction
enters an order approving the rejection of the Lease under Title 11 of
the United States Code as from time to time in effect, or under any
applicable law, other than said Title 11, of any jurisdiction relating
to the liquidation or reorganization of debtors or to the modification
or alteration of the rights of creditors, or by Tenant's consent to or
acquiescence in such relief;
then and in any of said cases, Landlord may, to the extent permitted by
law, immediately or at any time thereafter and with or without demand
or notice to Tenant, terminate this Lease and enter into and upon the
Premises, or any part thereof in the name of the whole, and repossess
the same as of Landlord's former estate, and expel Tenant and those
claiming through or under Tenant and remove its effects without being
deemed guilty of any manner of trespass, and without prejudice to any
remedies which might otherwise be used for arrears of rent and
preceding breach of covenant.
8.2 REMEDIES. (a) No termination or repossession provided for in Section
8.1 shall relieve Tenant or any guarantor of the liabilities and
obligations of Tenant under this Lease, all of which shall survive any
such termination or repossession. In the event of any such termination
or repossession, Tenant shall pay to Landlord, at Landlord's election,
either (i) in advance on the first day of each month, for what would
have been the entire balance of the term, 1/12th (and a pro rata
portion thereof for any fraction of a month) of the
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annual Fixed Rent, additional rent and all other amounts for which
Tenant is obligated hereunder, less, in each case, the actual net
receipts by Landlord by reason of any re-letting of the Premises after
deducting Landlord's reasonable expenses in connection with such
re-letting, including, without limitation, removal, storage and repair
costs and reasonable brokers' and attorneys' fees, or (ii) upon demand
and at the option of Landlord at any time thereafter, the present value
computed at a capitalization rate based upon the Prime Rate, of the
amount by which the payments of Fixed Rent and additional rent
reasonably estimated to be payable for the balance of the term would
exceed the payments reasonably estimated by Landlord to be the fair
rental value of the Premises on the terms and conditions of this Lease
over such period, determined as of such date.
(b) Landlord may (i) re-let the Premises or any part or parts thereof,
for a term or terms which may at Landlord's option be equal to or less
than or exceed the period which would otherwise have constituted the
balance of the term and may grant such concessions and free rent as
Landlord in its sole discretion considers advisable or necessary to
re-let the same, and (ii) make such alterations, repairs and
decorations to the Premises as Landlord in its sole discretion
considers advisable or necessary to re-let the same, and no action of
Landlord in accordance with the foregoing or failure to re-let or to
collect rent under re-letting shall operate or be construed to release
or reduce Tenant's liability as aforesaid.
(c) Nothing contained in this Lease shall limit or prejudice the right
of Landlord to prove for and obtain in proceedings for bankruptcy,
insolvency or like proceedings by reason of the termination of this
Lease, an amount equal to the maximum allowed by any statute or rule of
law in effect at the time when, and governing the proceedings in which,
the damages are to be proved, whether or not the amount be greater,
equal to, or less than the amount of the loss or damages referred to
above.
8.3 REMEDIES CUMULATIVE. Any and all rights and remedies which either party
may have under this Lease, and at law and equity, shall be cumulative
and shall not be deemed inconsistent with each other, and any two or
more of all such rights and remedies may be exercised at the same time
insofar as permitted by law, except for any which are expressly
designated as exclusive rights or remedies.
8.4 LANDLORD'S RIGHT TO CURE DEFAULTS. Landlord may, but shall not be
obligated to, cure, at any time, without notice, any default by Tenant
under this Lease; and whenever Landlord so elects, all costs and
expenses incurred by Landlord, including reasonable attorneys' fees, in
curing a default shall be paid, as additional rent, by Tenant to
Landlord on demand, together with interest thereon at the Default Rate
from the date of payment by Landlord to the date of payment by Tenant.
8.5 EFFECT OF WAIVERS OF DEFAULT. Any consent or permission by either party
to any act or omission which otherwise would be a breach of any
covenant or condition herein, shall not in any way be held or construed
(unless expressly so declared) to operate so as to
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impair the continuing obligation of any covenant or condition herein,
or otherwise, except as to the specific instance, operate to permit
similar acts or omissions.
8.6 NO WAIVER, ETC. The failure of either party to seek redress for
violation of, or to insist upon the strict performance of, any covenant
or condition of this Lease shall not be deemed a waiver of such
violation nor prevent a subsequent act, which would have originally
constituted a violation, from having all the force and effect of an
original violation. The receipt by Landlord of rent with knowledge of
the breach of any covenant of this Lease shall not be deemed to have
been a waiver of such breach by Landlord. No consent or waiver, express
or implied, by either party to or of any breach of any agreement or
duty shall be construed as a waiver or consent to or of any other
breach of the same or any other agreement or duty.
8.7 NO ACCORD AND SATISFACTION. No acceptance by Landlord of a lesser sum
than the Fixed Rent, additional rent or any other charge then due shall
be deemed to be other than on account of the earliest installment of
such rent or charge due, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment as rent or other
charge be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover
the balance of such installment or pursue any other remedy in this
Lease provided.
ARTICLE 9
RIGHTS OF MORTGAGEES AND GROUND LESSORS
9.1 RIGHTS OF MORTGAGEES AND GROUND LESSORS. (a) This Lease, and all rights
of Tenant hereunder, are and shall be subject and subordinate to any
Superior Lease and all renewals, extensions, modifications and
replacements thereof, and to all Superior Mortgages whether or not any
such Superior Mortgage shall also cover other lands and/or buildings,
to each and every advance made or hereafter to be made under such
Superior Mortgages, and to all renewals, modifications, replacements
and extensions of such Superior Leases and such Superior Mortgages and
all consolidations of such Superior Mortgages, provided that Landlord
shall deliver to Tenant an agreement ("Non-Disturbance Agreement") of
each such Superior Lessor or Superior Mortgagee in the customary form
used by such Superior Lessor or Superior Mortgagee to the effect that,
subject to the conditions set forth in clauses (a) - (g) of the
following paragraph, Tenant's rights under this Lease shall not be
disturbed by such Superior Lessor or Superior Mortgagee, so long as
there shall exist no event of default hereunder as referred to in
Section 8.1 hereof. This Section shall be self-operative and no further
instrument of subordination shall be required. In confirmation of such
subordination, Tenant shall promptly execute, acknowledge and deliver
any instrument that Landlord, any Superior Lessor or any Superior
Mortgagee or any of their respective successors in interest may
reasonably require to evidence such subordination. Any lease to which
this Lease is, at
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the time referred to, subject and subordinate is herein called
"Superior Lease" and the lessor of a Superior Lease or its successor in
interest, at the time referred to, is herein called "Superior Lessor";
and any mortgage to which this Lease is, at the time referred to,
subject and subordinate, is herein called "Superior Mortgage" and the
holder of a Superior Mortgage is herein called "Superior Mortgagee".
The parties acknowledge that Superior Leases as of the date hereof
consist of (i) a certain East Office Ground Lease (the "Massport
Lease") between Massachusetts Port Authority ("Massport"), as landlord,
and 121A Owner, as tenant, dated as of July 13, 1998, and (ii) a
certain East Office Operating Sublease between 121A Owner, as landlord,
and Landlord, as tenant, dated as of July 13, 1998.
(b) If any Superior Lessor or Superior Mortgagee or the nominee or
designee of any Superior Lessor or Superior Mortgagee shall succeed to
the rights of Landlord under this Lease, whether through possession or
foreclosure action or delivery of a new lease or deed, or otherwise,
then at the request of such party so succeeding to Landlord's rights
(herein called "Successor Landlord") and upon such Successor Landlord's
written agreement to accept Tenant's attornment, Tenant shall attorn to
and recognize such Successor Landlord as Tenant's landlord under this
Lease and shall promptly execute and deliver any instrument that such
Successor Landlord may reasonably request to evidence such attornment.
