U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30,1999
[ ] Transition Report Under Section 13 or 15(d) of the
Exchange Act
For the transition period from to
Commission file number: 0-20102
CELERITY SOLUTIONS, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 52-1283993
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation)
270 Bridge Street, Suite 301
Dedham, MA 02026
(Address of principal executive office)
(781) 329-1900
Issuer's telephone number
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes[X] No[_]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Number Outstanding Shares
Title of Class as of November 12, 1999
-------------- -----------------------
Common Stock, $.10 Par Value 9,592,886
Transitional Small Business Disclosure Format: Yes [_] No [X]
Exhibit Index on Page 12
Page 1 of 13
<PAGE>
CELERITY SOLUTIONS, INC.
SEPTEMBER 30, 1999
FORM 10-QSB
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of September 30, 1999 (unaudited)
and March 31,1999 3
Condensed Consolidated Statements of Operations for the three
and six months ended September 30, 1999 and 1998 (unaudited) 5
Condensed Consolidated Statements of Cash Flows for the
six months ended September 30, 1999 and 1998 (unaudited) 6
Notes to Condensed Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis and Plan of
Operation 8
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings 12
ITEM 2. Changes in Securities 12
ITEM 3. Defaults Upon Senior Securities 12
ITEM 4. Submission of Matters to a Vote of Security Holders 12
ITEM 5. Other Information 12
ITEM 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
Page 2 of 13
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Celerity Solutions, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
September 30 March 31
1999 1999
----------------------------
Assets
Current assets:
Cash and cash equivalents $ 148,375 $ 401,376
Short-term investments 13,391 13,251
Accounts receivable, net 1,627,898 2,774,327
Income taxes receivable 42,301 42,301
Notes receivable 98,711 98,711
Notes and guaranteed royalties receivable 0 12,500
Prepaid expenses and other current assets 124,622 125,915
---------------------------
Total current assets 2,055,298 3,468,381
Property and equipment, at cost 1,635,810 1,593,133
Less Accumulated depreciation and amortization (1,132,413) (970,149)
---------------------------
Net Property and equipment 503,397 622,984
Capitalized software, net 680,929 785,923
Goodwill, net 924,420 995,017
Other long-term assets 138,134 84,057
===========================
Total assets $ 4,302,178 $ 5,956,362
===========================
Page 3 of 13
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Celerity Solutions, Inc.
Condensed Consolidated Balance Sheets (continued)
(Unaudited)
<TABLE>
<CAPTION>
September 30 March 31
1999 1999
-------------------------------------
<S> <C> <C>
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued liabilities $ 1,560,524 $ 2,437,361
Current portion of notes payable to related parties 445,797 593,318
Short term notes payable 199,186
Unearned revenue and other current liabilities 304,484 391,684
-------------------------------------
Total current liabilities 2,310,805 3,621,549
Notes payable to related parties 619,952 1,019,952
Deferred rent 60,156 62,406
-------------------------------------
Total liabilities 2,990,913 4,703,907
Shareholders' equity:
Common stock, $.10 par value 959,289 959,289
Additional paid-in capital 19,038,245 19,038,245
Accumulated deficit (16,760,175) (16,818,985)
-------------------------------------
3,237,359 3,178,549
Less treasury stock, at cost (1,926,094) (1,926,094)
-------------------------------------
Total shareholders' equity 1,311,265 1,252,455
-------------------------------------
Total liabilities and shareholders' equity $ 4,302,178 $ 5,956,362
=====================================
</TABLE>
Page 4 of 13
<PAGE>
Celerity Solutions, Inc.
Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30 September 30
1999 1998 1999 1998
------------------------------------------------------------------------
-----(Unaudited)----- -----(Unaudited)-----
<S> <C> <C> <C> <C>
Revenue:
Services $ 1,500,279 $ 2,189,742 $ 3,503,796 $ 4,123,313
Software licenses 720,500 761,049 1,050,654 1,292,185
Hardware and other 14,995 105,810 14,995 1,020,481
--------------------------------------------------------------------
Total revenue 2,235,774 3,056,601 4,569,445 6,435,979
Cost of sales
Services 1,133,671 1,596,507 2,175,830 2,995,404
Hardware and related 12,500 86,881 27,500 868,277
Amortization of capitalized software 52,497 43,266 104,994 86,532
--------------------------------------------------------------------
Total cost of sales 1,198,668 1,726,654 2,308,327 3,950,213
--------------------------------------------------------------------
Gross margin 1,037,106 1,329,947 2,261,121 2,485,766
Operating expenses:
Research and development 425,675 270,565 940,327 562,965
General and administrative 323,307 706,900 646,251 1,305,325
Sales and marketing 239,243 483,402 512,181 839,677
Amortization of goodwill 35,299 34,771 70,597 69,543
--------------------------------------------------------------------
Total operating expenses 1,023,524 1,495,638 2,169,356 2,777,510
Operating income (loss) 13,582 (165,691) 91,765 (291,744)
Other income (expense):
Interest and other income 33,884 22,443 4,455 87,888
Interest expense (20,445) (60,572) (37,410) (124,450)
--------------------------------------------------------------------
Income (loss) before income taxes 27,021 (203,820) 58,810 (328,306)
Income tax benefit 0 33,000 0 53,000
--------------------------------------------------------------------
Net income (loss) $ 27,021 $ (170,820) 58,810 $ (275,306)
====================================================================
ncome (loss) per common share:
Net income (loss) per share $ 0.00 $ (0.02) $ 0.01 $ (0.03)
====================================================================
Weighted average shares outstanding 9,592,886 8,017,798 9,592,886 8,017,798
====================================================================
</TABLE>
Page 5 of 13
<PAGE>
CELERITY SOLUTIONS, INC.
Celerity Solutions, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
September 30
1999 1998
--------------------------------
<S> <C> <C>
Operating Activities
Net income (loss) $ 58,810 $ (275,306)
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Sale of software license in exchange for notes payable to (400,000)
related parties
Depreciation and amortization of property and equipment 162,264 157,759
Amortization of goodwill and developed software 175,591 156,074
Changes in operating assets and liabilities
Accounts receivable 1,146,429 (937,010)
Prepaid expenses and other current assets 1,293 (80,487)
Short and long term notes receivable 12,500 793,493
Other long term assets (54,077) 17,268
Accounts payable and accrued liabilities (876,837) 274,824
Income taxes payable (79,700)
Short term notes payable (199,186) 0
Unearned revenue, deferred rent and other current liabilities (89,450) (111,341)
---------------------------------
Net cash used in operating activities (62,663) (84,426)
Investing Activities
Purchase of property and equipment (42,677) (171,000)
---------------------------------
Net cash used in investing activities (42,677) (171,000)
Financing Activities
Purchases of short-term investments (140) (25,950)
Notes payable to related parties (147,521) (220,130)
Proceeds from sales of short-term investments 0 500,000
---------------------------------
Net cash (used in) provided by financing activities (147,661) 253,920
---------------------------------
Net decrease in cash and cash equivalents (253,001) (1,506)
Cash and cash equivalents at beginning of period 401,376 1,347,246
---------------------------------
Cash and cash equivalents at end of period $ 148,375 $ 1,345,740
=================================
</TABLE>
Page 6 of 13
<PAGE>
CELERITY SOLUTIONS, INC.
1. Statement of Information Provided
The accompanying unaudited condensed consolidated financial statements, which
are for interim periods, have been prepared in accordance with Form 10-QSB
instructions and do not include all disclosures provided in the annual
consolidated financial statements. In the opinion of management, all adjustments
consisting of normal recurring accruals and adjustments considered necessary for
a fair presentation have been included. These unaudited condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and the footnotes thereto contained in the Annual Report on
Form 10-KSB for the fiscal year ended March 31, 1999 of Celerity Solutions, Inc.
(the "Company"), as filed with the Securities and Exchange Commission. These
results have been determined on the basis of generally accepted accounting
principles and practices applied consistently with those used in the preparation
of the Company's March 31, 1999 Annual Report on Form 10-KSB. The March 31, 1999
balance sheet was derived from audited consolidated financial statements, but
does not include all disclosures required by generally accepted accounting
principles.
2. Income (loss) Per Share
The following table sets forth the computation of basic and diluted income
(loss) per share:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
--------------------------------------------------------------------
1999 1998 1999 1998
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Numerator:
Net income (loss) $ 27,021 $ (170,820) $ 58,810 $ (275,306)
====================================================================
Numerator for income (loss) per common
share and income (loss) per share-assuming
dilution $ 27,021 $ (170,820) $ 58,810 $ (275,306)
====================================================================
Denominator:
Denominator for income (loss) per common
share-Weighted average shares outstanding
9,592,886 8,017,798 9,592,886 8,017,798
Effect of Dilutive securities:
* ** * **
====================================================================
Denominator for diluted income (loss) per
share- Adjusted weighted average shares 9,592,886 8,017,798 9,592,886 8,017,798
====================================================================
Income (loss) per common share $ 0.00 $ (0.02) $ 0.01 $ (0.03)
====================================================================
Income (loss) per common share-assuming
dilution $ 0.00 $ (0.02) $ 0.01 $ (0.03)
====================================================================
</TABLE>
* No options are included in the calculation because all options are priced
above $0.125, which was the closing price of Celerity's stock on September 30,
1999. There are also warrants to purchase 344,500 shares at $3.57, which was
outstanding at September 30, 1999, but not included in the potential common
share computations because its exercise price was greater than the average
market price of common shares.
** Potential common shares are not included because they would be antidilutive.
Had the numerator been a profit the potential common shares would have increased
the weighted average shares outstanding by 351,579 shares as of the three months
ended September 30, 1998, and by 496,599 shares for the six months ended
September 30, 1998. In addition, there were options to purchase 1,193,000 shares
at exercise prices between $2.469 and $4.66 per share outstanding at September
30, 1998 that were not included in the potential common share computations
because their exercise prices were greater than the average market price of the
common shares. There were also warrants to purchase 599,621 shares at $3.57 and
2,500 shares at $2.47 which were outstanding at September 30, 1998, but not
included in the potential common share computations because their exercise
prices were greater than the average
Page 7 of 13
<PAGE>
CELERITY SOLUTIONS, INC.
2. Income (loss) Per Share (continued)
market price of common shares. These would have been antidilutive, even if a
profit had been reported in the numerator.
3. Related Party Transactions
During March and July 1999, two notes payable to related parties over $20,000.00
were renegotiated as follows:
The note payable To Mr. Carr with a balance of $1,025,798 at March 31, 1999
including imputed interest to be paid has been reduced by $200,000 in the
quarter ended September 30, 1999 for the sale of a source code license to Mr.
Carr related to the CSTI software. The Mr. Carr is prohibited from transferring
this license to a third party by a non-compete agreement which extends 12 months
from termination of employment. The note payable had been reduced by the
conversion of $300,000 of the debt into equity at $.40 per share and reflected
in the March 31, 1999 results. The remaining $538,048 is to be paid over 42
months at 8% with monthly payments of approximately $14,681.
Another note payable to Mr. Ringuette with a balance of $439,960 including
accrued interest has been reduced by $200,000 in the quarter ended September 30,
1999 for the sale of a source code license to the Mr. Ringuette for the
warehouse management software acquired in the Somerset acquisition. The balance
of $239,960 is to be paid over 36 months at 8% with monthly payments of $7,494.
These payments are offset by royalty fees earned from a 5 year royalty
agreement. If there is a balance remaining at the end of the 5 year agreement
the Company must pay that balance.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the condensed
unaudited financial statements included elsewhere within this quarterly report.
Fluctuations in annual and quarterly operating results may occur as a result of
certain factors, such as the size and timing of customer contracts and
competition. Due to such fluctuations, historical results and percentage
relationships are not necessarily indicative of the results for any future
period. Statements, which are not historical facts contained in this report, are
forward-looking statements that involve risks and uncertainties that could cause
actual results to differ materially from projected results. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
reflect management's analysis only as of the date hereof. The Company undertakes
no obligation to publicly release the results of any revision to these
forward-looking statements, which may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
Business Developments
During March and July 1999, all notes payable to related parties over
$20,000 were renegotiated. This resulted in the reclassification of $1,293,281
of current liabilities to long term, with $700,000 being transferred in the form
of debt conversions into equity and revenue. All payment schedules also include
provisions to defer payments up to 6 months. This deferral of 6 months of
principal payments results in $205,000 of current liabilities deferred on a roll
forward basis. This deferral includes note payments as well as severance pay
outs of $80,000 scheduled over the next year, which is reflected in accrued
liabilities and can also be deferred.
Page 8 of 13
<PAGE>
CELERITY SOLUTIONS, INC.
Revenue
Revenues from services decreased $689,463, or 32%, and $619,517, or 15%,
for the three month and six month periods ended September 30, 1999 versus the
same periods in 1998. These decreases were attributable to the completion of
several projects that incurred non-billable time during the second quarter and
the delay in the start of new projects. Management expects that service revenues
for the current fiscal year will decrease versus fiscal 1999 levels.
Revenues from software license sales decreased $40,549, or 5%, and
$241,531, or 19%, for the three month and six month periods ended September 30,
1999 versus the same periods in 1998. Management believes that license revenue
continues to trail last year as a result of delayed sales decisions of customers
related to year 2000 change over.
