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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from --------------------- to ---------------------
COMMISSION FILE NUMBER 0-14747
XYVISION, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-2751102
(State or other jurisdiction (I.R.S. Employer Identification
Number)
of incorporation or organization)
30 New Crossing Road, Reading, MA 01867
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (781) 756-4400
----------------------------
101 Edgewater Drive
Wakefield, MA 01880-1291
-----------------------------------
Former Address
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.
[x]Yes ----------------- No -----------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of February 12, 1998
Common Stock, $.03 par value 14,271,415
(Title of each class) (number of shares)
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Form 10-Q
Table of Contents
Page
Part I. Financial Information
Consolidated Balance Sheets
at December 31, 1997 and March 31, 1997............................... 2
Consolidated Statements of Operations
for the three and nine months ended December 31, 1997 and 1996 ....... 3
Consolidated Statements of Cash Flows
for the nine months ended December 31, 1997 and 1996 ................. 4
Notes to Consolidated Financial Statements ............................ 5
Management's Discussion and Analysis of Financial
Condition and Results of Operations .................................. 11
Part II. Other Information.................................................. 13
This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended.
For this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, the words "believes," "anticipates," "plans,"
"expects," and similar expressions are intended to identify forward-looking
statements. The important factors discussed below under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," including risks related to the Company's credit line availability
and debt restructuring efforts, among others, could cause actual results to
differ materially from those indicated by forward-looking statements made
herein and presented elsewhere by management from time to time. Such
forward-looking statements represent management's current expectations and are
inherently uncertain. Investors are warned that actual results may differ from
management's expectations.
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XYVISION, INC.
CONSOLIDATED BALANCE SHEETS
at December 31, 1997 and March 31, 1997
<TABLE>
<S> <C> <C>
(Unaudited)
December 31, March 31,
1997 1997
------------ ---------
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents ................................................ $ 243 $ 261
Accounts receivable:
Trade, less allowance for doubtful accounts of $394 at December 31, 1997
and $649 at March 31, 1997 ............................................. 4,483 5,544
Inventories ............................................................... 516 311
Other current assets ...................................................... 713 728
------------ ---------
Total current assets ................................................ 5,955 6,844
Property and equipment, net ............................................. 816 733
Other assets, net, principally software development costs ............... 2,543 2,400
------------ ---------
Total assets ...................................................... $ 9,314 $ 9,977
============ =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Note payable to a stockholder, less discount of $1,125 at December 31, 1997
and $350 at March 31, 1997................................................ $ 7,875 $ 4,550
Current portion of long-term debt ....................................... 2,128 2,031
Accounts payable and accrued expenses .................................... 2,225 2,969
Deferred service revenue ............................................. 1,015 1,243
Other current liabilities ................................................ 1,096 886
------------ ---------
Total current liabilities ............................................. 14,339 11,679
Long-term debt, less current portion ....................................... 75 165
------------ ---------
Total liabilities ................................................... 14,414 11,844
------------ ---------
Commitments and contingencies ............................................. - -
Stockholders' deficit:
Capital stock:
Series preferred stock, $1.00 par value; 2,700,000 shares authorized;
no shares issued ...................................................... - -
Series B preferred stock, $1.00 par value; 300,000 shares authorized;
235,299 issued at December 31, 1997 and March 31, 1997 (aggregate
liquidation preference of $3,057) .................................... 235 235
Common stock, $.03 par value; 50,000,000 shares authorized; 14,748,080 and
14,739,857 issued at December 31, 1997 and March 31, 1997,
respectively ......................................................... 442 442
Additional paid-in capital ................................................ 50,602 49,575
Accumulated deficit ...................................................... (55,211) (50,951)
------------ ---------
(3,932) (699)
Less:
Treasury stock, at cost; 476,665 shares at December 31, 1997 and
March 31, 1997 ......................................................... 1,168 1,168
Receivable from Employee Stock Ownership Plan .............................. - -
------------ ---------
Total stockholders' deficit .......................................... (5,100) (1,867)
------------ ---------
Total liabilities and stockholders' deficit ........................ $ 9,314 $ 9,977
============ =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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XYVISION, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
For the three and nine months ended December 31, 1997 and 1996
(In thousands, except per share data)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
--------------------------- ----------------------------
December 31, December 31, December 31, December 31,
1997 1996 1997 1996
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
Revenues:
Systems ................................................... $ 2,016 $ 3,334 $ 6,610 $ 10,030
Services ................................................... 2,285 2,364 6,813 7,178
------------ ------------ ------------ ------------
Total revenues .......................................... 4,301 5,698 13,423 17,208
------------ ------------ ------------ ------------
Cost of sales:
Systems ................................................... 697 1,031 2,586 3,460
Service ................................................... 1,664 1,909 5,127 5,360
------------ ------------ ------------ ------------
Total cost of sales .................................... 2,361 2,940 7,713 8,820
------------ ------------ ------------ ------------
Gross margin ................................................ 1,940 2,758 5,710 8,388
------------ ------------ ------------ ------------
Expenses:
Research and development .................................... 867 797 2,435 2,266
Marketing, general and administrative ..................... 2,228 1,776 6,719 5,509
------------ ------------ ------------ ------------
Total operating expenses ................................. 3,095 2,573 9,154 7,775
------------ ------------ ------------ ------------
Income (loss) from operations ................................. (1,155) 185 (3,444) 613
------------ ------------ ------------ ------------
Other expense, net:
Interest income ............................................. 3 1 5 4
Interest expense - third party .............................. (60) (38) (125) (227)
Interest expense - stockholder .............................. (226) (108) (626) (383)
------------ ------------ ------------ ------------
Total other expense, net .................................... (283) (145) (746) (606)
------------ ------------ ------------ ------------
Income (loss) before income taxes and extraordinary item . (1,438) 40 (4,190) 7
Provision for income taxes .................................... - - - -
------------ ------------ ------------ ------------
Net income (loss) before extraordinary item .................. (1,438) 40 (4,190) 7
Extraordinary item:
Gain on the exchange of convertible subordinated
debentures ................................................ - - - 100
------------ ------------ ------------ ------------
Net income (loss) ............................................. (1,438) 40 (4,190) 107
Series B Preferred Stock dividends ........................... 24 24 72 70
------------ ------------ ------------ ------------
Net income (loss) allocable to common stockholders ............ $ (1,462) $ 16 $ (4,262) $ 37
============ ============ ============ ============
Basic earnings per share: ....................................
Income (loss) allocable to common stockholders before
extraordinary item .......................................... (0.10) 0.00 (0.30) (0.01)
Extraordinary item .......................................... - - - 0.01
------------ ------------ ------------ ------------
Net income (loss) per share ................................. (0.10) 0.00 (0.30) 0.00
============ ============ ============ ============
Weighted average common and common
equivalent shares outstanding .............................. 14,271 14,208 14,269 11,388
============ ============ ============ ============
Diluted earnings per share:
Income (loss) allocable to common stockholders before
extraordinary item .......................................... (0.10) 0.00 (0.30) 0.00
Extraordinary item .......................................... - - - 0.00
------------ ------------ ------------ ------------
Net income (loss) per share ................................. (0.10) 0.00 (0.30) 0.00
============ ============ ============ ============
Weighted average common and common equivalent
shares outstanding ....................................... 14,271 21,966 14,269 17,239
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
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XYVISION, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the nine months ended December 31, 1997 and 1996
(In thousands)
<TABLE>
<S> <C> <C>
Nine Months Ended
------------------------------
December 31, December 31,
1997 1996
------------ ------------
(Unaudited)
Operations:
Net income (loss) ......................................................... $ (4,190) $ 107
Adjustments to reconcile net income to net cash used for operating activities:
Gain on the exchange of Convertible Subordinated Debentures .................. - (100)
Depreciation and amortization ................................................ 1,696 1,194
Provisions for losses on accounts receivable ................................. 292 100
Loss on disposal of property and equipment ................................. - 6
Operating assets and liabilities:
Accounts receivable ...................................................... 769 (1,062)
Inventories ............................................................... (205) (13)
Accounts payable and accrued expenses .................................... (744) (835)
Other current liabilities ................................................ (11) (19)
Other assets ............................................................... 24 56
------------ ------------
Net cash used for operations ................................................ (2,369) (566)
Investments:
Additions to property and equipment .......................................... (439) (360)
Proceeds from sale of property and equipment ................................. - 6
Capitalized software ......................................................... (1,265) (1,053)
------------ ------------
Net cash used for investments ................................................ (1,704) (1,407)
Financing:
Proceeds from line of credit from a stockholder .............................. 4,300 3,100
Repayment of line of credit to a stockholder ................................. (200) (1,600)
Issuance of preferred stock ................................................ - 1
Exercise of warrants ......................................................... - 200
Dividends on preferred stock ................................................ (72) (70)
Accrued interest ............................................................ 27 -
Principal loan payment from Employee Stock Ownership Plan .................. - 237
------------ ------------
Net cash provided from financing ............................................. 4,055 1,868
Net decrease in cash and cash equivalents .................................... (18) (105)
Cash and cash equivalents at the beginning of the period ..................... 261 332
------------ ------------
Cash and cash equivalents at the end of the period ........................... $ 243 $ 227
============ ============
Supplemental Information:
Conversion of 6% debentures to equity ....................................... 20 2,000
Conversion of 4% notes to equity .......................................... - 4,956
Conversion of accrued interest on 6% debentures to equity .................. 7 649
Conversion of 6% debentures to 15% and 4% notes ........................... - 340
Conversion of 15% notes to 4% notes ....................................... - 177
Conversion of accrued interest on 15% notes to Series B Preferred Stock ... - 75
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
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XYVISION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of management, the accompanying financial statements reflect
all adjustments (including normal recurring adjustments) necessary to
present fairly the Company's consolidated financial position as of
December 31, 1997 and the results of its consolidated operations and
consolidated cash flows for the interim periods ended December 31, 1997
and 1996. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These financial
statements should be read in conjunction with the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1997, as amended.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets, liabilities and accrued litigation at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates and would impact future results of operations and cash
flows.
The results of consolidated operations for the interim period ended
December 31, 1997 are not necessarily indicative of the results of
consolidated operations that may be expected for the complete fiscal year.
2. Trade receivables do not contain any material amounts collectible over a
period in excess of one year.
The Company sells its products to a wide variety of customers in a variety
of industries. The Company performs ongoing credit evaluations of its
customers but does not require collateral or other security to support
customer receivables. The Company maintains reserves for credit losses and
such losses have been within management's expectations.
3. Inventories are stated at the lower of cost, determined on a first-in,
first-out method, or market and consist primarily of finished goods.
4. On June 30, 1992, the Company obtained a $2,000,000 line of credit with
Tudor Trust ("Tudor Trust"), the largest stockholder of the Company. Mr.
Jeffrey Neuman, the grantor, sole trustee and sole current beneficiary of
Tudor Trust, also serves as Chairman of the Board of Directors of the
Company. The line, which is payable on demand, is collateralized by
substantially all of the assets of the Company and has been used for
working capital and general business purposes. Interest on the line of
credit is payable monthly. The Company issued 400,000 shares of common
stock and a common stock purchase warrant for 100,000 shares of common
stock at an exercise price of $.50 per share to Tudor Trust for no
additional consideration upon signing of the line of credit. In addition,
as required by the line of credit, from September 30, 1992 through June
30, 1993, the Company granted Tudor Trust four additional common stock
purchase warrants, each covering 100,000 shares of common stock. On
September 28, 1993, the Company and Tudor Trust amended the line of
credit. Under the terms of this amendment: (i) the amount available under
the line of credit was increased from $2,000,000 to $2,500,000; (ii) the
annual interest rate was reduced from 13% to 10%; and (iii) the term of
the line of credit was extended from June 30, 1994 to June 30, 1995. In
consideration of such changes, the Company: (i) reduced the exercise price
of 200,000 and 100,000 common stock purchase warrants exercisable by Tudor
Trust from $.50 and $.25 per share, respectively, to $.09 per share (the
fair market value of the common stock on September 28, 1993); (ii) issued
200,000 shares of common stock and a warrant to purchase 300,000 shares of
common stock at an exercise price of $.09 per share to Tudor Trust for no
additional consideration; and (iii) agreed to grant Tudor Trust up to
eight additional warrants, each covering 125,000 shares of common stock at
an exercise price at the lesser of the fair market value of the common
stock on the date of issue or $1.00 per share.
On December 3, 1993, the Company and Tudor Trust entered into an
additional amendment to the line of credit. Under the terms of this
amendment, the amount available under the line of credit was increased to
$3,000,000. In consideration of this change, the Company: (i) issued
100,000 shares of common stock and a warrant to purchase 500,000 shares of
common stock at fair market value of the common stock on December 3, 1993
and (ii) agreed to grant Tudor Trust up to seven additional common stock
purchase warrants between December 31,
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1993 and June 30, 1995, each covering 200,000 shares of common stock at an
exercise price at the lesser of the fair market value of the common stock
on the date of grant or $1.00 per share (these warrants are in lieu of the
last seven of the warrants referred to in clause (iii) of the preceding
paragraph).
On February 29, 1996, the Company and Tudor Trust entered into an
additional amendment to the line of credit. Under the terms on this
amendment, the amount available under the line of credit was increased to
$4,000,000 and the term of the line of credit was extended to December 31,
1997. In consideration of these changes, the Company granted Tudor Trust a
common stock purchase warrant for 200,000 shares of common stock at an
exercise price of $.10 per share (the fair market value of the common
stock on the date of issuance of such warrant) and agreed to continue to
grant Tudor Trust, for each fiscal quarter for which amounts are
outstanding under the credit line, a common stock purchase warrant for
200,000 shares of common stock provided that the number of shares subject
to the warrant shall be 325,000 (rather than 200,000 shares in the event
that the maximum amount of outstanding credit line advances on one or more
dates during the quarter ending on the issue date of such warrant exceeds
$3,000,000). The exercise price of the first five warrants (beginning with
the warrant for the quarter ended September 30, 1995) will be at the
lesser of the fair market value of the common stock on the date of the
grant or $1.00 per share while the exercise price of the final five
warrants will be the fair market value of the common stock on the date of
the grant.
The Company entered into an additional amendment to its line of credit
agreement with Tudor Trust, effective as of May 31, 1996, pursuant to
which (a) Tudor Trust agreed to (i) increase the maximum loan amount to
$5,000,000, (ii) reduce the interest rate on the line of credit from 10%
to 8% per annum, (iii) eliminate any borrowing covenants or conditions
that would prevent the Company from accessing the full $5,000,000 of
available credit, and (iv) eliminate the requirement for the issuance of
additional warrants to Tudor Trust under the line of credit (which were
issuable on a quarterly basis), and (b) in consideration therefor, the
Company issued to Tudor Trust warrants for 10,000,000 shares of common
stock of the Company at an exercise price of $.10 per share (representing
the parties' understanding as to the fair market value of the common stock
of the Company as of the date of warrant issuance). On July 11, 1997, the
Company received an independent third-party calculation of the fair market
value of the common stock of the Company as of the date of warrant
issuance of $.18 per share. On July 15, 1997, the Company and Tudor Trust
agreed to amend the warrants to increase the exercise price to $.18 per
share. In connection with this line of credit amendment, Tudor Trust
exercised previously granted warrants for the purchase of 2,092,500 shares
of common stock of the Company, for an aggregate purchase price of
$200,000. On July 14, 1997, the Company received an independent
third-party calculation of the value of the common stock purchase warrants
as of the date of warrant issuance of $.06 per warrant. The value of the
warrants is being amortized on a straight-line basis over the two year
term of the credit line and charged to interest expense.
On November 22, 1996, the Company and Tudor Trust entered into an
additional amendment to the line of credit to increase the maximum loan
amount thereunder from $5,000,000 to $6,000,000. Such amendment provided
that Tudor Trust shall have the sole discretion to decide whether or not
to make any and all advances of funds in excess of $5,000,000, and that
Tudor Trust shall have the right to refuse to make any advances of any
such funds in excess of $5,000,000 for any reason or no reason.
On November 10, 1997, the Company and Tudor Trust entered into an
additional amendment to the line of credit to increase the maximum loan
amount thereunder from $6,000,000 to $8,300,000. Such amendment also (i)
reduced the interest rate on the line of credit from 8% to 6%, (ii)
eliminated the provision that Tudor Turst shall have the sole discretion
to decide whether or not to make any advances of funds thereunder in
excess of $5,000,000, (iii) provided for Tudor Trust to cause the issuance
of a letter of credit from a bank in the amount of $444,600 to the
Company's new landlord, and (iv) extended the term of the line of credit
from December 31, 1997 to March 31, 2001. In consideration for such
amendment to the line of credit, the Company issued to Tudor Trust a
warrant for the purchase of 10,000,000 shares of Common Stock of the
Company at an exercise price of $.16, the fair market value of the Common
Stock on the date of warrant issuance.
In addition, the Company is currently in negotiations with Tudor Trust to
further amend the line of credit. Such amendment, as currently proposed,
would (i) increase the maximum loan amount thereunder from $8,300,000 to
$11,000,000, (ii) provide that Tudor Trust shall have the sole discretion
to decide whether or not to make advances of funds thereunder, (iii)
provide Tudor Trust with the option of receiving the interest payable
thereunder in cash or in shares of Common Stock based on the fair market
value of the Common Stock, and (iv) provide for the issuance by the
Company to Tudor Trust of a common stock purchase warrant covering
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3,000,000 shares of Common Stock of the Company at a purchase price equal
to the fair market value of the Common Stock on the date of issuance.
There can be no assurance, however, that such negotiations will be
successful or that increased borrowings will be available under the
Company's line of credit.
As of December 31, 1997, the Company had an outstanding credit line
balance of $9,000,000. As of February 12, 1998, the Company had an
outstanding credit line balance of $9,500,000.
5. In May 1987, the Company issued $25,000,000 principal aggregate amount of
6% Convertible Subordinated Debentures due 2002 (the "Debentures")
convertible into common stock at a conversion price of $22.50 per share.
Interest on the Debentures is payable annually (on May 5th) and the
Debentures may be called by the Company under certain conditions. At the
beginning of fiscal 1992, the Company had outstanding $22,410,000 of these
Debentures. This was a significant amount of debt for the Company and
represented an annual cash interest payment obligation of $1,344,600.
During fiscal 1992, the Company began a program to restructure its
financial position, specifically, these Debentures.
From March 10, 1992 to September 30, 1996, the Company consummated
restructuring transactions with the holders of a total of $19,035,000
principal aggregate amount of Debentures. Substantially all of these
transactions involved the exchange of outstanding Debentures for (i) an
unsecured, unsubordinated promissory note of the Company in a principal
amount equal to 30% of the principal amount of the Debentures delivered
for exchange, bearing interest (payable at maturity) at 15% per year
(compounded annually) and maturing 30 months from issuance and (ii)
107,095 shares of common stock of the Company per $1,000,000 principal
amount of Debentures. The Company issued 15% Promissory Notes in an
aggregate principal amount of $5,815,000 in connection with such Debenture
exchange transactions with aggregate interest of $2,452,000 payable at
maturity. Such 15% Promissory Notes in an aggregate principal amount of
$4,542,000 were to mature on September 30, 1994, and the remainder of
these 15% Promissory Notes were to mature at various dates between
September 30, 1994 and December 30, 1998.
During the course of its attempts to restructure the Debentures and
negotiate transactions with Debentureholders, the Company did not make the
interest payment due on the Debentures on May 5 of 1992, 1993, 1994, 1995,
1996 or 1997. Under the terms of the Indenture covering the Debentures,
the Trustee or the holders of not less than 25% of the outstanding
principal amount of the Debentures have the right to accelerate the
maturity date of the remaining Debentures. As of February 12, 1998, no
such acceleration had occurred or been threatened.
Between September 30, 1996 and December 31, 1997, the Company completed
transactions with investors holding an additional aggregate amount of
$2,020,000 principal amount of the Debentures. Under the terms of the
exchange agreements, holders of Debentures exchanged their Debentures for
such number of shares of common stock of the Company as is equal to the
sum of the principal amount of the Debentures exchanged plus the accrued
interest thereon, divided by $3.33. The Company has accounted for the
exchanges as a contribution of capital by significant stockholders. As of
December 31, 1997, a total of $1,355,000 principal amount of Debentures
remained outstanding. Of such Debentures, the Company has identified the
holders of $315,000 principal amount, leaving the holders of $1,040,000
principal amount of Debentures unidentified.