Upon such attornment, this Lease shall continue in full force and
effect as a direct lease between the Successor Landlord and Tenant upon
all of the terms, conditions and covenants as are set forth in this
Lease, except that the Successor Landlord (unless formerly the landlord
under this Lease or its nominee or designee) shall not be (a) liable in
any way to Tenant for any act or omission, neglect or default on the
part of Landlord under this Lease, (b) responsible for any monies owing
by or on deposit with Landlord to the credit of Tenant other than the
Security Deposit and rent for the balance of the current month if paid
in advance by Tenant, (c) subject to any counterclaim or setoff which
theretofore accrued to Tenant against Landlord, (d) bound by any
modification of this Lease subsequent to such Superior Lease or
Mortgage, or by any previous prepayment of Annual Fixed Rent or
additional rent for more than 1 month, which was not approved in
writing by the Superior Landlord or the Superior Mortgagee, (e) liable
to the Tenant beyond the Successor Landlord's interest in the Property
and the rents, income, receipts, revenues, issues and profits issuing
from the Property, (f) responsible for the performance of any work to
be done by the Landlord under this Lease to render the Premises ready
for occupancy by the Tenant, but shall be subject to the provisions of
Sections 3.1(b) and 3.1(c), or (g) required to remove any person
occupying the Premises or any part thereof, except if such person
claims by, through or under the Successor Landlord.
9.2 MODIFICATIONS. If any Superior Lessor or Superior Mortgagee shall
reasonably require any modification(s) of this Lease, Tenant shall, at
Landlord's request, promptly execute and deliver to Landlord such
instruments effecting such modification(s) as Landlord shall require,
provided that such modification(s) do not affect the rent payable
hereunder and do not adversely affect in any material respect any of
Tenant's rights or impose any new obligations under this Lease. In
addition, and notwithstanding Section 9.1 to the contrary, Landlord or
any Superior Lessor or Superior Mortgagee may, at its option, make this
Lease superior to any such Superior Mortgage or Superior Lease by
giving Tenant 10 days prior written notice of such election and no
other documentation shall be necessary to effect such change.
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ARTICLE 10
APPRAISAL OF FAIR RENTAL VALUE
10.1 DISPUTE AS TO FAIR RENTAL VALUE. In the event that Tenant disputes the
amount claimed by Landlord as Fair Rental Value of the Premises
pursuant to Section 2.4 and such dispute cannot be resolved by mutual
agreement on or before the date 13 months prior to the commencement of
the Extension Term, Tenant shall have the right to submit the dispute
to the appraisal process hereinafter set forth. The amount of Fair
Rental Value determined pursuant to such appraisal process shall be
final and binding between the parties. The appraisal process shall be
conducted as follows:
10.1.1 APPOINTMENT OF APPRAISERS. Tenant shall make demand for
appraisal in writing within 20 business days after service of
Landlord's determination of Fair Rental Value given under
Section 2.4 specifying therein the name and address of the
person to act as the appraiser on its behalf. The appraiser
shall be a real estate appraiser with at least ten years'
experience in the field and a qualified member of the American
Institute of Real Estate Appraisers, or any successor of such
Institute (or if such organization or successor shall not
longer be in existence, a recognized national association or
institute of land appraisers) familiar with the fair market
rent of first-class commercial office space in Boston,
Massachusetts. Failure on the part of Tenant to make a timely
and proper demand for such appraisal shall constitute a waiver
of the right thereto. Within 10 business days after the
service of the demand for appraisal, Landlord shall give
notice to Tenant, specifying the name and address of the
person designated by Landlord to act as appraiser on its
behalf who shall be similarly qualified. If Landlord fails to
notify Tenant of the appointment of its appraiser within or by
the time above specified, then Tenant shall thereafter send a
second notice to Landlord indicating such failure and
requesting Landlord to appoint such an appraiser. If Landlord
fails to notify Tenant of the appointment of its appraiser
within 5 business days after the giving of such notice by
Tenant then the appraiser appointed by Tenant shall be the
sole appraiser to determine the issue.
10.1.2 DECISION BY TWO APPRAISERS. In the event that 2 appraisers are
chosen pursuant to paragraph (a) above, the appraisers so
chosen shall meet within 10 business days after the second
appraiser is appointed and, if within 10 business days after
such first meeting the two appraisers shall be unable to agree
upon a determination of Fair Rental Value, they shall appoint
a third appraiser, who shall be a competent and impartial
person with the same minimum qualifications and experience as
is required of the first two appraisers. In the event they are
unable to agree upon such appointment within 5 business days
after expiration of said 10 day period, the third appraiser
shall be selected by the parties themselves, if they can agree
thereon, within a further period of 10 business days. If the
parties do not so agree, then either party, on behalf of both,
may request appointment of such a qualified person
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by an officer of the American Arbitration Association in
Boston, Massachusetts. The 3 appraisers shall decide the
dispute, if it has not previously been resolved, by following
the procedure set forth below.
10.1.3 DECISION BY THREE APPRAISERS. Where the issue cannot be
resolved by agreement the two appraisers selected by Landlord
and Tenant or settlement between the parties during the course
of the appraisal process, the issue shall be resolved by the
three appraisers in accordance with the following procedure.
Within 20 days after the third appraiser has been selected,
each appraiser shall state in writing his determination of the
Fair Rental Value, supported by the reasons therefor, with
counterpart copies to each party. The appraisers shall arrange
for a simultaneous exchange of such proposed determinations.
The Fair Rental Value shall be the mean of the three
appraisals; provided, however, if an appraisal deviates from
the mean by more than 10%, such deviant appraisal shall be
discarded and Fair Rental Value shall be, if there is one
deviant appraisal, the mean of the two appraisals remaining,
or, if there are two deviant appraisals, the one appraisal
remaining.
10.2 BINDING EFFECT; COSTS. All such determinations of Fair Rental Value
shall be final and binding upon the parties. The provision for
determination by appraisal shall be specifically enforceable to the
extent such remedies are available under the applicable law, and any
determination hereunder shall be final and binding upon the parties
hereto, and either party shall have the right to enter judgment
thereon, unless otherwise provided by applicable law. If a
determination of Fair Rental Value is to be made pursuant to this
Article 10, Landlord and Tenant shall each pay for the fees and
disbursements of any appraiser appointed by it and shall share equally
in the fees and expenses of any third appraiser.
ARTICLE 11
MISCELLANEOUS PROVISIONS
11.1 NOTICES FROM ONE PARTY TO THE OTHER. All notices required or permitted
hereunder shall be in writing and addressed, if to the Tenant, at the
Original Notice Address of Tenant or after the Fixed Rent Commencement
Date for the Initial Premises at the Premises or such other address as
Tenant shall have last designated by notice in writing to Landlord and,
if to Landlord, at the Original Notice Address of Landlord or such
other address as Landlord shall have last designated by notice in
writing to Tenant. Any notice shall be sent to such address by
registered or certified mail, return receipt requested, postage
prepaid, or by nationally recognized courier, charges prepaid, or by
hand and shall be effective when received or when tendered delivery is
refused.
11.2 QUIET ENJOYMENT. Landlord agrees that upon Tenant's paying the rent and
performing and observing the agreements, conditions and other
provisions on its part to be performed and observed, Tenant shall and
may peaceably and quietly have, hold and enjoy the Premises during the
term hereof without any manner of hindrance or molestation from
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Landlord or anyone claiming under Landlord, subject, however, to the
terms of this Lease.
11.3 LEASE NOT TO BE RECORDED. Tenant agrees that it will not record this
Lease. Both parties shall, upon the request of either, execute and
deliver a notice or short form of this Lease in such form, if any, as
may be permitted by applicable statute.
11.4 LIMITATION OF LANDLORD'S LIABILITY. The term "Landlord" as used in this
Lease, so far as covenants or obligations to be performed by Landlord
are concerned, shall be limited to mean and include only the owner or
owners at the time in question of the Property, and in the event of any
transfer or transfers of title to the Property, the Landlord (and in
case of any subsequent transfers or conveyances, the then grantor)
shall be concurrently freed and relieved from and after the date of
such transfer or conveyance, without any further instrument or
agreement of all liability as respects the performance of any covenants
or obligations on the part of the Landlord contained in this Lease
thereafter to be performed, it being intended hereby that the covenants
and obligations contained in this Lease on the part of Landlord, shall,
subject as aforesaid, be binding on the Landlord, its successors and
assigns, only during and in respect of their respective successive
periods of ownership of said leasehold interest or fee, as the case may
be. Tenant, its successors and assigns, shall not assert nor seek to
enforce any claim for breach of this Lease against any of Landlord's
assets other than Landlord's interest in the Property and in the rents,
issues and profits thereof, and Tenant agrees to look solely to such
interest for the satisfaction of any liability or claim against
Landlord under this Lease, it being specifically agreed that in no
event whatsoever shall Landlord (which term shall include, without
limitation, any general or limited partner, trustees, beneficiaries,
officers, directors, or stockholders of Landlord) ever be personally
liable for any such liability.
