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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20459
___________________
INTEGRATED ANNUAL REPORT TO STOCKHOLDERS AND
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission file number 033-55254-27
ADVANCED LUMITECH, INC.
(Exact name of registrant as specified in its charter)
Nevada 87-0438637
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
1601 Trapelo Road
Waltham, MA 02451
(Address of principle executive offices) (Zip Code)
781-890-2200
(Registrant's telephone number, including area code)
___________________
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001
___________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K X
---
As of March 31, 2000, the market value of the voting stock of the
Registrant held by non-affiliates of the Registrant was $ 39,260,259.
The number of shares of the Registrant's common stock, par value $.001 per
share, outstanding as of March 31, 2000 was 32,697,770.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the 2000 Annual Meeting of
Stockholders are incorporated by reference into Part III of this Form 10-K.
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ADVANCED LUMITECH, INC.
TABLE OF CONTENTS
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Page
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PART I.
Item 1. Business 1
Item 2. Properties 4
Item 3. Legal Proceedings 4
Item 4. Submission of Matters to a Vote of Security Holders 4
PART II.
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 5
Item 6. Selected Financial Data 6
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 8. Financial Statements and Supplementary Data 12
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 25
PART III.
Item 10. Directors and Executive Officers 25
Item 11. Executive Compensation 26
Item 12. Security Ownership of Certain Beneficial Owners
and Management 26
Item 13. Certain Relationships and Related Transactions
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 29
Signatures 31
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Note Regarding Forward Looking Statements:
Any statements contained in this Form 10-K that do not describe
historical facts, including without limitation statements concerning expected
revenues, earnings, product introductions and general market conditions, may
constitute forward-looking statements as that term is defined in the Private
Securities Litigation Reform Act of 1995. Any such forward-looking statements
contained herein are based on current expectations, but are subject to a number
of risks and uncertainties that may cause actual results to differ materially
from expectations. The factors that could cause actual future results to differ
materially from current expectations include the following: the Company's
ability to raise the financing required to support the Company's operations; the
Company's ability to establish the intended operations; fluctuations in demand
for the Company's products and services; the Company's ability to manage its
growth; the Company's ability to develop, market and introduce new and enhanced
products on a timely basis; the Company's lack of customers; and the ability of
the Company to compete successfully in the future. Further information on
factors that could cause actual results to differ from those anticipated is
detailed in various filings made by the Company from time to time with the
Securities and Exchange Commission. Any forward-looking statements should be
considered in light of those factors.
PART 1
Item 1. Business
The Company
Advanced Lumitech, Inc. ("ADLU" or "the Company") is a development stage
company, which, through its subsidiary, Lumitech SA ("Swiss Lumitech"), has
developed and patented a luminescent imaging media (the "Luminescent Product"),
which can be used in a variety of products in numerous fields such as safety and
signs, consumer electronics and color printing. The Company will market its
Luminescence product and related products under the brand name `Brightec'. The
Company plans to use only the most advanced and environmentally friendly
luminescent materials in its products. Currently, the Company uses a new
generation of high yield luminescent material, based on alkaline earth
chemistry, which provides significantly greater luminescence than traditional
zinc sulphide luminescent material.
The Company will manufacture, market and sell luminescent sheets and substances
that are specially designed for state-of-the-art digital printing using pigments
with the greatest light intensity. There are various categories and sizes of
luminescent sheets, which will permit wide-spread applications in photography,
color printing, textiles, decoration and different printing technologies. The
luminescent substances are targeted for industrial and commercial applications
such as paints, inks and compounds.
During the fourth quarter of 1999, the Company moved its corporate offices to
the United States, assembled an executive team, identified preliminary market
opportunities and established a sales and distribution network. Although the
Company has not commenced commercial manufacturing or marketing of Brightec and
has generated no revenues to date, it expects, although there are no assurances,
that manufacturing, sales and marketing activities will commence in the second
half of 2000. The manufacturing, marketing and selling of Brightec products is
dependent upon the Company's successful raising of financing, as described in
"Management's Discussion and Analysis - Liquidity and Capital Resources". As
discussed in Note 1 to the Consolidated Financial Statements, these conditions,
among others, raise substantial doubts about the Company's ability to continue
as a going concern.
The Company was incorporated on April 16, 1986 as Hyena Capital, Inc., a Nevada
corporation. For the period from incorporation to August 13, 1998, the Company
had no operations of any kind. On August 13, 1998, the Company acquired 100% of
the then outstanding common stock of Swiss Lumitech, a company founded in
Switzerland in 1992, which had developed and patented the Luminescence
technology.
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For accounting purposes, the acquisition of Swiss Lumitech was treated as a
reverse acquisition of the Company by Swiss Lumitech. However, the Company was
the legal acquirer and accordingly, the acquisition was effected by the issuance
of 4,000,000 newly issued common shares ($ 0.001 par value) of the Company. As a
result of this transaction, the shareholders of Swiss Lumitech became majority
shareholders of the Company, owning 80% of the Company's then issued 5,000,000
voting common shares. On August 14, 1998, the Company's Board of Directors
authorized the change of the Company's name from Hyena Capital, Inc. to Advanced
Lumitech, Inc. and authorized a five-for-one split of the Company's then issued
common stock, increasing the Company's common stock to 25,000,000.