Revenues from hardware and related sales decreased $90,815 and $1,005,486
for the three and six month periods ended September 30, 1999 versus the same
periods in 1998. These decreases are attributable to the completion in 1998 of
two large hardware sales. Hardware sales fluctuate with the installation of new
systems where the customer requires that the Company's software be integrated
with hardware. Hardware sales are not expected to be significant in fiscal 2000.
The level of net sales realized by the Company in any quarter is
principally dependent on the portion of projects completed. The purchase of
supply chain and warehouse management solutions requires a significant
commitment of capital and resources on the part of the customer, the sales
cycles are long and average from six to nine months. As a result, revenue is
subject to many risks such as budgetary cycles of customers, changes in the
business of a customer and overall economic trends that are not controllable by
the Company. Quarterly results have varied significantly in the past and are
likely to fluctuate in the future as a result of the timing of new orders,
product development expenditures, and the number and timing of new product
completions. A significant portion of the Company's operating expenses are fixed
and planned expenditures in any given quarter are based on sales and revenue
forecasts. Accordingly, if net sales do not meet the Company's expectations in
any given quarter, operating results and financial condition could be adversely
and disproportionately affected. As a result of these and other factors, the
Company's results of operations and financial condition for any period are
inherently difficult to predict. The Company expects that revenues in fiscal
2000 will decrease below those reported in fiscal 1999, due to the year 2000
change over slowing purchase decisions for customers and potential customers of
the Company along with a decrease in service billings associated with the work
force reductions.
Cost of Sales
Cost of services are incurred in connection with the sale of supply chain
and warehouse management software. Cost of services consists of costs primarily
associated with consulting and implementation services that are sold as part of
a total supply chain and warehouse management solution, and costs associated
with providing support to customers. These costs decreased $462,836, or 29%, and
$819,574, or 28%, during the three and six month periods ended September 30,
1999 versus the same periods in 1998. Cost of services as a percent of revenue
from services increased from 73% to 76% and from 73% to 62% for the three and
six month periods ended September 30,1999 versus the same periods in 1998. The
Company has decreased its consulting staff and subcontractors and deployed
employees from R&D to work on service related revenues as a result of decreased
revenue expectations for the current fiscal year.
Cost of sales from hardware and related sales decreased $74,381 and
$840,777 for the three and six month periods ended September 30, 1999 versus the
same periods in 1998. This decrease is attributable to the completion of two
large hardware sales during 1998. Hardware sales fluctuate with the installation
of new systems where the customer requires that the Company's software be
integrated with hardware. Hardware sales are not expected to be significant in
fiscal 2000.
Research and Development
Research and development expenses increased $155,110, or 57%, and $377,362,
or 67%, during the three and six month periods ended September 30, 1999 versus
the same period in 1998. Development increased during fiscal 1999 as the Company
accelerated the project of integrating the supply chain and warehouse management
products. This effort is expected to reach technological feasibility in the next
quarter, however, there can be no assurances that the Company will be able to
develop and market new products or product enhancements that respond to the
technological change or evolving standards, that new products will be released
on schedule, or that released products will achieve any degree of market
acceptance.
Page 9 of 13
<PAGE>
CELERITY SOLUTIONS, INC.
General and Administrative
General and administrative expenses decreased $383,593, or 54%, and
$659,074, or 50%, during the three and six month periods ended September 30,
1999 versus the same periods in 1998. These decreases are due to the
restructuring that occurred during March 1999.
Sales and Marketing
Sales and marketing expenses decreased $244,159, or 51%, and $327,496, or
39%, during the three and six month periods ended September 30, 1999 versus the
same periods in 1998. This item includes personnel related costs, as well as
those costs related to facilities, travel, trade shows, advertising and
promotions. These decreases are due to the restructuring that occurred during
March 1999.
Liquidity and Capital Resources
The Company's primary sources of liquidity are cash, and cash equivalents.
During the six months ended September 30, 1999, cash and cash equivalents
decreased $253,001, or 64%, to $148,375.
Accounts receivable decreased $1,146,429, or 41%, to $1,627,898 for the six
months ended September 30, 1999. Of the total decrease, approximately $350,000
resulted from the settlement of a disputed, past due balance with one major
customer. Additional decreases can be attributed to the decrease in revenues for
the six months ended September 30, 1999 and the improved cash collection effort
by the company.
Other long term assets increased $54,077, or 64% for the six months ended
September 30, 1999. This increase was due to an additional rent deposit required
for the renewal of the lease for the corporate facilities at 270 Bridge Street,
Dedham, MA.
Accounts payable and accrued liabilities decreased $876,837, or 36%, to
$1,560,524 for the six months ended September 30, 1999. The Company had slowed
payments with several vendors in the last two quarters of fiscal 1999. Most of
these vendors were brought up to date during the two quarters.
Notes payable to related parties decreased $547,521 for the six months
ended September 30, 1999. The Company reduced notes payable to related parties
by $400,000 in a non-cash transaction, as a result of source code sales to Paul
Carr and Luc Ringuette in the amount of $200,000 each. The Company has the
option of paying interest only on the notes for six months. The Company has
exercised this interest only option for two months during the six months ended
September 30, 1999.
Short term notes payable has decreased $199,186 for the six months ended
September 30, 1999. The company paid the balance due to Imperial Bank under the
terms of the Company's factoring agreement. The Company was notified in August
that Imperial Bank will not fund additional advances under this agreement until
Celerity provides Imperial with copyright documentation for Celerity's software
products required under the security provisions of the agreement. The failure of
Imperial Bank to fund future advances on receivables under this agreement is not
expected to have an adverse effect on the Companies operations.
Unearned revenue decreased $89,200 for the six months ended September 30,
1999, reflecting the net recognition of support maintenance and license revenue
fees that are greater than the receipts taken in on new yet-to-be recognized
license fees.
The Company believes its existing cash and cash equivalent balances,
short-term investment balances, and cash generated from operations will satisfy
the Company's working capital and capital expenditure requirements for at least
the next twelve months.
The Company does not currently have plans for major capital expenditures,
but does have $1,065,749 in notes payable to related parties from the
acquisitions of SAI and CSTI. These notes are payable in various amounts ending
June 2002. The Company believes that existing cash and cash equivalent balances,
short-term investment balances and potential cash flow from operations will
satisfy this long-term liability.
Looking forward to fiscal 2001, the Company expects sales to increase as
decisions delayed by the year 2000 change over are made. The Company is
considering if an additional investment in sales and marketing will increase the
rate and amount of new sales. However, there can be no assurances that the
Company will make investments in additional sales and marketing areas. Any
material investment would require the Company to obtain additional sources of
financing.
Page 10 of 13
<PAGE>
CELERITY SOLUTIONS, INC.
Year 2000 Compliance Issues
Many older computer systems and software products in use today were
programmed with a two -digit date code field. These systems or software products
need to be modified, upgraded or replaced to distinguish the Year 2000 in order
to avoid the possibility of erroneous results or system failures. The effects of
this issue and the efforts by companies to address it are uncertain. The risk
for Celerity exists in four areas: systems used by the Company to run its
business, systems used by the Company's vendors, potential warranty or other
claims from the Company's customers, and the potential reduced spending by
others companies as a result of significant information systems spending on Year
2000 issues.
The Company has inventoried and evaluated its internal systems, equipment,
and facilities and established a schedule to replace or upgrade systems that are
known to be Year 2000 non-compliant. The Company utilizes outside providers for
services such as payroll processing and 401(k) benefit administration, which may
or may not be Year 2000 compliant. The Company has requested and received from a
majority of its vendors written confirmation of their knowledge of or plans for
Year 2000 compliance. The Company has taken steps to make sure that its internal
systems will function in the year 2000, but failure of any critical
technological component to operate properly may have an adverse impact on
business operations or require the Company to incur unanticipated expenses to
remedy any problems. The Company does not expect Year 2000 related compliance
costs to be material, but can not assure that such costs will be
inconsequential. The Company has not identified alternative contingency plans,
but will do so as it continues to assess the Year 2000 risk.
The Company's software products have been modified to be Year 2000
compliant. However, the Company's products are complex and might contain
undetected errors or failures even though intended to be Year 2000 compliant.
There can be no assurance that the Company's software products contain or will
contain all necessary date code changes or that errors will not be found in new
products or product releases, resulting in loss of or delay in product
acceptance. If the Company is unable, or is delayed in its efforts to make the
necessary date code changes, there could be a material adverse effect upon the
Company's business, operating results, financial condition and cash flows.
Many companies are expending significant resources to modify or upgrade
their existing software and hardware for Year 2000 compliance. This might reduce
funds available to purchase other software products such as the Company's supply
chain management software. Additionally, Year 2000 problems in a customer's
other software products might significantly limit the customer's realized
benefit from the supply chain management software. These events could result in
a material adverse effect on the Company's business, operating results,
financial condition and cash flows.
Future Operating Results (Statutory Safe Harbor Disclosure)
This report contains forward-looking statements. For this purpose, any
statement, 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.
Numerous factors may affect the Company's business and its results of
operations. These factors include the potential for significant fluctuations in
quarterly results, dependence on new products and rapid technological change,
risk of software errors or failures, the level and intensity of competition,
lack of product diversification, dependence on certain distribution channels,
proprietary intellectual property rights, limited operating history in the
supply chain management software industry, integration of acquisitions, loss of
key employees, lack of profitability, sustaining a public trading market,
absence of dividends, and international operations. For a discussion of these
and other factors that may affect the Company's future results, see the Form
10-KSB for March 31, 1999 filed by the Company with the SEC in July 1999.
Page 11 of 13
<PAGE>
CELERITY SOLUTIONS, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See the Companies 10QSB for the period ended June 30, 1999, filed on August 23,
1999
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 10, 1999 the registrant held its 1999 Annual Meeting of
Stockholders at the Company's corporate offices located at 270 Bridge Street
Suite 301, Dedham, Massachusetts. The following voting matters were approved at
the meeting:
<TABLE>
<CAPTION>
Against/ Broker
For Withheld Abstain Non-Vote
--------- -------- ------- --------
<S> <C> <C> <C> <C>
1. Election of five persons to the
Board of Directors to hold office
until the next Annual Meeting or
until their successors have been
elected and qualified or their
earlier resignation or removal:
Luc Ringuette 6,042,898 41,525 -- --
Paul Carr 6,040,958 43,465 -- --
Harold H. Leach Jr 6,042,898 41,525 -- --
Richard J. Santigati 6,042,898 41,525 -- --
Edward B. Merino 6,042,898 41,525 -- --
2. Approval of Amendment to Celerity
Solutions, Inc.'s Amended and
Restated 1992 Non-Qualified Stock
Option Plan for Non-Employee
Directors increasing compensation
for director services for the
director of the Compensation and
Audit committees from 20,000 stock
options to 30,000 stock options. 5,910,187 122,851 34,385 17,000
3. Approval of Ernst & Young LLP as
Celerity Solutions, Inc. auditors
for fiscal 2000. 6,069,823 9,507 5,093
</TABLE>
ITEM 5. OTHER INFORMATION
Not applicable
.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Dedham, MA office lease agreement
10.2 Irvine, CA office lease amendment
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
none
Page 12 of 13
<PAGE>
CELERITY SOLUTIONS, INC.
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CELERITY SOLUTIONS, INC.
(Registrant)
Date: November 12, 1999 /s/Cheryl McCarthy
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Cheryl McCarthy
Controller (Principal Accounting
Officer)
Date: November 12, 1999 /s/Paul Carr
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Paul Carr
President & Chief Financial Officer
Page 13 of 13
DATE OF LEASE EXECUTION: August ____, 1999
(To be completed by Landlord)
ARTICLE I
REFERENCE DATA SHEET
THIS REFERENCE DATE SHEET IS FOR INFORMATIONAL PURPOSES ONLY. ALL TERMS ARE AS
DEFINED IN THE LEASE
1.1 SUBJECTS REFERRED TO:
LANDLORD: Bridge Realty Trust
MANAGING AGENT: Finard & Company, LLC
MANAGING AGENT'S ADDRESS: 3 Burlington Woods Drive,
Burlington, MA 01803,
Attn: Laura M. Mintz
LANDLORD'S REPRESENTATIVE: Laura M. Mintz
TENANT: Celerity Solutions, Inc.
TENANT'S ADDRESS (FOR NOTICE AND BILLING): 270 Bridge Street,
Dedham, MA 02027
TENANT'S REPRESENTATIVE: ________________________
BUILDING ADDRESS: 270 Bridge Street,
Dedham, MA 02027
RENTABLE FLOOR AREA OF TENANT'S SPACE: 8,173 square feet
TOTAL RENTABLE FLOOR AREA OF THE BUILDING: 38,000 square feet
TENANT'S PRO RATA SHARE: 21.51 %
COMMENCEMENT DATE: October 1, 1999
TERM EXPIRATION DATE: September 30, 2004
TERM: Five (5) YEARS
ANNUAL BASE RENT: Year 1: $18.50 (p.r.s.f.)
Year 2: $19.00 (p.r.s.f.)
Year 3: $19.50 (p.r.s.f.)
Year 4: $20.50 (p.r.s.f.);
and
Year 5: $21.50 (p.r.s.f.)
ANNUAL ESTIMATED ELECTRICAL COST TO TENANT'S SPACE: $0.85 (p.r.s.f.)
BASE YEAR FOR REAL ESTATE TAXES ESCALATION IS: Fiscal Year 2000
BASE YEAR FOR OPERATING COST ESCALATION IS: January 1, 2000
PREPAID RENT: $54,827.22
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1.2 EXHIBITS.