In order to relieve itself of the payment obligations on the 15%
Promissory Notes, in fiscal 1995 the Company began a program to
restructure the 15% Promissory Notes. As of December 31, 1997, the Company
closed exchange transactions with 15% Promissory Note holders of an
aggregate principal amount of $5,709,000 and accrued interest of
$2,353,000, in which, in exchange for the delivery of a 15% Promissory
Note (including all rights to receive any interest accrued thereon) for
cancellation, the Company issued (i) a new Promissory Note that will
mature 30 months from the date of issuance and bears interest at 4% per
annum, (ii) one share of common stock for each $10.00 of principal amount
of 15% Promissory Note delivered and (iii) one share of Series B Preferred
Stock for each $10.00 of interest due on the 15% Promissory Note
delivered. The Series B Preferred Stock accrues a cumulative dividend in
the amount of $.40 per share per annum, whether or not declared, and has a
liquidation preference of $12.50 per share, plus any dividends declared or
accrued but unpaid. Each share of Series B Preferred Stock is convertible
into two shares of common stock, subject to adjustment for certain events.
Additionally, holders of outstanding shares of Series B Preferred Stock
are entitled to voting rights equivalent to the rights attributable to the
whole shares of common stock into which the shares of Series B Preferred
Stock are convertible. The exchange transactions were completed assuming a
fair value of $10 per share of Series B Preferred Stock. As of December
31, 1997, 15% Promissory Notes in
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an aggregate principal amount of $60,000 and accrued interest of $53,000
were overdue. The Company may seek to restructure the remaining 15%
Promissory Notes but there can be no assurance that it will do so.
The Company continues to convert its debt to equity, specifically the 4%
Promissory Notes. As of December 31, 1997, the Company has completed
transactions with holders of an aggregate of $4,974,000 principal amount
of the outstanding 4% Promissory Notes. Under the terms of the exchange
agreements, the holders of the 4% Promissory Notes exchanged their 4%
Promissory Notes for such number of shares of common stock of the Company
as is equal to the principal amount of the 4% Promissory Notes exchanged
divided by $2.00 (any accrued but unpaid interest was paid in cash as the
time of such exchange). The Company has accounted for the conversions as a
contribution of capital by significant stockholders. As of December 31,
1997, 4% Promissory Notes in an aggregate principal amount of $512,000
were overdue. The Company may seek to restructure the remaining 4%
Promissory Notes but there can be no assurance that it will do so.
The Company continues to negotiate, in good faith, restructuring
transactions with as many of the remaining holders of Debentures, 15%
Promissory Notes and 4% Promissory Notes as possible. However, despite the
progress that has been made, the Company can still give no assurance about
the outcome of these restructuring efforts and does not expect the matters
to be resolved in the near future. If the Company is unable to enter into
exchange transactions with the remaining holders, and such holders seek to
pursue legal remedies against the Company, the Company may have to seek
protection under applicable laws, including the Bankruptcy Code, while it
develops, analyzes and completes alternative restructuring strategies.
The Company anticipates that its cash requirements for the remainder of
fiscal 1998 and the first two quarters of fiscal 1999 will be satisfied
mainly from its credit line, as proposed to be amended, or otherwise from
Tudor Trust, assuming the continued forbearance by the holders of the
Debentures, 15% Promissory Notes and 4% Promissory Notes and the
availability of increased borrowings under the credit line or otherwise
from Tudor Trust. In addition, the Company's current outstanding credit
line balance is in excess of the current terms of the credit line, and for
the remainder of fiscal 1998, the Company expects to require cash in
excess of the current terms of the credit line. There can be no assurance
that the forbearance by the debtholders will continue or that the Company
will successfully negotiate an amendment to the credit line as proposed,
or otherwise, or that Tudor Trust will continue to advance any required
funds under or above the credit line. The above uncertainties raise
substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments relating
to the recovery and classifications of recorded asset amounts or the
amounts and classifications of liabilities that might be necessary should
the Company be unable to continue as a going concern.
6. The Company's deferred tax assets consist primarily of its net operating
loss carryforwards. Management has assigned a valuation allowance to fully
offset the future tax benefits of these deferred tax assets. There has
been no change to the valuation allowance during the three or nine months
ended December 31, 1997.
7. The Company has adopted the Financial Acounting Standards Board Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share"
in the three and nine months ended December 31, 1997 and all historical
net income per share data presented has been restated to conform to the
provisions of this statement. SFAS No. 128 establishes a different method
of computing net income per share than is currently required under the
provisions of Accounting Principles Board Opinion No. 15. The following
table reconciles the numerator and the denominators of the basic and
diluted earnings per share (EPS) computations as shown on the Consolidated
Statement of Income inlcuded in this report on Form 10-Q.
8
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
---------------------------- ------------------------------
December 31, December 31, December 31, December 31,
1997 1996 1997 1996
----------- ------------ ----------- -----------
(Unaudited) (Unaudited)
Basic EPS Computation:
Income (loss) before extraordinary item ............ (1,438) 40 (4,190) 7
Series B Preferred Stock Dividends .................. 24 24 72 70
----------- ------------ ----------- -----------
Income (loss) allocable to common stockholders before
extraordinary item ................................. (1,462) 16 (4,262) (63)
----------- ------------ ----------- -----------
Extraordinary item ................................. - - - 100
Net income (loss) allocable to common stockholders ... (1,462) 16 (4,262) 37
=========== ============ =========== ===========
Weighted average common shares outstanding ......... 14,271 14,208 14,269 11,388
=========== ============ =========== ===========
Basic EPS:
Income (loss) allocable to common stockholders before
extraordinary item ................................. (0.10) 0.00 (0.30) (0.01)
Extraordinary item ................................. - - - 0.01
----------- ------------ ----------- -----------
Net income (loss) per share ........................ (0.10) 0.00 (0.30) 0.00
=========== ============ =========== ===========
Diluted EPS Computation::
Income (loss) before extraordinary item ............ (1,438) 40 (4,190) 7
Series B Preferred Stock Dividends .................. 24 24 72 70
----------- ------------ ----------- -----------
Income (loss) allocable to common stockholders before
extraordinary item ................................. (1,462) 16 (4,262) (63)
Extraordinary item ................................. - - - 100
----------- ------------ ----------- -----------
Net income (loss) allocable to common stockholders ... (1,462) 16 (4,262) 37
=========== ============ =========== ===========
Weighted average common shares outstanding ......... 14,271 14,208 14,269 11,388
Common Stock Equivalents:
Stock options and stock warrants (treasury method) - 7,722 - 5,815
Convertible 15% Promissory Notes .................. - 36 - 36
----------- ------------ ----------- -----------
Weighted average common and common equivalents
outstanding .......................................... 14,271 21,966 14,269 17,239
=========== ============ =========== ===========
Diluted EPS:
Income (loss) allocable to common stockholders before
extraordinary item ................................. (0.10) 0.00 (0.30) 0.00
Extraordinary item ................................. - - - 0.00
----------- ------------ ----------- -----------
Net income (loss) per shae ........................... (0.10) 0.00 (0.30) 0.00
=========== ============ =========== ===========
</TABLE>
During the third quarter of fiscal 1998, Options to purchase 1,952,000
shares of common stock at prices ranging from $.28 to $5.00 with expiration
dates ranging up to December 22, 2007 were outstanding but were not
included in the computation of diluted EPS because the option's price was
greater than the average market price
9
<PAGE>
<PAGE>
of the common shares. These options were still outstanding at the end of
the third quarter of fiscal 1998. Additionally, warrants to purchase
1,405,000 shares of common stock at prices ranging from $.33 to $.53 with
expiration dates ranging up to December 31, 2000 were outstanding but were
not included in the computation of diluted EPS because the warrant's price
was greater than the average market price of the common shares. These
warrants were still outstanding at the end of the third quarter of fiscal
1998. Also, the following common stock equivalents were not included in
the diluted EPS calculation as a result of the net loss for the period (i)
common stock options and warrants of 5,109,000 (ii) common equivalents of
the Series B Preferred Stock, 471,000 (iii) common equivalents as a result
of certain debt to equity transactions, 464,000.
During the third quarter of fiscal 1997, Options to purchase 2,005,000
shares of common stock at prices ranging from $.95 to $5.00 with
expiration dates ranging up to October 25, 2006 were outstanding but were
not included in the computation of diluted EPS because the option's price
was greater than the average market price of the common shares. These
options were still outstanding at the end of the third quarter of fiscal
1997. Also, the following common stock equivalents were not included in
the diluted EPS calculation as a result of their antidilutive effect (i)
common equivalents of the Series B Preferred Stock, 471,000 (ii) common
equivalents as a result of certain debt to equity transactions, 469,000.
During the first nine months of fiscal 1998, Options to purchase 1,717,000
shares of common stock at prices ranging from $.38 to $5.00 with
expiration dates ranging up to December 22, 2007 were outstanding but were
not included in the computation of diluted EPS because the option's price
was greater than the average market price of the common shares. These
options were still outstanding at the end of the third quarter of fiscal
1998. Additionally, warrants to purchase 1,405,000 shares of common stock
at prices ranging from $.33 to $.53 with expiration dates ranging up to
December 31, 2000 were outstanding but were not included in the
computation of diluted EPS because the warrant's price was greater than
the average market price of the common shares. These warrants were still
outstanding at the end of the third quarter of fiscal 1998. Also, the
following common stock equivalents were not included in the diluted EPS
calculation as a result of the net loss for the period (i) common stock
options and warrants of 6,542,000 (ii) common equivalents of the Series B
Preferred Stock, 471,000 (iii) common equivalents as a result of certain
debt to equity transactions, 464,000.
During the first nine months of fiscal 1997, Options to purchase 2,005,000
shares of common stock at prices ranging from $.50 to $5.00 with
expiration dates ranging up to October 25, 2006 were outstanding but were
not included in the computation of diluted EPS because the option's price
was greater than the average market price of the common shares. These
options were still outstanding at the end of the third quarter of fiscal
1997. Also, the following common stock equivalents were not included in
the diluted EPS calculation as a result of their antidilutive effect (i)
common equivalents of the Series B Preferred Stock, 471,000 (ii) common
equivalents as a result of certain debt to equity transactions, 469,000.
10
<PAGE>
<PAGE>
XYVISION, INC.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
For the three and nine month periods ended December 31, 1997 and 1996
Results of Operations
Revenues for the third quarter of fiscal 1998 were $4,301,000, a decrease
of $1,397,000, or 25%, from the same quarter of fiscal 1997. Revenues for the
first nine months of fiscal 1998 were $13,423,000, a decrease of $3,785,000, or
22%, from the same period of the previous year. In the third quarter of fiscal
1998, systems revenues decreased $1,318,000, or 40%, from the same quarter of
fiscal 1997. This decrease in systems revenues is primarily attributable to
decreases in Publishing division domestic PDM sales and Contex division
European systems sales. For the first nine months of fiscal 1998, systems
revenues decreased $3,420,000, or 34%, from the comparable period of fiscal
1997. This decrease in systems revenues is primarily attributable to decreases
in Publishing division domestic sales and Contex division world wide sales. For
the three and nine month periods ended December 31, 1997, service revenues
decreased $79,000, or 3%, and $365,000, or 5%, from the comparable periods of
fiscal 1997, respectively. These decreases are primarily due to decreases in
the Publishing division and Contex division domestic maintenance revenues.
For the third quarter of fiscal 1998, gross margins decreased to 45% of
revenues from 48% in the comparable quarter of fiscal 1997. For the first nine
months of fiscal 1998, gross margins decreased to 43% of revenues from 49% of
revenues for the comparable period of fiscal 1997. Systems margins for the
third quarter of fiscal 1998 decreased to 65% of revenues from 69% for the same
quarter of fiscal 1997. For the first nine months of fiscal 1998, systems
margins decreased to 61% of revenues from 66% of revenues from the comparable
period of fiscal 1997. These decreases in systems margins are partially
attributable to decreased revenues combined with a relatively level amount of
amortization expenses. For the third quarter of fiscal 1998, service margins
increased to 27% of revenues from 19% for the same quarter of fiscal 1997, a
result of decreased headcount and its associated costs in Publishing division
customer support group. For the first nine months of fiscal 1998 and fiscal
1997, service margins remained constant at 25% of revenues.
Research and development expenses, net of capitalized software development
costs, were $867,000 and $2,435,000 for the three and nine month periods ended
December 31, 1997, respectively. These amounts represent an increase of 9% and
7%, respectively, from the comparable periods of fiscal 1997. Capitalized
software development costs were $357,000 and $1,265,000 for the third quarter
and first nine months of fiscal 1998, respectively, as compared to $300,000 and
$1,053,000, respectively, for the same time periods of fiscal 1997. Research
and development expenses (excluding software development costs) for the third
quarter increased to 20% of revenues from 14% for the same quarter of fiscal
1997. For the first nine months of fiscal 1998, research and development
expenses (excluding software development costs) increased to 18% of revenues
from 13% for the same time period of fiscal 1997. The expense increases were
mainly a result of increased headcount and its associated costs in both the
Publishing and Contex divisions.
Marketing, general and administrative expenses were $2,228,000 and
$6,719,000, or 52% and 50% of revenues, for the third quarter and first nine
months of fiscal 1998, respectively. These are increases from $1,776,000 and
$5,509,000 from the comparable periods of fiscal 1997, which represented 31% of
revenues and 32% of revenues, respectively. The increase was primarily the
result of the increased domestic marketing expenditures and the opening of
European sales offices for the Publishing division.
Total other expense, net was $283,000 and $746,000 for the third quarter
and first nine months of fiscal 1998, an increase of $138,000, or 95%, and
$140,000, or 23%, respectively, from the comparable periods of fiscal 1997. The
increases in interest expense for the third quarter and first nine months of
1998 were primarily due to a higher average balance in the credit line and
increased amortization expense related to the common stock purchase warrants
described in Note 4 of the consolidated financial statements.
The Company's deferred tax assets consist primarily of its net operating
loss carryforwards. The Company has a valuation allowance to fully offset
future tax benefits of these deferred tax assets. The valuation allowance has
been increased to offset increases in the net operating loss carryforwards for
the third quarter and first nine months of fiscal 1998.
The Company accrued dividends of $24,000 and $72,000 on the Series B
Preferred Stock for the third quarter and first nine months of fiscal 1998,
respectively, compared to $24,000 and $70,000 in the third quarter and first
nine months of fiscal 1997, respectively. The dividends were a result of the
15% Promissory Note exchange program described in Note 5 to the consolidated
financial statements.
11
<PAGE>
<PAGE>
The Company recorded a net loss allocable to common stockholders of
$1,462,000 for the third quarter of fiscal 1998 compared to a net income
allocable to common stockholders of $16,000 for the third quarter of fiscal
1997. For the first nine months of fiscal 1998, the Company recorded a net loss
allocable to common stockholders of $4,262,000 compared to net income allocable
to common stockholders of $37,000 for the first nine months of fiscal 1997
The Company believes that inflation has not had a material effect on its
results of operations to date.
Liquidity and Capital Resources
At December 31, 1997, the Company had cash of $243,000, a decrease of
$18,000 from March 31, 1997. During the first nine months of fiscal 1998, the
Company's operating and investment activities used $4,073,000 of cash.
The Company has a $8,300,000 amended line of credit with Tudor Trust, the
largest stockholder of the Company. Mr. Jeffrey L. Neuman, the grantor, sole
trustee and sole current beneficiary of Tudor Trust, also serves as Chairman of
the Board of Directors of the Company. This credit line, which is payable on
demand, is secured by substantially all of the assets of the Company and has
been used for working capital and general business purposes. The credit line
currently bears interest at a rate of 6% per year, payable monthly. As of
December 31, 1997, the Company had an outstanding line of credit balance of
$9,000,000. As of February 12, 1998, the Company had an outstanding credit line
balance of $9,500,000. The Company is currently in negotiations with Tudor
Trust to further amend the line of credit to, among other things, permit
increased borrowing. There can be no assurance, however, that such negotiations
will be successful or that increased borrowings will be available under the
Company's line of credit. See Note 4 to the consolidated financial statements
for a further description of the Company's line of credit, as amended, and the
proposed amendment thereto.
See Note 5 to the consolidated financial statements for a description of
the Company's efforts to restructure the outstanding Debentures, 15% Promissory
Notes and 4% Promissory Notes. Despite the progress that has been made, the
Company can give no assurance about the outcome of these restructuring efforts
and does not expect the matters to be resolved in the near future. If the
Company is unable to enter into exchange transactions with the remaining debt
holders, and such holders seek to pursue legal remedies against the Company,
the Company may have to seek protection under applicable laws, including the
Bankruptcy Code, while it develops, analyzes and completes alternative
restructuring strategies.
The Company anticipates that its cash requirements for the remainder of
fiscal 1998 and the first two quarters of fiscal 1999 will be satisfied mainly
from its credit line, as proposed to be amended, or otherwise from Tudor Trust,
assuming the continued forbearance by the holders of the Debentures, 15%
Promissory Note and 4% Promissory Notes and the availability of increased
borrowings under the credit line or otherwise from Tudor Trust. In addition,
the Company's current outstanding credit line balance is in excess of the
current terms of the credit line, and for the remainder of fiscal 1998, the
Company expects to require cash in excess of the current terms of the credit
line. There can be no assurance that the forbearance by the debtholders will
continue or that the Company will successfully negotiate an amendment to the
credit line as proposed, or otherwise, or that Tudor Trust will continue to
advance any required funds under or above the credit line. The above
uncertainties raise substantial doubt about the Company's ability to continue
as a going concern. The financial statements do not include any adjustments
relating to the recovery and classifications of recorded asset amounts or the
amounts and classifications of liabilities that might be necessary should the
Company be unable to continue as a going concern.
YEAR 2000
The Company recognizes that it must ensure that its products and
operations will not be adversely impacted by various so-called "Year 2000"
systems and software failures which can arise in certain time sensitive
functions. All of the Company's products are currently Year 2000 compliant, and
therefore the Company does not expect to undertake additional research and
development efforts in this regard. In addition, the Company is in the process
of identifying anticipated costs, problems and uncertainties associated with
making its internal-use operating systems Year 2000 compliant. In general, the
Company expects to resolve the Year 2000 issue with respect to its computer
systems and software applications through upgrade, conversion, modification or
replacement of non-compliant systems and applications. There can be no
assurance, however, that the systems of other parties upon which the Company's
business also relies will be Year 2000 compliant. The costs of becoming Year
2000 compliant, or the failure thereof by the Company or other parties, could
have a material adverse effect on the Company's business, financial condition
or results of operations.
12
<PAGE>
<PAGE>
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
<TABLE>
<S> <C> <C>
(a) Exhibit Number Description
--------------- ------------------------------------------------------
4.1 Amendment, dated November 17, 1997 to Rights Agreement
between the Company and Mellon Bank, N.A. (formerly
Connecticut Bank and Trust Company, N.A.)
10.1 Sublease Agreement, dated as of September 18, 1997, by
and between the Company and TASC, Inc.
10.2 Fourth Amendment, dated November 22, 1996, to the
Amended and Restated Secured Advance Facility Loan
Agreement between the Company and Tudor Trust.
10.3 Fifth Amendment, dated November 10, 1997, to the
Amended and Restated Secured Advance Facility Loan
Agreement between the Company and Tudor Trust.
27 Financial Data Schedule
(b) the Company filed no reports on Form 8-K during the quarter for which this
report is filed.
</TABLE>
13
<PAGE>
<PAGE>
SIGNATURES
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.
XYVISION, INC.
----------------------------
(Registrant)
February 12, 1998
/s/ Eugene P. Seneta
------------------------------
Eugene P. Seneta
Vice President, Chief
Financial Officer,
Treasurer and Secretary
(Principal Financial and
Accounting Officer)
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> MAR-31-1998 MAR-31-1998
<PERIOD-END> DEC-31-1997 DEC-31-1997
<CASH> 243 243
<SECURITIES> 0 0
<RECEIVABLES> 4,877 4,877
<ALLOWANCES> (394) (394)
<INVENTORY> 516 516
<CURRENT-ASSETS> 713 713
<PP&E> 14,876 14,876
<DEPRECIATION> (11,517) (11,517)
<TOTAL-ASSETS> 9,314 9,314
<CURRENT-LIABILITIES> 14,339 14,339
<BONDS> 75 75
0 0
235 235
<COMMON> (4,167) (4,167)
<OTHER-SE> (1,168) (1,168)
<TOTAL-LIABILITY-AND-EQUITY> 9,314 9,314
<SALES> 13,423 4,301
<TOTAL-REVENUES> 13,423 4,301
<CGS> 7,713 2,361
<TOTAL-COSTS> 7,713 2,361
<OTHER-EXPENSES> 9,154 3,095
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 746 283
<INCOME-PRETAX> (4,190) (1,438)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,190) (1,438)
<EPS-PRIMARY> (0.30) (0.10)
<EPS-DILUTED> (0.30) (0.10)
</TABLE>
<PAGE>
FOURTH AMENDMENT TO AMENDED AND RESTATED SECURED
ADVANCE FACILITY LOAN AGREEMENT
This FOURTH AMENDMENT TO THE AMENDED AND RESTATED SECURED ADVANCE FACILITY
LOAN AGREEMENT (the "Fourth Amendment") is entered into as of this 22nd day of
November, 1996 (the "Fourth Amendment Date") by and between XYVISION, INC., a
Delaware corporation with its principal office at 101 Edgewater Drive,
Wakefield, Massachusetts (the "Borrower"), and Jeffrey L. Neuman as trustee of
the Tudor Trust u/d/t August 11, 1986, with an address of 450 North Roxbury
Drive, 4th Floor, Beverly Hills, California (the "Lender").