Prior to developing the Luminescence product, Swiss Lumitech's operations
consisted of unrelated activities including the publication and marketing of a
book written by Swiss Lumitech's co-founders. From that point until its
acquisition by the Company, Swiss Lumitech engaged in the development of the
Luminescence product and utilized it to develop a range of luminescent watches,
which it distributed through an affiliated company, Lumitech BV (the
"Netherlands Affiliate").
Strategy
The Company's objective is to become the innovator and worldwide market leader
in Luminescence products. The Company's strategy is to generate revenues from
the commercial sale of the luminescent products, which will be sold under the
brand name "Brightec". The Company's current business strategy is twofold.
Initially, the Company expects to market and sell its luminescent sheets in
retailing establishments through OEM's and over the internet. The Company
expects this to provide short-term revenue to fund the research and development
necessary to capitalize on the commercial marketplace.
Sales and Marketing
The Company expects to market its products using both a direct sales and a
broker network, who have access to retail channels, that reports to its Vice
President of Sales. The Company also intends to sell its product over the
internet using sites that are popular with its target markets. Currently, the
Company does not have formal arrangements in place with distributors or third
parties.
To deliver short-term revenue, the Company plans to capitalize on the rapidly
growing ink-jet media market for recreational printing. It believes that its
state of the art luminescence technology coupled with the ability of users to
customize the product by using their own images will be a successful combination
in the area of recreational printing that is being driven by personalization and
creativity.
Research and Development
Currently, the Company's development resources are focused on the final stages
of commercialization of the luminescent sheets, including product testing and
establishment of manufacturing capabilities in the U.S. In 1999, research and
development expenses of approximately $674,000 were related to salaries and
supplies to further develop the luminescence products and product testing. The
Company intends to expend approximately the same amounts in FY 2000 for research
and development activities to improve and broaden the Company's Luminescence
products. In this regard, the Company expects to establish a laboratory in the
U.S. and use its current lab in Switzerland for limited creative research.
However, such expenditures are dependent on the Company's ability to
successfully raise additional capital, as described in `Management's Discussion
and Analysis -Liquidity and Capital Resources'. If the Company is unable to
successfully raise such funds and is unable to invest further in research and
development, the Company may be unable to develop new products or enter new
markets and such inability may have an adverse effect on the Company's results
of operations.
In 1999, the Company and Socol SA ("Socol"), a shareholder of the Company, which
is a Swiss based private company which had worked with the Company in developing
the Luminescence products, entered into a definitive collaboration agreement,
the terms of which are set forth in a letter agreement (the "Socol Letter
Agreement"). In the Letter Agreement, the Company agreed to issue 2,500,000
shares of its common stock to Socol; and Socol agreed to the following: (i) its
agreement to accept such shares in full consideration for Socol's participation
and efforts in connection with the Luminescence product, (ii) its disclaimer of
any interest or right in or to the Company's Brightec products, the Luminescence
product Patent or proprietary information and know how relating to said patents
and Brightec
2
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products and (iii) its agreement to transfer all know how relating to said
patent and Brightec products and proprietary information to Lumitech. The
Company also has a non-exclusive manufacturing agreement with Socol whereby
Socol will provide to the Company certain luminescent substances at cost.
Manufacturing
In 1999, the Company decided to outsource its manufacturing to a U.S based
coating company. To this end, the Company entered into an agreement for the
commercial manufacture of both the fluids and the luminescent sheets used in the
manufacturing of the Luminescent Products. During the first half of this
calendar year, the "know how" for the manufacture of the Luminescent Products
will be transferred from Switzerland to the Company's U.S. based coating
manufacturer. Formulation changes required for the scale up will be jointly
handled between the two sites. The manufacturing process itself is being
designed to allow multiple products to be generated from substantially the same
product mix, thus allowing the Company to maintain lower levels of finished
goods inventory than otherwise possible. The formulations of the fluids will
continue to be provided by Socol. The plan, although there can be no assurances,
is to be manufacturing products for sale by the end of the third quarter
depending on the Company's ability to successfully raise additional capital, as
described in `Management's Discussion and Analysis - Liquidity and Capital
Resources'.
Source of Raw Materials
To date, all materials in the Luminescent product have been purchased from third
party suppliers through Socol. The Company anticipates that with its move to
establish a U.S. based manufacturing process, the Company will assume
responsibility for purchases from third parties. All raw materials used in the
product are manufactured by leading companies in Europe, Japan and the U.S. The
Company, although there can be no assurances, does not anticipate any problems
obtaining materials used in the manufacturing process, including the luminescent
pigments. The suppliers of these materials have assured the Company that they
are capable of meeting the proposed manufacturing schedule and quantities.
Patents
The Company first received a patent for the Luminescence product in France in
August 1997 (the "Luminescence Technology Patent"). This patent covered the
processes for all types of luminescent pictures (photographic, textile and
decoration), as well as the products resulting from the implementation of such
processes. The Company received a patent in Singapore in May 1999 and the
European patent (including Germany, Austria, Belgium, Denmark, France, Spain,
Greece, Ireland, Italy, Netherlands, Portugal, Great Britain, Sweden and
Switzerland) has been approved for issuance as well as the patent for Poland.