11.5 ACTS OF GOD. In any case where either party hereto is required to do
any act, delays caused by or resulting from Acts of God, war, civil
commotion, fire, flood or other casualty, labor difficulties, shortages
of labor, materials or equipment, government regulations, unusually
severe weather, or other causes beyond such party's reasonable control
shall not be counted in determining the time during which work shall be
completed, whether such time be designated by a fixed date, a fixed
time or a "reasonable time," and such time shall be deemed to be
extended by the period of such delay.
11.6 LANDLORD'S DEFAULT. Landlord shall not be deemed to be in default in
the performance of any of its obligations hereunder unless it shall
fail to perform such obligations and such failure shall continue for a
period of 30 days or such additional time as is reasonably required to
correct any such default after written notice has been given by Tenant
to Landlord specifying the nature of Landlord's alleged default.
Landlord shall not be liable in any event for incidental or
consequential damages to Tenant by reason of Landlord's default,
whether or not notice is given. Except as expressly set forth herein,
Tenant shall have no right to terminate this Lease for any default by
Landlord hereunder and no right, for any such default, to offset or
counterclaim against any rent due hereunder.
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11.7 BROKERAGE. Each party warrants and represents that it has dealt with no
broker in connection with the consummation of this Lease, other than
the Broker (whose commission shall be paid by Landlord pursuant to a
separate agreement if, as and when this Lease is fully executed and
delivered and not otherwise), and each party shall defend, indemnify
and hold harmless the other against any and all liability for breach of
such warranty and representation.
11.8 APPLICABLE LAW AND CONSTRUCTION. This Lease shall be governed by and
construed in accordance with the laws of the Commonwealth of
Massachusetts and, if any provisions of this Lease shall to any extent
be invalid, the remainder of this Lease shall not be affected thereby.
There are no oral or written agreements between Landlord and Tenant
affecting this Lease. This Lease may be amended, and the provisions
hereof may be waived or modified, only by instruments in writing
executed by Landlord and Tenant. The titles of the several Articles and
Sections contained herein are for convenience only and shall not be
considered in construing this Lease. Unless repugnant to the context,
the words "Landlord" and "Tenant" appearing in this Lease shall be
construed to mean those named above and their respective heirs,
executors, administrators, successors and assigns, and those claiming
through or under them respectively. If there be more than one tenant,
the obligations imposed by this Lease upon Tenant shall be joint and
several.
11.9 LITIGATION EXPENSES. In any litigation between the parties regarding
this Lease, the losing party shall pay to the prevailing party all
reasonable expenses and court costs including attorney's fees incurred
by the prevailing party. A party shall be considered the prevailing
party if:
(i) it initiated the litigation and substantially obtains the relief
sought, either by entry of a judgment or the other party's
voluntary action before trial or judgment;
(ii) it did not initiate the litigation and the other party withdraws
its action without substantially obtaining the relief it sought;
or
(iii) it did not initiate the litigation and judgment is entered in
favor of either party, but without substantially granting the
relief sought by the initiating party.
11.10 ROOF SPACE. (a) Tenant shall have the right to use an area of the roof
of the Building designated by Landlord (the "Roof Space") for the
purpose of installing (in accordance with the terms and conditions of
this Lease), operating and maintaining a satellite dish antenna, not
larger than 18 inches in diameter, and the necessary equipment related
thereto for Tenant's own use (collectively the "Communications
Equipment"). Tenant shall pay Landlord annual rent for the Roof Space
at the rate of $300.00 per month, payable at the same time and in the
same manner as the Annual Fixed Rent for the Premises, and all of the
other provisions of this Lease shall apply to the Roof Space as if it
were part of the Premises.
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(b) Tenant's right to install the Communications Equipment shall be
subject to the reasonable approval rights of Landlord and Landlord's
architect with respect to the plans and specifications for the
Communications Equipment, including, without limitation, the size,
height and dimensions of the Communications Equipment, the manner in
which the Communications Equipment is attached to the roof of the
Building and the manner in which any cables are run to and from
Premises and the Communications Equipment. Tenant shall be solely
responsible for obtaining all necessary governmental and regulatory
approvals and for the cost of installing, operating, maintaining and
removing of the Communications Equipment.
(c) Landlord agrees that Tenant, upon reasonable prior notice to
Landlord, shall have access to the Roof Space for the purpose of
installing, maintaining, repairing and removing the Communications
Equipment, provided that, in the event of an emergency, Landlord will
use reasonable efforts to provide Tenant with immediate access to the
Roof Space. It is agreed, however, that only authorized engineers,
employees or properly authorized contractors of Tenant, FCC inspectors
or persons under their direct supervision will be permitted to have
access to the Roof Space. Tenant further agrees to exercise firm
control over the people requiring access to the Roof Space in order to
keep to a minimum the number of people having access to the Roof Space
and the frequency of their visits.
(d) Tenant shall be responsible for assuring that the installation,
maintenance, operation and removal of the Communications Equipment will
in no way damage the Building or roof thereof, or interfere with the
use of the Building and roof by Landlord or any other tenants. Tenant
agrees to be responsible for any damage caused to the roof or any other
part of the Building, which may be caused by Tenant or any of its
agents or representatives.
(e) Tenant agrees to install and operate the Communications Equipment
in a manner which will not cause material interference to Landlord or
other tenants of the Building. For purposes hereof, interference from
the operation of the Communications Equipment shall be deemed to be
material if it reduces the operating efficiency or utility of any
equipment or if it adversely affects the purity of any frequency or
signal then used by Landlord or any tenant of the Building for
transmission or receiving purposes. In the event the Communications
Equipment causes such material interference, Tenant shall change the
frequency on which it transmits and/or receives and take any other
steps necessary to eliminate the interference. If said interference
cannot be eliminated within a reasonable period of time, in the
judgment of Landlord, the Tenant agrees to remove the portion of the
Communications Equipment from the Roof Space that is causing such
interference and Tenant's right to use the Roof Space for such portion
of the Communications Equipment shall then terminate without further
obligation on either party, other than Tenant's obligation to remove
such Communications Equipment and repair any damages as a result
thereof.
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(f) All installations and operations in connection with this Lease by
Tenant shall meet with all applicable rules and regulations of the
Federal Communications Commission ("FCC"), Federal Aviation
Administration ("FAA") and all applicable codes and regulations of the
city, county and state concerned. Under this Lease, the Landlord
assumes no responsibility for the licensing, operation and/or
maintenance of Tenant's equipment. Tenant has the responsibility of
carrying out the terms of its FCC license in all respects.
(g) Tenant shall be responsible for the cost of installation,
operation, cleanliness, maintenance and removal of the Communications
Equipment and appurtenances, all of which shall remain the personal
property of Tenant, and shall be removed by Tenant at its own expense
at the termination of this Lease. Tenant shall repair any damage caused
by such removal, including the patching of any holes to match, as
closely as possible, the color surrounding the area where the equipment
and appurtenances were attached. Such maintenance and operation shall
be performed in a manner to avoid any interference with any other
tenants or Landlord. Tenant agrees to maintain all of Tenant's
equipment placed on or about the roof in proper operating condition and
maintain same in satisfactory condition as to appearance and safety.
Tenant agrees that at all times during the term of this Lease, it will
keep the Roof Space free of all trash or waste materials by Tenant.
(h) In light of the specialized nature of the Communications Equipment,
Tenant shall be permitted to utilize the services of its choice for
installation, removal and repair of the Communications Equipment.
Notwithstanding the foregoing, Tenant must provide Landlord with prior
notice of any such installation, removal or repair and coordinate such
work with Landlord in order to avoid voiding or otherwise adversely
effecting any warranties granted to Landlord with respect to the roof.