WHEREAS, the Borrower and the Lender are parties to an Amended and
Restated Secured Advance Facility Loan Agreement dated September 28, 1993, as
amended by the First Amendment thereto dated December 3, 1993, the Second
Amendment thereto dated February 29, 1996, and the Third Amendment thereto
dated May 31, 1996 (the "Agreement");
WHEREAS, the Borrower and the Lender desire to amend the Agreement to
provide for an increase in the loan amount to $6,000,000; and
WHEREAS, the parties hereto wish to amend the Agreement as hereinafter set
forth:
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and with the specific intent to
be bound hereby, the Borrower and the Lender hereby agree, and hereby agree to
amend the Agreement, as follows:
1. Definitions. Each term in this Fourth Amendment not otherwise defined
herein shall be deemed to have the same meaning ascribed to that term in the
Agreement.
2. Loan Account. Section 1.18 of the Agreement is hereby deleted in its
entirety and the following is inserted in its place:
3. Maximum Loan Amount. Section 1.19 of the Agreement is hereby deleted in
its entirety and the following is inserted in its place:
"Six Million Dollars ($6,000,000)."
4. Permitted Indebtedness. Section 1.23 is hereby amended to delete the
reference to Second Amended Schedule 1.23 and insert in its place Third Amended
Schedule 1.23, a copy of which is attached hereto.
1
<PAGE>
<PAGE>
5. Secured Promissory Note. Section 1.25 of the Agreement is hereby
deleted in its entirety and the following sentence is inserted in its place:
"The amended and restated secured promissory note in the amount of Six
Million Dollars ($6,000,000)
executed by the Borrower and delivered to the Lender on the Fourth
Amendment Date."
6. Security Agreement. Section 1.26 of the Agreement is hereby amended to
delete the reference to Third Amended Exhibit 4.1 and insert in its place
Fourth Amended Exhibit 4.1, a copy of which is attached hereto.
7. Advances. Section 2.4 of the Agreement is hereby amended to insert a new
second sentence as follows: "Notwithstanding any other provision of this
Agreement to the contrary, all Advances under this Agreement thatwould
result in the aggregate principal amount of unpaid Advances outstanding
immediately after such Advanceto be greater than $5,000,000 shall be made
at the sole discretion of the Lender, and the Lender may refuse to
makeany such Advances for any reason or no reason."
8. Loan Account. Section 2.3 of the Agreement is hereby deleted in its
entirety and the following is inserted in its place:
9. Scheduled Principal Payments. The last sentence of Section 3.1 is
hereby deleted in its entirety.
10. Security Agreement. Section 4.1 of the Agreement is hereby amended to
delete the reference to Amended Exhibit 4.1 and insert in its place Fourth
Amended Exhibit 4.1, a copy of which is attached hereto.
11. Secured Promissory Note. Section 7.1 is hereby amended to delete the
reference to Third Amended Exhibit 7.1(A) and insert in its place Fourth
Amended Exhibit 7.1(A), a copy of which is attached hereto.
12. Patents, Copyrights, etc. The first sentence of Section 9.11 is hereby
amended to delete the reference to Third Amended Schedule 9.12 and insert in
its place Fourth Amended Schedule 9.12, a copy of which is attached hereto.
13. The changes effected by this Amendment shall be deemed to take effect
as of the close of business on November 22, 1996. 14. Except as amended hereby,
the Agreement shall remain in full force and effect and is in all respects
hereby ratified and affirmed.
2
<PAGE>
<PAGE>
Witnessed: XYVISION, INC.
/s/ Virginia H. Kingsley By: /s/ Kevin J. Duffy
Name: Kevin J. Duffy
Title: President
- --------------------- /s/ Jeffrey Neuman
Jeffrey Neuman as trustee of
the Tudor Trust u/d/t
August 11, 1986 and not
individually
3
<PAGE>
<PAGE>
FIFTH AMENDMENT TO AMENDED AND RESTATED
SECURED ADVANCE FACILITY LOAN AGREEMENT
This FIFTH AMENDMENT TO THE AMENDED AND RESTATED SECURED ADVANCE FACILITY
LOAN AGREEMENT (the "Fifth Amendment") is entered into as of this 10th day of
November 1997 (the "Fifth Amendment Date") by and between XYVISION, INC., a
Delaware corporation with its principal office at 101 Edgewater Drive,
Wakefield, Massachusetts 01880 (the "Borrower"), and Jeffrey L. Neuman as
trustee of the Tudor Trust u/d/t August 11, 1986, with an address of 450 North
Roxbury Drive, 4th Floor, Beverly Hills, California 90210 (the "Lender").
WHEREAS, the Borrower and the Lender are parties to an Amended and
Restated Secured Advance Facility Loan Agreement dated September 28, 1993, as
amended by the First Amendment thereto dated December 3, 1993, the Second
Amendment thereto dated February 29, 1996, the Third Amendment thereto dated
May 31, 1996, and the Fourth Amendment thereto dated November 22, 1996 (the
"Agreement");
WHEREAS, the Borrower and the Lender desire to amend the Agreement to
provide for (i) an increase in the loan amount to $8,300,000 and (ii) an
undertaking by the Lender to enter into specified letter of credit obligations
for the benefit of the Borrower; and
WHEREAS, the parties hereto wish to amend the Agreement as hereinafter set
forth;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and with the specific intent to
be bound hereby, the Borrower and the Lender hereby agree, and hereby agree to
amend the Agreement, as follows:
1. Definitions. Each term in this Fifth Amendment not otherwise defined
herein shall be deemed to have the same meaning ascribed to that term in the
Agreement.
2. Maximum Loan Amount.Section 1.19 of the Agreement is hereby deleted
in its entirety and the following is inserted in its place:
"1.19. Maximum Loan Amount. Eight Million Three Hundred Thousand Dollars
($8,300,000)."
3. Minimum Draw. Section 1.20 of the Agreement is hereby deleted in its
entirety and the following is inserted in its place:
"1.20. Minimum Draw. The minimum amount of any Advance under this
Agreement shall be Fifty Thousand Dollars ($50,000.00)."
1
<PAGE>
<PAGE>
4. Permitted Indebtedness. Section 1.23 is hereby amended to delete the
reference to Third Amended Schedule 1.23 and insert in its place Fourth Amended
Schedule 1.23, a copy of which is attached hereto.
5. Secured Promissory Note. Section 1.25 of the Agreement is hereby
deleted in its entirety and the following sentence is inserted in its place:
"The amended and restated secured promissory note in the amount of Eight
Million Three Hundred
Thousand Dollars ($8,300,000) executed by theBorrower and delivered to
the Lender on the Fifth
Amendment Date."
6. Security Agreement. Section 1.26 of the Agreement is hereby amended to
delete the reference to Fourth Amended Exhibit 4.1 and insert in its place
[FIFTH] Amended Exhibit 4.1, a copy of which is attached hereto.
7. Interest. Section 2.2 of the Agreement is hereby deleted in its
entirety and the following sentence is inserted in its place:
"Amounts advanced to the Borrower by the Lender under this Agreement
shall bear interest, payable as
set forth in Section 3.2 of this Agreement, from the date of each such
Advance on the unpaid principal
balance thereof until paid in full at a rate of thirteen percent (13%)
per annum; provided, however, that
from and after the Amendment Date, all of the unpaid principal balance
outstanding from time to time
shall bear interest at the rate of ten percent (10%) per annum; provided,
further, that from and after the
Third Amendment Date, all of the unpaid principal balance outstanding
from time to time shall bear
interest at the rate of eight percent (8%) per annum; and provided,
further, that from and after the Fifth
Amendment Date, all of the unpaid principal balance outstanding from time
to time shall bear interest at
the rate of six percent (6%) per annum."
8. Advances. Section 2.4 of the Agreement is hereby amended to delete the
second sentence thereof.
9. Addition of Article IIA. The Agreement is amended by adding thereto a
new Article IIA as follows:
"IIA. THE LETTER OF CREDIT OBLIGATIONS.
2A.1. Letter of Credit Issuance. At Borrower's request, as of the Fifth
Amendment Date, the Lender has
caused Fleet National Bank (the "Bank") to issue a letter of credit in
the face amount of $444,600 (the
"Letter of Credit") to TASC, Inc. (the "Landlord"). In connection with
the issuance of the Letter of Credit,
the Lender has entered into a letter of credit application and
reimbursement agreement with the Bank (the
2
<PAGE>
<PAGE>
"Reimbursement Agreement") under which the Lender has agreed to reimburse
the Bank for all amounts
drawn by the Landlord under the Letter of Credit.
2A.2. Borrower's Reimbursement Obligations to Lender. Borrower hereby
agrees to pay to Lender,
immediately upon demand by Lender, any and all amounts irrevocably paid
by Lender to the Bank under
the Reimbursement Agreement including, without limitation, the amount of
any collateral which is, from
time to time, pledged by the Lender to secure its obligations under the
Reimbursement Agreement and
which is applied by the Bank to the Lender's obligations.
2A.3. Payment of Reimbursement Obligations. Amounts payable by the
Borrower to the Lender under
Section 2A.2 shall bear interest from the date of Lender's demand under
that Section, until paid in full, at
the rate applicable from time to time to the principal balance of
Advances under the Agreement pursuant
to Section 2.2 hereof.
2A.4. Reimbursement Obligations Constitute Liabilities. The Borrower
confirms and agrees that its
obligations under Section 2A.2 and Section 2A.3 constitute Liabilities
under the Agreement secured by
the Security Agreement and by the Fifth Amended Assignment of Patents and
Trademarks, dated as of the
Fifth Amendment Date, between the Borrower and the Lender.
9. Scheduled Principal Payments. Section 3.1 of the Agreement is hereby
amended to change "December 31, 1997" as it appears in the third line thereof
to "March 31, 2001."
10. Security Agreement. Section 4.1 of the Agreement is hereby amended to
delete the reference to Fourth Amended Exhibit 4.1 and insert in its place
Fifth Amended Exhibit 4.1, a copy of which is attached hereto.
11. Secured Promissory Note. Section 7.1 is hereby amended to delete the
reference to fourth Amended Exhibit 7.1(A) and insert in its place Fifth
Amended Exhibit 7.1(A), a copy of which is attached hereto.
12. Patents, Copyrights, etc. The first sentence of Section 9.11 is hereby
amended to delete the reference to Fourth Amended Schedule 9.12 and insert in
its place Fifth Amended Schedule 9.12, a copy of which is attached hereto.
13. Additional Facility Fee. As inducement for the Lender to enter into
this Amendment, the Borrower shall issue to the Lender, upon execution of this
Amendment, a Warrant for the purchase of 10,000,000 shares of
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Common Stock of the Borrower at a purchase price equal to $.16 per share,
substantially in the form attached to this Amendment as Exhibit 3.5 (E-1). The
last sentence of Section 12 of the Third Amendment to the Agreement is hereby
deleted in its entirety.
14. The changes effected by this Amendment shall be deemed to take effect
as of the close of business on November 10, 1997.
15. Except as amended hereby, the Agreement shall remain in full force and
effect and is in all respects hereby ratified and affirmed.
Witnessed: XYVISION, INC.
/s/Eugene P. Seneta By: /s/ Kevin J. Duffy
Name: Kevin J. Duffy
Title: President and C.O.O.
- --------------------- /s/ Jeffrey Neuman
Jeffrey Neuman as trustee of
the
Tudor Trust u/d/t August 11,
1986
and not individually
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AMENDMENT
Dated November 17, 1997
to
RIGHTS AGREEMENT
Between
XYVISION, INC.
and
MELLON BANK, N.A.
Dated as of October 19, 1988, as amended
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This Amendment is made as of the 17th day of November, 1997 by Xyvision,
Inc., a Delaware corporation (the "Company"), and Mellon Bank, M.A., as Rights
Agent (the "Rights Agent"), to the Rights Agreement dated as of October 19,
1988 between the Company and the Rights Agent (as amended, the "Rights
Agreement").
<TABLE>
<S> <C>
WHEREAS: The Board of Directors of the Company voted to amend the Rights Agreement by resolutions adopted
on December 19, 1991 to provide that James Saltzman shall not be deemed an "acquiring person" until
he becomes the beneficial owner of 35% or more of the Company's outstanding shares of Common
Stock and that a Section 11(a)(ii) Event shall not be deemed to occur until Mr. Saltzman becomes the
beneficial owner of 35%.or more of the Company's outstanding shares of Common Stock.
WHEREAS: The Board of Directors of the Company voted to further amend the Rights Agreement by resolutions
adopted on August 5, 1992 to provide that Tudor Trust shall not be deemed an "acquiring person" until
it becomes the beneficial owner of 35% or more of the Company's outstanding shares of Common Stock
and that a Section 11(a)(ii) Event shall not be deemed to occur until Tudor Trust becomes the beneficial
owner of 35% or more of the Company's outstanding shares of Common Stock.
WHEREAS: The Board of Directors of the Company voted to further amend the Rights Agreement by resolutions
adopted on November 14, 1995 to provide that Tudor Trust shall not be deemed an "acquiring person"
until it becomes the beneficial owner of 50% or more of the Company's outstanding shares of Common
Stock and that a Section 11(a)(ii) Event shall not be deemed to occur until Tudor Trust becomes the
beneficial owner of 50% or more of the Company's outstanding shares of Common Stock.
WHEREAS: The Board of Directors of the Company voted to further amend the Rights Agreement by resolutions
adopted on May 7, 1996 to provide that Tudor Trust shall not be deemed an "acquiring person" until it
becomes the beneficial owner of 65% or more of the Company's outstanding shares of Common Stock
and that a Section 11(a)(ii) Event shall not be deemed to occur until Tudor Trust becomes the beneficial
owner of 65%or more of the Company's outstanding shares of Common Stock.
WHEREAS: The Board of Directors of the Company voted to further amend the Rights Agreement by resolutions
adopted on July 22, 1997 to provide that Tudor Trust shall not be deemed an "acquiring person" until
it becomes the beneficial owner of 75% or more of the Company's outstanding shares of Common Stock
and that a Section 11(a)(ii) Event shall not be deemed to occur until Tudor Trust becomes the beneficial
owner of 75% or more of the Company's outstanding shares of Common Stock.
</TABLE>
NOW, THEREFORE, pursuant to Section 27 of the Rights Agreement, the
Company and the Rights Agent hereby amend the Rights Agreement as follows:
1. Paragraph (a) of Section 1 is hereby amended and restated in its entirety as
follows: "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial
Owner of 20% or more of the shares of Common Stock then outstanding, but
shall not include the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any
Person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan. Notwithstanding the foregoing,
neither James Saltzman, nor any Affiliates or Associates of James
Saltzman, shall be considered an Acquiring Person unless and until James
Saltzman, together with all Affiliates and Associates of James Saltzman,
shall be the Beneficial Owner of 35
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or more of the shares of Common Stock then outstanding. Notwithstanding
the foregoing, neither Tudor Trust, nor any Affiliates or Associates of Tudor
Trust, shall be considered an Acquiring Person unless and until Tudor Trust,
together with all Affiliates and Associates of Tudor Trust, shall be the
Beneficial Owner of 75% or more of the shares of Common Stock then outstanding.
2. Paragraph (y) of Section 1 is hereby amended and restated in its entirety as
follows:
"Section 11(a)(ii) Event" shall mean any event described in Section
11(a)(ii)(A), (B) or (C) hereof. Notwithstanding the foregoing, a Section
11(a)(ii) Event shall not be deemed to have occurred pursuant to clause (B)
of Section 11(a)(ii) as a result of James Saltzman, alone or together with
his Affiliates and Associates, becoming the Beneficial Owner of 30% or more
of the shares of Common Stock then outstanding unless and until James
Saltzman, alone or together with his Affiliates and Associates, becomes the
Beneficial Owner of 35% or more of the shares of Common Stock then
outstanding (subject to the other provisions of said clause (B)).
Notwithstanding the foregoing, a Section 11(a)(ii) Event shall not be
deemed to have occurred pursuant to clause (B) of Section 11(a)(ii) as a
result of Tudor Trust, alone or together with its Affiliates and
Associates, becoming the Beneficial Owner of 30% or more of the shares of
Common Stock then outstanding unless and until Tudor Trust, alone or
together with its Affiliates and Associates, becomes the Beneficial Owner
of 75% or more of the shares of Common Stock then outstanding (subject to
the other provisions of said clause (B)).
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
XYVISION, INC.
By: /s/ Kevin J. Duffy
Name: Kevin J. Duffy
Title: President and C.O.O.
ATTEST:
By: /s/ Eugene P. Seneta
Name: Eugene P. Seneta
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MELLON BANK, N.A.
By: /s/ Tracie L. Vicki
Name: Tracie L. Vicki
Title: Vice President
ATTEST:
By: /s/
Name:
4
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THE EFFECTIVENESS AND ENFORCEABILITY OF THIS SUBLEASE AGREEMENT IS EXPLICITLY
CONDITIONED UPON THE RECEIPT BY TASC, INC. OF THE WRITTEN APPROVAL OF THIS
DOCUMENT BY THE "LANDLORD" AS HEREIN DEFINED.
SUBLEASE
BETWEEN
TASC, INC
AND
XYVISION, Inc.