The exhibits listed below in this section are incorporated in this Lease by
reference and are to be construed as part of this Lease:
EXHIBIT A Plan showing Tenant's Premises
EXHIBIT B Riders (not applicable).
EXHIBIT C Specifications of Leasehold Improvements and Tenant Layout
(if applicable).
EXHIBIT D Landlord's Services.
EXHIBIT E Rules and Regulations
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ARTICLE II
PREMISES AND TERM
2.1 PREMISES.
Subject to and with the benefit of the provisions of this Lease, Bridge
Realty Trust (the "Landlord") hereby leases to Celerity Solutions, Inc. (the
"Tenant"), and Tenant leases from Landlord, the premises located on the third
floor of the building at 270 Bridge Street, Dedham, Massachusetts (the
"Building") and which are more particularly shown in Exhibit A attached hereto
and made a part hereof, but excluding exterior faces of exterior walls, the
common facilities area and building service fixtures and equipment serving
exclusively or in common other parts of the Building (the "Tenant Premises", the
"Premises" or the "Leased Premises").
Tenant shall have, as appurtenant to the Premises, the right to use in
common with others entitled thereto: (a) the common facilities included in the
Building or on the parcel of land on which the Building is located (the "Lot"),
including the lobby, elevators public bathrooms and the parking facility (on a
first-come, first-served basis), to the extent and in the location from time to
time designated by Landlord and (b) the building service fixtures and equipment
serving the Premises.
Landlord reserves the right from time to time, without unreasonable
interference with Tenant's use, (a) to install, repair, replace, use, maintain
and relocate for service to the Premises and to other parts of the Building or
elsewhere, building service fixtures and equipment wherever located in the
Building and (b) to alter or relocate any common facilities, it being understood
that any parking may be relocated on or off the Lot from time to time by
Landlord, provided that in all events said substitutions are substantially
equivalent.
2.2 TERM.
To have and to hold for a period (the "Term") commencing on October 1, 1999
(the "Commencement Date"), and continuing until September 30, 2004 (the "Term
Expiration Date" or the "Expiration Date"), unless sooner terminated as provided
in this Lease.
ARTICLE III
CONSTRUCTION
3.1 PREMISES; CONSTRUCTION.
Tenant agrees to accept the Premises on the Commencement Date in
substantially the same condition as they exist on the date of execution of this
Lease. Any Tenant's construction, installation of furnishings, and later changes
or additions shall be approved in writing by Landlord pursuant to the terms
hereof and shall be coordinated with Landlord in such manner as not to damage
the Building or Lot or interfere with Building operations. Without limiting any
of the terms hereof, Landlord will not approve any construction, alterations, or
additions requiring unusual expense to readapt the Premises to normal office use
on lease termination or increasing the cost of construction, insurance or taxes
on the Building or of Landlord's services called for by Section 5.1, unless
Tenant first gives assurances acceptable to Landlord that such re-adaption will
be made prior
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to such termination without expense to Landlord and makes provisions acceptable
to Landlord for payment of such increased cost. All changes and additions shall
be part of the Building, except such items as the parties agree in writing
either shall be removed by Tenant on termination of this Lease, or shall be
removed or left at Tenant's election.
Any Tenants construction work approved by Landlord ("Tenants Work") shall
be done in a good and workmanlike manner in full compliance with all laws and
ordinances applicable thereto and in accordance with the plans approved in
advance by Landlord. The cost of Tenant's Work shall be borne wholly by Tenant
and Tenant shall enter into a separate contract for the doing of such work.
Tenant shall have no power or authority to create any lien or permit any lien to
attach to the present estate, reversion or other estate of Landlord in the
Premises or the Building and all materialmen, contractors, artisans, mechanics,
laborers and other parties contracting with Tenant with respect to the Premises
or any part thereof are hereby charged with notice that they must look solely to
Tenant to secure payment of any bill for work done or material furnished or for
any other purposes during the term of this Lease. Tenant shall immediately
remove any and all such liens and Tenant shall hold Landlord harmless and
indemnified from all costs, expenses, loss or damage by reason of the existence
or placing of any such lien.
3.2 LANDLORD'S WORK.
Provided Tenant is not in default of this Lease, Landlord agrees to use
reasonable efforts to complete the work listed on Exhibit C (the "Landlord's
Work") on or before October 1, 2000, which shall, however, be extended for a
period equal to that of any delays due to governmental regulations, unusual
scarcity of or inability to obtain labor or materials, labor difficulties,
casualty or other causes beyond Landlord's reasonable control. It is
acknowledged and agreed by Tenant that the Landlord's Work will be completed
during the Tenant's occupancy of the Premises. In connection therewith, Tenant
shall reasonably cooperate with Landlord to allow to Landlord to complete such
work and shall afford Landlord reasonable access to the Premises at such
reasonable times designated by Landlord. It is anticipated that the Landlord's
work may be completed during three consecutive weekends and, therefore, Tenant
will experience some interference with its use and occupancy of the Premises.
Landlord agrees, to the extent practically possible, to use reasonable efforts
to minimize such interference and, subject to the provisions herein, to complete
such work during consecutive weekends.
3.3 GENERAL PROVISIONS APPLICABLE TO CONSTRUCTION.
All construction work required or permitted by this Lease, whether by
Landlord or by Tenant, shall be done in a good and workmanlike manner and in
compliance with all applicable laws and all lawful ordinances, regulations and
orders of governmental authority and insurers of the Building. Either party may
inspect the work of the other at reasonable times and promptly shall give
written notice of observed defects. Landlord's obligations under Section 3.2, if
any, shall be deemed to have been performed if Tenant fails to provide written
notice to Landlord within ten (10) days of the Landlord's completion of the
Landlord's Work.
3.4 REPRESENTATIVES.
Each party authorizes the other to rely in connection with their respective
rights and obligations under this Article III upon approval and other actions on
the party's behalf by Laura M. Mintz ("Landlord's Representative") in the case
of Landlord or_____________________
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("Tenant's Representative") in the case of Tenant or by any person designated in
substitution or addition by notice to the party relying.
ARTICLE IV
RENT
4.1 ANNUAL RENT.
The Tenant shall pay to Landlord's Managing Agent, the fixed rent ("Annual
Rent") at the annual rate or rates set forth below, payable in advance to
Landlord c/o Finard & Company, LLC, 3 Burlington Woods Drive, Burlington, MA
01803, Attention: Laura M. Mintz, or at such other address as Landlord may
designate in writing.
1. From the Commencement Date through September 30, 2000 annual rent of
$151,200.50 in equal monthly installments of $12,600.04.
2. From October 1, 2000 through September 30, 2001, annual rent of
$155,287.00 in equal monthly installments of $12,940.58.
3. From October 1, 2001 through September 30, 2002, annual rent of
$159,373.50, in equal monthly installments of $13,281.13.
4. From October 1, 2002 through September 30, 2003, annual rent of
$167,546.50, in equal monthly installments of $13,962.21.
5. From October 1, 2003 through September 30, 2004, annual rent of
$175,719.50, in equal monthly installments of $14,643.30.
Any rents due for a portion of a month shall be adjusted accordingly.
Tenant agrees to pay rent to Landlord, without any offset or reduction
whatsoever, equal to 1/12th of the Annual Rent for the appropriate time period
in equal installments in advance on the first day of each calendar month
included in the Term; and for any portion of a calendar month at the beginning
or end of the Term, at the proportionate rate payable for such portion, in
advance.
4.2 ADDITIONAL RENT, OPERATING COSTS ESCALATION AND TAX ESCALATION.
A. Tax Escalation - The Tenant shall pay to the Landlord as additional rent
hereunder, Tenant's Share (as defined herein) of the excess of the amount of
real estate taxes assessed for the Building and the Lot, of which the Premises
are a part ("Real Estate Taxes"), over the Real Estate Taxes assessed for said
Building and Lot, for the fiscal year 2000 (hereinafter called the "Real Estate
Base Year"). Tenant will pay to Landlord as additional rent hereunder when and
as designated by notice in writing by Landlord, the Tenant's Share of such
excess that may occur in each year of the term of this lease or any extension of
renewal thereof and proportionally for any part of any year in which the Real
Estate Taxes assessed are in excess of the Real Estate Base Year. If the
Landlord obtains an abatement of any such excess Real Estate Taxes, a
proportionate share of
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such abatement less the reasonable fees and costs incurred in obtaining the
same, if any, shall be refunded to the Tenant.
B. Operation Costs Escalation - The Tenant shall pay to the Landlord as
additional rent hereunder, when and as designated by notice in writing by
Landlord, Tenant's Share of any increase in Operating Costs (as hereinafter
defined) over those incurred during the calendar year of 2000 ("Operation Costs
Base Year"). This increase shall be prorated should this lease be in effect with
respect to only a portion of any calendar year.
For the purposes of this lease, "Operating Costs" shall mean and include
all costs and expenses incurred by the Landlord during the applicable calendar
year in connection with the operation and maintenance of the Building and the
Lot including, without limitation:
premiums for insurance; fees payable to third parties for financial audits
of Operating Costs; compensation and all fringe benefits, worker's compensation
insurance premiums and payroll taxes paid by Landlord to, for or with respect to
all persons engaged in the operating, maintaining, or cleaning of the Building
and Lot; all utility charges not billed directly to tenants by Landlord or the
utility; payments to independent contractors under service contracts for
cleaning, operating, managing, maintaining and repairing the Building and Lot
(which payments may be to affiliates of Landlord provided the same are at
reasonable rates consistent with the type of occupancy and the services
rendered); rent paid by the managing agent or imputed cost equal to the loss of
rent by Landlord for making available to the managing agent space for a Building
office on the ground floor or above; if the Building shares common areas or
facilities with another building or buildings, the Building's pro rata share (as
reasonably determined by Landlord) of the cost of cleaning, operating, managing
(including the cost of the management office for such buildings and facilities),
maintaining and repairing such common areas and facilities; all other reasonable
and necessary expenses paid in connection with the cleaning, operating,
managing, maintaining and repairing of the Building and Lot, or either, and
properly chargeable against income; and capital costs which save costs or are
required by law it being agreed that if Landlord installs a new or replacement
capital item in connection therewith, the cost thereof as reasonably amortized
by Landlord, with interest at the average prime commercial rate in effect from
time to time at the three largest national banks in Boston, Massachusetts on the
amortized amount, shall be included in Operating Costs. Landlord's Statement
shall also show the average number of square feet of the Building which were
occupied for the preceding fiscal year or fraction thereof.
Notwithstanding the foregoing:(i) with respect to any calendar year during
which Landlord is not furnishing items of work or services, which would have
otherwise constituted Operating Costs, whether because the Building has an
average occupancy rate during such calendar year of less than 95% or one or more
tenants of the Building are obtaining or providing such items of work or service
independently or otherwise, then for purposes of computing Operating Costs, such
components of Operating Costs shall be reasonably extrapolated by Landlord and
computed for such calendar year as though such components were incurred with
respect to tenants occupying collectively 95% of the Building during such
calendar year; and (ii) Operating Costs shall not include any of the following:
(a) brokerage commissions;
(b) wages, salaries or other compensation paid to any executive employees
of Landlord above the grade of Building Manager;
(c) the cost of tenant fit-up and build-out work done by Landlord for a
particular tenant in such tenant's demised premises in the Building;
(d) depreciation;
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(e) ground rent;
(f) reserves;
(g) cost of parties and receptions at the Building;
(h) costs of repairs and other work necessitated by fire or other casualty
of an insurable nature or by the exercise of eminent domain, to the
extent such costs are not the responsibility of Tenant hereunder, and
are covered either by insurance or an award in connection with any
exercise of eminent domain;
(i) general overhead of Landlord and its subsidiaries;
(j) advertising and promotional expenditures;
(k) any fines or penalties incurred on account of willful violation by
Landlord of any governmental rule or requirement, or costs incurred as
the result of Landlord's gross negligence; and
(l) any expenditures for which Landlord is reimbursed by third parties
(other than by tenants pursuant to provisions comparable hereto).
4.3 ESTIMATED ADDITIONAL RENT PAYMENTS.
If requested by Landlord, Tenant shall pay monthly with each payment of
rent as additional rent, one-twelfth of Landlord's estimate of Tenant's Share of
Operating Costs and/or Real Estate Taxes. In any event, within ninety (90) days
after the end of each calendar year Landlord shall advise Tenant by written
notice ("Landlord's Statement") of the actual costs incurred (such delivery of
the Landlord's Statement to be deemed a certification by Landlord or its agent
that the Landlord's Statement is materially accurate in all respects), the
amount paid by Tenant, and the amount which Tenant shall owe for the past year.
Tenant shall, upon demand, pay any deficiency, and any overpayment shall be
credited to Tenant's obligations hereunder for the next year, or, in the case of
the last year under the Tenant, such overpayment shall be credited to Tenant as
necessary.
4.4 CHANGE OF FISCAL YEAR.
Landlord shall have the right from time to time to change the period of
accounting under Section 4.2 to any annual period other than a fiscal year, and
upon any such change all items. shall be appropriately apportioned. All amounts
for periods partially within and partially without the accounting periods shall
be appropriately apportioned, and any items which are not determinable at the
time of a Landlord's Statement shall be included therein on the basis of
Landlord's estimate, and with respect thereto Landlord shall render promptly
after determination a supplemental Landlord's Statement, and appropriate
adjustment shall be made according thereto.