If necessary, Tenant, at its sole cost and expense, shall retain any
contractor having a then existing warranty in effect on the roof to
perform such work (to the extent that it involves the roof), or, at
Tenant's option, to perform such work in conjunction with Tenant's
contractor. In the event Landlord contemplates roof repairs that
require temporary removal or relocation of the Communications
Equipment, or which may result in an interruption of the Tenant's
telecommunication service, Landlord shall formally notify Tenant at
least ten (10) days in advance prior to the commencement of such
contemplated work in order to allow Tenant to make other arrangements
for such services, provided that, in the event of an emergency,
Landlord shall not be required to give Tenant ten (10) days notice but,
in good faith, shall give Tenant as much notice as is reasonably
possible considering the nature of the emergency. In addition, if the
roof repairs are not of an emergency nature and Tenant reasonably
requires more than ten (10) days in which to make alternative service
arrangements, Landlord will work together in good faith with Tenant to
agree upon an arrangement that allows Landlord to perform such roof
repairs on a timely basis without additional cost and allows Tenant an
adequate amount of time to make alternative service arrangements.
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ARTICLE 12
SECURITY DEPOSIT
12.1 INITIAL SECURITY DEPOSIT. Concurrently with Tenant's execution of this
Lease Tenant shall wire transfer to Landlord, in accordance with the
wiring instructions set forth in Exhibit K attached hereto, funds in
the amount of the Security Deposit Amount set forth in Section 1.1 as
security for the full and punctual performance by Tenant of all of the
terms of this Lease. Landlord shall deposit such funds in an interest
bearing money market account in a financial institution selected by
Landlord, with interest to be added to such account (the funds and
interest in such account being referred to as the "Security Deposit").
In the event Tenant defaults in the performance of any of the terms of
this Lease beyond any applicable cure period, including the payment of
rent, Landlord may use, apply or retain the whole or any part of the
Security Deposit to the extent required for the payment of any rent or
for any sum which Landlord may expend or may be required to expend by
reason of Tenant's default of any of the terms of this Lease, including
any damages or deficiency in the re-letting of the Premises, whether
accruing before or after summary proceedings or other re-entry by
Landlord. In the case of every such use, application or retention,
Tenant shall, on demand, pay to Landlord the sum which when added to
the Security Deposit then held by Landlord (if any) will cause the
Security Deposit held by Landlord to equal the applicable Security
Deposit Amount. If Tenant shall fully and punctually comply with all of
the terms of this Lease, the Security Deposit, together with any
accrued interest thereon, shall be returned to Tenant after the
termination of this Lease and delivery of exclusive possession of the
Premises to Landlord. In the event of a sale or lease of the building,
Landlord shall have the right to transfer the security to the buyer or
lessee and Landlord shall ipso facto be released by Tenant from all
liability for the return of such security; and Tenant agrees to look
solely to the new landlord for the return of the Security Deposit; and
it is agreed that the provisions hereof shall apply to every transfer
or assignment made of the Security Deposit to a new landlord. Tenant
shall not assign or encumber or attempt to assign or encumber the
monies deposited herein as security and neither Landlord nor its
successors or assigns shall be bound by any such assignment,
encumbrance or attempted assignment or encumbrance.
12.2 REDUCTION SCHEDULE. Provided that Tenant is not in default of any of
its obligations hereunder beyond any applicable cure period at the time
of scheduled reduction hereunder, after the end of the 2nd Lease Year
the Security Deposit Amount shall be reduced to the following amounts
during the following periods:
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<TABLE>
<CAPTION>
Lease Year Security Deposit Amount
---------- -----------------------
<S> <C>
3 $1,600,000.00
4 $1,200,000.00
5 through 7 and the Extension
Term if applicable $800,000.00
</TABLE>
In implementation thereof, after any reduction hereunder, if the amount
of the Security Deposit held by Landlord exceeds the Security Deposit
Amount required hereunder, Landlord shall remit such excess to Tenant
within 5 business days of Tenant's request therefor, however there
shall be no more than one such remittance per reduction hereunder.
ARTICLE 13
TENANT'S EMERGENCY GENERATOR
13.1 TENANT'S EMERGENCY GENERATOR. Tenant shall have the right to install
(in accordance with the terms and conditions of the Lease), operate and
maintain an emergency back-up generator (the "Generator") and 1
accessory fuel tank (the "Tank") each in locations designated by
Landlord.
13.2 TERMS OF USE. The space utilized by Tenant for the Generator and Tank
shall not be included in the Rentable Area of the Premises and no Fixed
Rent or Additional Rent shall be payable therefor but all of the other
provisions of this Lease shall apply thereto, except that Landlord
shall not have any obligation to provide any services thereto.
Notwithstanding anything herein to the contrary, Tenant's right to
install the Generator and Tank shall be subject to Landlord's
reasonable approval of the manner in which the Generator and Tank are
installed, the manner in which any cables and wires are run to and from
the Generator to the Premises and any fuel lines are run from the Tank
to the Generator and the measures that will be taken to eliminate any
vibrations or sound disturbances from the operation of the Generator
and to minimize the hazards presented by the Tank. Tenant shall be
solely responsible for obtaining all necessary governmental and
regulatory approvals and for the cost of installing, operating,
maintaining and removing of the Generator and Tank. Tenant shall also
be responsible for the cost of all utilities consumed in the operation
of the Generator.
13.3 INSTALLATION, OPERATION, MAINTENANCE AND REMOVAL. (a) Tenant shall be
responsible for assuring that the installation, maintenance, operation
and removal of the Generator and Tank will in no way damage the
Building. Tenant agrees to be responsible for any damage caused to the
Building or Property in connection with the installation,
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maintenance, operation or removal of the Generator and Tank and, in
accordance with the terms of Section 6.1.5 of this Lease, to indemnify,
defend and hold Landlord and all Landlord Affiliates harmless from all
liabilities, obligations, damages, penalties, claims, costs, charges
and expenses, including, without limitation, reasonable architects' and
attorneys' fees (if and to the extent permitted by law), which may be
imposed upon, incurred by, or asserted against Landlord in connection
with the installation, maintenance, operation or removal of the
Generator and Tank.
(b) Tenant shall be responsible for the installation, operation,
cleanliness, maintenance and removal of the Generator, Tank and
appurtenances, all of which shall remain the personal property of
Tenant, and shall be removed by Tenant at its own expense at the
termination of the Lease. Tenant shall repair any damage caused by such
removal, including the patching of any holes to match, as closely as
possible, the color surrounding the area where the Generator, Tank and
appurtenances were attached. Such maintenance and operation shall be
performed in a manner to avoid any unreasonable interference with any
other tenants or Landlord. Tenant agrees to maintain the Generator and
Tank in good condition and repair. If Tenant fails to perform any of
its obligations under this Article 13 and such failure continues for 10
business days after written notice from Landlord, then, in addition to
and not in lieu of any of Landlord's other remedies on account thereof,
at Landlord's election, exercisable by and effective upon written
notice to Tenant, Tenant's rights under this Article 13 shall terminate
and Tenant shall immediately remove the Generator and Tank from the
Building and the Property and repair any damage caused by the
installation and/or removal thereof.
13.4 ACCESS TO GENERATOR AREA. Tenant, upon prior notice to Landlord and
subject to the reasonable rules and regulations enacted by Landlord,
shall have access to the Generator and Tank for the purpose of
installing, repairing, maintaining and removing them. Tenant shall only
test the Generator and Tank outside Normal Business Hours and upon
prior notice to Landlord.
54
<PAGE>
WITNESS the execution hereof under seal on the day and year first above
written:
Landlord:
EAST OFFICE OPERATING
LIMITED PARTNERSHIP
By: Commonwealth Flats
Development East Corp.,
Its general partner
By: /s/ John Drew
-----------------------------
Name: John Drew
Title:
Tenant:
BREAKAWAY SOLUTIONS, INC.
By: /s/ Gordon Brooks
-----------------------------
Name: Gordon Brooks
Title: President and Chief
Executive Officer
55
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
The land, together with all buildings and improvements thereon, shown
as Parcel B-2 on a plan of land entitled "ALTA/ACSM Land Title Survey prepared
for Commonwealth Flats Development L.P. World Trade Center Boston-East Office
Building and Park South Boston, Massachusetts" dated May 27, 1998, prepared by
Cullinane Engineering and recorded with the Suffolk County Registry of Deeds
("Suffolk Deeds") in Book 23335, Page 76 (the "Plan") and more particularly
described in accordance with said Plan as follows:
<TABLE>
<S> <C>
Beginning at a point on the southerly side of Northern Avenue at the
northwesterly corner of Parcel B-2;
Thence by the southerly side of Northern Avenue, S61(degree) 19' 13"E,
160.00 feet;
Thence by the westerly side of Parcel D, S28(degree) 40' 47"W, 389.00
feet;
Thence by New Congress Street, N61(degree) 19' 13"W, 160.00 feet;
Thence by the easterly side of Seaport Lane, N28(degree) 40' 47"E,
389.00 feet to be point and place of beginning
</TABLE>
Containing, according to said Plan, 62,240 square feet of land, more or less.