Dated as of September , 1997
1
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS, REFERENCE AND EXHIBITS 2
SECTION 1.1 Definitions 2
SECTION 1.2 Effect of Reference to Definitions 4
SECTION 1.3 Exhibits and Schedules 4 ARTICLE II
SUBLEASED PREMISES, TERM, COMMENCEMENT OF TERM, AND USE 5
SECTION 2.1 5
(a) Subleased Premises 5
(b) Common Facilities 5
SECTION 2.2 Term 5
SECTION 2.3 Use 5
SECTION 2.4 Option to Extend 6 ARTICLE III
RENT, ITS DETERMINATION, COMMENCEMENT AND METHOD OF PAYMENt 7
SECTION 3.1 Fixed Annual Rent 7
SECTION 3.2 Payment of Rent 7
SECTION 3.3 Operating Expense Charge 7
SECTION 3.4 Initial Payments 7
SECTION 3.5 Security Deposit 8
ARTICLE IV
UTILITIES AND SERVICES 9
ARTICLE V
INSURANCE 10
SECTION 5.1 Increases in Coverage 10
SECTION 5.2 Required Coverage 10
SECTION 5.3 Disposition of Insurance Policies 10
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SECTION 5.4 Waiver of Subrogation 10
SECTION 5.5 Blanket Policies 11
ARTICLE VI
SUBTENANT'S ADDITIONAL COVENANTS 11
SECTION 6.1 Performing Obligations 11
SECTION 6.2 Use 11
SECTION 6.3 Subtenant Maintenance and Repair 11
SECTION 6.4 Changes and Alterations 12
SECTION 6.5 Payment for Subtenant's Work 12
SECTION 6.6 Compliance with Laws 12
SECTION 6.7 Indemnity 12
SECTION 6.8 Personal Property at Subtenant's Risk 13
SECTION 6.9 Yield Up 13
SECTION 6.10 Subordination 13
SECTION 6.11 Estoppel Certificates 14
SECTION 6.12 Nuisance 14
SECTION 6.13 Rules and Regulations 15
SECTION 6.14 Signs 15
SECTION 6.15 Permits, Approvals, etc 15
SECTION 6.16 Workman's Compensation Insurance 15
SECTION 6.17 Inspection of Subleased Premises 15
SECTION 6.18 Non-Exclusive Common Areas 16
SECTION 6.19 Tenant's Environmental Indemnity 16
ARTICLE VII
SUBLANDLORD MAINTENANCE, REPAIR AND ALTERATIONS 18
SECTION 7.1 Initial Improvements 18
SECTION 7.2 Landlord's Repair Obligation 18
SECTION 7.3 Access 19
SECTION 7.4 Cleaning Services 19
SECTION 7.5 Sublandlord's Reservations 19
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SECTION 7.6 Interruption of Utilities 20
ARTICLE VIII
QUIET ENJOYMENT 20
ARTICLE IX
DAMAGE AND EMINENT DOMAIN 20
SECTION 9.1 Fire or Other Casualty 20
SECTION 9.2 Eminent Domain 21
ARTICLE X
DEFAULTS BY SUBTENANT AND REMEDIES 22
SECTION 10.1 Defaults 22
SECTION 10.2 Subordination of Claims 25
ARTICLE XI
ASSIGNMENT AND SUBLETTING 25
SECTION 11.1 Assignment of Sublease by Sublandlord 25
SECTION 11.2 Assignment and Subletting by Subtenant 26
SECTION 11.3 Intentionally Deleted 26
SECTION 11.4 Intentionally Deleted 26
SECTION 11.5 No Waiver or Release 26
ARTICLE XII
HOLDING OVER 27
ARTICLE XIII
MISCELLANEOUS PROVISIONS 27
SECTION 13.1 Representations and Warranties 27
SECTION 13.2 Sublandlord/Subtenant Relationship 27
SECTION 13.3 Broker 27
SECTION 13.4 Notices 28
SECTION 13.5 Notice of Sublease 28
SECTION 13.6 Applicable Law, Severability, Construction 28
SECTION 13.7 Successors and Assigns 28
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SECTION 13.8 Sublease Subject to Overlease 29
SECTION 13.9 Common Facilities 29
SECTION 13.10 Non-Competition for Employees 30
SECTION 13.11 Right of First Offer 31
SECTION 13.12 Handicapped Access 31
SECTION 13.13 Temporary Storage 32
5
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SUBLEASE
THIS Sublease AGREEMENT, dated September ___, 1997 is made by and
between TASC, Inc. (formerly known as The Analytic Sciences Corporation), a
Massachusetts corporation having a business address of 55 Walkers Brook
Drive, Reading, Massachusetts 01867-3297 ("Sublandlord") and Xyvision, Inc.
a Delaware corporation having a business address of 101 Edgewater Drive,
Wakefield, MA ("Subtenant")
RECITALS:
WHEREAS, Arthur Gelb and Harry B. Silverman, as Trustees of TASC Realty
Trust, established under a Declaration of Trust dated June 1, 1984 and
recorded with the Middlesex South Registry of Deeds in Book 15891, page 33
("Landlord") is the owner in fee of (i) all of that certain parcel of land
situated in the Town of Reading, County of Middlesex, and Commonwealth of
Massachusetts, as more particularly described in Exhibit A-1 attached
hereto and made a part hereof ("Site One"), and the building located
thereon currently known as and numbered 55 Walkers Brook Drive, Reading,
Massachusetts (the "Original Building") and (ii) all of that certain parcel
adjacent to Site One, as more particularly described in Exhibit A-2
attached hereto and made a part hereof ("Site Two" and, together with Site
One, the "Site"), and the buildings located thereon, one building
consisting of approximately 11,200 square feet and known as the Butler
Building (the "Butler Building") and the other building consisting of
approximately 35,000 square feet ("Building II" and, together with the
Butler Building and the Original Building, the "Buildings")
WHEREAS, Landlord has leased the Site and the Buildings to Sublandlord
pursuant to that certain Lease dated August 8, 1991 (the "Overlease"); and
WHEREAS, Subtenant desires to lease from Sublandlord, and Sublandlord
desires to lease to Subtenant, a portion of Building II consisting of
approximately 31,200 sq. ft. located on three floors in Building II, all as
more particularly described on Exhibit A-3 attached hereto and made a part
hereof (the "Subleased Premises").
NOW, THEREFORE, the parties hereto, intending legally to be bound,
hereby covenant and agree as set forth below.
ARTICLE I
DEFINITIONS, REFERENCE AND EXHIBITS
SECTION 1.1 Definitions
Buildings: The Original Building, the Butler Building, Building II or all or
any of them as appropriate.
Building II: The building situated on Site Two containing approximately 35,000
square feet of gross rentable building area.
Butler Building: The building situated on Site Two containing approximately
11,200 square feet of gross rentable building area.
First Extended Term: That two year period commencing on February 1, 2002 and
ending on January 31, 2004 for which Subtenant may elect to extend the Original
Term of this Sublease in accordance with Section 2.4 hereof.
Fixed Annual Rent: The annual rent payable by Subtenant to Sublandlord during
the Sublease Term, as such annual rent may be adjusted during the Second
Extended Term, all as set forth in Section 3.1 of this Sublease.
Landlord and Mailing Address: Arthur Gelb and Harry B. Silverman,
as Trustees of TASC
Realty Trust u/d/t dated June 1, 1984
55 Walkers Brook Drive
Reading, Massachusetts 01867
Original Building: The free-standing building containing approximately 139,200
square feet of gross rentable building area situated on Site One and currently
known as and numbered 55 Walkers Brook Drive, Reading,
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<PAGE>
Massachusetts.
Original Term: The original term of this Sublease shall commence on February
1, 1998 and shall continue through January 31, 2002, unless earlier terminated
in accordance with the terms and conditions of this Sublease.
Permitted Uses: Office and related uses associated with a software company
including, without limitation, programming, research and development, training,
sales and marketing, provided that such uses are permitted under the provisions
of the Zoning By-Laws of the Town of Reading, Massachusetts and not otherwise
prohibited by any law, regulation, ordinance or order of the Town of Reading,
Massachusetts, the Commonwealth of Massachusetts or the United States of
America.
Rent: The Fixed Annual Rents, Subtenant's Operating Expense Charge and any
other charges or sums payable by Subtenant as additional rent or otherwise
under this Sublease.
Second Extended Term: That two year period commencing on February 1, 2004 and
ending on January 31, 2006 for which Subtenant may elect to extend the Original
Term of this Sublease, as extended by the First Extended Term, in accordance
with Section 2.4 hereof.
Site: Site One, Site Two or each of them, as appropriate. Site One and Site
Two contain in the aggregate approximately 13.287 acres of land.
Site One: All that certain plot, piece or parcel of land situate, lying and
being in Reading, Middlesex County, Massachusetts, containing approximately
8.502 acres of land, as more particularly described in Exhibit A-1 attached to
the Sublease, upon which the Original Building is situated.
Site Two: All that certain plot, piece or parcel of land situate, lying and
being in Reading, Middlesex County, Massachusetts, containing approximately
4.785 acres of land and all that certain plot, piece or parcel of land situate,
lying and being in Reading, Middlesex County, Massachusetts located
northwesterly of the 4.785 acre parcel described above and containing
approximately .556 acres, as more particularly described in Exhibit A-2
attached to the Sublease, upon which the Butler Building and Building II are
situated.
Sublandlord and Mailing Address: TASC, Inc.
55 Walkers Brook Drive
Reading, Massachusetts 01867-3297
Sublease Term: The Original Term as the same may be extended, or earlier
terminated, in accordance with the terms and conditions of this Sublease.
Sublease Year: The first year of the Sublease will commence on February 1,
1998 and terminate on January 31, 1999. The second and succeeding Sublease
years each shall be a period of twelve (12) consecutive months, commencing on
the next February 1st.
Subtenant and Mailing: Prior to February 1, 1998, Subtenant's mailing address
address: will be:
Xyvision, Inc.
101 Edgewater Drive
Wakefield, Massachusetts 01880
Attention: Eugene P. Seneta
On and after February 1, 1998 Subtenant's mailing address will be:
Xyvision, Inc.
55 Walkers Brook Drive
Reading, Massachusetts 01867
Term Commencement February 1, 1998.
Date:
SECTION 1.2 Effect of Reference to Definitions. Each reference in this
Sublease to any of the
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Definitions contained in Section 1.1 shall be construed to incorporate the
data stated under that title.
SECTION 1.3 Exhibits and Schedules. The exhibits and schedules listed
in and attached to this Sublease are incorporated by reference and are a
part of this Sublease.
ARTICLE II
SUBLEASED PREMISES, TERM, COMMENCEMENT OF TERM, AND USE
SECTION 2.1
(a) Subleased Premises. Sublandlord hereby subleases to Subtenant,
subject to and with the benefit of the terms, covenants, conditions and
provisions of this Sublease, the Subleased Premises.
(b) Common Facilities. Subtenant shall have as appurtenant to the
Subleased Premises, the right to use in common with others entitled
thereto: (a) common walkways, driveways, lobbies, hallways, ramps,
stairways, elevators, loading platforms located in Building II or on Site
Two and the parking areas shown in the cross hatched area on Exhibit B
attached hereto; (b) the common pipes, ducts, conduits, wires and
appurtenant equipment serving the Subleased Premises; and (c) if the
Subleased Premises include less than the entire rental area of any floor,
the common facilities, if any, of such floor. Subtenant's right to use
such area shall be subject to reasonable Rules and Regulations from time
to time promulgated by Sublandlord. Subtenant understands that Subtenant's
use of the Common Facilities and the Subleased Premises must be in
accordance with the United States Department of Defense security
regulations applicable to Sublandlord and the Subtenant agrees that Rules
and Regulations required by such Department of Defense Security
Regulations shall be deemed reasonable for the purposes of this Section
2.1. Subtenant agrees not to unreasonably withhold or delay its consent to
any change in the common areas proposed by Sublandlord; provided that such
change does not materially reduce Subtenant's Subleased Premises nor
materially diminish Subtenant's use or enjoyment thereof.
SECTION 2.2 Term. TO HAVE AND TO HOLD the Subleased Premises for the
Original Term, as the Original Term may be extended pursuant to the terms
of this Sublease, commencing on February 1, 1998, subject to the terms,
covenants, agreements and conditions contained in this Sublease.
Notwithstanding anything herein to the contrary, Subtenant may occupy and
use the Subleased Premises on or after January 2, 1998, subject to the
terms hereof. Subtenant may thereafter begin to move into, occupy and use
the Subleased Premises, all in accordance with the terms hereof.
SECTION 2.3 Use. Subtenant shall use and occupy the Subleased Premises
solely for the Permitted Uses and for no other use or purpose without the
prior written consent of Sublandlord and Landlord, which consent shall not
be unreasonably withheld or delayed. Subtenant shall not use or occupy the
Subleased Premises for any unlawful purpose or in any manner that will
constitute waste, nuisance or unreasonable annoyance to the Sublandlord or
Landlord. Subtenant shall, in connection with its use of the Subleased
Premises, comply with all present and future laws, ordinances (including
zoning ordinances and land use requirements), regulations, and orders of
the United States of America, the Commonwealth of Massachusetts, the Town
of Reading, and any other public or quasi-public authority having
jurisdiction over the Subleased Premises, concerning the use, occupancy and
condition of the Subleased Premises and all machinery, equipment and
furnishings therein.
Subtenant shall pay any business, rent or other taxes that are now or
hereafter levied upon Subtenant's use or occupancy of the Subleased
Premises, or Subtenant's equipment, fixtures or personal property. In the
event that any such taxes are enacted, changed or altered so that any of
such taxes are levied against Sublandlord or Landlord, or the mode of
collection of such taxes is changed so that Sublandlord or Landlord are
responsible for collection or payment of such taxes, Subtenant shall pay
any and all such taxes to Sublandlord or Landlord upon written demand from
Sublandlord specifying the party to whom such payments are to be made.
Notwithstanding the foregoing, Subtenant shall in no event be responsible
for Sublandlord's or Landlord's income tax liability.
SECTION 2.4 Option to Extend. Unless on or before February 1, 2001
Sublandlord has given Subtenant written notice of its intention to
terminate this Sublease at the end of the Original Term, and provided that
Subtenant is not in default under this Sublease beyond applicable grace or
cure periods (and provided that Subtenant subsequently cures such default
within the applicable grace period), Subtenant shall have the right to
extend the Original Term of this Sublease for the First Extended Term by
providing written notice to Sublandlord on or before May 1, 2001. Upon the
exercise of such right to extend by Subtenant, the
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term of this Sublease shall be automatically extended upon all of the same
terms and conditions set forth herein, except that Tenant's Operating
Expense Charge shall be adjusted for the First Extended Term as set forth
in Section 3.1. In the event that Subtenant does not so notify Sublandlord
on or before May 1, 2001, Subtenant shall be deemed to have irrevocably
waived its rights to extend the Sublease pursuant to this Section 2.4.
Unless on or before February 1, 2003 Sublandlord has notified Subtenant
in writing of Sublandlord intention to terminate this Sublease at the end
of the First Extended Term and provided that Subtenant has exercised the
initial option to extend this Sublease as provided above and provided
further that Subtenant is not in default under this Sublease beyond
applicable grace or cure periods (and provided that Subtenant subsequently
cures such default within the applicable grace period), Subtenant shall
have the right to further extend this Sublease for the Second Extended Term
by providing written notice to Sublandlord on or before May 1, 2003. Upon
the exercise of such right to extend by Subtenant, the term of this
Sublease shall be automatically extended upon all of the same terms and
conditions set forth herein except that Fixed Annual Rent shall be adjusted
for the Second Extended Term as set forth in Section 3.1 and Subtenant's
Operating Expense Charge shall be adjusted as set forth in Section 3.3.
Subject to the terms hereof, in the event that Subtenant does not so notify
Sublandlord on or before May 1, 2003, Subtenant shall be deemed to have
irrevocably waived its rights to extend the Sublease for the Second
Extended Term pursuant to this Section 2.4.
ARTICLE III
RENT, ITS DETERMINATION, COMMENCEMENT AND
METHOD OF PAYMENT
SECTION 3.1 Fixed Annual Rent. Commencing on February 1, 1998,
Subtenant covenants and agrees to pay to Sublandlord Fixed Annual Rent in
the amount of $436,800 per year in equal monthly installments of $36,400 in
advance on the first day of each calendar month included in the Original
Term, and if applicable, each Extended Term; and for any portion of a
calendar month at the beginning or end of the Original Term and the
Extended Terms, if exercised, at the applicable rate payable in advance
prorated for the number of days in such portion. Fixed Annual Rent for the
First Extended Term, if exercised, shall remain $436,800 per year. Fixed
Annual Rent for the Second Extended Term, if exercised, shall be increased
to $468,000 per year and monthly Fixed Annual Rent payment shall be
increased to $39,000.
SECTION 3.2 Payment of Rent. All Rent shall be paid to Sublandlord in
legal tender of the United States, without setoff, deduction or demand, at
the address to which notices to Sublandlord are to be given or to such
other party or to such other address as Sublandlord may designate from time
to time by written notice to Subtenant. If Sublandlord shall at any time
accept Rent after it shall become due and payable, such acceptance shall
not excuse a delay upon subsequent occasions or constitute or be construed
as a waiver of any of Sublandlord's rights hereunder.
SECTION 3.3 Operating Expense Charge. In addition to paying Fixed
Annual Rent, Subtenant shall also pay to Sublandlord an additional sum
("Subtenant's Operating Expense Charge") to in part compensate Sublandlord
for Subtenant's proportionate share of operating expenses and "Carrying
Costs" (as such term is defined in the Overlease) for the Site and
Buildings. Subtenant and Sublandlord recognize and agree that it is
extremely difficult to compute Subtenant's fair share of operating expenses
and Carrying Costs and, as a consequence, each hereby agrees that
Subtenant's Operating Expense Charge shall be $156,000 for the period
commencing on February 1, 1998 and ending on January 31, 1999, which amount
shall be payable to Sublandlord in equal monthly payments of $13,000 on the
first day of each month commencing on February 1, 1998. Subtenant's
Operating Expense Charge shall be increased by 4% annually beginning on
February 1, 1999 and shall continue to increase by 4% per year thereafter
on each February 1st during the Original Term and, if applicable, during
the First Extension Term and the Second Extension Term.
SECTION 3.4 Initial Payments. In order to compensate Sublandlord for
the cost of Sublandlord's Work (as hereinafter defined) and to compensate
Sublandlord for the cost of Landlord's restoration of the Subleased
Premises following the expiration or earlier termination of the Sublease
Term (without relieving Subtenant of any of its obligations with respect to
such restoration, including without limitation those obligations set forth
in Section 6.9), Subtenant hereby agrees to pay to Sublandlord three (3)
payments of $50,000 (Fifty Thousand Dollars) each on November 1, 1997,
December 1, 1997 and January 1, 1998. Like all other payments due hereunder
from Subtenant, the three (3) payments of $50,000 each shall be secured by
the Letter of Credit hereinafter referred to.
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SECTION 3.5 Security Deposit. Upon execution of this Sublease,
Subtenant shall deliver to Sublandlord an unconditional, irrevocable letter
of credit from a financial institution acceptable to Sublandlord (which
financial institution shall have a net worth of no less than $250,000,000)
in the original amount of Four Hundred Forty-four Thousand Six Hundred
Dollars ($444,600) in the form attached hereto as Exhibit C (the "Letter of
Credit"). The Letter of Credit shall have an expiration date no earlier
than one (1) year after the date hereof. Not later than thirty (30) days
before the scheduled expiration date of such Letter of Credit, Subtenant
shall deliver to Sublandlord a replacement Letter of Credit meeting the
requirements set forth herein with an expiration date no earlier than one
(1) year after the scheduled expiration date of the Letter of Credit then
being held by Sublandlord. Subtenant's failure to deliver such replacement
Letter of Credit in form reasonably acceptable to Sublandlord by the date
set forth above shall give Sublandlord the right to immediately call the
Letter of Credit and hold the proceeds thereof as Subtenant's security
deposit hereunder. After receipt of a written request from Subtenant to do
so, Sublandlord agrees to review (but no more frequently than once during
each twelve (12) month period during the Sublease Term hereof) Subtenant's
financial performance and net worth. If Subtenant's financial performance
and net worth have substantially improved from and after the date hereof,
such that in Sublandlord's sole judgment, the amount of the Letter of
Credit may be reduced without creating a material greater risk to
Sublandlord, then Sublandlord shall agree to allow Subtenant to thereafter
decrease the amount of the Letter of Credit to an amount specified in
writing by Sublandlord. During the final twelve (12) months of the Original
Term, the amount of the Letter of Credit may be reduced on a monthly basis,
provided that, at all times during such final twelve (12) months of the
Original Term, the Letter of Credit amount shall be no less than the Fixed
Annual Rent due over the then remaining term. Notwithstanding anything
herein to the contrary, in the event that Subtenant elects to extend the
Sublease Term for either the First Extended Term or the Second Extended
Term, the amount of the Letter of Credit shall not be reduced during the
final twelve (12) months of the Original Term. Rather, the Letter of Credit
shall be so reduced during the last twelve (12) months of the First
Extended Term, unless Subtenant has exercised its right to extend for the
Second Extended Term, in which event the Letter of Credit shall be so
reduced during the last twelve (12) months of the Second Extended Term. It
is understood and agreed that if any default by Subtenant occurs hereunder,
which extends beyond applicable grace or cure periods, Sublandlord may call
the Letter of Credit and use, apply or retain the whole or any part of the
proceeds thereof to the extent required for payment of any Fixed Annual
Rent, Tenant's Operating Expense Charge or any other sum as to which
Subtenant is in default or for any sum which Sublandlord may expend or may
be required to expend by reason of any default by Subtenant hereunder,
including, but not limited to, any damage or deficiency accrued before or
after summary proceedings or other reentry by Sublandlord. It is agreed
that Sublandlord shall always have the right to call the Letter of Credit
and apply the proceeds thereof or any part thereof, as aforesaid, without
prejudice to any other remedy or remedies which Sublandlord may have, or
Sublandlord may pursue any other such remedy or remedies in lieu of calling
the Letter of Credit and applying the proceeds thereof or any part thereof.
The Letter of Credit and, after a draw thereunder in accordance with the
provisions of this Sublease, any proceeds thereof, (not used by Sublandlord
to make payments required by Subtenant hereunder) will be held by
Sublandlord as security. Sublandlord shall not have any obligation to
segregate the proceeds drawn under such Letter of Credit in accordance with
the provisions of this Sublease from any other funds held by Landlord or to
accrue interest thereon for the benefit of Subtenant. If Sublandlord shall
call the Letter of Credit and apply the proceeds thereof or any part
thereof, as aforesaid, Subtenant shall immediately upon written demand pay
to Sublandlord the amount so applied to restore the security deposit to its
original amount. In the event that Subtenant shall fully and faithfully
comply with all of the terms, provisions, covenants and conditions of this
Sublease, the Letter of Credit, or any remaining proceeds thereof, shall be
returned to Subtenant within thirty (30) days after the expiration of the
Sublease Term and after delivery of full possession of the Subleased
Premises to Sublandlord in accordance with the terms hereof. In the event
of a sale or other transfer of this Sublease by Sublandlord, Sublandlord
shall have the right to transfer the Letter of Credit and the proceeds
thereof to the grantee, transferee or lessee and Sublandlord shall
thereupon be released by Subtenant from any and all liability with respect
thereto, its application and return, and Subtenant agrees to look solely to
the grantee, transferee or lessee. If such Letter of Credit does not permit
the transfer thereof to any such grantee, transferee or lessee, Subtenant
shall promptly arrange for the issuance of a substitute Letter of Credit
for the benefit of such grantee, transferee or lessee. The reasonable
administrative costs of issuing such substitute Letter of Credit shall be
paid by Sublandlord; provided, however, that Sublandlord shall not be
obligated to pay in excess of $100.00 with respect thereto. It is further
understood that this provision shall also apply to subsequent grantees,
transferees and lessees. Subtenant further covenants that it will not
assign or encumber nor attempt to assign or encumber the security deposit
and that neither Sublandlord nor its successors or assigns shall be bound
by any such assignment,
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encumbrance, attempted assignment or attempted encumbrance. Any assignment
or encumbrance of the Letter of Credit or any proceeds thereof by Subtenant
shall be null and void and without force or effect at law or in equity.