The Company expects that all of these patents will be delivered in the first
half of 2000. The Company has also registered applications for the Luminescence
Technology Patent in nine other countries including the United States of
America, Canada, Brazil, Mexico Turkey, Federation of Russia, Japan, China and
Hong Kong. The Company expects successful registration of the Luminescence
Technology Patent in those remaining countries to take from six months to five
years, depending on the country of application. The life of the Luminescence
Technology Patent will vary from country to country, but at a minimum will
extend to 2016. The inability to register the Luminescence product Patent in any
of the above mentioned countries may have a material adverse effect on the
Company's business, financial condition and results of operations.
On March 31, 1999, the Company and the co-inventor of the Luminescence product
executed and delivered an agreement amending a prior agreement dated January 26,
1996 (the "Patent Assignment Agreement"). The Patent Assignment Agreement
eliminates a requirement in the prior agreement that the Company pay royalties
calculated as a percentage of product sales based upon the Luminescence product
to the co-inventor and instead provides for the payment to said co-inventor of
$160,000, and the issuance to said co-inventor of 800,000 shares of the
Company's common stock. With respect to the cash payment obligation, the Company
paid the co-inventor $25,000 in 1998 and $57,000 in 1999. The balance is payable
from time to time as the Company's liquidity and other commitments permits. The
800,000 shares of the Company's common stock, with a value of $300,000 and the
$160,000, payable in cash, were charged to expense in 1999. Accounts payable and
accrued expenses at December 31, 1999 include approximately $78,000 of expenses
related to the patent assignment agreement.
3
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Seasonality
Although it has not begun to market or sell its Brightec products, the Company
does not anticipate any seasonality in its revenues.
Competition
The Company is not aware of any competing product that offers the same features
as Brightec. The Company does not intend for Brightec derived products to
compete against other potentially cheaper, non-photographic quality products,
based on existing zinc sulphide technology. Existing products, however, are
manufactured using processes and technologies supported by companies which may
have significantly greater resources and have been established and known in the
luminescence field for a number of years. Although, such "glow in the dark"
products are well known by the consumer and are already well established at
certain of the Company's intended sales outlet channels, the Company believes
its products are unique and will compete favorably with existing product
offerings.
As in any technology industry, there are numerous new technologies being
developed in imaging laboratories or by individual inventors, which technologies
may render the Company's technology obsolete. The Company is not aware of any
such competing technology under development or which has been developed.
Regulation
No government authorization is required to offer the Company's products.
Employees
As of December 31, 1999, the Company had 7 full time employees. As of March 31,
2000, the Company had 6 full time employees. The Company believes its future
success will depend in part on its continued ability to recruit and retain
highly qualified technical and managerial personnel.
Item 2. Properties
At December 31, 1999, the Company's only property was its office space located
at 36 Avenue Cardinal Mermillod, Carouge, Switzerland. This office is leased
under an agreement that allows the Company to terminate the lease at the end of
each 12-month period. In conjunction with the Company's plan to launch its
operations in the United States, the Company entered into a lease for its
corporate office at 1601 Trapelo Road, Waltham, MA in January 2000. The Company
currently occupies approximately 2,500 square feet at the Waltham location under
the terms of a lease expiring in January 2002, with annual rent of approximately
$83,000.
Item 3. Legal Proceedings
There are no material legal proceedings pending to which the Company is a party
or to which any of its properties are subject.
Item 4. Submission of Matters to a Vote of Security Holders
None
4
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PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
From inception to the date of the acquisition of Swiss Lumitech on August 13,
1998, there was no trading market for the Company's $.001 par value common
stock. Since August 13, 1998, the Company's common stock has been traded
Over-the-Counter Bulletin Board (US OTC-BB) under the symbol "ADLU".
The following table sets forth, on a per share basis, the range of high and low
bid information for the common stock for each quarter since August 13, 1998 and
reflect a five-for-one stock split effective August 14, 1998:
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High Low
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Fourth quarter ended December 31, 1999 $ 3.75 $ 0.43
Third quarter ended September 30, 1999 1.02 0.28
Second quarter ended June 30, 1999 0.65 0.24
First quarter ended March 31, 1999 1.10 0.06
Period from August 13, 1998 thru September 30, 1998 1.25 0.25
Fourth quarter ended December 31, 1998 1.42 0.56
</TABLE>
On March 31, 2000, the reported last sale price of the common stock on the US
OTC-BB was $2.44 per share and there were 671 holders of record of common stock.
These price quotations represent prices between dealers and do not include
retail mark ups, mark downs or commissions and may not necessarily represent
actual transactions. Since its organization, the Company has not paid dividends
on its capital stock. The Board of Directors does not contemplate declaring
dividends in the near future.
The following securities were sold by the Company during the last three years
and were not registered under the Securities Act of 1933, as amended (the
"Securities Act").
In March 1999, the Company issued 800,000 shares of its common stock to
Jacques-Charles Collet, the co-inventor of the Company's luminescence
technology, in exchange for the co-inventor's release of all ownership rights in
the technology. These shares were valued at approximately $300,000 based on the
last price of the Company's common stock on the date of transfer.
In October 1999, the Company agreed to issue 2,500,000 shares of its common
stock to Socol in exchange for the transfer of production processes and know-how
to manufacture the Luminescent Products. These shares were valued at $1,875,000.
In November 1999, the Company sold a $375,000 unit of its common stock resulting
in the issuance of 500,000 shares of its common stock and a warrant to purchase
500,000 shares of common stock at $1.00 per share.
In January 2000, the Company sold a $375,000 unit of its common stock resulting
in the issuance of 500,000 shares of its common stock and a warrant to purchase
500,000 shares of common stock at $1.00 per share.