DESCRIPTION OF PARCEL D
The land, together with all buildings and improvements thereon, shown
as Parcel D on the Plan and more particularly described in accordance with said
Plan as follows:
<TABLE>
<S> <C>
Beginning at a point of the southerly side of Northern Avenue, at the
northeasterly corner of Parcel B-2;
Thence by the southerly side of Northern Avenue, S61(degree) 19' 13"E,
150.01 feet;
Thence by the westerly side of D Street, S28(degree) 40' 47"W, 389.00
feet;
Thence by New Congress Street, N61(degree) 19'13", 150.01 feet;
Thence by the easterly side of Parcel B-2, N 28(degree) 40' 47"E, 389.00
feet to the point and place of beginning.
</TABLE>
Containing, according to said Plan, 58,359 square feet of land, more or less.
<PAGE>
EXHIBIT B
PLAN SHOWING THE PREMISES
8TH FLOOR
INITIAL SPACE AND ADDITIONAL SPACE
<PAGE>
EXHIBIT B
PLAN SHOWING THE PREMISES
7TH FLOOR
INITIAL SPACE AND ADDITIONAL SPACE
<PAGE>
EXHIBIT B
PLAN SHOWING THE PREMISES
6TH FLOOR PLAN
WORLD TRADE CENTER -- EAST OFFICE BUILDING BREAKAWAY
<PAGE>
EXHIBIT C
COMMENCEMENT DATE AGREEMENT
FOR THE
INITIAL SPACE AND ADDITIONAL SPACE
_________________ ("Landlord") and ________________ ("Tenant") are
parties to a lease ("Lease") dated ____________ of premises in a building
known as World Trade Center East, Two Seaport Lane, Boston, Massachusetts.
Landlord and Tenant hereby acknowledge and agree that the term of the Lease
of the Initial Space and the Additional Space began on the Commencement Date
for the Initial Space and the Additional Space which occurred on
__________________ and will end on ____________________ unless extended or
terminated earlier pursuant to provisions set forth in the Lease.
Executed under seal this ____ day of __________, 19__.
LANDLORD:
By:
----------------------------------
Its:
TENANT:
By:
----------------------------------
Its:
<PAGE>
EXHIBIT C
COMMENCEMENT DATE AGREEMENT
FOR THE
EXPANSION SPACE
_________________ ("Landlord") and ________________ ("Tenant") are
parties to a lease ("Lease") dated ____________ of premises in a building
known as World Trade Center East, Two Seaport Lane, Boston, Massachusetts.
Landlord and Tenant hereby acknowledge and agree that the term of the Lease
for the Expansion Space began on the Commencement Date for the Expansion
Space which occurred on __________________ and will end on
____________________ unless extended or terminated earlier pursuant to
provisions set forth in the Lease.
Executed under seal this ____ day of __________, 19__.
LANDLORD:
By:
----------------------------------
Its:
TENANT:
By:
----------------------------------
Its:
<PAGE>
EXHIBIT D
BUILDING DESCRIPTION
WORLD TRADE CENTER EAST
PROJECT DESCRIPTION
<PAGE>
WORLD TRADE CENTER -- BOSTON
EAST OFFICE BUILDING
SITE LOCATION PLAN
<PAGE>
WORLD TRADE CENTER BOSTON
EAST OFFICE BUILDING
<PAGE>
WORLD TRADE CENTER BOSTON
EAST OFFICE BUILDING
<PAGE>
WORLD TRADE CENTER BOSTON
EAST OFFICE BUILDING
<PAGE>
EXHIBIT E
WTC EAST OFFICE BUILDING
BASE BUILDING WORK SPECIFICATIONS
The following systems shall be part of the base building:
A. HEATING VENTILATION AND AIR CONDITIONING
1. The HVAC system consists of floor mounted, water-cooled, self-contained
air handling units which are served by a multi-celled cooling tower
system with a capacity of 2,250 tons. Outdoor air for ventilation will
be provided at the rate of 20/CFM per person based on one person per
150 usable feet, as per the BOCA National Mechanical Code.
2. Each office floor will be served by a water-cooled package air
conditioning unit, each with its own set of compressors and a waterside
economizer. Landlord provided medium pressure ring ductwork shall be
joined and supported per SMACNA standards. Landlord to provide all
thermal (external wrap) insulation, fire dampers (as required by code)
for base building medium pressure ductwork installed in Tenant's
Premises. All low pressure ductwork insulation will be part of TIW. No
ducts will be interior lined. Sound attenuators will be used to control
sound.
3. Air distribution will be provided by Variable air volume (VAV) boxes.
Fourteen perimeter fan powered VAV boxes, including electric heating
coils with built-in transformer controls, will be provided and
installed by the Landlord. These boxes are set up to handle
approximately 550 square feet each. Landlord will provide a material
allowance for one interior non-fan powered, VAV box (i.e. with controls
and thermostat, and without electric heat) for every 1500 usable square
feet, less the area covered by the 14 perimeter boxes. Installation of
these interior VAV boxes will be part of Tenant Improvement Work (TIW).
If any additional perimeter or interior VAV Boxes are required, they
will be part of TIW. The medium pressure duct will be connected to the
floor air handling units and the perimeter fan powered VAV units by the
landlord. All low pressure distribution from the perimeter VAV and
interior VAV boxes, as well as medium pressure connections to the
interior VAV boxes will be part of TIW.
4. The HVAC system will be capable of providing a cooling capacity of 5
watts per RSF for tenant light and power. Additional cooling capacity
of 25 tons per floor will be available in each floor mechanical room at
valved and capped condenser water outlets for loads greater than 5
watts square feet, and or after hour loads. It is estimated the
condenser water from this supplemental cooling will cost $500/ton/year.
1
<PAGE>
5. Smoke evacuation, Stair pressurization and garage exhaust systems will
be provided and served from a standby emergency generator in accordance
with the current high-rise code.
6. The building will be controlled through a "Building Energy Management
System", which will monitor and control building systems. Such system
is described in more detail in paragraph E.3 below.
7. Thermostats for the perimeter VAV boxes will be provided and installed
on top of the VAV box with 30 feet of wire. Final installation of
thermostat will be part of TIW.
B. ELECTRICAL
1. Building electric service is designed to provide 6 watts per RSF, 4
watts for general power, and two watts for lighting, with an additional
3 watts/RSF available at the floor electrical room for other tenant
needs on the floor. The distribution panel shall be part of TIW for
full floor tenants. On multi tenant floors, Landlord will provide
multiple distribution taps.
2. Central mechanical equipment loads, elevators, lights and power for
public spaces will be provided with additional electrical capacity
beyond the above stated tenant lighting and power allocation.
3. Electrical power will be provided by Boston Edison via redundant
primary (i.e. 13,800 volts) service to the building. Two primary
feeders and redundant transformers are provided. On single tenant
floors electrical consumption will be individually check metered for
each floor for tenant light and power as well as for HVAC requirements.
On multi tenant floors each tenant will be individually check metered
for tenant light and power. HVAC electrical will be billed on a square
foot pro rata basis during normal operating hours. After normal
operating hours electrical HVAC cost will be billed at an hourly rate
determined by Landlord on the basis of reasonable engineering
calculations.
4. Electrical energy provided by the landlord will be charged to the
tenant as indicated in the lease.
5. Emergency power will be provided by a diesel powered emergency
generator for life safety loads required by code.
6. Dual-feed telephone service is available from local exchange carriers
in the building. This redundancy will be extended throughout the
building. Fiber optic bandwidth and digital services will be available
to the building. Landlord will provide empty 4-inch sleeves located in
the building core telecom closets for installation of Tenant's
telephone wiring by Tenant's phone service provider(s).
2
<PAGE>
C. PLUMBING
1. Toilet rooms will be provided on all tenant floors and will meet or
exceed code requirements for quality and type of fixtures as well as
handicapped accessibility. Core toilet rooms will be served by a
dedicated exhaust duct and fan system to meet all applicable codes.