4.5 INTEREST PAYMENTS.
If any installment of Annual Rent or additional rent or on account of
leasehold improvements is paid more than 15 days after the due date thereof, at
Landlord's election, it shall bear interest at a rate equal to eighteen (18%)
percent per annum from such due date, which interest shall be immediately due
and payable as further additional rent.
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4.6 DEFINITION.
For the purposes hereof, "Tenant's Share" shall mean a fraction, the
denominator of which is the total rentable square footage of the Building and
the numerator is the total square footage of the Tenant's Premises.
4.7 REVIEW OF RECORDS.
After receipt of the Landlord's Statement, upon written request by Tenant,
Landlord shall provide Tenant with a reasonable statement of the costs and
charges comprising the Tenant's share of Operating Costs and/or Real Estate
Taxes; provided however, such request by Tenant shall not excuse Tenant's
obligation to pay Tenant's share of Operating Costs and/or Real Estate Taxes as
required hereunder.
ARTICLE V
LANDLORD'S COVENANTS
5.1 LANDLORD'S COVENANTS DURING THE TERM.
Landlord covenants during the Term:
5.1.1 Building Services - To furnish, through Landlord's employees or
independent contractors, the services listed in Exhibit D;
5.1.2. Repairs - Except as otherwise provided in Article VII, to make such
repairs to the roof, building systems not located in the Premises, exterior
walls, floor slabs, other structural components and common facilities of the
Building as may be necessary to keep them in serviceable condition; and
5.1.3 Quiet Enjoyment - That Tenant, on paying the rent and performing all
its obligations hereunder, shall peacefully and quietly have, hold and enjoy the
Premises throughout the Term without any manner of hindrance or molestation from
Landlord or anyone claiming under Landlord, subject however to all the terms and
provisions hereof.
5.1.4 Insurance - Subject to the limitations contained in Section 6.1.13
contained herein, Landlord shall maintain hazard insurance on the Building in
commercially reasonable amounts and coverages.
5.2 INTERRUPTIONS.
Landlord shall not be liable to Tenant for any compensation or reduction of
rent by reason of inconvenience or annoyance or for loss of business arising
from power losses or shortages or from the necessity of Landlord's entering the
Premises for any of the purposes in this Lease authorized, or for repairing the
Premises or any portion of the Building or Lot. In case Landlord is prevented or
delayed from making any repairs, alterations or improvements, or furnishing any
service or performing any other covenant or duty to be performed on Landlord's
part by reason of any cause beyond Landlord's reasonable control, Landlord shall
not be liable to Tenant therefor, nor, except as expressly otherwise provided in
Article VII, shall Tenant be entitled to any abatement or reduction of rent by
reason thereof, nor shall the same give rise to a claim in Tenant's favor that
such failure constitutes actual or constructive, total or partial, eviction from
the Premises.
Landlord 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. Except in case of
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emergency repairs, Landlord will give Tenant reasonable advance notice of any
contemplated stoppage and will use reasonable efforts to avoid unnecessary
inconvenience or interruption to Tenant by reason thereof.
Landlord also reserves the right to institute such policies, programs and
measures as may be necessary, required or expedient for the conservation or
preservation of energy or energy services or as may be necessary or required to
comply with applicable codes, rules, regulations or standards.
ARTICLE VI
TENANT'S COVENANTS
6.1 TENANT'S COVENANTS DURING THE TERM.
Tenant covenants during the Term and such further time as Tenant occupies
any part of the Premises:
6.1.1 Tenant's Payments - To pay when due (a) all Annual Rent and
additional rent, (b) all taxes which may be imposed on Tenant's personal
property in the Premises (including, without limitation, Tenant's fixtures and
equipment) regardless to whomever assessed, and (c) all charges by public
utilities for telephone and other utility services (including service
inspections therefor) rendered to the Premises not otherwise required hereunder
to be furnished by Landlord without charge and not consumed in connection with
any services required hereunder to be furnished by Landlord without charge.
6.1.2 Repairs and Yielding Up - Except as otherwise provided in Article VII
and Section 5.1.3 to keep the Premises in good order, repair and condition,
reasonable wear only excepted; and at the expiration or termination of this
Lease peaceably to yield up the Premises and all changes and additions therein
in such order, repair and condition, first removing all goods and effects of
Tenant and any items, the removal of which is required by agreement or specified
herein to be removed at Tenant's election and which Tenant elects to remove, and
repairing all damage caused by such removal and restoring the Premises and
leaving them clean and neat.
6.1.3 Occupancy and Use - Continuously from the Commencement Date, to use
and occupy the Premises only for office use (the "Permitted Uses"); not to
injure or deface the Premises, Building, or Lot; and not to permit in the
Premises any use thereof which is improper, offensive, contrary to law or
ordinances, or liable to create a nuisance or to invalidate or increase the
premiums for any insurance on the Building or its contents or liable to render
necessary any alteration or addition to the Building; not to dump, flush, or in
any way introduce any hazardous substances or any other toxic substances into
the septic, sewage or other waste disposal system serving the Premises, not to
generate, store or dispose of hazardous substances in or on the Premises or
dispose of hazardous substances from the Premises to any other location without
the prior written consent of Landlord and then only in compliance with the
Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. Section
6901 et seq., and all other applicable laws, ordinances and regulations; to
notify Landlord of any incident which would require the filing of a notice under
applicable federal, state, or local law; not to store or dispose of hazardous
substances on the Premises without first submitting to Landlord a list of all
such hazardous substances and all permits required therefor and thereafter
providing to Landlord on an annual basis Tenant's certification that all such
permits have been renewed with copies of such renewed permits; and to comply
with the orders and regulations of all governmental authorities with respect to
zoning, building, fire, health and other codes, regulations, ordinances or laws
applicable to the Premises. "Hazardous substances" as used in this paragraph
shall mean "hazardous substances" as defined in the Comprehensive Environmental
Response Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601 and regulations adopted pursuant to said Act.
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6.1.4 Rules and Regulations - To comply with the Rules and Regulations set
forth in Exhibit E and all other reasonable Rules and Regulations hereafter made
by Landlord, of which Tenant has been given notice, for the care and use of the
Building and Lot and their facilities and approaches, it being understood that
Landlord shall not be liable to Tenant for the failure of other tenants of the
Building to conform to such Rules and Regulations.
6.1.5 Safety Appliances - To keep the Premises equipped with all safety
appliances required by law or ordinance or any other regulation of any public
authority because of any use made by Tenant and to procure all licenses and
permits so required because of such use and, if requested by Landlord, to do any
work so required because of such use, it being understood that the foregoing
provisions shall not be construed to broaden in any way Tenant's Permitted Uses.
6.1.6 Assignment and Subletting - Not without the prior written consent of
Landlord, to assign this Lease, to make any sublease, or to permit occupancy of
the Premises or any part thereof by anyone other than Tenant, voluntarily or by
operation of law; as additional rent, to reimburse Landlord promptly for
reasonable legal and other expenses incurred by Landlord in connection with any
request by Tenant for consent to assignment or subletting; no assignment or
subletting shall affect the continuing primary liability of Tenant (which,
following assignment, shall be joint and several with the assignee); no consent
to any of the foregoing in a specific instance shall operate as a waiver in any
subsequent instance. Landlord's consent to any proposed assignment or subletting
is required both as to the terms and conditions thereof, and as to the
creditworthiness of the proposed assignee or subtenant and the consistency of
the proposed assignee's or subtenant's business with other uses and tenants in
the Building. Landlord's consent to assignment or subletting by Tenant shall not
be unreasonably withheld, provided that Tenant is not then in default under this
Lease (beyond applicable notice and cure periods); and provided further that
Landlord shall not be deemed unreasonable for withholding its consent to any
assignment or subletting where the Landlord reasonably determines that the
credit and/or the financial strength of the proposed subtenant, sublessee or
assignee is unacceptable. In the event that any assignee or subtenant pays to
Tenant any amounts in excess of the Annual Rent and additional rent then payable
hereunder, or pro rata portion thereof on a square footage basis for any portion
of the Premises, Tenant shall promptly pay said excess to Landlord as and when
received by Tenant. If Tenant requests Landlord's consent to assign this Lease
or sublet more than 25% of the Premises, Landlord shall have the option,
exercisable by written notice to Tenant given within 10 days after receipt of
such request, to terminate this Lease as of a date specified in such notice
which shall be not less than 30 or more than 60 days after the date of such
notice; provided, however, should Landlord exercise such option to terminate
this Lease, Tenant may, upon written notice to Landlord given within ten (10)
days after the receipt of Landlord's said termination, elect to rescind its
request for such assignment or sublet and then this Lease shall continue in full
force and effect.
6.1.6A Business Entities - If, at any time during the Term of this Lease,
Tenant is:
(i) a corporation, limited liability company or a trust (whether or not
having shares of beneficial interest) and there shall occur any change in the
identity of any of the persons then having power to participate in the election
or appointment of the directors, trustees, managers or other persons exercising
like functions and managing the affairs of Tenant; or
(ii) a partnership or association or otherwise not a natural person (and is
not a corporation or a trust) and there shall occur any change in the identity
of any of the persons who then are members of such partnership or association or
who comprise Tenant;
Tenant shall so notify Landlord and Landlord may terminate this Lease by notice
to Tenant given within 90 days thereafter if, in Landlord's reasonable judgment,
the credit of Tenant is thereby impaired. This Section 6.1.6A shall not apply if
the initial Tenant named herein is a corporation and the outstanding voting
stock thereof is listed on a recognized securities exchange.
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6.1.6B Transfers and Assignments in Connection with Mergers and
Acquisitions - Notwithstanding anything contained in sections 6.1.6 and 6.1.6A
of the Lease to the contrary, the Tenant, in connection with a merger,
consolidation or sale of substantially all of its assets, or sale of its stock
to or with a bona fide third party or an affiliate (each, a "Transferee"), may
assign this Lease or sell such shares to such Transferee (each, a "Transfer"),
provided that:
(i) Tenant is not then in default of any of its obligations under the Lease
beyond applicable notice and cure periods;
(ii) if an assignment of this Lease is required, the Tenant provides to
Landlord an assignment document assigning its rights hereunder to such
Transferee in form and substance reasonably satisfactory to Landlord;
(iii) the Transferee is of equal or greater financial strength than the
Tenant (as determined by the Landlord in its reasonable discretion).
To effectuate any Transfer pursuant to this Section 6.1.6B, the Tenant shall
provide Landlord twenty (20) days written notice prior to the proposed effective
date of such Transfer, together with written evidence reasonably satisfying the
requirements of subsections (ii) and (iii) above. In the event Landlord fails to
reasonably object to such evidence within such twenty (20) days, the Tenant
shall be deemed to have satisfied the conditions to a Transfer pursuant to this
Section 6.1.6B;
6.1.7 Indemnity - To indemnify and defend, with counsel approved by
Landlord, all actions against Landlord, any partner, trustee, stockholder,
officer, director, employee, member, manager or beneficiary of Landlord, holders
of mortgages secured by the Premises, the Building and/or the Lot, Landlord's
property manager, agents, employees or other representatives of Landlord and any
other party having an interest in the Premises ("Indemnified Parties") with
respect to, and to pay, protect, indemnify and save harmless, to the extent
permitted by law, all Indemnified Parties from and against, any and all
liabilities, losses, damages, costs, expenses (including reasonable attorneys'
fees and expenses), causes of action, suits, claims, demands or judgments of any
nature arising from (i) injury to or death of any person, or damage to or loss
of property, on the Premises unless caused by the negligence of Landlord or, if
caused by Tenant's acts or omissions, on adjoining sidewalks, streets or ways,
or connected with the use, condition or occupancy of any thereof, unless caused
by the negligence of Landlord or its servants or agents, (ii) violation of this
Lease, or (iii) any act, fault, omission, or misconduct of Tenant or its agents,
contractors, licensees, sublessees or invitees.
6.1.8 Tenant's Liability Insurance - To maintain comprehensive public
liability insurance on the Premises insuring and indemnifying Landlord and
Tenant against all claims and demands for (i) injury to or death of any person
or damage to or loss of property, on the Premises, adjoining walks, streets or
ways, or connected with the use, condition or occupancy of any thereof unless
caused by the negligence of Landlord or its servants or agents, (ii) violation
of this Lease, or (iii) any act, fault or omission, or other misconduct of
Tenant or its agents, contractors, licensees, sublessees or invitees, in amounts
which shall, at the beginning of the Term, be at least equal to $2,000,000.00
for injury or death to any one person, $1,000,000.00 for any one incident and
$1,000,000.00 with respect to damage to property, and from time to time during
the Term, shall be for such higher limits, if any, as are customarily carried in
the area in which the Premises are located on property similar to the Premises
and used for similar purposes, and shall be written on the "Occurrence Basis"
and include Host Liquor liability insurance, and to furnish Landlord with
certificates thereof. Such policies shall be maintained with companies qualified
to do business in Massachusetts and in good standing therein and shall name
Landlord and Landlord's then property manager as additional insured and as loss
payees. The Tenant shall deposit with the Landlord certificates for such
insurance at or prior to the Commencement Date, and thereafter within thirty
(30) days prior to the
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expiration of any such policies. All such insurance certificates shall provide
that such policies shall not be canceled without at least thirty (30) days prior
written notice to each insured named therein.
6.1.9 Tenant's Worker's Compensation Insurance - To keep all of Tenant's
employees working in the Premises covered by worker's compensation insurance in
statutory amounts and to furnish Landlord with certificates thereof.