The Company relied on Regulation S and Regulation D promulgated under the
Securities Act in connection with the security transactions described above.
5
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Item 6. Selected Consolidated Financial Data
The following selected consolidated financial data for the five years ended
December 31, 1999 have been derived from the Company's Consolidated Financial
Statements, which have been audited by Ernst & Young LLP. The selected financial
data presented below should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations", which is
included elsewhere in this 10-K.
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Fiscal Year Ended December 31,
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1999 1998 1997 1996 1995
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Statement of Operations Data
- ----------------------------
Sales $ -- $ -- $ 148,352 $ 54,688 $ 91,219
Net loss (4,274,710) (340,115) (219,531) (308,771) (225,351)
Basic and diluted
net loss per share (0.16) (0.02) (0.01) (0.01) (0.01)
Balance Sheet Data
- ------------------
Total assets 537,984 244,325 77,416 60,059 285,069
Long-term borrowings
(Consists of notes payable to 321,273 255,809 361,476 372,493 295,474
directors and related parties)
Stockholders' deficit $(1,031,978) $(772,302) $(1,067,637) $(919,365) $(735,639)
</TABLE>
6
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Factors That May Affect Future Results
Any statements contained in this Form 10-K that do not describe
historical facts, including without limitation statements concerning expected
revenues, earnings, product introductions and general market conditions, may
constitute forward-looking statements as that term is defined in the Private
Securities Litigation Reform Act of 1995. Any such forward-looking statements
contained herein are based on current expectations, but are subject to a number
of risks and uncertainties that may cause actual results to differ materially
from expectations. The factors that could cause actual future results to differ
materially from current expectations include the following: the Company's
ability to raise the financing required to support the Company's operations; the
Company's ability to establish the intended operations; fluctuations in demand
for the Company's products and services; the Company's ability to manage its
growth; the Company's ability to develop, market and introduce new and enhanced
products on a timely basis; the Company's lack of customers; and the ability of
the Company to compete successfully in the future. Further information on
factors that could cause actual results to differ from those anticipated is
detailed in various filings made by the Company from time to time with the
Securities and Exchange Commission. Any forward-looking statements should be
considered in light of those factors.
General
Advanced Lumitech, Inc. ("ADLU" or "the Company") is a development stage
company, which, through its subsidiary, Lumitech SA ("Swiss Lumitech"), has
developed and patented an exclusive new luminescent imaging media (the
"Luminescent product"), which can be used in a variety of products in numerous
fields such as safety and signs, consumer electronics and color printing. The
Company will market its Luminescence product and related products under the
brand name `Brightec'. The Company plans to use only the most advanced and
environmentally friendly luminescent materials in its products. Currently, the
Company uses a new generation of high yield luminescent material, based on
alkaline earth chemistry, which provides significantly greater luminescence than
traditional zinc sulphide luminescent material.
The Company will manufacture, market and sell luminescent sheets and substances
that are specially designed for state-of-the-art digital printing using pigments
with the greatest light intensity. There are various categories and sizes of
luminescent sheets, which will permit wide-spread applications in photography,
color printing, textiles, decoration and different printing technologies. The
luminescent substances are targeted for industrial and commercial applications
such as paints, inks and compounds.
During the fourth quarter of 1999, the Company moved its corporate offices to
the United States, assembled an executive team, identified preliminary market
opportunities and established a sales and distribution network. Although the
Company has not commenced commercial manufacturing or marketing of Brightec and
has generated no revenues to date, it expects manufacturing, sales and marketing
activities to commence in the second half of 2000. The manufacturing, marketing
and selling of Brightec products is dependent upon the Company's successful
raising of financing, as described in "Management's Discussion and Analysis -
Liquidity and Capital Resources'. If the Company is unable to successfully raise
such funds or market Brightec or manufacture Brightec products, there is
substantial doubt as to the Company's ability to continue as a going concern.
The Company was incorporated on April 16, 1986 as Hyena Capital, Inc., a Nevada
corporation. For the period from incorporation to August 13, 1998, the Company
had no operations of any kind. On August 13, 1998, the Company acquired 100% of
the then outstanding common stock of Swiss Lumitech, a company founded in
Switzerland in 1992, which had developed and patented the Luminescence
Technology.
Prior to developing the Luminescence product, Swiss Lumitech's operations
consisted of unrelated activities including the publication and marketing of a
book written by Swiss Lumitech's co-founders. From that point until its
acquisition by the Company, Swiss Lumitech engaged in the development of the
Luminescence product and utilized it to develop a range of luminescent watches,
which it distributed through an affiliated company, Lumitech BV (the
"Netherlands Affiliate").
7
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For accounting purposes, the acquisition of Swiss Lumitech was treated as a
reverse acquisition of the Company by Swiss Lumitech. Accordingly, the following
discussion reflects the combined operations of the Company and Swiss Lumitech
from the inception date of Swiss Lumitech to December 31, 1999.