ARTICLE IV
UTILITIES AND SERVICES
Subtenant shall contract or arrange for and pay, as the same shall
become due, all utilities and services for the Subleased Premises,
including, without limitation, oil, gas, electricity, water and sewer
service and any other public service furnished to the Subleased Premises.
Subtenant shall provide all heat and air conditioning at its sole cost and
expense. Subtenant understands and acknowledges that Subtenant is obligated
to pay the cost of heating, air conditioning and providing electricity for
lighting to that certain hallway adjacent to the Subleased Premises,
leading from the Butler Building to the Original Building.
ARTICLE V
INSURANCE
SECTION 5.1 Increases in Coverage. Subtenant covenants and agrees with
Sublandlord that commencing on the Term Commencement Date and thereafter
during the Sublease Term, Subtenant shall not conduct or permit to be
conducted any activity, or place any equipment in or about the Subleased
Premises which will in any way increase the rate of fire insurance or other
insurance on the Subleased Premises. If any increase in the rate of fire
insurance or other insurance is stated by any insurance company or by the
applicable Insurance Rating Bureau to be due as a result of any activity or
equipment of Subtenant in or about the Subleased Premises, such statement
shall be conclusive evidence that the increase in such rate is due to such
activity or equipment and, as a result thereof, Subtenant shall be liable
for the amount of such increase.
SECTION 5.2 Required Coverage. No later than January 2, 1998 and
throughout the Sublease Term, Subtenant shall obtain and maintain public
liability insurance in a company or companies licensed to do business in
the Commonwealth of Massachusetts. Said insurance shall be in amounts
reasonably approved by Sublandlord from time to time and shall name
Sublandlord and Landlord as additional insureds thereunder. Subtenant shall
also obtain and maintain for the same period, public liability insurance in
a minimum amount of Five Million Dollars ($5,000,000) for injury to one
person or more persons in respect to any one accident or occurrence, and
One Million Dollars ($1,000,000) for damage to property, or such higher
limits as may be reasonably required from time to time by the holder of any
mortgage on the Subleased Premises.
SECTION 5.3 Disposition of Insurance Policies. Subtenant shall furnish
Sublandlord with certificates of insurance of all policies of insurance
required under Section 5.2 and said policies shall (i) name Sublandlord,
Landlord and Landlord's mortgagee as named insureds, as their respective
interests may appear, and (ii) provide that the coverage thereunder may not
lapse or be canceled without thirty (30) days prior written notice to
Sublandlord, Landlord, Landlord's mortgagee and Subtenant.
SECTION 5.4 Waiver of Subrogation. All insurance whether or not
required, carried by Subtenant with respect to the Subleased Premises or
occurrences thereon, if Sublandlord or Landlord so request and it can be
written without additional premium, shall include either provisions
designating Sublandlord and Landlord as insureds or provisions denying to
the insurer acquisition by subrogation of rights of recovery against
Sublandlord and Landlord to the extent the rights have been waived by
Subtenant prior to occurrence of loss or injury. Each party,
notwithstanding any provisions of this Sublease to the contrary, waives any
rights of recovery against the other, and Subtenant waives such right
against Landlord and Landlord, by its consent to this Sublease, waives such
right against Subtenant, for loss or injury against which the waiving party
is protected by insurance containing provisions denying to the insurer
acquisition of rights by subrogation, reserving, however, any rights with
respect to any excess of loss or injury over the amount covered by the
insurance and with respect to any deductible amount specified in the
applicable policy.
SECTION 5.5 Blanket Policies. Nothing contained herein shall prevent
Subtenant from taking out insurance of the kind and in the amounts provided
for herein under a blanket insurance policy or policies covering properties
other than the Subleased Premises, provided, however, that any such policy
or policies of blanket insurance (a) shall specify therein, or Subtenant
shall furnish Sublandlord and Landlord with the written statement from the
insurers under such policy or policies, specifying the amount of the total
insurance allocated to the Subleased Premises, which amount shall not be
less than the amounts required herein, and (b) provided further, however,
that any such policy or policies of blanket insurance shall, as to the
Subleased Premises, otherwise comply as to endorsements and coverage with
the provisions herein.
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ARTICLE VI
SUBTENANT'S ADDITIONAL COVENANTS
Subtenant agrees that from and after January 2, 1998 and during the
Sublease Term and such further time as Subtenant occupies or uses the
Subleased Premises or any part thereof:
SECTION 6.1 Performing Obligations. To perform promptly all of the
obligations of Subtenant set forth in this Sublease, and to pay when due
all items of Fixed Annual Rent, Tenant's Operating Expense Charge and all
charges, rates and other sums which by the terms of this Sublease are to be
paid by Subtenant.
SECTION 6.2 Use. To use the Subleased Premises only for the Permitted
Uses.
SECTION 6.3 Subtenant Maintenance and Repair. Subject to Landlord's
obligation to repair set forth in Section 7.2 hereof, to keep the Subleased
Premises and all fixtures, equipment, improvements, structures, alterations
and additions located therein in good repair, and in clean, safe and
sanitary condition and to take good care and to maintain same in the same
condition as they were at the original commencement of Subtenant's
occupancy thereof or as they may be put during such occupancy, reasonable
wear and tear, unavoidable damage by fire and other casualty only excepted,
and to suffer no waste or injury thereto. At the expiration or other
termination of the Sublease Term, Subtenant shall surrender the Subleased
Premises, vacuumed, in the same order and condition in which they were at
the original commencement of the Subtenant's occupancy thereof or as they
may be improved during such occupancy, except as provided herein, ordinary
wear and tear, unavoidable damage by fire or other insured casualty only
excepted.
All injury, breakage and damage to the Subleased Premises caused by any
act or omission of Subtenant, or of any agent, employee, contractor,
customer or invitee of Subtenant, shall be repaired by and at the sole
expense of Subtenant, except that, if Subtenant fails to make such repair
within ten (10) days after written notice by Sublandlord to Subtenant of
any such injury, breakage, or damage, Sublandlord shall have the right, at
its option, to make such repairs and to charge Subtenant for all costs and
expenses incurred in connection therewith.
SECTION 6.4 Changes and Alterations. Subtenant shall have no
authority, without the express prior written consent of Sublandlord and
Landlord, to alter, remodel, reconstruct, demolish or otherwise change the
Subleased Premises. Sublandlord agrees not to unreasonably withhold or
delay its consent. However, notwithstanding anything herein to the
contrary, Sublandlord shall be entitled to withhold its consent if, for any
reason, Landlord fails to consent to a request by Subtenant to alter,
remodel, reconstruct, demolish or otherwise change the Subleased Premises.
SECTION 6.5 Payment for Subtenant's Work. To pay promptly when due the
entire cost of any work to the Subleased Premises undertaken by Subtenant
so that the Subleased Premises shall at all times be free of liens for
labor and materials; promptly to clear the record (or post appropriate
bonds) of any such lien; to procure all necessary permits before
undertaking such work; to do all of such work in a good and workmanlike
manner, employing materials of first class quality and complying with all
governmental requirements; and to save Sublandlord and Landlord harmless
and indemnified from all injury, loss, claims or damage to any person or
property occasioned by or growing out of such work.
SECTION 6.6 Compliance with Laws. Except as provided in Section 13.12
hereof, at Subtenant's expense, to comply promptly with all present and
future laws, ordinances, orders, rules, regulations and requirements of all
federal, state or municipal governments, departments, commissions, boards
and officers, foreseen and unforeseen, ordinary as well as extraordinary,
which may be applicable to the Subleased Premises, and Subtenant's
particular use of the Subleased Premises.
Notwithstanding anything herein to the contrary, Sublandlord shall be
responsible for complying with all present and future laws, ordinances,
orders, rules, regulations and requirements of all Federal, state or
municipal governments, departments, commissions, boards and officers, which
relate to the structural components of Building II (or as provided in
Section 13.12) for which Sublandlord is responsible pursuant to this
Sublease.
SECTION 6.7 Indemnity. Subtenant shall hold Sublandlord, Landlord and
their officers, directors, shareholders, employees, affiliates, agents,
servants, contractors, guests, invitees and licensees, harmless and
indemnified from, and shall defend such parties against, all injury, loss,
claims or damage (including reasonable attorneys' fees) to any person or
property while in, on or about the Subleased Premises, including but not
limited to claims or damages incurred by reason of any accident with the
equipment, elevators, gas,
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steam oil, water, or other pipes, or in any way growing out of the use,
misuse or abuse of gas, steam, oil, electric current, water or from the
bursting of any pipes, unless arising from any gross negligence or willful
misconduct of the indemnified party, or their agents, servants, employees,
agents, or contractors; to save Sublandlord, Landlord and their officers,
directors, shareholders, employees, affiliates, agents, servants,
contractors, guests, invitees and licensees, harmless and indemnified from,
and to defend such parties against, all injury, loss, claims or damage
(including reasonable attorneys' fees) to any person or property occasioned
by any omission, neglect, misconduct or default of Subtenant or Subtenant's
agents, servants, employees, contractors, guests, invitees or licensees.
SECTION 6.8 Personal Property at Subtenant's Risk. That all personal
property and equipment from time to time upon the Subleased Premises shall
be at the sole risk of Subtenant; and that Sublandlord and Landlord shall
not be liable for any damage which may be caused to the Subleased Premises
or to any person by the bursting or leaking of or condensation from any
plumbing, cooling or heating pipe or fixture, unless such damage is caused
by Sublandlord's gross negligence or willful misconduct.
SECTION 6.9 Yield Up. At the termination of this Sublease, peaceably
to yield up the Subleased Premises clean and in good order, repair and
condition, reasonable wear and tear and damage by fire or casualty
excepted; and at Subtenant's option, to remove any and all of Subtenant's
equipment and furniture, provided, however, that Subtenant shall restore
any damage caused by such removal and provided further that if Subtenant
fails so to restore the Subleased Premises, then Subtenant shall pay all of
Sublandlord's reasonable costs in making such restoration. It is understood
and agreed that any non-structural improvements (which are not fixtures) to
the Subleased Premises made by Subtenant shall remain the Subtenant's
property, and shall be removed by the Subtenant who shall restore any
damage caused by such removal or pay Sublandlord's reasonable costs in
making such restoration.
SECTION 6.10 Subordination. This Sublease shall be subject and
subordinate to any mortgage encumbering the Subleased Premises, now or
anytime hereafter in effect, and, in addition, Landlord and Sublandlord
shall have the option to subordinate this Sublease to any mortgage or deed
of trust which includes the Subleased Premises as part of the mortgage
premises, provided that the holder thereof enters into an agreement (a
"Nondisturbance Agreement") with Subtenant by the terms of which (a) in the
event of acquisition of title by such holder through foreclosure
proceedings or otherwise, provided Subtenant is not in default hereunder
beyond applicable grace or cure periods, the holder will agree to recognize
the rights of Subtenant under this Sublease and will accept Subtenant as
Subtenant of the Subleased Premises under the terms and conditions of this
Sublease and (b) Subtenant will agree to recognize the holder of such
mortgage as Landlord in such event. This agreement shall be made to
expressly bind and inure to the benefit of the successors and assigns of
Subtenant and of the mortgagee or upon anyone purchasing an interest in
said Subleased Premises at any foreclosure sale. Subtenant agrees to
execute one or more agreements to effectuate the foregoing upon the request
of Landlord or Sublandlord. Any such mortgage to which the Sublease shall
be subordinated may contain such terms, provisions and conditions as the
holder deems reasonable and customary. Sublandlord shall use reasonable
efforts to secure and deliver to Subtenant a Nondisturbance Agreement from
Landlord's current mortgagee, if any, provided however that Sublandlord's
failure to obtain such a Nondisturbance Agreement shall not constitute a
default by Sublandlord hereunder.
Subtenant agrees that in the event any proceedings are brought for the
foreclosure of any mortgage encumbering the Subleased Premises, Subtenant
shall attorn to the purchaser at such foreclosure sale, if requested to do
so by such purchaser, and shall recognize such purchaser as the Sublandlord
under this Sublease, and Subtenant waives the provisions of any statute or
rule of law, now or hereafter in effect, which may give or purport to give
Subtenant any right to terminate or otherwise adversely affect this
Sublease and the obligations of Subtenant hereunder in the event any such
foreclosure proceeding is prosecuted or completed. Subtenant agrees that
upon such attornment, such purchaser shall not be (a) bound by any payment
of Annual Fixed Rent for more than one (1) month in advance, (b) liable for
damages for any act or omission of any prior Sublandlord, or (c) subject to
any offsets or defenses which Subtenant might have against any prior
Sublandlord, provided, however, that after succeeding to Sublandlord's
interest under this Sublease, such purchaser shall perform in accordance
with the terms of this Sublease all obligations of Sublandlord arising
after the date such purchaser acquires title to the Subleased Premises.
Upon request by such purchaser, Subtenant shall execute and deliver an
instrument or instruments confirming its attornment.
SECTION 6.11 Estoppel Certificates. From time to time, for delivery to
Landlord, Sublandlord or a prospective purchaser or mortgagee of the
Subleased Premises or any assignee of any mortgage of the
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Subleased Premises, upon not less than ten (10) days prior written request
by Sublandlord, to execute, acknowledge and deliver to Sublandlord a
statement in writing certifying: (a) that this Sublease is unamended (or,
if there have been any amendments, stating the amendments); (b) that it is
then in full force and effect, if that be the fact; (c) the dates to which
Fixed Annual Rent, Tenant's Operating Expense Charge and any other payments
to Sublandlord and others have been paid; and (d) that there are no
defenses, offsets and counterclaims which Subtenant, at the time of the
execution of said statement, has against Subtenant's obligation to pay Rent
and to perform its other obligations under this Sublease. Any such
statement may be relied upon by Landlord, Sublandlord and such prospective
purchaser or mortgagee of the Subleased Premises, or portion thereof, or
any assignee of any mortgagee of the Subleased Premises, or portion
thereof. From time to time, for delivery to Subtenant, or any party
claiming through Subtenant, upon not less than ten (10) days prior written
request by Subtenant, Sublandlord agrees to execute, acknowledge and
deliver to Subtenant a statement in writing certifying: (a) that this
Sublease is unamended, or if there have been any amendments, stating the
amendments; (b) that it is then in full force and effect, if that be the
fact; and (c) the dates to which Fixed Annual Rent, Tenant's Operating
Expense charge, and any other payments to Sublandlord have been paid. Any
such statement may be relied upon by Subtenant, and any parties claiming
through Subtenant.
SECTION 6.12 Nuisance. At all times during the Sublease Term and such
further time as Subtenant occupies the Subleased Premises, not to injure,
overload, deface or otherwise harm the Subleased Premises; nor commit any
nuisance; nor to do or suffer any waste to the Subleased Premises; nor
permit the emission of any objectionable noise or odor; nor make any use of
the Subleased Premises which is improper, or contrary to any law or
ordinance or which will invalidate any insurance policy required herein.
SECTION 6.13 Rules and Regulations. Subtenant and its agents,
employees, invitees, licensees, customers, clients, family members, guests,
students and parties claiming through Subtenant shall abide by and observe
all rules or regulations that Sublandlord may reasonably promulgate from
time to time for the operation and maintenance of the Subleased Premises,
the Site and the Buildings, provided that notice thereof is given to
Subtenant and such rules and regulations are not inconsistent with the
provisions of this Sublease. Sublandlord shall not be liable to Subtenant
for the violation of such rules or regulations by its employees, agents,
business invitees, licensees, customers, clients, family members or guests.
If there is any inconsistency between this Sublease and the rules and
regulations, this Sublease shall govern. The initial rules and regulations
are attached hereto as Exhibit E.
SECTION 6.14 Signs. No sign, advertisement or notice referring to
Subtenant shall be inscribed, painted, affixed or otherwise displayed on
any part of the exterior of the Subleased Premises, except in accordance
with law. Sublandlord shall, at Sublandlord's expense, construct a
directory pylon at the driveway entrance from New Crossing Way and will, in
addition, provide a sign for Subtenant at the walkway entry to Building II.
Subtenant may erect a directional sign on the corner of Walker's Brook
Drive and New Crossing Way, provided that Subtenant first obtains all
necessary governmental permits and approvals therefore and provided that
Landlord consents thereto. The size of such sign shall not exceed the area
of the "TASC" sign now located on Walker's Brook Drive. Any interior or
glass door sign shall be erected or affixed at the sole cost and expense of
Subtenant. The design, size, and color of each sign will require the prior
written consent of both Sublandlord and Subtenant which consent shall not
be unreasonably withheld.
SECTION 6.15 Permits, Approvals, etc. To keep the Subleased Premises
equipped with all safety appliances required by law or ordinance or any
other regulation of any public authority because of any use thereof made by
Subtenant and to procure all licenses and permits required because of such
use; provided, however, that Sublandlord shall be responsible for
delivering the Subleased Premises equipped with all safety appliances
required, except such appliances as may be required as a result of
Subtenant's unusual uses of the Subleased Premises, if any.
SECTION 6.16 Workman's Compensation Insurance. To keep all Subtenant's
employees working in the Subleased Premises covered by workman's
compensation insurance in statutory amounts and to furnish Sublandlord with
certificates thereof upon request.
SECTION 6.17 Inspection of Subleased Premises. To permit Sublandlord
and Landlord and or their agents to examine the Subleased Premises at
reasonable times and with reasonable notice to Subtenant (except in the
case of emergency) and, if either Sublandlord or Landlord shall so desire,
to make any repairs or replacements Sublandlord or Landlord may reasonably
deem necessary or desirable to avert an emergency, the cost of which shall
be paid by Sublandlord or Subtenant in accordance with the provisions of
this Sublease.
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SECTION 6.18 Non-Exclusive Common Areas. Not to obstruct in any manner
any portion of the Site or Buildings or any portion thereof used by
Subtenant in common with others.
SECTION 6.19 Tenant's Environmental Indemnity. At all times during the
Sublease Term and such further time as Subtenant or those claiming through
Subtenant occupy the Subleased Premises or any part thereof, not to
introduce, generate or release or to allow to be introduced, generated or
released upon the Subleased Premises, the Site or the Buildings any
Hazardous Material (as defined herein), in violation of applicable
Environmental Laws or without obtaining all permits and approvals required
by applicable Environmental Laws for the same, and shall indemnify and hold
Sublandlord and its officers, directors, shareholders, employees,
affiliates, agents, servants, contractors, guests, invitees and licensees,
harmless from all losses, costs, expenses, claims and liabilities,
including, without limitation, reasonable attorneys' fees and defense
costs, environmental testing and audit costs, remediation costs, and the
expenses of investigations and negotiations with regulatory authorities, to
the extent arising from Subtenant's breach of the aforesaid obligation or
Subtenant's breach of any other obligation contained in this Section 6.19.
The term "Hazardous Material" shall include without limitation: (i)
substances included within the definitions of "hazardous substances",
"hazardous materials", "toxic substances", "oil" or "solid waste" in the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation
and Recovery Act of 1976, 42 U.S.C. Section 6901 et seq., the Clean Air
Act, 42 U.S.C. Section 7401 et seq., and the Hazardous Materials
Transportation Act, 49 U.S.C. Sections 1801 et seq., and the Massachusetts
Oil and Hazardous Material Release Prevention and Response Act, M.G.L.
Chapter 21E ("Chapter 21E") (collectively, the "Environmental Laws") and in
the regulations promulgated pursuant to the Environmental Laws; (ii)
substances listed in the United States Department of Transportation Table
(49 CFR 172.101 and amendments thereto) or by the Environmental Protection
Agency (or successor agency) as hazardous substances (40 CFR Part 302 and
amendments thereto); (iii) other substances, materials and wastes which are
or become regulated under applicable local, state or federal law, or the
United Stated government, or which are classified hazardous or toxic under
any Environmental Law; and (iv) any material, waste or substance which is
(A) petroleum, (B) friable asbestos, (C) polychlorinated biphenyls, (D)
flammable explosives; or (E) radioactive materials. Subtenant further
agrees to the following conditions:
(i) Subtenant will not use, generate, manufacture, produce, store,
release, discharge or dispose of, on, under or about the Subleased
Premises, the Site or the Buildings, or transport to or from the
Subleased Premises, the Site or the Buildings, any Hazardous
Material in violation of applicable Environmental Laws or allow its
employees, agents, contractors, or other invitees to do so.