6.1.10 Landlord's Right of Entry - To permit Landlord and Landlord's agents
entry; to examine the Premises at reasonable times and except in any case of
emergency (as reasonably determined by Landlord), upon reasonable notice
(whether oral, facsimile or in writing), if Landlord shall so elect, to make
repairs or replacements; to remove, at Tenant's expense, any changes, additions,
signs, curtains, blinds, shades, awnings, aerials, flagpoles, or the like not
consented to in writing; and to show the Premises to prospective tenants during
the 12 months preceding expiration of the Term and to prospective purchasers and
mortgages at all reasonable times.
6.1.11 Loading - Not to place Tenant's Property, as defined in section
6.1.13, upon the Premises so as to exceed a rate of 50 pounds of live load per
square foot and not to move any safe, vault or other heavy equipment in, about
or out of the Premises except in such manner and at such times as Landlord shall
in each instance approve; Tenant's business machines and mechanical equipment
which cause vibration or noise that may be transmitted to the Building structure
or to any other leased space in the Building shall be placed and maintained by
Tenant in settings of cork, rubber, spring, or other types of vibration
eliminators sufficient to eliminate such vibration or noise.
6.1.12 Landlord's Costs - In case Landlord shall be made party to any
litigation commenced by or against Tenant or by or against any parties in
possession of the Premises or any part thereof claiming under Tenant, to pay, as
additional rent, all costs including, without implied limitation, reasonable
counsel fees incurred by or imposed upon Landlord in connection with such
litigation and, as additional rent, also to pay all such costs and fees incurred
by Landlord in connection with the successful enforcement by Landlord of any
obligations of Tenant under this Lease.
6.1.13 Tenant's Property - All the furnishings, fixtures, equipment,
effects and property of every kind, nature and description of Tenant and of all
persons claiming by, through or under Tenant which, during the continuance of
this Lease or any occupancy of the Premises by Tenant or anyone claiming under
Tenant, may be on the Premises or elsewhere in the Building or on the Lot shall
be at the sole risk and hazard of Tenant, and if the whole or any part thereof
shall be destroyed or damaged by fire, water or otherwise, or by the leakage or
bursting of water pipes, steam pipes, by theft, or from any other cause, no part
of said loss or damage is to be charged to or be borne by Landlord unless due to
the gross negligence of Landlord.
6.1.14 Labor or Materialmen's Liens - To pay promptly when due the entire
cost of any work done on the Premises by Tenant its agents, employees, or
independent contractors; not to cause or permit any liens for labor or materials
performed or furnished in connection therewith to attach to the Premises, and
immediately to discharge any such liens which may so attach.
6.1.15 Changes or Additions - Not to make any changes or additions with a
cost of excess of $10,000.00 to the Premises without Landlord's prior written
consent, provided that Tenant shall reimburse Landlord for all costs incurred by
Landlord in reviewing Tenant's proposed changes or additions, and provided
further that, in order to protect the functional integrity of the Building, all
such changes and additions (whether or not requiring Landlord's consent
hereunder) shall be completed in a first class workmanlike manner by licensed
and insured contractors and such changes and additions shall be consistent with
the quality and character of the Building.
6.1.16 Holdover - To pay to Landlord 150% of the total of the Annual Rent
and additional rent then applicable for each month or portion thereof Tenant
shall retain possession of the Premises
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or any part thereof after any termination of this Lease, whether by lapse of
time or otherwise, and also to pay all damages sustained by Landlord on account
thereof. The provisions of this subsection shall not (i) operate as a waiver by
Landlord of the right of reentry provided in this Lease or of its rights to
terminate this Lease elsewhere provided in this Lease or provided by law or (ii)
cause an extension, renewal or revival of this Lease or the creation of a new
tenancy.
ARTICLE VII
CASUALTY AND TAKING
7.1 CASUALTY AND TAKING.
In case during the Term all or any substantial part of the Premises,
Building, or Lot or any one or more of them, are damaged materially by fire or
any other cause or by action of public or other authority in consequence thereof
or are taken by eminent domain or Landlord receives compensable damage by reason
of anything lawfully done in pursuance of public or other authority, this Lease
shall terminate at Landlord's election, which may be made, notwithstanding
Landlord's entire interest may have been divested, by notice to Tenant within
180 days after the occurrence of the event giving rise to the election to
terminate, which notice shall specify the effective date of termination which
shall be not less than 30 nor more than 60 days after the date of notice of such
termination. If any such case the Premises are rendered unfit for use and
occupation and the Lease is not so terminated, Landlord shall use due diligence
to put the Premises, or, in case of a taking, what may remain thereof (excluding
any items installed or paid for by Tenant which Tenant may be required or
permitted to remove) into proper condition for use and occupation to the extent
permitted by the net award of insurance or damages available to Landlord, and a
just proportion of the Annual Rent and additional rent according to the nature
and extent of the injury shall be abated until the Premises or such remainder
shall have been put by Landlord in such condition, and in case of taking which
permanently reduces the area of the Premises, a just proportion of the Annual
Rent and additional rent shall be abated for the remainder of the Term and an
appropriate adjustment shall be made to the Annual Estimated Operating Expenses.
Notwithstanding the foregoing, in the event Landlord does not terminate this
Lease pursuant to the terms of this Section 7.1 above and has not commenced
restoration of the premises within 30 days after the expiration of Landlord's
right to terminate, Tenant may upon thirty days (30) written notice to Landlord,
terminate this Lease, effective as of the date of such notice.
7.2 RESERVATION OF AWARD.
Landlord reserves to itself any and all rights to receive awards made for
damages to the Premises, Building or Lot and the leasehold hereby created, or
any one or more of them, accruing by reason of exercise of eminent domain or by
reason of anything lawfully done in pursuant of public or other authority.
Tenant hereby releases and assigns to Landlord all Tenant's rights to such
awards, and covenants to deliver such further assignments and assurances thereof
as Landlord may from time to time request and hereby irrevocably designates and
appoints Landlord its attorney-in-fact to execute and deliver in Tenant's name
and behalf all such further assignments thereof.
Tenant shall have the right, at its sole cost and expense, to assert a
separate claim or join in Landlord's claim in any condemnation proceeding for
its personal property, improvements, moving expense, or any other claims it may
have; provided, however, that no award to the Tenant shall reduce the award
which would otherwise be due the Landlord, and in no event prevent the Landlord
from collecting award proceeds.
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ARTICLE VIII
RIGHTS OF MORTGAGEE
8.1 PRIORITY OF LEASE.
At the election of Landlord, this lease and the Tenant's rights hereunder
shall be subject and subordinate to any present or future mortgagee, which
election may be changed from time to time. No document shall be necessary to
effectuate such subordination. Tenant shall, upon request of Landlord or such
mortgagee, or whoever so requests under this Article, execute any documents
which may be necessary to evidence or confirm such subordination, including
without limitation, a so-called "Tenant Estoppel Certificate" and/or any other
documents which will provide that Tenant will not hold such mortgagee
responsible for acts of the Landlord and will afford such mortgagee rights to
cure defaults of Landlord hereunder, all in a form satisfactory to each such
mortgagee.
Such subordination shall be effective irrespective of time of execution, or
the time of recording, of any such mortgage. Tenant shall, at the request of
Landlord, any mortgagee, enter into an attornment agreement whereby Tenant
recognizes such mortgagee, or any purchaser at foreclosure sale or otherwise, as
Landlord hereunder.
With respect to any present and future Mortgage, upon written request of
Tenant the Landlord shall use reasonable efforts to obtain from such Mortgagee a
so-called subordination, attornment and non-disturbance agreement, providing
that Tenant's rights hereunder shall not be disturbed in the event of
foreclosure, so long as Tenant shall not be in default hereunder.
As of the execution hereof Landlord acknowledges there is no mortgage
affecting the Building.
8.2 RIGHTS OF MORTGAGE HOLDERS; LIMITATION OF MORTGAGEE'S LIABILITY.
The word "mortgage" as used herein includes mortgages, deeds of trust or
other similar instruments evidencing other voluntary liens or encumbrances, and
modifications, consolidation, extensions, renewals, replacements and substitutes
thereof. The word "holder" shall mean a mortgagee, and any subsequent holder or
holders of a mortgage. Until the holder of a mortgage shall enter and take
possession of the Premises for the purpose of foreclosure, such holder shall
have only such rights of Landlord as are necessary to preserve the integrity of
this Lease as security. Upon entry and taking possession of the Premises for the
purpose of foreclosure, such holder shall have all the rights of Landlord.
Notwithstanding any other provision of this Lease to the contrary, including
without limitation Section 10.4, no such holder of a mortgage shall be liable,
either as mortgagee or as assignee, to perform, or be liable in damages for
failure to perform, any of the obligations of Landlord unless and until such
holder shall enter and take possession of the Premises for the purpose of
foreclosure, and such holder shall not in any event be liable to perform or for
failure to perform any obligations of Landlord hereunder. Upon entry for the
purpose of foreclosure, such holder shall be liable to perform all of the
obligations of Landlord (except for the obligations under Article III), subject
to and with the benefit of the provisions of Section 10.4, provided that a
discontinuance of any foreclosure proceeding shall be deemed a conveyance under
said provisions to the owner of the equity of the Premises.
8.3 MORTGAGEE'S ELECTION.
Notwithstanding any other provision to the contrary contained in this
Lease, if prior to substantial completion of Landlord's obligations under
Article III, any holder of a first mortgage premises enters and takes possession
of the premises thereof for the purpose of foreclosing the
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mortgage, such holder may elect, by written notice given to Tenant and Landlord
at any time within 90 days after such entry and taking of possession, not to
perform Landlord's obligations under Article III, and in such event the Landlord
and such holder and all persons claiming under it shall be relieved of all
obligations to perform, and all liability for failure to perform, said
Landlord's obligations under Article III.
8.4 NO PREPAYMENT OR MODIFICATION, ETC.
Except for the Prepaid Rent (as defined herein), Tenant shall not pay
Annual Rent, additional rent, or any other charge more than 10 days prior to the
due date thereof. No prepayment of Annual Rent, additional rent or other charge,
no assignment of this Lease and no agreement to modify so as to reduce the rent,
change the Term, or otherwise materially change the rights of Landlord under
this Lease, or to relieve Tenant of any obligations or liability under this
Lease, shall be valid unless consented to in writing by Landlord's mortgagees of
record, if any.
8.5 NO RELEASE OR TERMINATION.
No act or failure to act on the part of Landlord which would entitle Tenant
under the terms of this Lease, or by law, to be relieved of Tenant's obligations
hereunder or to terminate this Lease, shall result in a release or termination
of such obligations or a termination of this Lease unless (i) Tenant shall have
first given written notice of Landlord's act or failure to act to Landlord's
mortgagees of record, if any, specifying the act or failure to act on the part
of Landlord which could or would give basis to Tenant's rights and (ii) such
mortgagees, after receipt of such notice, have failed or refused to correct or
cure the condition complained of within a reasonable time thereafter, but
nothing contained in this Section 8.5 shall be deemed to impose any obligation
on any such mortgagee to correct or cure any such condition. "Reasonable time"
as used above means and includes a reasonable time to obtain possession of the
mortgaged premises, if the mortgagee elects to do so, and a reasonable time to
correct or cure the condition if such condition is determined to exist.
8.6 CONTINUING OFFER.
The covenants and agreements contained in this Lease with respect to the
rights, powers and benefits of a mortgagee (particularly, without limitation
thereby, the covenants and agreements contained in this Article VIII) constitute
a continuing offer to any person, corporation or other entity, which by
accepting or requiring an assignment of this Lease or by entry of foreclosure
assumes the obligations herein set forth with respect to such mortgagee; such
mortgagee is hereby constituted a party to this Lease as an obligee hereunder to
the same extent as though its name were written hereon as such; and such
mortgagee shall be entitled to enforce such provisions in its own name, Tenant
agrees on request of Landlord to execute and deliver from time to time any
agreement which may reasonably be deemed necessary to implement the provisions
of this Article VIII.
8.7 MORTGAGEE'S APPROVAL.
Landlord's obligation to perform its covenants and agreements hereunder is
subject to the condition precedent that this Lease be approved by the holder of
any mortgage of which the Premises are a part and by the issuer of any
commitment to make a mortgage loan which is in effect on the date hereof.
ARTICLE IX
DEFAULT
9.1 EVENTS OF DEFAULT.
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If any default by Tenant continues after notice, in case of Annual Rent,
additional rent, or any other monetary obligation to Landlord for more than 10
days, or in any other case for more than 30 days and such additional time, if
any, as is reasonably necessary to cure the default if the default is of such a
nature that it cannot reasonably be cured in 30 days and Tenant diligently
endeavors to cure such default; or if Tenant becomes insolvent, fails to pay its
debts as they fall due, files a petition under any chapter of the U.S.