The Company's strategy is to generate revenues from the commercial sale of the
luminescent sheets and substances, which will be sold under the brand name
"Brightec". Initially, the Company will market and sell its luminescent sheets
in retailing establishments through OEM's and over the internet. To deliver
short-term revenue, the Company plans to capitalize on the rapidly growing
ink-jet media market for recreational printing. This will provide a revenue
stream to fund the research and development necessary to capitalize on the
commercial marketplace. At December 31, 1999, the Company had not begun
commercial marketing of Brightec and has accumulated losses of $5,811,742. The
Company's current liabilities exceed its current assets by $749,066. The Company
is in the process of raising approximately $5.0 million in a private placement
of its shares and warrants. At December 31, 1999, the Company had successfully
placed a $375,000 unit of its common stock resulting in the issuance of 500,000
shares of its common stock and a warrant to purchase 500,000 shares of its
common stock at $1.00 per share. In January 2000, the Company placed the second
unit for $375,000 resulting in the issuance of 500,000 shares of its common
stock and a warrant to purchase 500,000 shares of its common stock at $1.00 per
share. The Company believes it has the ability to complete the $5.0 million
private placement, however, there can be no assurances that the Company will be
able to raise the funds it requires. As a result of these factors, substantial
doubt exists about the ability of the Company to continue to operate as a going
concern and cannot be predicted at this time. The Company's ability to continue
as a going concern is primarily dependent upon the Company's ability to obtain
the necessary financing to enable it to successfully market Brightec and then
upon future profitable operations. See `Liquidity and Capital and Capital
Resources - Ability to Continue as a Going Concern'.
Results of Operation for Years ended 1999, 1998 and 1997.
Revenues:
The Company had no revenues in 1999 or 1998 due to the change in the Company's
operations as described above. During 1997, the Company's revenues and related
cost of sales were generated exclusively from sales of Luminescence product
watches to the Netherlands Affiliate. The Company expects future revenues, if
any, to come from the sale of luminescent substances and sheets.
Gross Profit:
Due to the Company's change in strategy described above, the Company recorded no
revenues and therefore no gross profit in 1999 or 1998. For the year ended
December 31, 1997, the Company recorded negative gross profit of $75,439, which
was due in part to an inventory write-off of approximately $72,000 resulting
from the disposal of all Luminescence product watches. The Company expects that
future gross margins, if any, will result from the sale of Brightec products.
Historical results are not indicative of expected future results.
Research and Development Expenses:
Research and development expenses were $674,332 in 1999. The expenses in 1999
are related to salaries and supplies involved in the development efforts to
further develop the luminescence product and related Brightec products and
product testing. The Company intends to expend approximately the same funds in
FY 2000 for research and development activities to improve and broaden the
Company's Luminescence products. In this regard, the Company expects to
establish a laboratory in the U.S. and maintain a creative laboratory in
Switzerland.
Selling and Marketing Expenses:
Selling and marketing expenses consist primarily of compensation, marketing and
promotional materials and an allocation of facility related expenses. Selling
and marketing expenses increased $196,307 in 1999 to $266,688 from $70,381 in
1998. Selling and marketing expenses increased $44,366 in 1998 to $70,381 from
$26,015 in 1997. The increase in 1999 consists primarily of expenses incurred
for marketing materials to support the launch of the Brightec brand name and
expenses incurred in connection with establishing a sales and distribution
network in the U.S. The increase in 1998 in selling and marketing expenses is
primarily attributable to expenses incurred
8
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for marketing materials to support the launch of the Brightec brand name. The
Company expects that selling and marketing expenses will continue to increase in
dollar amount as the Company introduces and promotes products.
General and Administrative:
General and administrative expenses consist primarily of compensation of
executive personnel, legal and accounting costs and an allocation of facility
related expenses. General and administrative expenses increased $3,035,833 in
1999 to $3,256,907 from $221,074 in 1998. General and administrative expenses
increased $153,899 in 1998 to $221,074 from $67,175 in 1997. The increase in
general and administrative expenses in 1999 is due primarily to non-cash charges
of $2,175,000 relating to the shares issued to the co-inventor and to Socol for
the transfer of technology and know-how and approximately $800,000 in
compensation expense related to the issuance of stock and stock options to
consultants. The increase in general and administrative expenses in 1998 is
primarily due to patent and patent application costs associated with the
Company's Luminescence product and the costs of being a public company. The
Company expects that, exclusive of the costs related to the agreement with the
co-inventor and with Socol, general and administrative expenses will continue to
increase in dollar amount as a result of an expansion in the Company's
administrative staff to support its operations and as a result of being a public
company.
Interest Expense
Interest expense incurred on amounts due to related parties and the bank line of
credit was $76,783, $48,660 and $50,902 in the years ended December 31, 1999,
1998 and 1997, respectively.
Income Taxes
The Company has fully reserved for the tax benefits of its net operating losses
at December 31, 1999 and 1998. At December 31, 1999 and 1998, the Company had
federal net operating loss carryforwards of approximately $4.3 million and $0,
respectively, which will expire in varying amounts through 2017 and foreign net
operating losses of approximately $1.5 million at December 31, 1999 and 1998,
which begin to expire in varying amounts through 2006, if not utilized.
Utilization of net operating loss and tax credit carryforwards will be subject
to substantial annual limitations provided by the Internal Revenue Code of 1986,
as amended. The annual limitation may result in the expiration of net operating
loss and tax credit carryforwards before full utilization
Liquidity and Capital Resources:
Since inception, the Company has financed its working capital requirements
primarily through private sales of its debt and equity securities. The Company
has raised, from inception through December 31, 1999, cumulative net cash
proceeds from the sale of common stock and exercise of stock options of
approximately $1.5 million. The Company's net working capital deficit at
December 31, 1999 was $749,066 compared to a deficit of $543,002 in 1998.