(ii) Subtenant shall give immediate written notice to Sublandlord
of the following circumstances or events of which Subtenant is
aware:
(a) Any action, proceeding or inquiry by any governmental
authority with respect to the presence of any Hazardous
Material generated or stored by Subtenant on the Subleased
Premises, the Site or the Buildings, or the migration thereof
from or to other property;
(b) All demands or claims made or threatened by any third party
against Subtenant, or the Subleased Premises, the Site or the
Buildings, relating to any loss or injury resulting from any
Hazardous Material;
(c) Any spill, release, discharge or illegal disposal of any
Hazardous Material that occurs with respect to the Subleased
Premises the Site or the Buildings, or results from Subtenant's
operations, including, without limitation, those that would
constitute a violation of Environmental Law; and
(d) All matters of which Subtenant is required to give notice
pursuant to any Environmental Law.
(iii) In the event any Hazardous Materials are introduced,
generated or released to or on the Subleased Premises, the Site or Buildings by
Subtenant, or anyone claiming by or through Subtenant, including any agent,
employee, visitor or contractor of Subtenant, in violation of applicable
Environmental Laws, Subtenant shall at its sole expense and within thirty (30)
days after demand by Sublandlord (or such shorter period of time as may be
required under applicable laws or by any governmental entity having
jurisdiction thereof) commence to perform
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and thereafter diligently prosecute to completion such remedial work as is
reasonably necessary to restore the Subleased Premises, the Site and the
Buildings to, in all material respects, the condition existing prior to the
introduction of such Hazardous Material. All such remedial work shall be
performed in conformance with this Sublease, and all applicable Environmental
Laws. All remedial work shall be performed under the supervision of an
environmental consulting engineer approved in advance in writing by Sublandlord
(which approval shall not be unreasonably withheld) and otherwise in accordance
with this Sublease. All costs and expenses of such remedial work shall be paid
by Subtenant including, without limitation, the charges of the consulting
engineer, and Sublandlord's reasonable attorneys' fees and costs incurred in
connection with the monitoring or review of such remedial work. In the event
Subtenant shall fail to timely commence, or cause to be commenced, or fail to
diligently prosecute to completion such remedial work, Sublandlord may, but
shall not be required to, after prior written notice to Subtenant and
Subtenant's failure to perform within thirty (30) days of such notice
(provided, however, that such notice shall not be required in the event of an
emergency), cause such remedial work to be performed and all reasonable costs
and expenses thereof, shall become immediately due and payable together with
interest thereon at the rate of interest set forth relative to late payments of
Rent pursuant to this Sublease.
(iv) Without limitation in any respect of any other provision of
this Sublease, Subtenant will provide to Sublandlord, for Sublandlord's
information, a copy of any plan, program, report, proposal or other document
from time to time filed or otherwise furnished by or on behalf of Subtenant in
connection with the Subleased Premises, the Site or the Buildings to any
governmental authority, agency or other instrumentality governing the
environment, including without limitation any hazardous or toxic materials
storage, disposition or contingency plans or any plans filed under so-called
"Right to Know" laws, prior to the filing thereof with the said government
instrumentality.
ARTICLE VII
SUBLANDLORD MAINTENANCE, REPAIR AND ALTERATIONS
SECTION 7.1 Initial Improvements. On or before December 31, 1997,
Sublandlord, at its sole cost and expense, shall complete the improvements
and alterations to the Subleased Premises described on Exhibit F attached
hereto ("Sublandlord's Work"). All Sublandlord's Work shall be done in a
good and workmanlike manner and completed with first class materials.
Except as otherwise provided in this Section 7.1, Subtenant represents and
warrants that it has inspected the Subleased Premises and is satisfied with
the condition of the Subleased Premises as of the date hereof and agrees
that once the Sublandlord's Work has been completed, to accept the
Subleased Premises in their then "as is" condition without any
representation or warranty of condition by Sublandlord. Subtenant's
occupancy of the Subleased Premises shall be deemed to be a conclusive
acknowledgment by Subtenant of its satisfaction with the completion of
Sublandlord's Work.
SECTION 7.2 Landlord's Repair Obligation. Except as otherwise herein
provided to the contrary, Sublandlord shall make such repairs to the roof,
exterior walls, floors, HVAC, mechanical, electrical and plumbing systems,
common areas of Building II and the exterior grounds on Site Two, as may be
necessary to keep them in good and operable condition, ordinary wear and
tear and casualty excepted. Notwithstanding anything here to the contrary,
Subtenant shall be responsible for repairing any damage to the Subleased
Premises, the Site, the Buildings and/or the improvements thereon caused by
or resulting from the negligent acts, omissions or misconduct of Subtenant,
its officers, directors, stockholders, employees, agents or invitees.
SECTION 7.3 Access. Subtenant will permit Sublandlord, its agents and
representatives, to enter the Subleased Premises, to examine, inspect and
protect the Subleased Premises and to make such alterations and/or repairs
as in the sole judgment of Sublandlord may be necessary or desirable. In
connection with any such entry, Sublandlord shall provide reasonable prior
notice to Subtenant (except in cases of emergency) and shall use reasonable
efforts to minimize the disruption to Subtenant's use of the Subleased
Premises.
Sublandlord shall not be liable to Subtenant for any compensation or
reduction of Rent by reason of inconvenience or annoyance or for loss of
business arising from power losses, shortages or unavailability, the
necessity of Sublandlord's or Landlord's entering the Subleased Premises
for any of the purposes in this Sublease authorized, or for repairing the
Subleased Premises or any portion of the Buildings or other improvements
located on the Site however the necessity may occur. In case Sublandlord is
prevented or delayed from making any repairs, alterations or improvements
or furnishing any services or performing any other covenant or duty to
perform on Sublandlord's part, by reason of any cause reasonably beyond
Sublandlord's control, Sublandlord shall not be liable to Subtenant
therefore, nor, shall Subtenant be entitled
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to any abatement or reduction of rent by reason thereof, nor shall the same
give rise to a claim in Subtenant's favor that such failure constitutes
actual or constructive, total or partial, eviction from the Subleased
Premises. Sublandlord reserves the right to stop any service or utility
system, when necessary by reason of accident or emergency, or until
necessary repairs have been completed, provided, however, that in each
instance of stoppage, Sublandlord shall exercise reasonable diligence to
eliminate the cause thereof. Except in the case of emergency repairs,
Sublandlord shall give Subtenant reasonable advance notice of any
contemplated stoppage and will use reasonable efforts to avoid unnecessary
inconvenience to Subtenant by reason thereof.
SECTION 7.4 Cleaning Services. Sublandlord hereby covenants to furnish
to Subtenant, through Sublandlord's employees or independent contractors,
the janitorial and cleaning services listed on Exhibit E attached hereto
SECTION 7.5 Sublandlord's Reservations Sublandlord reserves the right
from time to time to (a) install, repair, replace, use, maintain and
relocate for service to the Subleased Premises and other parts of the
Buildings, pipes, ducts, conduits, wires and appurtenant fixtures wherever
located in the Buildings and (b) to alter or relocate any other common
facility, provided that the substitutions are substantially equivalent or
better and provided that Sublandlord does not unreasonably interfere with
Subtenant's use of the Subleased Premises or materially reduce the usable
area of the Subleased Premises.
SECTION 7.6 Interruption of Utilities. Notwithstanding anything to the
contrary in this Sublease provided, if as a result of Sublandlord's failure
or inability to furnish any of the utilities or services required to be
furnished by Sublandlord hereunder, the Subleased Premises are rendered
untenantable for a period of more than thirty (30) consecutive days, rent
payable under this Lease shall abate until such utilities or services are
restored.
ARTICLE VIII
QUIET ENJOYMENT
Sublandlord covenants that (subject to the terms of the Overlease and
the timely payment of all amounts due hereunder and the timely performance
of Subtenant's obligations hereunder) Subtenant shall peacefully and
quietly have, hold and enjoy the Subleased Premises throughout the Sublease
Term or until it is terminated as in this Sublease provided without
hindrance by Sublandlord or by anyone claiming by, through or under
Sublandlord.
ARTICLE IX
DAMAGE AND EMINENT DOMAIN
SECTION 9.1 Fire or Other Casualty. If, in the event that at any time
during the Sublease Term or such further time as Subtenant remains in
possession of the Subleased Premises, by reason of fire or other casualty,
either (a) the Subleased Premises shall be totally damaged or destroyed, or
(b) a material portion of the Subleased Premises is rendered unsuitable for
Subtenant's continued use and occupancy and Landlord does not elect within
ninety (90) days to make the required repairs or the damage to the
Subleased Premises cannot reasonably be expected to be repaired within nine
(9) months of the date of the casualty, Sublandlord or Subtenant may elect
to terminate this Sublease forthwith upon written notice to the other
delivered no later than ninety (90) days after such casualty. This Sublease
shall automatically terminate if the Overlease is terminated by Landlord as
a result of such casualty.
In the event that Landlord does not terminate the Overlease, or if
Sublandlord or Subtenant do not elect to terminate this Sublease, or if
such fire or other casualty does not damage a material portion of the
Subleased Premises so as to render it unsuitable for Subtenant's continued
use and occupancy, then this Sublease shall remain in full force and effect
and Sublandlord shall use reasonable efforts to cause Landlord to repair or
rebuild the Subleased Premises so as to restore them to the condition they
were in immediately prior to such damage, destruction or demolition within
nine (9) months of the date of the casualty. There shall be a reasonable
abatement of the Rent payable hereunder from the time of the damage or
destruction until completion of the repairs or rebuilding. If the insurance
proceeds are not sufficient for Landlord to restore the Subleased Premises
and Landlord and Sublandlord are unwilling to contribute the additional
funds required for such restoration then Subtenant shall have the right to
terminate this Sublease forthwith upon notice to Sublandlord with neither
party having further recourse against the other. In repairing or restoring
the Subleased Premises, Sublandlord shall not be responsible for any delay
which may result from governmental regulations, inability to obtain labor
or materials or any other cause beyond Landlord's or Sublandlord's
reasonable control.
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SECTION 9.2 Eminent Domain. Sublandlord reserves all rights to damage
awards relating to the Subleased Premises and the Subleasehold estate
hereby created by reason of any exercise of the right of eminent domain, or
by reason of anything lawfully done in pursuance of any public or other
authority; and by way of confirmation, Subtenant grants to Sublandlord all
Subtenant's rights to such damage awards so reserved, except as otherwise
provided herein. Subtenant covenants to execute and deliver such
instruments of assignment thereof as Sublandlord may from time to time
request. If all the Subleased Premises are taken by eminent domain, this
Sublease shall terminate when Subtenant is required to vacate the Subleased
Premises or such earlier date as Subtenant is required to begin the
payments of Rent to the taking authority. If a partial taking by eminent
domain results in so much of the Subleased Premises being taken as to
render a material portion of the Subleased Premises unsuitable for
Subtenant's continued use and occupancy, Sublandlord or Subtenant may elect
to terminate this Sublease as of the date when the Subtenant is required to
vacate the portion of the Subleased Premises so taken, by written notice to
the other given not more than ninety (90) days after the date on which
Sublandlord receives notice of the taking. If a partial taking by eminent
domain does not result in such portion of the Subleased Premises as
aforesaid being taken, then this Sublease shall not be terminated or
otherwise affected by any exercise of the right of eminent domain;
provided, however, there shall be a reasonable abatement of the Rent and
other sums payable hereunder due to the partial taking. Whenever any
portion of the Subleased Premises shall be taken by any exercise of the
right of eminent domain, and if this Sublease shall not be terminated in
accordance with the provisions of this Section 9.2, Sublandlord shall use
reasonable efforts to cause Landlord to do such work as may be required to
restore the Subleased Premises or what remains thereof (not including
Subtenant's trade fixtures, business equipment and furniture) as nearly as
may be to the condition in which they were immediately prior to such
taking, and Subtenant shall at its expense, proceeding with all reasonable
dispatch, do such work to its trade fixtures, business equipment and
furniture, as may be required. If the condemnation proceeds are not
sufficient to restore the Subleased Premises or what remains thereof and
Landlord is unwilling to contribute the additional funds required for such
restoration then Subtenant shall have the right to terminate this Sublease
forthwith upon notice to Sublandlord with neither party having further
recourse against the other. A just proportion of the Rent and other sums
payable hereunder, according to the nature and extent of the taking shall
be abated from the time Subtenant is required to vacate that portion of the
Subleased Premises taken. Nothing contained herein shall be deemed to
prevent Subtenant from making a claim for its trade fixtures and moving
expenses from any condemning authority.
ARTICLE X
DEFAULTS BY SUBTENANT AND REMEDIES
SECTION 10.1 Defaults. The occurrence of any of the following shall
constitute a default by Subtenant under this Sublease:
(a) If Subtenant shall fail to pay (i) any installment of Fixed
Annual Rent, (ii) any installment of Tenant's Operating Expense
Charge or (ii) any other payment required by this Sublease within
five (5) days of when due, provided, however, that Subtenant's
failure to pay any such amount when due more than two (2) times
during any consecutive twelve (12) months during the Sublease Term
shall be a default hereunder;
(b) If Subtenant shall violate or fail to perform any other term,
condition, covenant or agreement to be performed or observed by
Subtenant under this Sublease and such violation or failure to
perform is not remedied within fifteen (15) days after delivery to
Subtenant of written notice thereof; provided, however, that if
such violation or failure shall be of such a nature that the same
cannot be completely remedied or cured within such fifteen (15) day
period, then no default shall exist if Subtenant shall have
commenced curing such default within such fifteen (15) day period
and diligently prosecutes such cure to completion within an
additional forty-five (45) days; or
(c) Any of the following (an "Event of Bankruptcy") shall occur:
(i) Subtenant's becoming insolvent, as that term is defined in
Title II of the United States Code (the "Bankruptcy Code"), or
under the insolvency laws of any state, district, commonwealth
or territory of the United States (the "Insolvency Laws");
(ii) The appointment of a receiver or custodian for any or all
of Subtenant's property or
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assets, or the institution of a foreclosure action upon any of
Subtenant's real or personal property;
(iii) The filing of a voluntary petition by Subtenant under the
provisions of the Bankruptcy Code or Insolvency Laws;
(iv) The filing of an involuntary petition against Subtenant as
the subject debtor under the Bankruptcy Code or Insolvency
Laws, which either (i) is not dismissed within sixty (60) days
of filing, or (ii) results in the issuance of an order for
relief against the debtor; or
(v) Subtenant's making or consenting to an assignment for the
benefit of creditors or a common law composition of creditors.
If Subtenant shall be in default under this Sublease, Sublandlord shall
have the right, at its sole option, to give Subtenant notice of
Sublandlord's intent to terminate the Sublease on the date of delivery of
such notice. Upon Subtenant's receipt of such notice, the term of this
Sublease and the estate hereby granted shall expire and terminate as fully
and completely and with the same effect as if such date were the date fixed
for the expiration of the term of this Sublease. With or without
terminating this Sublease, Sublandlord may re-enter and take possession of
the Subleased Premises. If necessary, Sublandlord may proceed to recover
possession of the Subleased Premises under and by virtue of the laws of the
Commonwealth of Massachusetts, or by such other proceedings including
re-entry and possession, as may be applicable. If Sublandlord elects to
terminate this Sublease, everything contained in this Sublease on the part
of Sublandlord to be done and performed shall cease without prejudice,
however, to the right of Sublandlord to recover from Subtenant all Rent and
other sums accrued up to the time of termination or recovery of possession
by Sublandlord, whichever is later. Whether or not this Sublease is
terminated by reason of Subtenant's default, Sublandlord may, but shall not
be obligated to, relet the Subleased Premises or any part thereof for such
rent and upon such terms as are not unreasonable under the circumstances
and, if the full rental provided herein plus the costs, expenses and
damages hereafter described shall not be realized by Sublandlord, Subtenant
shall be liable for all damages sustained by Sublandlord, including,
without limitation, deficiency in the Fixed Annual Rent and Tenant's
Operating Expense Charge, reasonable attorneys' fees, brokerage fees, and
the expenses of placing the Subleased Premises in first-class rentable
condition equivalent to the condition of the Subleased Premises at the
outset of this Sublease or as the Subleased Premises may be improved during
the Sublease Term hereof, except as otherwise provided herein. Sublandlord
shall in no way be responsible or liable for any failure to relet the
Subleased Premises or any part thereof, or any failure to collect any rent
due and/or accrued upon such reletting, it being understood and agreed that
Sublandlord may elect to hold Subtenant liable for the Fixed Annual Rent,
Tenant Operating Expense Charge, and any and all other items of cost and
expense which Subtenant shall have been obligated to pay throughout the
remainder of the Sublease Term. Any damages or loss of Fixed Annual Rent or
Tenant Operating Expense Charge sustained by Sublandlord may be recovered
by Sublandlord, at Sublandlord's option, at the time of the reletting, or
in separate actions, from time to time, as said damage shall have been made
more easily ascertainable by successive relettings, or, at Sublandlord's
option, may be deferred until the expiration of the Sublease Term, in which
event Subtenant hereby agrees that the cause of action shall not be deemed
to have accrued until the date of expiration of the Sublease Term. The
provisions contained in this Section shall be in addition to, and shall not
prevent the enforcement of, any claim Sublandlord may have against
Subtenant for anticipatory breach of this Sublease.
Notwithstanding the foregoing, upon occurrence of an Event of
Bankruptcy:
(a) Sublandlord shall have all rights and remedies available to
Sublandlord pursuant to this Article X; provided, that while a case
in which Subtenant is the subject debtor under the Bankruptcy Code
is pending and only for so long as Subtenant or its Trustee in
Bankruptcy (hereinafter referred to as "Trustee") is in compliance
with the provisions of subsections (b) and (c) below, Sublandlord
shall not exercise its rights and remedies pursuant to this Article
X;
(b) In the event Subtenant becomes the subject debtor in a case
pending under the Bankruptcy Code, Sublandlord's right to terminate
this Sublease shall be subject to the rights of Trustee to assume
or assign this Sublease. Trustee shall not have the right to assume
or assign this Sublease unless Trustee within sixty (60) days of
the occurrence of an Event of Bankruptcy (i) cures all defaults
under this Sublease, (ii) fully compensates Sublandlord for
monetary damages incurred
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as a result of such defaults, and (iii) provides adequate assurance
of future performance on the part of Subtenant as debtor in
possession or on the part of the assignee subtenant; and
(c) In the event Subtenant is unable or fails, as provided in
paragraph (b) above, to (i) cure its defaults, (ii) reimburse the
Sublandlord for its monetary damages or (iii) pay the Fixed Annual
Rent and Tenant's Operating Expense Charge due under this Sublease
and all other payments required of Subtenant under this Sublease on
time, Subtenant agrees in advance that it has not met its burden to
provide adequate assurance of future performance, and Sublandlord
may terminate this Sublease in accordance with the provisions of
this Article X.
All rights and remedies of Sublandlord set forth herein are in addition
to all other rights and remedies available to Sublandlord at law or in
equity. All rights and remedies available to Sublandlord hereunder or at
law or in equity are expressly declared to be cumulative. The exercise by
Sublandlord of any such right or remedy shall not prevent the concurrent or
subsequent exercise of any other right or remedy. No delay in the
enforcement or exercise of any such right or remedy shall constitute a
waiver of any default by Subtenant hereunder or of any of Sublandlord's
rights or remedies in connection therewith. Neither party shall be deemed
to have waived any default by the other hereunder unless such waiver is set
forth in a written instrument signed by the party waiving the default. If
either party waives in writing any default by the other, such waiver shall
not be construed as a waiver of any covenant, condition of agreement set
forth in this Sublease except as to the specific circumstances described in
such written waiver.
If Sublandlord shall institute proceedings against Subtenant and a
compromise or settlement thereof shall be made, such compromise or
settlement shall not constitute a waiver of any other covenant, condition
or agreement set forth herein, nor of any of Sublandlord's rights
hereunder. Neither the payment by Subtenant of a lesser amount than the
installments of Fixed Annual Rent, Tenant's Operating Expense Charge or of
any sums due hereunder nor any endorsement or statement on any check or
letter accompanying a check for payment of Rent or other sums payable
hereunder shall be deemed an accord and satisfaction, and Sublandlord may
accept such check or payment without prejudice to Sublandlord's right to
recover the balance of such Rent or other sums or to pursue any other
remedy available to Sublandlord. No re-entry by Sublandlord, and no
acceptance by Sublandlord of keys from Subtenant, shall be considered an
acceptance of a surrender of this Sublease.