Bankruptcy Code, 11 U.S.C. 101 et seq., as it may be amended (or any similar
petition under any insolvency law of any jurisdiction), or if such petition is
filed against Tenant; or if Tenant proposes any dissolution, liquidation,
composition, financial reorganization or recapitalization with creditors, makes
an assignment or trust mortgage for the benefit of creditors, or if a receiver,
trustee, custodian or similar agent is appointed or takes possession with
respect to any property of Tenant; or if the leasehold hereby created is taken
on execution or other process of law in any action against Tenant; then, and in
any such case, Landlord and the agents and servants of Landlord may, in addition
to and not in derogation of any remedies for any preceding breach of covenant,
immediately or at any time thereafter while such default continues and without
further notice, at Landlord's election, do any one or more of the following: (1)
give Tenant written notice stating that the Lease is terminated, effective upon
the giving of such notice or upon a date stated in such notice, as Landlord may
elect, in which event the Lease shall be irrevocably extinguished and terminated
as stated in such notice without any further action, or (2) with or without
process of law, in a lawful manner, enter and repossess the Premises as of
Landlord's former estate, and expel Tenant and those claiming through or under
Tenant, and remove its and their effects, without being guilty of trespass, in
which event the Lease shall be irrevocably extinguished and terminated at the
time of such entry, or (3) pursue any other rights or remedies permitted by law.
Any such termination of the Lease shall be without prejudice to any remedies
which might otherwise be used for arrears of rent or prior breach of covenant,
and in the event of such termination Tenant shall remain liable under this Lease
as hereinafter provided. Tenant hereby waives all statutory rights (including,
without limitation, rights of redemption, if any) to the extent such rights may
be lawfully waived, and Landlord, without notice to Tenant, may store Tenant's
effects and those of any person claiming through or under Tenant at the expense
and risk of Tenant and, if Landlord so elects, may sell such effects at public
auction or private sale and apply the net proceeds to the payment of all sums
due to Landlord from Tenant, if any, and pay over the balance, if any, to
Tenant.
9.2 TENANT'S OBLIGATIONS AFTER TERMINATION.
In the event that this Lease is terminated under any of the provisions
contained in Section 9.1 or shall be otherwise terminated for breach of any
obligation of Tenant, Tenant covenants to pay forthwith to Landlord, as
compensation, the excess of the total rent reserved for the residue of the Term
over the rental value of the Premises for said residue of the Term. In
calculating the rent reserved, there shall be included, in addition to the
Annual Rent and all additional rent, the value of all other consideration agreed
to be paid or performed by Tenant for said residue. Tenant further covenants as
an additional and cumulative obligation after any breach of payments to Landlord
and failure to perform any obligations which Tenant covenants in this Lease to
pay and to perform in the same manner and to the same extent and at the same
time as if this Lease had not been terminated. In calculating the amounts to be
paid by Tenant under the next foregoing covenant, Tenant shall be credited with
any amount paid to Landlord as compensation as provided in the first sentence of
this Section 9.2 and also with the net proceeds of any rents obtained by
Landlord by reletting the Premises, after deducting all Landlord's expenses in
connection with such reletting, including, without implied limitation, all
repossession costs, brokerage commissions, fees for legal services and expenses
of preparing the Premises for such reletting, it being agreed by Tenant that
Landlord may (i) relet the Premises or any part or parts thereof for a term or
terms which may at Landlord's option be equal to or less than or exceed the
period which would otherwise have constituted the balance of the Term and may
grant such concessions and free rent as Landlord in its sole judgment considers
advisable or necessary to relet the same and (ii) make such alteration, repairs
and decorations in the Premises as Landlord in its sole judgment considers
advisable or necessary to
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relet the same, and no action of Landlord in accordance with the foregoing or
failure to relet or to collect rent under reletting shall operate or be
construed to release Tenant's liability as aforesaid.
So long as at least 12 months of the Term remain unexpired at the time of
such termination, in lieu of any other damages or indemnity and in lieu of full
recovery by Landlord of all sums payable under all the foregoing provisions of
this Section 9.2 Landlord may by written notice to Tenant, at any time after
this Lease is terminated under any of the provisions contained in Section 9.1,
or is otherwise terminated for breach of any obligation of Tenant and before
such full recovery, elect to recover, and Tenant shall thereupon pay, as
liquidated damages, an amount equal to the aggregate of the Annual Rent and
additional rent accrued under Article IV in the 12 months ended next prior to
such termination plus the amount of Annual Rent and additional rent of any kind
accrued and unpaid at the time of termination and less the amount of any
recovery by Landlord under the foregoing provisions of this Section 9.2 up to
the time of payment of such liquidated damages.
Nothing contained in this Lease shall, however, limit or prejudice the
right of Landlord to prove and obtain in proceedings for bankruptcy or
insolvency by reason of the termination of this Lease, an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, the damages are to be proved, whether or not
the amount be greater, equal to, or less than the amount of the loss or damages
referred to above.
Notwithstanding the foregoing, but without limiting any of the Landlord's
rights and remedies hereunder, including without limitation, any rights of
Landlord to liquidated damages provided above, in the event of the continuing
default by Tenant, Landlord shall use reasonable efforts to relet the Premises
to mitigate its damages.
ARTICLE X
MISCELLANEOUS
10.1 NOTICE OF LEASE.
Upon request of either party, both parties shall execute and deliver, after
the Term begins, a short form of this Lease in form appropriate for recording or
registration, and if this Lease is terminated before the Term expires, an
instrument in such form acknowledging the date of termination.
10.2 RELOCATION.
Intentionally Omitted.
10.3 NOTICES FROM ONE PARTY TO THE OTHER.
All notices required or permitted hereunder shall be in writing and
addressed, if to the Tenant, at Tenant's Address or such other address as Tenant
shall have last designated by notice in writing to Landlord ("Tenant Address")
and, if to Landlord, at Landlord's Address or such other address as Landlord
shall have last designated by notice in writing to Tenant ("Landlord Address").
Any notice shall have been deemed duly given if mailed to such address postage
prepaid, registered or certified mail, return receipt requested, when deposited
with the U.S. Postal Service, or if delivered to such address by hand, when so
delivered.
10.4 BIND AND INURE.
The obligations of this Lease shall run with the land, and this Lease shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that
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the Landlord named herein and each successive owner of the Premises shall be
liable only for the obligations accruing during the period of its ownership.
10.5 LANDLORD.
"Landlord", and all pronouns referring thereto, shall mean the person or
legal entity from time to time holding the Landlord's interest hereunder. The
obligations of Landlord shall be binding upon the assets of Landlord which
comprise the Premises but not upon other assets of Landlord. No individual
partner, trustee, stockholder, officer, director, employee, member or
beneficiary of Landlord shall be personally liable under this Lease and Tenant
shall look solely to Landlord's interest in the Premises in pursuit of its
remedies upon an event of default hereunder, and the general assets of the
individual partners, trustees, stockholders, officers, employees, members or
beneficiaries of Landlord shall not be subject to levy, execution or other
enforcement procedure for the satisfaction of the remedies of Tenant.
10.6 NO SURRENDER.
The delivery of keys to any employee of Landlord or to Landlord's agent or
any employee thereof shall not operate as a termination of this Lease or a
surrender of the Premises.
10.7 NO WAIVER, ETC.
The failure of Landlord or of Tenant to seek redress for violation of, or
to insist upon the strict performance of any covenant or condition of this Lease
or, with respect to such failure of Landlord, any of the Rules and Regulations
referred to in Section 6.1.4, whether heretofore or hereafter adopted by
Landlord, shall not be deemed a waiver of such violation nor prevent a
subsequent act, which would have originally constituted a violation, from having
all the force and effect of an original violation, nor shall the failure of
Landlord to enforce any of said Rules and Regulations against any other tenant
in the Building be deemed a waiver of any such Rules or Regulations. The receipt
by Landlord of Annual Rent or additional rent with knowledge of the breach of
any covenant of this Lease shall not be deemed a waiver of such breach by
Landlord, unless such waiver be in writing and signed by Landlord. No consent or
waiver, express or implied, by Landlord or Tenant to or of any breach of any
agreement or duty shall be construed as a waiver or consent to or of any other
breach of the same or any other agreement or duty.
10.8 NO ACCORD AND SATISFACTION.
No acceptance by Landlord of a lesser sum than the Annual Rent and
additional rent due shall be deemed to be other than on account of the earliest
installment of such rent due, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment as rent be deemed as
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such installment or
pursue any other remedy in this Lease provided.
10.9 CUMULATIVE REMEDIES.
The specific remedies to which Landlord may resort under the terms of this
Lease are cumulative and are not intended to be exclusive of any other remedies
or means of redress to which it may be lawfully entitled in case of any breach
or threatened breach by Tenant of any provisions of this Lease. In addition to
the other remedies provided in this Lease, Landlord shall be entitled to the
restraint by injunction of the violation or attempted or threatened violation of
any of the covenants, conditions or provisions of this Lease or to a decree
compelling specific performance of any such covenants, conditions or provisions.
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10.10 LANDLORD'S RIGHT TO CURE.
If Tenant shall at any time default in the performance of any obligation
under this Lease (after applicable notice and cure periods), Landlord shall have
the right, but shall not be obligated, to enter upon the Premises and to perform
such obligation, notwithstanding the fact that no specific provision for such
substituted performance by Landlord is made in this Lease with respect to such
default. In performing such obligation, Landlord may make any reasonable payment
of money or perform any other reasonable act. All sums so paid by Landlord
(together with interest at the rate of eighteen (18%) percent per annum and all
necessary incidental costs and expenses in connection with the performance of
any such act by Landlord, shall be deemed to be additional rent under this Lease
and shall be payable to Landlord immediately on demand. Landlord may exercise
the foregoing rights without waiving any other of its rights or releasing Tenant
from any of its obligations under this Lease.
10.11 ESTOPPEL CERTIFICATE.
10.11.1 Tenant's Estoppel - Tenant agrees, from time to time, upon not less
than 15 days' prior written request by Landlord, to execute, acknowledge and
deliver to Landlord a statement in writing certifying that this Lease is
unmodified and in full force and effect; that Tenant has no defenses, offsets or
counterclaims against its obligations to pay the Annual Rent and additional rent
and to perform its other covenants under this Lease; that there are no uncured
defaults of Landlord or Tenant under this Lease (or, if there have been
modifications, that this Lease is in full force and effect as modified and
stating the modifications, and, if there are any defenses, offsets,
counterclaims, or defaults, setting them forth in reasonable detail); and the
dates to which the Annual Rent, additional rent and other charges have been
paid. Any such statement delivered pursuant to this Section 10.11 shall be in a
form reasonably acceptable to and may be relied upon by any prospective
purchaser or mortgagee of premises which include the Premises or any prospective
assignee of any such mortgagee.
10.11.2 Landlord's Estoppel - Landlord agrees, from time to time, upon not
less than 15 days' prior written request by Tenant, to execute, acknowledge and
deliver to Tenant a statement in writing certifying that this Lease is
unmodified and in full force and effect (or, if there have been modifications,
that this Lease is in full force and effect as modified and stating the
modifications); the amount of Pre-Paid Rent held by Landlord; the dates through
which the Annual Rent, additional rent and other charges have been paid; and
that to the best of Landlord's knowledge, there exists no uncured default of
Landlord or Tenant under the Lease.
10.12 WAIVER OF SUBROGATION.
Any insurance carried by either party with respect to the Premises and
property therein or occurrences thereon shall include a clause or endorsement
denying to the insurer rights of subrogation against the other party to the
extent rights have been waived by the insured prior to occurrences of injury or
loss. Each party, notwithstanding any provisions of this Lease to the contrary,
hereby waives any rights of recovery against the other for injury or loss due to
hazards covered by insurance containing such clause or endorsement to the extent
of the indemnification received thereunder.
10.13 ACTS OF GOD.
In any case where either party hereto is required to do any act, delays
caused by or resulting from Acts of God, war, civil commotion, fire, flood or
other casualty, labor difficulties, shortages of labor, materials or equipment,
government regulations, unusually severe weather, or other causes beyond such
party's reasonable control shall not be counted in determining the time during
which
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work shall be completed, whether such time be designated by a fixed date, a
fixed time or a "reasonable time", and such time shall be deemed to be extended
by the period of such delay.
10.14 BROKERAGE.
Each of Landlord and Tenant represents and warrants to the other that it
has dealt with no brokers, agents, finders or the like, other than Insignia/ESG
and CRF Partners in connection with this Lease transaction and agrees to defend
(with such counsel reasonably approved by the other), indemnify and save the
other harmless from and against any and all cost, expense or liability for any
compensation, commissions or charges claimed by any other broker, finder or
agent.
10.15 SUBMISSION NOT AN OFFER.
The submission of a draft of this Lease or a summary of some or all of its
provisions does not constitute an offer to lease or demise the Premises, it
being understood and agreed that neither Landlord nor Tenant shall be legally
bound with respect to the leasing of the Premises unless and until this Lease
has been executed by both Landlord and Tenant and a fully executed copy has been
delivered to Landlord.
10.16 APPLICABLE LAW AND CONSTRUCTION.
This Lease shall be governed by and construed in accordance with the laws
of the state in which the Premises are located. If any term, covenant, condition
or provision of this Lease or the application thereof to any person or
circumstances shall be declared invalid or unenforceable by the final ruling of
a court of competent jurisdiction having final review, the remaining terms,
covenants, conditions and provisions of this Lease and their application to
persons or circumstances shall not be affected thereby and shall continue to be
enforced and recognized as valid agreements of the parties, and in the place of
such invalid or unenforceable provision, there shall be substituted a like, but
valid and enforceable provision which comports to the findings of the aforesaid
court and most nearly accomplishes the original intention of the parties.
There are no oral or written agreements between Landlord and Tenant
affecting this Lease. This Lease may be amended, and the provisions hereof may
be waived or modified, only by instruments in writing executed by Landlord and
Tenant.
The titles of the several Articles and Sections contained herein are for
convenience only and shall not be considered in construing this Lease.