Cash and cash equivalents increased to $490,276 at December 31, 1999 from
$207,938 at December 31, 1998. Net cash used in operating activities for the
year ended December 31, 1999 was $677,818. The net cash used in operating
activities during the year ended December 31, 1999 was principally the result of
the net loss of $4,274,710, adjusted for non cash expenses of approximately
$3,068,917 associated with stock based compensation, partially offset by an
increase in accounts payable and accrued liabilities.
Net cash used in investing activities for the year ended December 31, 1999 was
approximately $16,707, consisting of capital expenditures for property and
equipment.
Net cash provided by financing activities for the year ended December 31, 1999
was approximately $855,746. The net cash provided of $855,746 was primarily the
result of cash received in the Company's financing and cash received in the
exercise of stock options.
Ability to Continue as a Going Concern
At December 31, 1999, the Company had not begun to commercially market Brightec
and generate revenues therefrom and the Company's operations to date have
generated accumulated losses of $5,811,742. The Company's current liabilities
exceed its current assets by $749,066 at December 31, 1999. Also, at December
31, 1999 the Company exceeded the borrowings available under the line-of-credit
with a bank by approximately
9
<PAGE>
$75,000. In addition, at December 31, 1999, Swiss Lumitech was not in
compliance with certain statutory capital requirements under Swiss law. The
Company's ability to remedy this condition is uncertain due to the Company's
current financial condition. As of March 31, 2000 the Company has approximately
$200,000 of funds available. These conditions raise substantial doubts about the
Company's ability to continue as a going concern. The Company believes it has
the ability to obtain additional funds from its principal stockholders or by
raising additional debt or equity securities as described below. However, there
can be no assurances that the Company will be able to raise the funds it
requires, or that if such funds are available, that they will be available on
commercially reasonable terms.
In order to generate future revenues from the sale of Brightec products, the
Company anticipates making significant investments in personnel and resources
over the next 12-month period. The Company also intends to repay a significant
amount of debt, including the bank line-of-credit. The Company expects that it
may require up to approximately $5.0 million of cash or available credit during
the next 12-month period to finance payment of existing liabilities, including
the bank line-of-credit, purchases of raw materials and operating expenses. The
Company is continuing discussions with investors in its effort to obtain
additional financing.
The ability of the Company to continue to operate as a going concern is
primarily dependent upon the ability of the Company to raise the necessary
financing, to effectively market and produce Brightec products, to establish
profitable operations and to generate positive operating cash flows. If the
Company fails to raise funds, or the Company's line-of-credit is reduced or
terminated, or the Company is unable to generate operating profits and positive
cash flows, there are no assurances that the Company will be able to continue as
a going concern and it may be unable to recover the carrying value of its
assets.
In November 1999, the Company successfully placed a $375,000 equity unit
resulting in the issuance of 500,000 shares of its common stock and a warrant to
purchase 500,000 shares of its common stock at $1.00 per share. In January 2000,
the Company placed a second unit for $375,000 resulting in the issuance of
500,000 shares of its common stock and a warrant to purchase 500,000 shares of
its common stock at $1.00 per share. Management believes that it will be
successful in raising the necessary financing to fund the Company's operations
through the 2000 calendar year. Accordingly, management believes that no
adjustments or reclassifications of recorded assets and liabilities are
necessary at this time.
Credit Availability
The Company, through Swiss Lumitech, has borrowings under a line-of-credit with
a Swiss bank. Pursuant to the terms of the bank line-of-credit, the Company may
borrow up to $300,000, at the December 31, 1999 rate of exchange. At December
31, 1999 and 1998, the Company had exceeded such limit, but in each instance,
the bank granted the Company a temporary extension, with no stated expiration
date, to exceed the limit by the bank. The line-of-credit agreement contains
terms and conditions, restricting Swiss Lumitech's ability to pledge its assets
as security for separate borrowings and requiring the payment of interest each
quarter. In addition, any and all accounts receivable generated by the Company
are automatically pledged to the bank pursuant to the terms of the
line-of-credit agreement. At December 31, 1999, the borrowings under the bank
line-of-credit carries interest at 6.35%. The line-of-credit is guaranteed up to
available borrowings by a relative of certain directors.
Should the Company's line-of-credit be reduced or terminated, or if the Company
is unable to generate operating profits and positive cash flows, there are no
assurances that the Company will be able to continue as a going concern and it
may be unable to recover the carrying value of its assets. The Company does not
believe the bank line-of-credit will be reduced or terminated in the near future
and intends to repay it in full during 2000.
Commitments
The Company had no material capital expenditure commitments as of December 31,
1999.
Effects of Inflation
Management believes that financial results have not been significantly impacted
by inflation and price changes.
Euro Currency
The participating member countries of the European Union have adopted the Euro
as its common legal currency on January 1, 1999. At this early stage of its
assessment the Company cannot predict the impact of the conversion to the Euro.
10
<PAGE>
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The Company faces exposure to financial market risks, including adverse
movements in foreign currency exchange rates and changes in interest rates.
These exposures may change over time as business practices evolve and could have
a material adverse impact on the Company's financial results. The Company's
primary exposure has been related to local currency revenue and operating
expenses in Europe. Historically, the Company has not hedged specific currency
exposures as gains and losses on foreign currency transactions have not been
material to date.