2. Four (4) each waste, vent, and cold water stacks will be available on
each floor to provide for tenant requirements.
D. FIRE PROTECTION/LIFE SAFETY SYSTEMS
1. The building will provide an automatic sprinkler system covering the
complete base building to meet existing codes. Modification of this
system to meet tenant design requirements will be part of Tenant
Improvement Work. System design must meet Factory Mutual Standards.
2. A state-of-the-art high rise fire alarm system providing automatic
activation of the smoke control systems will be provided at Landlord's
expense. Provision and distribution of fire alarm system that is
specific to Tenant space design will be part of Tenant Improvement
Work.
E. ENERGY CONSERVATION FEATURES
1. Insulation, air barrier and vapor barrier at exterior walls is provided
as per code.
2. Insulated glass with a low E reflective coating and a thermal efficient
window system. Base Building exterior insulated glass will have a
minimum air space of 1/2" as required to meet or exceed STC 35
criteria. High performance elastometric non hardening sealants that do
not diminish the STC 35 rating will be used for exterior joints,
including the window and curtain wall perimeters.
3. Landlord will furnish and install an Energy Management System ("EMS")
which will control cost and comfort by monitoring HVAC functions. The
EMS will allow Landlord to enter and change setpoints, override
schedules, diagnose equipment problems, track energy use and
acknowledge alarms from a central location. The EMS will have the
capability of remote control through modem access. The brand and model
EMS will be comparable to those installed in typical Class A high rise
building.
F. ACCESS CONTROL
1. A card access control system will be provided for after hours building
and elevator access. This will also secure access to floors.
3
<PAGE>
2. A lobby attendant will be stationed in the main lobby during normal
working hours. A security guard will be stationed in the main lobby
after normal working hours - (i.e. 24-hour coverage). Both the
attendant and the security guard will monitor building security
cameras.
G. FINISHES
TENANT'S PREMISES
1. Floor shall be delivered ready for carpet.
2. Perimeter wall and columns shall be drywalled and taped to a level 1
finish.
3. Interior core walls shall be drywalled and taped to a level 1 finish.
Core doors shall be primed and ready to accept finish.
4. Standard finished ceiling height shall be 9', assuming Tenant specifies
conventional lay-in ceiling construction and normal care is taken in
designing and coordinating tenants electrical and mechanical work.
5. Landlord shall furnish and install building standard window blinds for
all exterior windows. A standard window soffit detail will be furnished
by the Landlord, and constructed by the tenant as part of TIW.
6. A common shaft for Tenant's installed kitchen exhaust ducts shall be
provided by Landlord at Landlord's expense. The shaft will meet all
fire ratings required by applicable codes, including rated clean-out
access doors. Tenants will be required to fire-rate their own duct
riser within the common shaft.
MULTI-TENANT FLOOR ELEVATOR LOBBIES
1. Lobby ceiling will be 2'x 2' acoustical tile laid in a narrow profile
recessed grid system.
2. Lobby floorings will be combination loop/cut pile carpeting with wood
base.
3. Walls will receive a fabric wall covering. Elevator doors and frames
will be painted.
4. Lobby lighting shall be provided to level of approximately 25-foot
candles.
5. Core doors shall have a final finish.
4
<PAGE>
CORRIDORS FROM ELEVATOR LOBBIES
(MULTI-TENANT FLOORS ONLY.)
[CORRIDORS ON MULTI-TENANT FLOORS SHALL BE PROVIDED BY LANDLORD AT
LANDLORD'S COST.]
1. Corridor partitions shall be constructed of metal studs with gypsum
wallboard on the corridor side extending above ceiling to the underside
of structure.
2. Corridor ceilings will be 2' x 2' acoustical tile laid in a narrow
profile recessed grid system.
3. Corridor flooring will be a combination loop/cut pile carpeting with
vinyl base.
4. Corridor walls will receive a polymix finish. Doors and frames will be
painted with an enamel paint.
5. Lighting will consist of recessed 2' x 2' fluorescent parabolic lens
fixtures.
Core Toilet Rooms
1. All walls will have ceramic tile to a height of approximately 5' with
painted gypsum wallboard above.
2. Floor finish will be ceramic tile.
3. Ceilings will be gypsum wallboard.
4. Lavatory counter tops will be granite with under-mounted sinks.
5. Toilet rooms will comply with handicapped access requirements of the
Massachusetts Architectural Access Board and the Americans with
Disabilities Act.
6. Toilet partitions will be painted metal or plastic laminate and ceiling
hung.
7. Lighting will be indirect cove lights.
H. STRUCTURAL
1. Office floor loading is designed for:
60 psf live load
20 psf partition load
------
TOTAL: 80 psf
2. Floor slabs shall be constructed to a minimum Ff. 20 floor flatness.
5
<PAGE>
3. Floor slabs shall be suitable for installation of carpet and will be
constructed such that 10' freestanding (unleveled) straight edge
placed anywhere on the slab and allowed to rest upon two high spots
has a gap between the straight edge and the floor not exceeding 1/4".
I. VERTICAL TRANSPORTATION
1. A group of 8 first class passenger elevators will be provided to
service the Building. Each cab is rated at 3500 pound capacity with a
speed of 500 FPM, having a total travel of 204'-0". Under one way peak
traffic conditions, the elevator system's five-minute calculated
handling capacity is 12.5% of the estimated building population. Under
heavy two traffic conditions, the calculated handling capacity is 12%
of the estimated building population.
Under peak one way traffic conditions, the calculated average interval
is just over 20 seconds; the calculated average waiting time is 17
seconds; and the calculated average destination time is less than one
minute.
Under heavy two-way traffic conditions, the calculated average waiting
time is 18 seconds, and the calculated average destination time is also
less than one minute.
2. One service elevator serving P-1, 1-16, and Penthouse floors.
3. Two garage passenger elevators.
4. During the performance of Tenant Improvement Work, Landlord will
provide at its expense elevator access and elevator operator(s) as well
as normal building security. During after hours use of elevators
(during the performance of Tenant Improvement Work), Tenant shall bear
the cost for overtime elevator operator (s), and Tenant specific
security as a part of Tenant Improvement Work. Tenant shall not be
responsible for elevator charges or laborer charges during move-in.
Tenant will be responsible for removal of all cardboard and trash
associated with move-in.
6
<PAGE>
EXHIBIT F
WORLD TRADE CENTER EAST
OFFICE SPACE CLEANING SPECIFICATIONS
I. INTERIOR TENANT AREAS
NIGHTLY MONDAY THROUGH FRIDAY, EXCLUDING HOLIDAYS
1. Dust mop all stone, ceramic tile, terrazzo and other type of un-waxed
flooring.
2. Dust mop all vinyl, asphalt, rubber and similar types of flooring.
Remove gum and other substances, spot mop if necessary.
3. Vacuum all carpeted areas.
4. Dust mop all private and public stairways and vacuum if carpeted.
5. Hand dust and wipe clean all horizontal surfaces including furniture,
file cabinets, fixtures, and windowsills, using chemically treated dust
cloth. PAPERS ON DESKS SHALL REMAIN UNDISTURBED.
6. Dust and sanitize all telephones using disinfectant solution. Care is
to be taken NOT to depress buttons thus altering phone programs, i.e.,
call forwarding.
7. Remove fingerprints from all painted surfaces near light switches,
entrance doors, drinking fountains, etc.
8. Remove all gum and foreign matter on sight.
9. Empty and clean all waste receptacles and remove waste materials to
compactors. Replace liners as necessary.
10. Damp wash interiors of all waste disposal receptacles and wash as
necessary.
11. Clean and sanitize all water fountains, and water coolers with a
disinfectant solution. Wash all sinks and the floors adjacent to them
on a nightly basis.
12. Spot mop floors for spills, etc.
13. Empty and damp clean all ashtrays.
1
<PAGE>
14. Clean all low ledges, shelves, bookcases, chair rails, trim, pictures,
charts etc. within reach.
15. Clean mirrors, metal work, glass tabletops.
16. Upon completion of work, all slop sinks are to be thoroughly cleaned
and all cleaning equipment and supplies stored neatly in locations
designated by the Management of the building.
17. All cleaning operations shall be scheduled so that a minimum of lights
are to be left on at any time. Upon completion of cleaning all lights
are to be turned off. All entrance doors are to be kept locked during
the cleaning operation.