If Subtenant defaults in the making of any payment or in the doing, of
any act herein required to be made or done by Subtenant, then Sublandlord
may, but shall not be required to, make such payment or do such act. If
Sublandlord elects to make such payment or do such act, all costs and
expenses incurred by Sublandlord, plus interest thereon at the rate per
annum which is two percent (2%) higher than the "prime rate" then being
charged by BankBoston, from the date incurred by Sublandlord to the date of
payment thereof by Subtenant, shall constitute additional rent due
hereunder and shall be payable by Subtenant to Sublandlord within five (5)
business days after receipt of written demand therefore, provided, however,
that nothing contained herein shall be construed as permitting Sublandlord
to charge or receive interest in excess of the maximum legal rate then
allowed by law. The taking of such action by Sublandlord shall not be
considered as a cure of such default by Subtenant or prevent Sublandlord
from pursuing any remedy it is otherwise entitled to in connection with
such default.
If Subtenant fails to make any payment of Rent on or before the date
such payment is due and payable, Subtenant shall pay on demand to
Sublandlord a late charge of five percent (5%) of the amount of such
payment. In addition, if Subtenant shall fail to make any such payment
within five (5) days, such payment shall bear interest at the rate per
annum which is two percent (2%) higher than the "prime rate" then being
charged by BankBoston from the date such payment became due to the date of
payment thereof by Subtenant; provided, however, that nothing contained
herein shall be construed as permitting Sublandlord to charge or receive
interest in excess of the maximum legal rate then allowed by law. Such late
charge and interest shall constitute additional rent due and payable
hereunder with the next installment of Fixed Annual Rent due hereunder.
SECTION 10.2 Subordination of Claims. As a material inducement to
Sublandlord's willingness to enter into this Sublease, Jeffrey A. Neuman,
as trustee of the Tudor Trust u/d/t dated August 11, 1986 ("Tudor Trust")
has executed and delivered herewith to Sublandlord a certain Subordination
Agreement, in the form attached hereto as Exhibit D, which Agreement
subordinates all of Tudor Trust's and/or its affiliates'
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present and future claims of indebtedness against Subtenant to any claim or
claims of Sublandlord against Subtenant arising under this Sublease.
ARTICLE XI
ASSIGNMENT AND SUBLETTING
SECTION 11.1 Assignment of Sublease by Sublandlord. Sublandlord may
assign its interest in this Sublease, including its right to receive any
payments hereunder from any source whatsoever, to any mortgagee or other
party and may execute in connection therewith all such documents as such
mortgagee or other party deems reasonably necessary. Subtenant hereby
consents to such assignment by Sublandlord and agrees to execute in
connection therewith all such documents acknowledging such assignment as
Sublandlord or mortgagee deems reasonable necessary. Sublandlord may, at
any time, voluntarily assign, convey or otherwise transfer any of its
right, title or interest in or to this Sublease or the Subleased Premises
and upon such assignment, conveyance or other transfer, Subtenant shall
look only to such assignee or transferee for performance of Sublandlord's
obligations thereafter accruing hereunder.
SECTION 11.2 Assignment and Subletting by Subtenant. Subtenant shall
not assign or sublet all or any portion of the Sublease without the prior
written consent of Sublandlord, which consent may be withheld by
Sublandlord if Landlord refuses or fails to consent thereto. If Landlord
consents to a proposed assignment or sublet by Subtenant, Sublandlord
agrees not to unreasonably withhold or delay its consent thereto, provided
that the financial condition of the proposed assignee or sublessee is equal
to or better than that of Subtenant as of the date hereof and the use of
Subleased Premises by such party will be compatible with the use of the
Buildings and Site by Sublandlord and other occupants. No assignment or
subletting and no consent of Sublandlord thereto shall affect the
continuing primary liability of Subtenant which following an assignment,
shall be joint and several with the assignee. Notwithstanding anything here
to the contrary, Subtenant recognizes that any proposed assignee or
sublessee must be compatible with Sublandlord's security requirements and,
as a consequence, Sublandlord shall have the right to withhold its consent
to any proposed assignment or sublease likely to jeopardize or make more
costly Sublandlord's security. Landlord shall also have the right to
withhold its consent to any proposed assignment or sublease to any
competitor of Sublandlord. If Landlord consents to such proposed assignment
or subletting, Sublandlord's consent will not be required to an assignment
or subletting by Subtenant to any corporation, partnership, trust, or other
business organization directly or indirectly controlling Subtenant or to
any successor by merger, consolidation, or acquisition of substantially all
of the assets of Subtenant; provided however that such assignment or
subletting shall not be valid or effective (a) unless Subtenant gives
Sublandlord ten (10) days prior written notice of such assignment or
subletting, together with such information concerning the proposed assignee
or sublessee as Sublandlord shall reasonably request, and (b) such assignee
of sublease and its use of the Subleased Premises does not jeopardize or
make more costly Subtenant's security. In the event of any assignment or
sublease, Subtenant shall pay to Sublandlord as additional rent due
hereunder fifty percent (50%) of all "Net Profits" received by Subtenant in
connection with such assignment or subletting, such payments to be made to
Sublandlord within thirty (30) days after Subtenant's receipt thereof. For
the purposes hereof, the term "Net Profits" shall mean all rent and other
sums paid to (or for the benefit of) Subtenant, less (i) rent payable by
Subtenant hereunder and (ii) customary brokerage, legal, marketing and
build out expenses incurred by Subtenant as actual out of pocket expenses
in assigning or subletting the Sublease Premises.
SECTION 11.3 Intentionally Deleted.
SECTION 11.4 Intentionally Deleted.
SECTION 11.5 No Waiver or Release. The consent by Sublandlord to any
assignment, transfer or subletting to any party other than Sublandlord,
including a subsidiary, affiliate or successor corporation or partnership,
shall not be construed as a waiver or release of Subtenant from the terms
of any covenant or obligation under this Sublease, nor shall the collection
or acceptance of rent from any such assignee, transferee, subtenant or
occupant constitute a waiver or release of Subtenant of any covenant or
obligation contained in this Sublease, nor shall any such assignment or
subletting be construed to relieve Subtenant from obtaining the consent in
writing of Sublandlord to any further assignment or subletting. In the
event that Subtenant defaults hereunder and any applicable grace period
contained herein has passed, Subtenant hereby assigns to Sublandlord the
rent due from any subtenant of Subtenant and hereby authorizes each such
subtenant to pay such rent directly to Sublandlord.
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ARTICLE XII
HOLDING OVER
In the event that Subtenant breaks its obligation hereunder and fails to
immediately surrender the Subleased Premises on the date of the expiration
of the Sublease Term, Subtenant shall become a Subtenant by the month at a
rental rate equal to twice the Annual Fixed Rent and Tenant's Operating
Expense Charge in effect during the last month of the Sublease Term and
shall also be liable for all damages sustained by Sublandlord on account of
such holding over. Said monthly tenancy shall commence on the first day
following the expiration of the Sublease Term. As a monthly Subtenant,
Subtenant shall be subject to all the terms, conditions, covenants and
agreements of this Sublease. Notwithstanding the foregoing provisions of
this Article XII, in the event that Subtenant shall hold over after the
expiration of the Sublease Term, Sublandlord, at its option, may forthwith
re-enter and take possession of the Subleased Premises without process, or
by any legal process in force in the Commonwealth of Massachusetts and in
any event, Subtenant shall be deemed in default hereunder as a result of
such holding over.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1 Representations and Warranties. Subtenant acknowledges
that neither Sublandlord nor any broker, agent or employee of Sublandlord
has made any representations or promises with respect to the Subleased
Premises or the Building except as herein expressly set forth, and no
rights, privileges, easements or licenses are being acquired by Subtenant
except as herein expressly set forth.
SECTION 13.2 Sublandlord/Subtenant Relationship. Nothing contained in
this Sublease shall be construed as creating a partnership or joint venture
of or between Sublandlord and Subtenant, or to create any other
relationship between the parties hereto other than that of Sublandlord and
Subtenant.
SECTION 13.3 Broker. Each party represents and warrants to the other
that neither of them has employed or dealt with any broker, agent or finder
in carrying on the negotiations relating to this Sublease or the Subleased
Premises other than the Thomas Group, Inc. and Spaulding & Slye ("the
Brokers"). Each party shall indemnify and hold the other harmless from and
against any claim or claims for brokerage or other commissions asserted by
any broker, agent or finder (other than the Brokers) claiming by, under or
through the warranting party with respect to dealings in connection with
this Sublease or negotiations hereof. The fees of the Brokers earned in
connection with the Sublease and the transaction contemplated hereby shall
be payable by Sublandlord.
SECTION 13.4 Notices. All notices, consents, approvals, or other
communication required by the provisions of this Sublease to be given to
Sublandlord or Subtenant shall be in writing and shall be given by
registered or certified mail or by overnight courier addressed to the
Mailing Address of the party set forth in Section 1.1 hereof or to such
other address as the party shall have last designated by notice, and with a
copy in the case of Sublandlord to Primark Corporation, 1000 Winter Street,
Suite 4300N, Waltham, Massachusetts 02154, Attention: Michael Kargula,
Executive Vice President and General Counsel and to Lawrence R. Cahill,
P.C., Goodwin, Procter & Hoar LLP, Exchange Place, Boston, Massachusetts
02109, and in the case of Subtenant to Jeffrey A. Hermanson, Esq., Hale and
Dorr LLP, 60 State Street, Boston, Massachusetts 02109, or such other
counsel as either party may from time to time designate in writing. The
customary receipt shall be conclusive evidence of compliance with this
Section 13.4. Notice shall be deemed given when delivered to a courier or
three (3) days after deposit in the U.S. mail, postage prepaid.
SECTION 13.5 Notice of Sublease. Subtenant agrees that it will not
record this Sublease. However, Sublandlord and Subtenant shall, upon the
request of either, execute, acknowledge, and deliver a recordable notice of
this Sublease. If this Sublease is terminated before the expiration of the
Sublease Term, Sublandlord and Subtenant shall execute and deliver an
instrument in form suitable for recording acknowledging the date of
termination of this Sublease.
SECTION 13.6 Applicable Law, Severability, Construction. This Sublease
shall be governed by and construed in accordance with the laws of
Massachusetts and, if any provisions of this Sublease shall to any extent
be invalid, the remainder of this Sublease, and the application of such
provisions in other circumstances, shall not be affected thereby. This
Sublease may be amended only by an instrument in writing executed by
Sublandlord and Subtenant. The titles of the several Articles and Sections
contained herein are for convenience only and shall not be considered in
construing this Sublease.
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SECTION 13.7 Successors and Assigns. It is understood and agreed that
the covenants and agreements of the parties hereto shall run with the land
and that no covenant or agreement of Sublandlord, expressed or implied,
shall be binding upon Sublandlord except in respect of any breaches or
breaches thereof committed while Sublandlord holds a leasehold interest in
the Subleased Premises. Reference in this Sublease to "Sublandlord" or to
"Subtenant" and all expressions referring thereto, shall mean the person
named herein as Sublandlord or as Subtenant, as the case may be, and the
heirs, executors, administrators, successors and assigns of such person or
persons, and those claiming by, through or under it unless repugnant to the
context. The person who signs this Sublease for Subtenant in a
representative capacity personally warrants and represents that he is duly
authorized to do so.
It is further understood and agreed that Subtenant shall look solely to
the leasehold estate of Sublandlord for the satisfaction of Subtenant's
remedies for the collection of a judgment (or other judicial process)
requiring the payment of money by Sublandlord in the event of any default
or breach by Sublandlord with respect to any of the terms, covenants and
conditions of this Sublease to be observed or performed by Sublandlord and
any other obligations of Sublandlord created by or under this Sublease, and
neither any officer of Sublandlord executing this Sublease nor any
shareholder, employee or agent of Sublandlord shall be personally liable
for any of the covenants or agreements of Sublandlord expressed herein or
implied hereunder or otherwise because of anything arising from or
connected with the use and occupation of the Subleased Premises by
Subtenant.
No officer of Subtenant executing this Sublease, nor any shareholder,
employee or agent of Subtenant shall be personally liable for any of the
covenants or agreements of Subtenant expressed herein or implied hereunder.
SECTION 13.8 Sublease Subject to Overlease. This Sublease is subject
to the terms and conditions of the Overlease. Subtenant and Sublandlord
represent, warrant and agree that neither party shall do anything which
shall have the effect of creating a breach on the part of Sublandlord or
Subtenant of any of the terms, covenants and conditions of the Overlease.
Subtenant and Sublandlord agree that this Sublease shall not be effective
unless and until the Landlord shall consent hereto in writing. Subtenant
agrees to reasonably cooperate with Sublandlord in connection with the
obtaining of Landlord's consent to this Sublease and Subtenant further
agrees to submit in writing to Sublandlord for transmittal to Landlord any
reasonable information or document requested by Landlord.
SECTION 13.9 Common Facilities. Cafeteria. Subtenant shall have the
nonexclusive right, in common with others, to have its employees use the
cafeteria facilities located in Building One, which cafeteria area is more
specifically identified in Exhibit H attached hereto (the "Cafeteria").
Conference Room. Subtenant shall have the nonexclusive right, in common
with others, to use the conference room located in the Original Building,
the location of which is more specifically identified on Exhibit I attached
hereto (the "Conference Room"). The Sublessee's right to use the Conference
Room shall be limited a total of eight (8) days per year. Subtenant's use
of the Conference Room must be scheduled no less than fourteen (14) days in
advance and shall be subject to the reasonable availability thereof. The
number of persons in attendance shall not exceed fifty (50) on any
occasion.
Parking. Subtenant shall have the right to use 117 parking spaces
adjacent to Building II for the use of its employees. Such "employee
parking" shall be located as shown on Exhibit B attached hereto. In
addition, Subtenant shall have the right to use 8 additional parking
spaces, also adjacent to Building II, for visitor (but not employee)
parking, such "visitor parking" will be located as shown on Exhibit B. All
Subtenant employees shall park in the "employee parking area" and shall
exit and enter the Subleased Premises only through the entrance to the
Subleased Premises adjacent to the "employee parking" area on the southeast
side of Building II.
Loading Dock. Sublandlord will use reasonable efforts to make available
to Subtenant shipping and receiving facilities located in the Original
Building (as more particularly identified as Exhibit J attached hereto) to
be used on a limited basis in common with Sublandlord. The use of such
shipping and receiving facilities shall be limited as set forth in that
certain letter of June 9, 1997 from Xyvision to The Thomas Group, Inc., a
copy of which is attached hereto as Exhibit K.
Subtenant's use of the Cafeteria, Conference Room, Parking Areas, and
Loading Dock shall be in accordance to the Rules and Regulations attached
hereto as Exhibit E (including any subsequent amendments thereto
promulgated from time to time by Sublandlord). Subtenant's usage thereof
shall also comply with the
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United States Department of Defense security regulations and Sublandlord's
security regulations related thereto. The breach by Subtenant, its
employees, agents or invitees of such Rules and Regulations or the security
requirements shall constitute a default under this Sublease. In such event,
Sublandlord may, by written notice to Subtenant, revoke Subtenant's right
to the use and enjoyment of the Cafeteria, Loading Dock and/or the
Conference Room. Notwithstanding anything here to the contrary, Subtenant
understands and agrees that its use of the Cafeteria, Conference Room, and
Loading Dock must be coordinated carefully with Sublandlord so as to
minimize any negative impact on Sublandlord or its operations. Sublandlord
and Subtenant agree to work together cooperatively to work out the mutually
agreeable use of such facilities. However, if Sublandlord and Subtenant are
unsuccessful in doing so, then Sublandlord shall have the right to
terminate Subtenant's use of such areas by written notice to Subtenant and
in such event Subtenant shall immediately cease further use of such
facilities and shall nevertheless continue to perform all of its
obligations hereunder without abatement, set off or counterclaim.
SECTION 13.10 Non-Competition for Employees. Sublandlord and Subtenant
hereby covenant and agree not to interview or employ any "Employees" of the
other at any time during the Sublease Term. For the purposes hereof, the
term "Employees" shall include any then current employee of either
Sublandlord or Subtenant or any person who was employed by such party at
any time during the Sublease Term. In addition to all other remedies
available herein, or at law or in equity, in the event that either
Sublandlord or Subtenant breaches its obligation contained in this Section
the breaching party (the "Breaching Party") shall immediately after written
demand therefor pay the other party (the "Aggrieved Party") the sum of
$100,000 for each Employee of the Aggrieved Party hired by the Breaching
Party. Sublandlord and Subtenant understand and agree that the damages
caused to the Aggrieved Party by such a breach are likely to be difficult
or impossible to calculate and substantiate. As a consequence, Sublandlord
and Subtenant agree that $100,000 shall be deemed a fair and equitable
liquidated damage sum for each such breach. Notwithstanding anything to the
contrary, Sublandlord and Subtenant may (but shall not be required to)
mutually agree in writing to allow the hiring of an Employee by the other
and in such event the hiring party shall not be default under this Section
13.10; provided that both parties have given their prior written consent
thereto.
SECTION 13.11 Right of First Offer. In the event that Sublandlord
shall decide to offer to sublease additional space in the Buildings
("Additional Space"), Sublandlord shall give written notice to Subtenant of
its intention to do so (the "Intention to Sublease Notice"), which notice
shall contain Sublandlord's proposed rental terms. Subtenant shall have the
right, for a period of 14 days after receipt of the Intention to Sublease
Notice to sublease the Additional Premises being offered by Sublandlord
pursuant to the terms set forth in the Intention to Sublease Notice.
Subtenant's election to sublease must be set forth in a written acceptance
of the terms set forth in the Intention to Sublease Notice, which
acceptance must be delivered to Sublandlord within said fourteen (14) day
period. Notwithstanding anything herein to the contrary, the Rent payable
by Subtenant to Sublandlord with respect to the first ten thousand (10,000)
square feet of Additional Space shall be identical on a square footage
basis to the Fixed Annual Rent and Tenant's Operating Expense Charge then
and thereafter payable by Subtenant under this Sublease, with the effect
that the Fixed Annual Rent for the Additional Space shall be $14 per square
foot per year for each rentable square foot of the Additional Space (which
amount shall be increased to $15 per square foot if the Second Extended
Term is exercised) and the Subtenant Operating Expense Charge applicable to
such Additional Space shall be $5 per square foot of Additional Space if
such space is offered on or before January 31, 1999, which amount shall
increase by 4
for each 12-month period thereafter. If the Additional Space to be
offered by Sublandlord exceeds ten thousand (10,000) square feet or if
Subtenant has previously subleased an additional 10,000 square feet of
space in the Buildings, then Sublandlord may charge Subtenant the fair
market rental value for space in excess of 10,000 square feet, as
determined in Sublandlord's sole judgment and as set forth in the Intention
to Sublease Notice. If Subtenant elects to sublease the Additional Space as
herein provided, it will execute and deliver to Sublandlord a Sublease
which is identical to this Sublease in all material respects with the
exception of the description of the sublease premises, the sublease term
and, if applicable, the Rent. The new sublease for the Additional Space
must be executed and delivered to Sublandlord within thirty (30) days after
Subtenant's receipt of Sublandlord's Intention to Sublet Notice. If for any
reason other than a Sublandlord default or delay, a sublease agreement for
the Additional Space has not been executed and delivered by the parties
within said thirty (30) day period, then Sublandlord shall have the right
to market the Additional Space and sublease it to a third party on any
terms that Sublandlord may elect and Subtenant shall no longer have any
rights with respect thereto.
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SECTION 13.12 Handicapped Access. Subtenant has inspected the
Subleased Premises and is satisfied with its compliance with applicable
laws, including without limitation, laws relating to access. If during the
Sublease Term, Sublandlord or Subtenant is required by a governmental
enforcement action, or the filing of a third party lawsuit seeking to
modify access to the Subleased Premises, to comply with then applicable
handicapped access laws, Sublandlord will be responsible for causing the
Subleased Premises to comply therewith at Sublandlord's sole cost and
expense
SECTION 13.13 Temporary Storage. Sublandlord will use its reasonable
efforts to make available on a temporary basis off-site storage for certain
furniture and computer equipment. Subtenant shall pay Sublandlord at the
commencement of such storage, rent equal to $5 per square foot per year for
the storage space, which rent shall be prorated over the number of days
between the commencement of such storage to February 1, 1998. Subtenant
shall remove all of its goods and materials from such storage space so
leased by Subtenant on or before February 1, 1998. Subtenant shall obtain
insurance in such amounts as Sublandlord may reasonably request, insuring
the stored goods and materials against damage or injury during such
storage. Subtenant hereby releases Sublandlord, its officers, directors,
employees and agents from all liability in connection with any damage done
to, or resulting from, the storage of such goods and materials, unless such
damage or casualty is caused by the gross negligence or willful misconduct
of Sublandlord, its officers, directors, agents or employees. Subtenant
hereby agrees to indemnify and hold Sublandlord and its officers,
directors, shareholders, employees, affiliates, agents, servants,
contractors, guests, invitees and licensees, harmless from all liability in
connection with its storage of such goods and materials and its use of the
storage area. While Sublandlord and Subtenant shall attempt to agree upon
mutually satisfactory storage arrangements, if they shall fail to do so,
such failure shall not be deemed to be a breach by Sublandlord of this
Sublease, nor shall Subtenant's obligations hereunder in any way be altered
or diminished.