11
<PAGE>
Item 8. Financial Statements and Supplementary Data
ADVANCED LUMITECH, INC.
Index to Consolidated Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors 13
Consolidated Balance Sheets at December 31, 1999 and 1998 14
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997 and for the period
from inception (February 7, 1992) to December 31, 1999 15
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 and for the period
from inception (February 7, 1992) to December 31, 1999 16
Consolidated Statements of Stockholders' Deficit for the
years ended December 31, 1999, 1998 and 1997
and for the period from inception (February 7, 1992)
to December 31, 1999 17
Notes to Consolidated Financial Statements 18
</TABLE>
12
<PAGE>
Report of Independent Auditors
Board of Directors and Stockholders
Advanced Lumitech, Inc.
We have audited the accompanying consolidated balance sheets of Advanced
Lumitech, Inc. (a development stage company) as of December 31, 1999 and 1998
and the related consolidated statements of operations, stockholders' deficit,
and cash flows for each of the three years in the period ended December 31, 1999
and for the period from inception (February 7, 1992) to December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits, the consolidated financial statements
referred to above present fairly, in all material respects, the consolidated
financial position of Advanced Lumitech, Inc. (a development stage company) at
December 31, 1999 and 1998 and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31, 1999
and for the period from inception (February 7, 1992) to December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue to operate as a going concern. As more fully
described in Note 1, the Company has incurred recurring operating losses since
inception, has generated an accumulated deficit of $5,811,742 since inception
and has a working capital deficit of $749,066 at December 31, 1999. In addition,
the Company has limited cash resources and borrowings exceed the line-of-credit
established with its bank. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 1. The financial statements do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
/s/ Ernst & Young LLP
Boston, Massachusetts
April 5, 2000
13
<PAGE>
ADVANCED LUMITECH, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
------------------- -------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 490,276 $ 207,938
Prepaid expenses and other assets 9,347 9,878
----------- -----------
Total current assets 499,623 217,816
Office and photographic equipment 76,815 60,108
Less accumulated depreciation (38,454) (33,599)
----------- -----------
38,361 26,509
----------- -----------
Total assets $ 537,984 $ 244,325
=========== ===========
Liabilities and stockholders' deficit
Current liabilities:
Borrowings under bank line-of-credit $ 376,828 $ 408,641
Accounts payable 157,885 101,699
Accrued liabilities 551,874 50,000
Accounts payable to affiliated companies 120,941 156,412
Notes payable to related party 41,161 44,066
----------- -----------
Total current liabilities 1,248,689 760,818
Notes payable to directors 321,273 255,809
----------- -----------
Total liabilities 1,569,962 1,016,627
Stockholders' deficit:
Common stock, $0.001 par value;
100,000,000 shares authorized;
31,997,770 shares in 1999 and 25,000,000
shares in 1998 issued and outstanding 31,998 25,000
Additional paid-in capital 4,678,775 45,426
Stock subscriptions receivable (34,965) (34,965)
Stock subscribed -- 688,347
Deferred compensation (58,083) --
Deficit accumulated during the development stage (5,811,742) (1,537,032)
Cumulative translation adjustment 162,039 40,922
----------- -----------
Total stockholders' deficit (1,031,978) (772,302)
----------- -----------
Total liabilities and stockholders' deficit $ 537,984 $ 244,325
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
14
<PAGE>
ADVANCED LUMITECH, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
inception
(February 7,
Year ended 1992) through
December 31, December 31,
--------------------------------------------------------------------------------
1999 1998 1997 1999
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales to third parties $ -- $ -- $ -- $ 814,540
Sales to affiliated company -- -- 148,352 203,040
------------------------------------------------------------------------------
-- -- 148,352 1,017,580
Cost of sales -- -- 223,791 1,005,756
------------------------------------------------------------------------------
Gross profit (loss) -- (75,439) 11,824
Operating expenses:
Research and development 674,332 -- -- 674,332
Selling and marketing 266,688 70,381 26,015 437,015
General and administrative 3,256,907 221,074 67,175 4,399,985
------------------------------------------------------------------------------
4,197,927 291,455 93,190 5,511,332
------------------------------------------------------------------------------
Operating loss (4,197,927) (291,455) (168,629) (5,499,508)
Interest expense, net 76,783 48,660 50,902 312,234
------------------------------------------------------------------------------
Net loss $ (4,274,710) $ (340,115) $ (219,531) $ (5,811,742)
==============================================================================
Basic and diluted net loss per
share $ (0.16) $ (0.02) $ (0.01)
============ ============ ============
Weighted average number of shares
used in computation of basic 27,535,735 21,458,000 20,000,000
and diluted net loss per share ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
15
<PAGE>
ADVANCED LUMITECH, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
inception
(February 7, 1992)
Year Ended through
December 31, December 31,
----------------------------------------------------------------------------
1999 1998 1997 1999
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating activities
Net loss $(4,274,710) $ (340,115) $ (219,531) $(5,811,742)
Adjustments to reconcile net loss to net cash
used in operating activities:
Inventory written-off -- -- 72,079 72,079