18. Spot clean both sides of tenant entry glass doors.
19. Spot clean desk tops and counter tops.
20. Pick up all recyclable material and take to appropriate place.
WEEKLY
1. Hand dust all door louvers and other ventilating louvers within reach.
2. Dust all baseboards.
3. In high traffic areas, damp mop if necessary and apply spray-buffing
solution in a fine mist and buff with a synthetic pad.
4. Damp mop all non-carpeted and public stairways.
5. Wipe clean all bright work.
6. Completely clean interior glass partitions and doors.
7. Dust all chair rails.
8. Dust walls up to normal reach.
MONTHLY
1. Hose vacuum underneath all furniture.
2. Dust all vertical surfaces such as walls, furniture, partitions and
surfaces not reached in nightly cleaning.
2
<PAGE>
3. Dust exterior of lighting fixtures.
QUARTERLY
1. Wash all baseboards.
2. Dust all exterior window blinds
3. Dust and/or clean all diffusers
OTHER
1. Cleaning of computer rooms will be responsibility of individual
tenants.
2. Coffee stations and dishware are responsibility of the tenant.
II. PUBLIC CORRIDORS, STAIRWELLS (EMERGENCY EGRESS), SERVICE AREAS
NIGHTLY
1. Vacuum and spot clean carpeting.
2. Sweep and mop public concrete floors.
3. Sweep and mop public stairwells and landings.
4. Clean baseboards of scuffs and marks.
5. Empty and clean ashtrays and sand urns.
6. Clean all directories, signage kiosks, wall signage and electric
kiosks.
7. Clean corridor glass and metal work.
8. Spot clean walls, ceilings, lights, etc.
9. Clean telephones and telephone booth areas.
10. Clean and sanitize all public water fountains.
11. Dust all handrails.
12. Dust to hand height all horizontal surfaces of equipment ledge, sill,
shelves, radiators, frames, partitions, handrails, etc.
3
<PAGE>
13. Damp wipe all public granite seating areas and surrounding granite
treatments.
14. Clean exterior surfaces of all trash containers and planters.
15. Keep slop sinks, closets, supply rooms and other janitorial areas in a
clean orderly condition.
16. Keep electrical and telephone closets clean and free of storage.
17. Replace burned out light bulbs.
WEEKLY
1. Clean all door vents.
2. Dust all vertical surfaces within reach.
3. Sweep emergency egress stairs and landings.
MONTHLY
1. Wash all corridor glass and metal completely including atriums.
2 . Dry shampoo heavily traveled carpeted areas.
QUARTERLY
1. Clean handrails, wall mounted equipment casings, landings, walls, kick
plates in emergency egresses.
2. Shampoo and extract all carpeting.
3. Damp clean inside reflectors of high hat lighting fixtures.
SEMI-ANNUALLY
1. Vacuum soffits containing fluorescent fixtures in atrium areas.
2. Wash windows, ledges, plants and light bulbs on inside of both atriums.
4
<PAGE>
III. RESTROOMS
BUILDING OPERATING HOURS
Day porters and matrons will be assigned to perform the following:
1. Empty trash containers and insert new liners.
2. Sweep and spot wash floors as necessary.
3. Spot clean sinks and mirrors. Clean and spot polish shelves and metal
dispensers. Check for Graffiti and spot clean if necessary.
4. Ensure cleanliness of urinals and toilets.
5. Refill all dispenser units as needed.
NON-OPERATING HOURS
1. Damp wash, sanitize (using disinfectant solution) and polish all
fixtures including toilet bowls, urinals and wash basins.
2. Sweep and wash floors with approved germicidal solution.
3. Wash and polish mirrors, powder shelves, dispensers, hand dryers,
bright work including flushometers, piping and toilet seat hinges.
4. Clean and sanitize BOTH sides of toilet seats.
5. Empty all containers and disposal units and insert new liners.
6. Wash and sanitize interiors and exteriors of all containers prior to
inserting new liners.
7. Empty, clean and sanitize all sanitary napkin disposal units.
8. Dust and spot wash where necessary partitions, tile walls, dispensers,
ceiling lights, switches and receptacles.
9. Refill all dispensers to normal limits including sanitary supplies,
soap, tissue, towels, etc.
10. Remove all rubbish and transport to compactor.
11. Dust ceiling door vents and doorframes.
5
<PAGE>
PERIODIC
MONTHLY
1. Machine scrub all tile floors, hand brush corners and hand brush toilet
edges with approved germicidal detergent solution.
2. Wash completely all partitions, tile walls and enamel surfaces.
IV. WINDOW CLEANING
PERIODIC
1. External windows will be washed and cleaned a minimum of three times
per year. Internal windows will be washed and cleaned a minimum of two
times per year.
6
<PAGE>
EXHIBIT G
RULES AND REGULATIONS
1. The sidewalks, entrances, passages, corridors, vestibules, halls,
elevators, or stairways in or about the Building shall not be
obstructed by Tenant.
2. Tenant shall not place objects against glass partitions, doors or
windows which would be unsightly from the Building corridor or from the
exterior of the Building.
3. Tenant shall not waste electricity or water in the Building premises
and shall cooperate fully with Landlord to assure the most effective
operation of the Building heating and air conditioning systems. All
regulating and adjusting of heating and air-conditioning apparatus
shall be done by the Landlord's agents or employees.
4. Tenant shall not use the Premises so as to cause any increase above
normal insurance premiums on the Building.
5. No bicycles, vehicles, or animals (except guide dogs for the disabled)
of any kind shall be brought into or kept in or about the Premises. No
space in the Building shall be used for manufacturing or for the sale
of merchandise of any kind at auction or for storage thereof
preliminary to such sale.
6. Tenant shall cooperate with Landlord in minimizing loss and risk
thereof from fire and associated perils.
7. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were designed and
constructed and no sweepings, rubbish, rags, acid or like substance
shall be deposited therein. All damages resulting from any misuse of
the fixtures shall be borne by the Tenant.
8. Landlord may from time to time adopt appropriate systems and procedures
for the security or safety of the Building, any persons occupying,
using, or entering the Building, or any equipment, finishings, or
contents of the Building, and Tenant will comply with Landlord's
reasonable requirements relative to such systems and procedures.
9. No cooking will be done or permitted by Tenant within the Premises,
except in areas of the Premises which are specifically constructed for
cooking and except that use by the tenant of microwave ovens and
Underwriters' Laboratory approved equipment for brewing coffee, tea,
hot chocolate, and similar beverages will be permitted, provided that
such use is in accordance with all applicable federal, state, and city
laws, codes, ordinances, rules, and regulations.
1
<PAGE>
10. The elevator designated for freight by Landlord will be available for
use by all tenants in the Building during Normal Business Hours and
pursuant to such procedures as Landlord may determine from time to
time. The persons employed to move Tenant's equipment, material,
furniture, or other property in or out of the Building must be
acceptable to Landlord. All moving operations will be conducted at such
times and in such a manner as Landlord will direct, and all moving will
take place during non-Business Hours unless Landlord agrees in writing
otherwise.
11. Tenant acknowledges that the Building has been designated a non-smoking
building. At no time shall Tenant permit its agents, employees,
contractors, guests or invitees to smoke in the Building or, except in
specified locations, directly outside the Building.
12. Landlord reserves the right at any time to rescind, alter or waive any
rule or regulation at any time prescribed for the Building and to
impose additional reasonable rules and regulations when in its judgment
deems it necessary, desirable or proper for its best interest and for
the best interest of the tenants and no alteration or waiver of any
rule or regulation in favor of one tenant shall operate as an
alteration or waiver in favor of any other tenant, provided such rules
and regulations do not diminish Tenant's rights under the Lease.
Landlord shall not be responsible to any tenant for the nonobservance
or violation by any other tenant however resulting of any rules or
regulations at any time prescribed for the Building
2
<PAGE>
EXHIBIT H
TENANT ESTOPPEL CERTIFICATE
TO: ("Mortgagee" or "Purchaser")
--------------------------
THIS IS TO CERTIFY THAT:
1. The undersigned is the tenant (the "Tenant") under that certain
lease (the "Lease") dated __________, 199_, by and between ____________ as
landlord (the "Landlord"), and the undersigned, as Tenant, covering those
certain premises commonly known and designated as _______________ (the
"Premises") in the building located at ______________, ________________,
Massachusetts.