Unless repugnant to the context, the words "Landlord" and "Tenant"
appearing in this Lease shall be construed to mean those named above and their
respective heirs, executors, administrators, successors and assigns, and those
claiming through or under them respectively. If there be more than one tenant,
the obligations imposed by this Lease upon Tenant shall be joint and several.
ARTICLE XI
PREPAID RENT
Contemporaneously with the execution hereof, the Tenant has made as
prepayment of Annual Rent, payment in the amount of $54,827.22 (the "Prepaid
Rent") to be held by Landlord both as security and as an advance of certain
Annual Rents as provided herein. It is acknowledged and agreed that no interest
shall be payable to Tenant on the Prepaid Rent and Landlord may commingle the
Prepaid Rent with its other accounts. Provided Tenant is not in default of any
provision of this Lease (beyond applicable notice and cure periods), Prepaid
Rent may be applied by Tenant to the thirteenth (13th), twenty-fifth (25th) and
thirty-seventh (37th) months (the "Advance
20
<PAGE>
Months") of the Term (but not including any increases based upon Real Estate
Taxes or Operating Costs) as such months occur. Except during the Advance
Months, if all or any part of the Prepaid Rent is applied by Landlord to any
obligation of Tenant pursuant to the terms hereof, Tenant shall immediately upon
request by Landlord restore the Prepaid Rent to its original amount (less any
deductions for payments on account of any Advance Months). Except as provided
above, Tenant shall not have the right to call upon Landlord to apply all or any
part of the Prepaid Rent to cure any default or fulfill any obligation of
Tenant. It is acknowledged by Tenant that Landlord may upon any default by the
Tenant of any of its obligations herein (beyond applicable notice and cure
periods), use all or part of the Prepaid Rent as partial liquidated damages to
cover part of its damages occasioned by such breach; the Tenant further
acknowledging that application of the Prepaid Rent in such fashion is
reasonable. Notwithstanding the foregoing, the application of the Prepaid Rent
towards Landlord's damages shall not limit the Landlord's remedies under Article
IX hereof. Upon any conveyance by Landlord of its interest under this Lease, the
Prepaid Rent (or such remaining part thereof) may be delivered by Landlord to
Landlord's grantee or transferee. Upon any such delivery and acknowledgement of
receipt by such grantee or transferee, Tenant hereby releases Landlord herein
named of any and all liability with respect to the Prepaid Rent, its application
and return, and Tenant agrees to look solely to such grantee or transferee. It
is further understood that this provision shall also apply to subsequent
grantees and transferees.
21
<PAGE>
EXECUTED as a sealed instrument in two or more counterparts on the day and
year first above written.
LANDLORD:
BRIDGE REALTY TRUST
By:______________________________
Marcia E. Jackson
Its: Trustee
By:______________________________
Shirley Jackson
Its: Trustee
TENANT:
CELERITY SOLUTIONS, INC.
By:______________________________
Name:____________________________
Its:_____________________________
22
<PAGE>
A copy of Tenant's corporate authorization for such execution is attached
hereto.
23
<PAGE>
EXHIBIT C
LANDLORD'S WORK
Install Shaw/Stratton "Potential" 28 oz. carpet in the color selected by Tenant
from samples provided by Landlord in the Leased Premises; provided, however, (i)
no carpeting shall be installed in any areas currently covered in VCT Tile, and
(ii) the landlord shall not be obligated to replace any vinyl cover base, unless
said vinyl cover base is damaged beyond repair (as determined by the Landlord in
its reasonable discretion during the installation of the carpet).
24
<PAGE>
EXHIBIT D
LANDLORD'S SERVICES
I. CLEANING
A. General
1. All cleaning work will be performed between 8 a.m. and midnight,
Monday through Friday, unless otherwise necessary for stripping,
waxing, etc.
2. Abnormal waste removal (e.g. computer installation paper, bulk
packaging, wood or cardboard crates, refuse from cafeteria
operation, etc.) shall be Tenant's responsibility.
B. Daily Operations (5 times per week)
1. Tenant Areas
a. Empty and clean all waste receptacles; wash receptacles as
necessary.
b. Vacuum all rugs and carpeted areas.
c. Empty, damp-wipe and dry all ashtrays.
2. Lavatories
a. Sweep and wash floors with disinfectant.
b. Wash both sides of toilet seats with disinfectant.
c. Wash all mirrors, basins, bowls, urinals.
d. Spot clean toilet partitions.
e. Empty and disinfect sanitary napkin disposal receptacles.
f. Refill toilet tissue, towel, soap, and sanitary napkin
dispensers.
3. Public Areas
a. Wipe down entrance doors and clean glass (interior and
exterior).
b. Vacuum elevator carpets and wipe down doors and walls.
c. Clean water coolers.
C. Operations as Needed (but not less than every other day)
1. Tenant and Public Areas
a. Buff all resilient floor areas.
D. Weekly Operations
25
<PAGE>
1. Tenant Areas, Lavatories, Public Areas
a. Hand-dust and wipe clean all horizontal surfaces with
treated cloths to include furniture, office equipment,
windowsills, door ledges, chair rails, baseboards, counter
tops, etc., within normal reach.
b. Remove finger marks from private entrance doors, light
switches, and doorways.
c. Sweep all stairways.
E. Monthly Operations
1. Tenant and Public Areas
a. Thoroughly vacuum seat cushions on chairs, sofas, etc.
b. Vacuum and dust grillwork.
2. Lavatories
a. Wash down interior walls and toilet partitions.
F. As Required and Weather Permitting
1. Entire Building
a. Clean inside of all windows.
b. Clean outside of all windows.
G. Yearly
1. Tenant and Public Areas
a. Strip and wax all resilient tile floor areas.
II. HEATING, VENTILATING, AND AIR CONDITIONING
1. Heating, ventilating, and air conditioning as required to provide
reasonably comfortable temperatures for normal business day
occupancy (excepting holidays); Monday through Friday from 8:00
a.m. to 5:00 p.m. and Saturday from 8:00 a.m. to 1:00 p.m. Any
additional heating, ventilating and/or air conditioning requested
and/or required by the Tenant, other than during the normal
business day as defined herein, shall be billed to the Tenant at
the rate of $25.00 per hour.
2. Maintenance of any additional or special air conditioning
equipment and the associated operating cost will be at Tenant's
expense.
III. WATER
Hot water for lavatory purposes and cold water for drinking, lavatory and
toilet purposes.
26
<PAGE>
IV. ELEVATORS (if Building is Elevatored)
Elevators for the use of all tenants and the general public to and from all
floors of the Building. Programming of elevators (including, but not
limited to, service elevators) shall be as Landlord from time to time
determines best for the Building as a whole.
V. RE-LAMPING OF LIGHT FIXTURES
Tenant will reimburse Landlord for the cost of lamps, ballasts and starters
and the cost of replacing same within the Premises.
VI. CAFETERIA AND VENDING INSTALLATIONS
1. Any space to be used primarily for lunchroom or cafeteria operation
shall be Tenant's responsibility to keep clean and sanitary, it being
understood that Landlord's approval of such use must be first obtained
in writing.
2. Vending machines or refreshment service installations by Tenant must
be approved by Landlord in writing and shall be restricted in use to
employees and business callers. All cleaning necessitated by such
installations shall be at Tenant's expense.
VII. ELECTRICITY
1. Landlord, at Landlord's expense, shall furnish electrical energy
required for lighting, electrical facilities, equipment machinery,
fixtures, and appliances used in or for the benefit of Tenant's Space,
in accordance with the provisions of the Lease of which this Exhibit
is part.
2. Tenant shall not, without prior written notice to Landlord in each
instance, connect to the Building electric distribution system any
fixtures, appliances or equipment other than normal office machines
such as desk-top computers, calculators and typewriters, or any
fixtures, appliances or equipment which Tenant on a regular basis
operates beyond normal building operating hours. In the event of any
such connection, Tenant agrees to an increase in the ANNUAL ESTIMATED
ELECTRICAL COST TO TENANT'S SPACE and a corresponding increase in
Annual Rent by an amount which will reflect the cost to Landlord of
the additional electrical service to be furnished by Landlord, such
increase to be effective as of the date of any such installation. If
Landlord and Tenant cannot agree thereon, such amount shall be
conclusively determined by a reputable independent electrical engineer
or consulting firm to be selected by Landlord and paid equally by both
parties, and the cost to Landlord will be included in Operating Costs
provided in Section 4.2 hereof.
3. Tenant's use of electrical energy in Tenant's Space shall not at any
time exceed the capacity of any of the electrical conductors or
equipment in or otherwise serving Tenant's Space. In order to insure
that such capacity is not exceeded and to avert possible adverse
effect upon the Building electric service, Tenant shall not, without
prior written notice to Landlord in each instance, connect to the
Building electric distribution systems any fixtures, appliances or
equipment which operate on a voltage in excess of 120 volts normal or
make any alteration or addition to the electric system of Tenant's
Space. Unless Landlord shall reasonably object to the connection of
any such fixtures, appliances or equipment, all additional risers or
other equipment required therefor shall be provided by Landlord, and
the cost thereof shall be paid by Tenant upon Landlord's demand. In
the event of any such
27
<PAGE>
connection, Tenant agrees to an increase in the ANNUAL ESTIMATED
ELECTRICAL COST TO TENANT'S SPACE and a corresponding in Annual Rent
by an amount which will reflect the cost to Landlord of the additional
service to be furnished by Landlord, such increase to be effective as
of the date of any such connection. If Landlord and Tenant cannot
agree thereon, such amount shall be conclusively determined by a
reputable independent electrical engineer or consulting firm to be
selected by Landlord and paid equally by both parties, and the cost to
Landlord will be included in Operating Costs provided in Section 4.2
hereof.
4. If at any time after the date of this Lease, the rates at which
Landlord purchases electrical energy from the public utility supplying
electric service to the Building, or any changes incurred or taxes
payable by Landlord in connection therewith, shall be increased or
decreased, the Annual Rent and ANNUAL ESTIMATED ELECTRICAL COST TO
TENANT'S SPACE shall be increased or decreased, as the case may be, by
an amount equal to the estimated increase or decrease, as the case may
be, in Landlord's cost of furnishing the electricity referred to in
Paragraph 1 above as a result of such increase or decrease in rates,
charges, or taxes. If Landlord and Tenant cannot agree thereon, such
amount shall be conclusively determined by a reputable independent
electrical engineer or consulting firm to be selected by Landlord and
paid equally by both parties, and the cost to Landlord will be
included in Operating Costs as provided in Section 4.2 hereof. Any
such increase or decrease shall be effective as of the date of the
increase or decrease in such rate, charges, or taxes.
5. Landlord may, at any time, elect to discontinue the furnishing of
electrical energy. In the event of any such election by Landlord: (a)
Landlord agrees to give reasonable advance notice of any such
discontinuance to Tenant; (b) Landlord agrees to permit Tenant to
receive electrical service directly from the public utility supplying
service to the Building and to permit the existing feeders, risers,
wiring and other electrical facilities serving Tenant's Space to be
used by Tenant and/or such public utility for such purpose to the
extent they are suitable and safely capable; (c) Landlord agrees to
pay such charges and costs, if any, as such public utility may impose
in connection with the installation of Tenant's meters and to make or,
at such public utility may require, as a condition of providing
comparable electrical service to Tenant; (d) the Annual Rent shall be
equitably decreased to reflect such discontinuance by an amount equal
to the ANNUAL ESTIMATED ELECTRICAL COST TO TENANT'S SPACE then in
effect; and (e) Tenant shall thereafter pay, directly to the utility
furnishing the same, all charges for electrical services to the
Premises.
6. Whenever the Annual Rent is increased or decreased pursuant to any of
the foregoing paragraphs of this Article, the parties, upon request of
either, to execute and deliver each to the other an amendment to this
Lease confirming such increase or decrease.
28
<PAGE>
EXHIBIT E
RULES AND REGULATIONS
1. The entrances, lobbies, passages, corridors, elevators, halls, courts,
sidewalks, vestibules, and stairways shall not be encumbered or obstructed
by Tenant or its agents, servants, employees, licensees or visitors or used
by them for any purposes other than ingress or egress to and from the
Premises.
2. The moving in or out of all safes, freight, furniture, or bulky matter of
any description shall take place during the hours which Landlord may
determine from time to time. Landlord reserves the right to inspect all
freight and bulky matter to be brought into the Building and to exclude
from the Building all freight and bulky matter which violates any of these
Rules and Regulations or the Lease of which these Rules and Regulations are
a part. Landlord reserves the right to have Landlord's structural engineer
review Tenant's floor loads on the Premises at Tenant's expense.
3. Tenant, or the employees, agents, servants, visitors or licensees of Tenant
shall not at any time place, release or discard any rubbish, paper,
articles, or objects of any kind whatsoever outside the doors of the
Premises or in the corridors or passageways of the Building. No animals or
birds shall be brought or kept in or about the Building. Bicycles shall not
be permitted in the Building.
4. Tenant shall not place objects against glass partitions or doors or windows
or adjacent to any common space which would be unsightly from the Building
corridors or from the exterior of the Building and will promptly remove the
same upon notice from Landlord.
5. Tenant shall not make noises, cause disturbances, create vibrations, odors
or noxious fumes or use or operate any electric or electrical devices or
other devices that emit sound waves or are dangerous to other tenants and
occupants of the Building or that would interfere with the operation of any
device or equipment or radio or television broadcasting or reception from
or within the Building or elsewhere, or with the operation of roads or
highways in the vicinity of the Building, and shall not place or install
any projections, antennae, aerials, or similar devices inside or outside of
the Premises, without the prior written approval of Landlord.