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Executed as an instrument under seal as of the date first written above.
ATTEST: SUBLANDLORD:
TASC, Inc.
By:
Witness Its:
SUBTENANT:
Xyvision, Inc.
By:
Witness Its:
List of Exhibits
Exhibit A-1 - Legal Description of Site One
Exhibit A-2 - Legal Description of Site Two
Exhibit A-3 - Plan of Subleased Premises
Exhibit B - Parking and Access Plan
Exhibit C - Letter of Credit
Exhibit D - Subordination Agreement
Exhibit E - Rules and Regulations
Exhibit F - Sublandlord's Work
Exhibit G - Janitorial and Cleaning Services
Exhibit H - Cafeteria Plan
Exhibit I - Conference Room Plan
Exhibit J - Loading Dock Plan
Exhibit K - Letter re: Use of Shipping and Receiving Area
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EXHIBIT A-l
That certain parcel of land in the Town of Reading, County of Middlesex,
Commonwealth of Massachusetts described as follows:
Beginning at a point at the easterly most corner of the parcel, said point
being located on the westerly sideline of Walkers Brook Drive and being the lot
corner dividing land of Boston Gas Company and "Lot I";
Thence along the line dividing land of Boston Gas Company and "Lot I"
S53|SD48'35"W four hundred fifty eight and seventy two hundredths feet (458.72
ft.);
Thence S39|SD30'35"W four hundred fifty four and twelve hundredths feet (454.12
ft.) to the lot corner dividing land of Boston Gas Company, Boston & Maine
Railroad and "Lot I";
Thence along the line dividing land of Boston & Maine Railroad and "Lot I"
N59|SD26'15"W five hundred eighty one and seventy five hundredths feet (581.75
ft.) to the lot corner dividing land of Boston & Maine Railroad, a fifty foot
wide (50 ft.) Town of Reading Right of Way and "Lot I";
Thence along the line dividing the fifty foot Right of Way and "Lot I"
N36|SD07'23"E two hundred twenty feet (220.00 ft.) to the lot corner dividing
"Lot I" and "Lot II";
Thence along the common lines dividing "Lot I" and "Lot II" by the following
courses: S53|SD52'37"E seventy and forty nine hundredths feet (70.49 ft.);
Thence S36|SD07'23"W two feet (2.00 ft.);
Thence S53|SD52'37"E fifty nine and fifty hundredths feet (59.50 ft.);
Thence N36|SD07'23"E four feet (4.00 ft.);
Thence S53|SD52'37"E seventy seven and sixty five hundredths feet (77.65 ft.);
Thence N39|SD30'36"E fifty six and ninety one hundredths feet (56.91 ft.);
Thence S50|SD29'24"E sixty feet (60.00 ft.);
Thence N39|SD30'36"E one hundred seventy five and eight hundredths feet (175.08
ft.);
Thence N30|SD39'46"W twenty two and forty six hundredths feet (22.46 ft.);
Thence N05|SD29'26"W twenty three and sixteen hundredths feet (23.16 ft.);
Thence N39|SD30'36"E one hundred nine and ninety five hundredths feet (109.95
ft.);
Thence N84|SD30'36"E seventy seven and thirteen hundredths feet (77.13 ft.);
Thence N39|SD30'36"E one hundred fifty six and sixty three hundredths feet
(156.63 ft.);
Thence N75|SD35'47"E twenty four and seventy five hundredths feet (24.75 ft.);
Thence N39|SD30'36"E one hundred thirty two and fifty five hundredths feet
(132.55 ft.).to a point on the westerly sideline of Walkers Brook Drive at the
lot corner dividing "Lot I" and "Lot II";
Thence S54|SD07'50"E four hundred three and one hundredths feet (403.01 ft.)
along the westerly sideline of Walkers Brook Drive to the point of beginning.
TOGETHER WITH:
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PARKING EASEMENT #1: A parking easement on the area shown as "Parking Easement
#1" on a plan recorded with Middlesex South District Registry of Deeds on
September 4, 1987 as Plan No. 1233 of 1987 in Book 18519, Page 105, which
easement is located within Lot 3 as shown on said plan. Said easement shall be
for the sole purpose of parking registered motor vehicles. Subtenant shall
maintain the area shown as "Parking Easement #1" in a safe and clean condition.
Said "Parking Easement #1" is bounded and described as follows:
NORTHWESTERLY by Lot 3, 167.66 feet;
NORTHWESTERLY by Lot 3, 17.00 feet;
SOUTHEASTERLY by Lot I, 166.00 feet;
SOUTHWESTERLY and by land now or formerly of Boston & Maine R.R., 17.08 feet.
Said easement right is subject to the limitations, restrictions and conditions
as contained in deed from Arthur Gelb and Harry B. Silverman, Trustees, TASC
Realty Trust, to the Town of Reading recorded with said Registry in Book 17792,
page 225.
ACCESS AND UTILITY Easement #1: An access and utility easement, in common with
others, for the purpose of pedestrian and vehicular access to and from John
Street and for underground utility connections in that area shown as "Access &
Utility Easement #1" on the above referenced plan. Subtenant shall maintain the
easement areas in a safe and clean condition. Utilities shall be underground
only. Any excavation for the installation, inspection, replacement and
maintenance of utilities by Subtenant shall be done expeditiously and so as not
to interfere with the rights of others over the easement area. No parking shall
be allowed in the easement area, excepting that portion contained in "Parking
Easement #3". Said easement area is bounded and described as follows:
NORTHEASTERLY by Lot II, 129.53 feet;
SOUTHWESTERLY by Lot II, 4.00 feet;
SOUTHEASTERLY by Lot II, 213.63 feet;
SOUTHERLY by Lot I, 52.33 feet;
SOUTHEASTERLY by Lot I, 156.63 feet;
SOUTHERLY by Lot I, 24.75 feet;
SOUTHEASTERLY by Lot I, 132.55 feet; and
NORTHEASTERLY by John Street, 47.67 feet.
The premises are subject to the following easement rights, as shown on the
above-referenced plan:
Easement First: an access and utility easement, in common with others, for the
purpose of pedestrian and vehicular access to and from John Street and for
underground utility connections over that area shown as "Access & Utility
Easement #2", and being bounded and described as follows:
NORTHWESTERLY by Lot II, 132.55 feet;
NORTHEASTERLY by John Street, 30.49 feet;
SOUTHWESTERLY by Lot I, 266.11 feet;
SOUTHERLY by Lot I, 63.64 feet;
NORTHWESTERLY by Lot II, 156.63 feet;
NORTHERLY by Lot II, 24.75 feet.
Easement Second: A variable-width drainage and utility easement for the purpose
of surface and subsurface drainage and overhead, surface and subsurface utility
connections over that area shown as "Variable-Width Drainage & Utility
Easement" and being bounded and described as follows:
NORTHEASTERLY by John Street, 298.93 feet;
SOUTHEASTERLY by Lot I, 312.84 feet;
WESTERLY by Lot I, 281.98 feet;
NORTHWESTERLY by Lot I, 109.11 feet.
Easement Third: A drainage easement of thirty (30) feet in width for the
purpose of subsurface drainage, running generally in a northwest to southeast
direction from the common boundary between Lot I and Lot 3 and shown as
"30'-Wide Drainage Easement" and being bounded and described as follows:
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NORTHWESTERLY by Lot I, 514.12 feet;
SOUTHEASTERLY by Lot I, 30.00 feet;
SOUTHWESTERLY by Lot I, 512.35 feet;
NORTHWESTERLY by Lot 3, 30.03 feet.
Easement Fourth: A 30-foot-wide drainage and utility easement along the
southwesterly rear lot line of Lot I and shown as "30" Drainage & Utility
Easement". Said easement is for the purpose of drainage and utility
connections. This easement right exists in common with rights of others over
said easement, insofar as in force and applicable.
Easement Fifth: A portion of a sewer easement of thirty (30) feet in width,
running generally in a northerly to southerly direction from the northerly
boundary of Lot 2 and shown on the above-referenced plan as "30' Sewer
Easement."
Easements First through Fifth are created and reserved for the benefit of Lots
II and 2, as shown on the above-referenced plan.
Easement Sixth: A 50 foot wide easement over the area shown as "50' Wide
Drainage Canal Easement" as shown on the above-referenced plan which runs near
the southeasterly sideline of Lot I. This easement is for the limited purpose
of allowing the Town of Reading (the "Town") to enter such ditch for repairing
and maintaining the existing drainage ditch and or no other purpose. The Town's
rights are subject to the taking by the Commonwealth of Massachusetts for an
easement recorded at Middlesex South District Registry of Deeds Book 6695, Page
502. Nevertheless, under no circumstances shall this reservation in the Town
prohibit the Subtenant, its successors and assigns from lawfully altering such
ditch or from establishing a drainage design and system on other property of
Subtenant, its successors and assigns which will discharge into said drainage
ditch and drainage area. There exists a covenant by the Town not to alter such
drainage ditch or system in a manner that would cause the drainage water to
inundate the banks of said ditch and flow onto the remainder of the premises,
or other property of Subtenant.
Easement Seventh: A 20 feet wide access easement along the southeasterly
sideline of the 50 foot wide drainage canal easement as described in the
preceding paragraph and as shown on the above-referenced plan as "20' Wide
Access Road Easement". This easement is for the limited purpose of vehicular or
pedestrian access to the canal by the Department of the Public Works of the
Town of Reading for the exclusive purpose of maintaining said canal and for no
other purpose.
Easement Eight: The right to drain into the existing 50 foot wide drainage
canal easement as shown on the above-referenced plans located near the
southeasterly sideline of Lot I, for the benefit of Lots II and 2.
As to Easements First through Sixth, and Easement Eighth, Subtenant reserves
for the benefit of Lots II and 2, the right to enter the premises for the
purpose of inspection, installation, maintenance, replacement, repair and
testing work. Subtenant covenants and agrees to use the easements in a safe and
lawful manner, to excavate when necessary, in an expedient manner, and to
restore the surface of the area disturbed by these activities. Easements
Fourth, Fifth, Sixth and Seventh are also described in deed recorded with said
Registry in Book 15891, Page 44. The premises are subject to such easements and
have the benefit of restrictions and reservations with reference to such
easements as contained in said deed, insofar as in force and applicable to Lot
I.
EXHIBIT A-2
Parcel 1
That certain parcel of land in the Town of Reading County of Middlesex,
Commonwealth of Massachusetts described as follows:
Beginning at a point located at the intersection of the southerly sideline of
Walkers Brook Drive with the easterly sideline of New Crossing Road.
Thence S 54|SD 07' 50" E Three Hundred Twenty Two and Twenty Nine Hundredths
Feet (322.29 Ft.) along the southerly sideline of Walkers Brook Drive;
Thence along the lines dividing lots I and II by the following courses; S 39|SD
30' 36" W One Hundred Thirty Two and Fifty Five Hundredths Feet (132.55 ft.);
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Thence S 75|SD 35' 47" W Twenty Four and Seventy Five Hundredths Feet (24.75
Ft.);
Thence S 39|SD 30' 36" W One Hundred Fifty Six and Sixty Three Hundredths Feet
(156.63);
Thence S 84|SD 30' 36" W Seventy Seven and Thirteen Hundredths Feet (77.13
Ft.);
Thence S 39|SD 30' 36" W One Hundred Nine and Ninety Five Hundredths Feet
(109.95 Ft.);
Thence S 05|SD 29' 26" E Twenty Three and Sixteen Hundredths Feet (23.16 Ft.);
Thence S 30|SD 39' 46" E Twenty Two and Forty Six Hundredths Feet (22.46 Ft.);
Thence S 39|SD 30' 36" W One Hundred Seventy Five and Eight Hundredths Feet
(175.08 Ft.);
Thence N 50|SD 29' 24" W Sixty Feet (60.00 Ft.);
Thence S 39|SD 30' 3611 W Fifty Six and Ninety One Hundredths Feet (56.91 Ft .)
Thence N 53|SD 52' 37" W Seventy Seven and Sixty Five Hundredths Feet (77.65
Ft.);
Thence S 36|SD 07' 23" W Four Feet (4.00 Ft.); Thence N 53 52' 37" W Fifty Nine
and Fifty Hundredths Feet (59.50 Ft.);
Thence N 36|SD 07' 23" E Two Feet (2.00 Ft.);
Thence N 53|SD 52' 37" W Seventy and Forty Nine Hundredths Feet (70.49 Ft.) to
a point located on the easterly side-line of New Crossing Road;
Thence N 36|SD 07' 23" E Seven Hundred Three and Fifty Three Hundredths Feet
(703.53 Ft.) along the easterly sideline of New Crossing Road to a point of
curvature;
Thence by a curve to the right of radius Twenty Feet (20.00 Ft.) Thirty One and
Thirty Three Hundredths Feet (31.33 Ft.) to the point of beginning.
Parcel 2
That certain parcel of land in the Town of Reading, County of Middlesex,
Commonwealth of Massachusetts described as follows:
Beginning at the southerly most point of the parcel, said point being located
at the intersection of the westerly sideline of New Crossing Road and the
northerly layout line of the Boston and Maine Railroad right of way.
Thence N 59|SD 26' 15" W Two Hundred and Forty Two Hundredths Feet (200.42 Ft.)
along the Boston and Maine Railroad layout line;
Thence N 73|SD 06' 57" E Two Hundred Ninety Eight and Twenty Nine Hundredths
Feet (298.29 Ft.) to a point;
Thence S 53|SD 52' 37" E Twenty Feet (20.00 Ft.) to a point located on the
westerly sideline of New Crossing Road; Thence S 36|SD 07' 23" W Two Hundred
Eighteen and Eighty Three Hundredths Feet (218.83 Ft.) to the point of
beginning.
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EXHIBIT C
LETTER OF CREDIT
BENEFICIARY: TASC, Inc.
MAXIMUM/AGGREGATE
USD $444,600.00
EXPIRATION DATE:
LADIES AND GENTLEMEN:
WE HEREBY ESTABLISH OUR IRREVOCABLE LETTER OF CREDIT IN YOUR FAVOR FOR
ACCOUNT OF THE APPLICANT, XYVISION, INC., UP TO AN AGGREGATE AMOUNT NOT TO
EXCEED $444,600 US DOLLARS AVAILABLE BY YOUR DRAFT(S) DRAWN ON OURSELVES AT
SIGHT WHICH STATE THAT YOU ARE ENTITLED TO DRAW ON SUCH LETTER OF CREDIT, SUCH
DRAFT(S) TO BE ACCOMPANIED BY THE ORIGINAL OF THIS LETTER OF CREDIT AND BY A
WRITTEN CERTIFICATION BY AN AUTHORIZED REPRESENTATIVE OF BENEFICIARY, SWORN TO
UNDER OATH, IN THE FORM OF EXHIBIT A ATTACHED HERETO.
PARTIAL DRAWINGS ARE PERMITTED.
DRAFTS MUST STATE "DRAWN AGAINST STRAIGHT STANDBY LETTER OF CREDIT NUMBER
__________" AND MUST BE PRESENTED AT ____________________.
THIS LETTER OF CREDIT IS TRANSFERABLE BY BENEFICIARY. IF AT ANY TIME YOU
DESIRE TO TRANSFER YOUR INTEREST HEREUNDER, KINDLY FURNISH US WITH INSTRUCTIONS
FOR TRANSFER ON OUR STANDARD TRANSFER FORM AND THEN RETURN THIS LETTER OF
CREDIT TO US FOR APPROPRIATE ENDORSEMENT.
EXCEPT AS OTHERWISE EXPRESSLY STATED HEREIN, THIS CREDIT IS SUBJECT TO THE
UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION),
INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 500.
WE AGREE WITH YOU THAT ALL DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH THE
TERMS OF THIS LETTER OF CREDIT WILL BE DULY HONORED ON PRESENTATION TO US.
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Exhibit A)
To Letter of Credit
CERTIFICATE
The undersigned, being first duly sworn, deposes and says as follows:
1. That the undersigned is an authorized representative of
_________________ ("Beneficiary"), and that the undersigned is duly
authorized to sign this Certificate on behalf of Beneficiary; and
2. 2. That either (i) a default which extends beyond applicable grace
or cure periods exists under the Sublease dated ________________ between
Xyvision, Inc. and Beneficiary, or (ii) the Letter of Credit provided to
Beneficiary is due to expire within thirty (30) days from the date hereof,
Beneficiary has not received written notice that such letter of credit has
been renewed, and no satisfactory replacement letter of credit has been
delivered to Beneficiary.
By: ________________________ Name:
Title:
STATE OF __________________
____________________ COUNTY, SS
On this _____ day of ____________, before me appeared
_______________________,
to me personally known, who, being by me duly sworn, did say that he/she is the
_______________ of ___________________, a ______________________ corporation,
that said instrument was signed on behalf of said corporation, and that the
foregoing certification is true, correct and complete to his/her personal
knowledge, and he/she did acknowledge said instrument to be his/her free act
and deed and the free act and deed of said corporation.
_____________________________
Notary Public My Commission Expires:
This certificate is signed by ________________________ , N.A., for
identification:
_________________________________
Hereunto Duly Authorized
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EXHIBIT D
SUBORDINATION AGREEMENT
This is a Subordination Agreement (this "Agreement") made and entered by
and between Jeffrey A. Neuman, as trustee of the Tudor Trust u/d/t dated
August 11, 1986, with an address of 233 South Beverly Drive, Beverly Hills,
California (the "Junior Lender") and TASC, INC., a Massachusetts
corporation with an address of 55 Walkers Brook Drive, Reading,
Massachusetts 01867 ("TASC").
TASC is the Sublandlord under a certain Sublease (the "Sublease") of
even date between TASC and Xyvision, Inc. (the "Debtor").
The Junior Lender has loaned certain funds to Debtor in accordance with
the provisions of a certain Secured Advance Facility Loan Agreement dated
September 28, 1993, as amended (the "Junior Loan Facility").
In consideration of the mutual covenants herein contained and other
valuable consideration, the receipt and sufficiency whereof are hereby
acknowledged, the Junior Lender and TASC hereby agree as follows:
1. The Junior Loan Facility, as it may be amended from time to time,
shall be, at all times, subject and subordinate to the Debtor's obligations
to TASC under the Sublease and to any and all extensions, modifications,
increases, renegotiations, renewals or replacements thereof.
2. The Junior Lender covenants and agrees with TASC that, promptly upon
demand by TASC, the Junior Lender shall execute, acknowledge, seal and
deliver such additional and further documents as TASC may, from time to
time, reasonably require to evidence such subordination and other
provisions herein provided for.
3. The Junior Lender agrees that following any default by Debtor under
the Sublease the Junior Lender shall not seek to assert, collect or enforce
any amounts due to it under the Junior Loan Facility until such time as
Debtor's obligations to TASC under the Sublease have been satisfied in
full. The foregoing shall not limit the right of the Junior Lender to
collect payments under the Junior Loan Facility prior to the occurrence of
any such default.
4. The agreements and obligations of the Junior Lender hereunder shall
not be affected by any action TASC has taken, or may take, or fail to take,
with respect to the Debtor under the Sublease or any other instrument now
or hereafter existing that evidences or secures the Debtor's obligations to
TASC under the Sublease.
5. All of the covenants, agreements and obligations of the Junior Lender
set forth herein shall be binding upon its successors and assigns and each
subsequent holder from time to time of the Junior Loan Facility and shall
inure to the benefit of TASC, its successors and assigns, and the holder
from time to time of the Sublandlord's interest under the Sublease. 6. This
Agreement and all rights and obligations hereunder, including matters
of construction, validity and performance shall be governed by the laws
of the Commonwealth of Massachusetts.
7. TASC and Junior Lender respectively warrant and represent to each
other that the execution and delivery of this Subordination Agreement has
been duly authorized and that their respective obligations hereunder
constitute valid, binding and enforceable obligations in accordance with
the terms hereof.
IN WITNESS WHEREOF, the parties have caused these premises to be
executed and delivered as an instrument under seal as of the ____ day of
_______________, 1997.
TASC
By: ______________________________
Name:
Title:
33
<PAGE>
<PAGE>
TUDOR TRUST
____________________________________
Jeffrey L. Neuman, Trustee as aforesaid and not
individually
The undersigned Debtor hereby consents to the foregoing and agrees to be
bound by all of the terms, conditions and provisions hereof.
EXECUTED as a sealed instrument as of the ____ day of
___________________, 1997
XYVISION, INC.
By: ______________________________
Title:
34
<PAGE>