2. The Lease (i) constitutes the entire agreement between the
undersigned and the Landlord with respect to the Premises, (ii) is the only
Lease between the undersigned and the Landlord affecting the Premises and (iii)
has not been modified, changed, altered or amended in any respect, except (if
none, so state):
---------------------------------------
---------------------------------------
---------------------------------------
3. The undersigned has accepted and now occupies the Premises as of the
date hereof, and all improvements, if any, required by the terms of the Lease to
be made by the Landlord have been completed and all construction allowances to
be paid by Landlord have been paid. In addition, the undersigned has made no
agreement with Landlord or any agent, representative or employee of Landlord
concerning free rent, partial rent, rebate of rental payments or any other type
of rental or other economic inducement or concession except (if none, so state):
---------------------------------------
---------------------------------------
---------------------------------------
4. 1. The term of the Lease began (or is scheduled to begin)
on _________ , 19___ and will expire on _________,
19__;
2. The fixed rent for the Premises has been paid to and
including _______________, 19__;
3. The fixed rent being paid pursuant to the Lease is at
the annual rate of $____________; and
1
<PAGE>
4. The escalations payable by Tenant under the Lease are
currently $______, based on a pro rata share of
______%, and have been reconciled through _______,
19__.
5. (i) To the best of Tenant's knowledge, no party to the Lease is in
default, (ii) the Lease is in full force and effect, (iii) the rental payable
under the Lease is accruing to the extent therein provided thereunder, (iv) to
the best of Tenant's knowledge, as of the date hereof the undersigned has no
charge, lien or claim of off-set (and no claim for any credit or deduction)
under the Lease or otherwise, against rents or other charges due or to become
due thereunder or on account of any prepayment of rent more than one (1) month
in advance of its due date, and (v) Tenant has no claim against Landlord for any
security, rental, cleaning or other deposits, except (if none, so state):
---------------------------------------
---------------------------------------
6. Since the date of the Lease there are no actions, whether voluntary
or otherwise, pending against the undersigned under the bankruptcy,
reorganization, arrangement, moratorium or similar laws of the United States,
any state thereof of any other jurisdiction.
7. Tenant has not sublet, assigned or hypothecated or otherwise
transferred all or any portion of Tenant's leasehold interest, except (if none,
so state):
---------------------------------------
---------------------------------------
8. Neither Tenant nor Landlord has commenced any action or given or
received any notice for the purpose of terminating the Lease, nor does Tenant
have any right to terminate the Lease, except (if none, so state):
---------------------------------------
---------------------------------------
---------------------------------------
9. Tenant has no option or preferential right to purchase all or any
part of the Premises (or the real property of which the Premises are a part) nor
any right or interest with respect to the Premises or the real property of which
the Premises are a part. Tenant has no right to renew or extend the term of the
Lease or expand the Premises except (if none, so state):
---------------------------------------
---------------------------------------
---------------------------------------
10. The undersigned acknowledges that the parties named herein are
relying upon this estoppel certificate and the accuracy of the information
contained herein in making a loan
2
<PAGE>
secured by the Landlord's interest in the Premises, or in connection with the
acquisition of the Property of which the Premises is a part.
3
<PAGE>
EXECUTED UNDER SEAL AS OF _____________, 19__.
TENANT:
-------------------------
By:
----------------------
Name:
Title:
Duly Authorized
4
<PAGE>
EXHIBIT I
NONDISCRIMINATION AND AFFIRMATIVE ACTION COVENANTS
With respect to the exercise of all rights and privileges granted under
this Lease, Tenant agrees that Tenant, its successors in interest, subtenants,
and assigns shall:
(a) not discriminate against any person, employee, or applicant
for employment because of race, color or religion, national
origin, age, sex, sexual orientation, disability, or Vietnam
era veteran status in the use of the Premises, including the
hiring and discharging of employees, the provision or use of
services, and the selection of suppliers and contractors;
(b) conspicuously post notices to employees and prospective
employees setting forth the Fair Employee Practices Law of the
Commonwealth of Massachusetts; and
(c) comply with all applicable federal and state laws, rules and
regulations and orders and Massport rules and orders (provided
copies of such Massport rules and orders have been provided to
Tenant) pertaining to Civil Rights and Equal Opportunity.
Non-compliance by Tenant, its successors in interest, subtenants, or assigns
with the foregoing (beyond any cure period set forth in the Lease) shall
constitute a material breach of this Lease. Tenant shall indemnify and hold
harmless Landlord and Massport from any claims and demands of third persons
resulting from non-compliance therewith. The provisions of this Exhibit I shall
survive the expiration or any early termination or cancellation of this Lease
with respect to the period ending on such expiration or earlier termination .
<PAGE>
EXHIBIT J
RENTABLE AREA DEFINITION AND
MEASUREMENT METHOD
RENTABLE AREA
MEASUREMENT STANDARDS - SINGLE TENANCY FLOORS
Three steps, in sequence, are to be followed to determine the total Rentable
Area: (i) compute gross area, (ii) deduct certain areas, (iii) add applicable
share of attributable area (see paragraph c below). Gross area minus such
deductions is referred to in this Lease as "usable area."
(a) GROSS AREA: The gross area of a floor shall be the entire area within the
exterior walls. The measurement along the entire exterior wall shall be taken to
a line established by the horizontal plane of the inside of the glass or other
transparent material.
(b) DEDUCTIONS FROM THE GROSS AREA: The following non-rentable building areas
and their enclosing walls are to be deducted:
1. Elevator shafts and mechanical shafts.
2. Egress stairways.
3. Attributable areas, if any, within the gross area.
(c) ATTRIBUTABLE AREA: The attributable areas shall include, without limitation,
the following: common facilities, including, mechanical and electrical equipment
in the penthouse, mail room, security desk and service area, public lobbies and
circulation areas, fire control room, internal loading docks, and switchgear and
telephone data rooms. The parties acknowledge and agree that the applicable
share of attributable area for floors 6, 7 and 8 is 3,388 per floor.
1
<PAGE>
MEASUREMENT STANDARDS - MULTIPLE TENANCY FLOORS
The sum of the Total Rentable Area for two or more tenants on a floor shall be
Total Rentable Area for that floor as computed in the manner for single tenancy
floors.
Three steps are to be followed to determine the Total Rentable Area for each
tenant on a multiple occupancy floor: (i) compute the Net Rentable Area for such
floor pursuant to (a) below, (ii) compute the Net Rentable Area for each tenant
pursuant to (b) below; (iii) multiply the Total Rentable Area of such floor (as
defined for single tenancy floors) by a fraction whose numerator is the Net
Rentable Area for such tenant and whose denominator is the Net Rentable Area for
such floor.
(a) NET RENTABLE AREA FOR ANY FLOOR: The Net Rentable Area shall be the
gross area as described for single tenancy less the entire core area
(measured to the finished enclosing walls thereof, but excluding any
part of the core rented to a tenant) and corridors (measured to the
finished surface of the office side of the enclosing walls of the
corridor).
(b) NET RENTABLE AREA FOR EACH TENANT: Exterior walls are to be measured as
described in the procedure for gross area. Demising walls between
tenants are to be equally divided. Corridor walls to the finished
surface of the office side of the corridor are not to be included in
the Net Rentable Area of each tenant.
2
<PAGE>
EXHIBIT K
LANDLORD'S WIRING INSTRUCTIONS
First National Bank of Chicago
ABA#: 071000013
Account Name: FMR Corp.
Account #: 5938791
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 7,747,165
<SECURITIES> 0
<RECEIVABLES> 5,015,175
<ALLOWANCES> 225,000
<INVENTORY> 0
<CURRENT-ASSETS> 21,356,236
<PP&E> 5,925,520
<DEPRECIATION> 1,460,488
<TOTAL-ASSETS> 39,827,510
<CURRENT-LIABILITIES> 10,120,607
<BONDS> 0
878
0
<COMMON> 1,051
<OTHER-SE> 27,505,364
<TOTAL-LIABILITY-AND-EQUITY> 39,827,510
<SALES> 14,743,582
<TOTAL-REVENUES> 14,743,582
<CGS> 7,038,220
<TOTAL-COSTS> 21,760,570
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 154,810
<INCOME-PRETAX> (6,983,338)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,983,338)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,983,338)
<EPS-BASIC> (1.52)
<EPS-DILUTED> 0
</TABLE>