6. Tenant may not (without Landlord's approval therefor, which approval will
be signified on Tenant's Plans submitted pursuant to the Lease) and Tenant
shall not permit or suffer anyone to: (a) cook in the Premises; (b) place
vending or dispensing machines of any kind in or about the Premises; (c) at
any time sell, purchase or give away, or permit the sale, purchase, or gift
of food in any form.
7. Tenant shall not: (a) use the Premises for lodging, manufacturing or for
any immoral or illegal purposes; (b) use the Premises to engage in the
manufacture or sale of, or permit the use of spirituous, fermented,
intoxicating or alcoholic beverages on the Premises; (c) use the Premises
to engage in the manufacture or sale of, or permit the use of, any illegal
drugs on the Premises.
8. No awning or other projections shall be attached to the outside walls or
windows. No curtains, blinds, shades, screens or signs other than those
furnished by Landlord shall be attached to, hung in, or used in connection
with any window or door of the Premises without prior written consent of
Landlord.
29
<PAGE>
9. No signs, advertisement, object, notice or other lettering shall be
exhibited, inscribed, painted or affixed on any part of the outside or
inside of the Premises if visible from outside of the Premises. Interior
signs on doors shall be painted or affixed for Tenant by Landlord or by
sign painters first approved by Landlord at the expense of Tenant and shall
be of a size, color and style acceptable to Landlord.
10. Tenant shall not use the name of the Building or use pictures or
illustrations of the Building in advertising or other publicity without
prior written consent of Landlord. Landlord shall have the right to
prohibit any advertising by Tenant which, in Landlord's opinion, tends to
impair the reputation of the Building or its desirability for offices, and,
upon written notice from Landlord, Tenant will refrain from or discontinue
such advertising.
11. Door keys for doors in the Premises will be furnished at the Commencement
of the Lease by Landlord. Tenant shall not affix additional locks on doors
and shall purchase duplicate keys only from Landlord and will provide to
Landlord the means of opening of safes, cabinets, or vaults left on the
Premises. In the event of the loss of any keys so furnished by Landlord,
Tenant shall pay to Landlord the cost thereof.
12. Tenant shall cooperate and participate in all security programs affecting
the Building.
13. Tenant assumes full responsibility for protecting its space from theft,
robbery and pilferage, which includes keeping doors locked and other means
of entry to the Premises closed and secured.
14. Tenant shall not make any room-to-room canvass to solicit business from
other tenants in the Building, and shall not exhibit, sell or offer to
sell, use, rent or exchange any item or services in or from the Premises
unless ordinarily embraced within Tenant's use of the Premises as specified
in its Lease. Canvassing, soliciting and peddling in the Building are
prohibited and Tenant shall cooperate to prevent the same. Peddlers,
solicitors and beggars shall be reported to the Management Office.
15. Tenant shall not mark, paint, drill into, or in any way deface any part of
the Building or Premises. No boring, painting, driving of nails, or screws,
cutting or stringing of wires shall be permitted, except with the prior
written consent of Landlord (which shall not be unreasonably withheld), and
as Landlord may direct. Tenant shall not install any resilient tile or
similar floor covering in the Premises except with the prior written
approval of Landlord. The use of cement or other similar adhesive material
is expressly prohibited.
16. Tenant shall not waste electricity or water and agrees to cooperate fully
with Landlord to assure the most effective operation of the Building's
heating and air conditioning and shall refrain from attempting to adjust
controls. Tenant shall keep corridor doors closed except when being used
for access.
17. The water and wash closets and other plumbing fixtures shall not be used
for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags, or other substances shall be thrown therein.
18. Building employees shall not be required to perform, and shall not be
requested by any tenant or occupant to perform, any work outside of their
regular duties, unless under specific instructions from the office of the
Managing Agent of the Building.
19. Tenant may request heating and/or air conditioning during other periods in
addition to normal working hours by submitting its request in writing to
the office of the Managing Agent of the Building no later than 2:00 p.m.
the preceding work day (Monday through
30
<PAGE>
Friday) on forms available from the office of the Managing Agent. The
request shall clearly state the start and stop hours of the "off-hour"
service. Tenant shall submit to the Building Manager a list of personnel
authorized to make such request. The Tenant shall be charged for such
operation in the form of additional rent; such charges are to be determined
by the Managing Agent and shall be fair and reasonable and reflect the
additional operating costs involved.
20. Tenant covenants and agrees that its use of the Premises shall not cause a
discharge of more than the gallonage per foot of Premises Design Floor Area
per day of sanitary (non-industrial) sewage allowed under the sewage
discharge permit for the Building. Discharges in excess of that amount, and
any discharge of industrial sewage, shall only be permitted if Tenant, at
its sole expense, shall have obtained all necessary permits and licenses
therefor, including without limitation permits from state and local
authorities having jurisdiction thereof. Tenant shall submit to Landlord on
December 31 of each year of the Term of this Lease a statement, certified
by an authorized officer of Tenant, which contains the following
information; name of all chemicals, gases, and hazardous substances, used,
generated, or stored on the Premises; type of substance (liquid, gas or
granular) quantity used, stored or generated per year (excluding
information regarding the use or storage of normal household cleaning
products in de minimis quantities); method of disposal; permit number, if
any, attributable to each substance, together with copies of all permits
for such substance; and permit expiration date for each substance.
31
FIRST AMENDMENT TO LEASE
I. PARTIES AND DATE.
This First Amendment to Lease (the "Amendment") dated _________________,
1998, is by and between THE IRVINE COMPANY ("Landlord"), and CELERITY SOLUTIONS,
INC., a California corporation, dba Somerset Software ("Tenant").
II. RECITALS.
On September 11, 1998, Landlord and Tenant entered into a lease ("Lease")
for space in a building located at 7545 Irvine Center Drive, Suite 250, Irvine,
California ("Suite 250").
Landlord and Tenant each desire to modify the Lease to change the location
of the "Premises" under the Lease from Suite 250 to space comprising
approximately 6,209 rentable square feet within a building located at 20
Fairbanks, Suite 187, Irvine, California, to adjust the Basic Rent, and make
such other modifications as are set forth in "III. MODIFICATIONS" next below.
III. MODIFICATIONS.
A. Premises. Effective as of December 1, 1999, all references to the
"Premises" under the Lease shall be deemed to refer to the premises described in
Section III(C)(1) below ("Suite 187" herein).
B. Building. Effective as of December 1, 1999, all references to the
"Building" under the Lease shall be deemed to refer to the building located at
20 Fairbanks, Irvine, California.
C. Basic Lease Provisions. The Basic Lease Provisions are hereby amended as
follows:
1. Effective as of December 1, 1999, Item 1 shall be deleted in its
entirety and substituted therefor shall be the following:
"1. Premises: Suite No. 187 (the Premises are more particularly
described in Section 2.1)
Address of Building: 20 Fairbanks, Irvine, CA 92618"
2. Effective as of December 1, 1999, Item 2 shall be deleted in its
entirety and substituted therefor shall be the following:
<PAGE>
2. Project Description (if applicable): Tripointe"
3. Item 4 is hereby amended by adding the following:
"Commencement Date for Suite 187: December 1, 1999."
4. Item 5 is hereby deleted in its entirety and substituted therefor
shall be the following:
"5. Lease Term: The Term of this Lease shall expire at midnight
5. Effective as of December 1, 1999, Item 6 shall be deleted in its
entirety and substituted therefor shall be the following:
"6. Basic Rent: Eighteen Thousand Six Hundred Twenty-Seven
Dollars ($18,627.00) per month, based on $3.00 per rentable
square foot.
Basic Rent is subject to adjustment as follows:
Commencing April 1, 2000, the Basic Rent shall be Nine Thousand
Three Hundred Fourteen Dollars ($9,314.00) per month, based on
$1.50 per rentable square foot.
Commencing December 1, 2000, the Basic Rent shall be Nine
Thousand Six Hundred Twenty-Four Dollars ($9,624.00) per month,
based on $1.55 per rentable square foot.
Commencing December 1, 2001, the Basic Rent shall be Nine
Thousand Nine Hundred Thirty-Four Dollars ($9,934.00) per month,
based on $1.60 per rentable square foot.
Commencing December 1, 2002, the Basic Rent shall be Ten Thousand
Two Hundred Forty-Five Dollars ($10,245.00) per month, based on
$1.65 per rentable square foot.
6. Effective as of December 1, 1999, Item 8 shall be deleted in its
entirety and substituted therefor shall be the following:
"8. Floor Area of Premises: Approximately 6,209 rentable square
feet."
<PAGE>
7. Effective as of December 1, 1999, Item 14 shall be deleted in its
entirety and substituted therefor shall be the following:
"14. Vehicle Parking Spaces: Twenty-Four (24)"
D. Sections Deleted. The following Sections of the Lease are hereby deleted
in their entirety and ---------------- shall have no further force or effect:
Sections 2.4, 2.5, 3.3 and 5.2(b) of the Lease.
E. Termination of Suite 250. Landlord and Tenant agree that the rights and
obligations of the parties under the Lease with respect to Suite 250 shall
terminate in their entirety, effective as of midnight on the day preceding the
Commencement Date for Suite 187, provided that such termination shall not
relieve Tenant of (a) any accrued obligation or liability under the Lease with
respect to Suite 250 as of said termination date, or (b) any obligation under
the Lease with respect to Suite 250 which was reasonably intended to survive the
expiration or termination thereof. Tenant understands and agrees that is shall
completely vacate Suite 250 by midnight on the day preceding the Commencement
Date for Suite 187 and shall, at Tenants sole cost and expense, (a) remove all
property therefrom in accordance with the provisions of Section 15.3 of the
Lease, (b) repaint Suite 250 utilizing building standard paint, (c) repair any
damage to Suite 250, including, but not limited to the walls and carpet, and (d)
shampoo the carpet in Suite 250.
F. Floor Plan of Premises. Effective as of December 1, 1999, Exhibit A
attached to the Lease is deleted and is substituted by the Revised Exhibit A
attached to this Amendment.
G. Project Site Plan. Effective as of December 1, 1999, Exhibit Y attached
to the Lease is deleted and is substituted by the Revised Exhibit Y attached to
this Amendment.
H. Acceptance of Premises. Tenant acknowledges that Suite 187 shall be
leased to Tenant in an "as-is" condition without further obligation on
Landlord's part as to improvements whatsoever, except that Landlord shall
shampoo the carpet in Suite 187 and repaint Suite 187 utilizing building
standard paint.
IV. GENERAL.
A. Effect of Amendments. The Lease shall remain in full force and effect
except to the extent that it is modified by this Amendment.
B. Entire Agreement. This Amendment embodies the entire understanding
between Landlord and Tenant with respect to the modifications set forth in "III.
MODIFICATIONS" above and can be changed only by a writing signed by Landlord and
Tenant.
C. Counterparts. If this Amendment is executed in counterparts, each is
hereby declared
<PAGE>
to be an original; all, however, shall constitute but one and the same
amendment. In any action or proceeding, any photographic, photostatic, or other
copy of this Amendment may be introduced into evidence without foundation.
D. Defined Terms. All words commencing with initial capital letters in this
Amendment and defined in the Lease shall have the same meaning in this Amendment
as in the Lease, unless they are otherwise defined in this Amendment.
E. Corporate and Partnership Authority. If Tenant is a corporation or
partnership, or is comprised of either or both of them, each individual
executing this Amendment for the corporation or partnership represents that he
or she is duly authorized to execute and deliver this Amendment on behalf of the
corporation or partnership and that this Amendment is binding upon the
corporation or partnership in accordance with its terms.
F. Attorneys' Fees. The provisions of the Lease respecting payment of
attorneys' fees shall also apply to this Amendment.
V. EXECUTION.
Landlord and Tenant executed this Amendment on the date as set forth in "I.
PARTIES AND DATE." above.
LANDLORD: TENANT:
THE IRVINE COMPANY CELERITY SOLUTIONS, INC.,
a Delaware corporation
By______________________________________ By_________________________
Robert E. Williams, Jr., President,
Irvine Industrial Company, a division Title______________________
of The Irvine Company
By____________________________________ By_________________________
Nancy E. Trujillo,
Assistant Secretary Title______________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONDENSED
CONSOLIDATED BALANCE SHEET AT S EPTEMBER 30, 1999 AND THE CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 FOUND ON
PAGES 3-5 OF THE COMPANY'S FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 148,375
<SECURITIES> 13,391
<RECEIVABLES> 1,813,640
<ALLOWANCES> (185,742)
<INVENTORY> 0
<CURRENT-ASSETS> 2,055,297
<PP&E> 1,635,810
<DEPRECIATION> (1,132,413)
<TOTAL-ASSETS> 4,302,178
<CURRENT-LIABILITIES> 2,310,805
<BONDS> 0
0
0
<COMMON> 959,289
<OTHER-SE> 19,038,245
<TOTAL-LIABILITY-AND-EQUITY> 4,302,178
<SALES> 0
<TOTAL-REVENUES> 4,569,445
<CGS> 0
<TOTAL-COSTS> 2,308,327
<OTHER-EXPENSES> 2,169,356
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,410
<INCOME-PRETAX> 58,810
<INCOME-TAX> 0
<INCOME-CONTINUING> 58,810
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,810
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
</TABLE>