Depreciation 4,855 6,628 4,729 40,722
General and administrative expense associated
with stock based charges 3,068,917 -- -- 3,068,917
Changes in operating assets and liabilities:
Accounts receivable from affiliated company -- 66,672 (66,672) --
Prepaid expenses and other current assets 531 (7,608) 186 (9,347)
Inventory -- -- (25,811) (72,079)
Accounts payable and accrued liabilities 558,060 (76,072) 31,629 709,759
Accounts payable to affiliated companies (35,471) (23,513) 142,612 120,941
---------------------------------------------------------------------
Net cash used in operating activities (677,818) (374,008) (60,779) (1,880,750)
Investing activities
Proceeds from disposal of property and equipment -- -- -- 10,216
Purchase of property and equipment (16,707) (25,157) (7,495) (89,299)
---------------------------------------------------------------------
Net cash used in investing activities (16,707) (25,157) (7,495) (79,083)
Financing activities
Net change in bank line of credit (31,813) 32,760 2,408 376,828
Change in notes payable to directors 65,464 (66,188) (10,571) 321,273
Change in note payable to related party (2,905) 4,587 (446) 41,161
Cash received for sale of common stock and
exercise of stock options 825,000 688,347 -- 1,548,808
---------------------------------------------------------------------
Net cash provided by (used in) financing activities 855,746 659,506 (8,609) 2,288,070
Effects of changes in foreign exchange rates 121,117 (52,897) 71,259 162,039
---------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 282,338 207,444 (5,624) 490,276
Cash and cash equivalents at beginning of period 207,938 494 6,118 --
---------------------------------------------------------------------
Cash and cash equivalents at end of period $ 490,276 $ 207,938 $ 494 $ 490,276
=====================================================================
Supplemental disclosure of cash flow information:
Interest paid $ 15,514 $ 29,854 $ 27,320 $ 212,152
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
16
<PAGE>
ADVANCED LUMITECH, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional Deferred Stock Sub- During the
Common Stock Paid-in Stock Compen- scriptions Development
Shares Par Value Capital Subscribed sation Receivable Stage
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of Stock in February 1992 20,000,000 $ 20,000 $ 15,461 $ - $ - $ - $ -
Net loss for the period February 7,
1992 to December 31, 1992 - - - - - - (30,528)
Foreign currency translation adjustment - - - - - - -
Comprehensive loss - - - - - - -
---------------------------------------------------------------------------------------
Balance at December 31, 1992 20,000,000 20,000 15,461 - - - (30,528)
Net loss for year - - - - - - (212,727)
Foreign currency translation adjustment - - - - - - -
Comprehensive loss - - - - - - -
---------------------------------------------------------------------------------------
Balance at December 31, 1993 20,000,000 20,000 15,461 - - - (243,255)
Net loss for year - - - - - - (200,009)
Foreign currency translation adjustment - - - - - - -
Comprehensive loss - - - - - - -
---------------------------------------------------------------------------------------
Balance at December 31, 1994 20,000,000 20,000 15,461 - - - (443,264)
Net loss for year - - - - - - (225,351)
Foreign currency translation adjustment - - - - - - -
Comprehensive loss - - - - - - -
---------------------------------------------------------------------------------------
Balance at December 31, 1995 20,000,000 20,000 15,461 - - - (668,615)
Net loss for year - - - - - - (308,771)
Foreign currency translation adjustment - - - - - - -
Comprehensive loss - - - - - - -
---------------------------------------------------------------------------------------
Balance at December 31, 1996 20,000,000 20,000 15,461 - - - (977,386)
Unpaid subscriptions for stock - - 34,965 - (34,965) - -
Net loss for year - - - - - - (219,531)
Foreign currency translation adjustment - - - - - - -
Comprehensive loss - - - - - - -
---------------------------------------------------------------------------------------
Balance at December 31, 1997 20,000,000 20,000 50,426 - (34,965) - (1,196,917)
Receipt of subscriptions for 1,867,602
common shares of stock - - - - - 688,347 -
Issuance of shares in connection with
acquisition of the Company 5,000,000 5,000 (5,000) - - - -
---------------------------------------------------------------------------------------
Net loss for year - - - - - - (340,115)
Foreign currency translation adjustment - - - - - - -
Comprehensive loss - - - - - - -
---------------------------------------------------------------------------------------
<CAPTION>
Accumulated
Other Total
Compre- Stockholders'
hensive Equity
Income(loss) (Deficit)
- -------------------------------------------------------------------------
<S> <C> <C>
Issuance of Stock in February 1992 $ - $ 35,461
Net loss for the period February 7,
1992 to December 31, 1992 - (30,528)
Foreign currency translation adjustment (378) (378)
------------
Comprehensive loss - (30,906)
------------------------------
Balance at December 31, 1992 (378) 4,555
Net loss for year - (212,727)
Foreign currency translation adjustment (31) (31)
------------
Comprehensive loss - (212,758)
------------------------------
Balance at December 31, 1993 (409) (208,203)
Net loss for year - (200,009)
Foreign currency translation adjustment (34,590) (34,590)
------------
Comprehensive loss - (234,599)
------------------------------
Balance at December 31, 1994 (34,999) (442,802)
Net loss for year - (225,351)
Foreign currency translation adjustment (67,486) (67,486)
------------
Comprehensive loss - (292,837)
------------------------------
Balance at December 31, 1995 (102,485) (735,639)
Net loss for year - (308,771)
Foreign currency translation adjustment 125,045 125,045
------------
Comprehensive loss - (183,726)
------------------------------
Balance at December 31, 1996 22,560 (919,365)
Unpaid subscriptions for stock - -
Net loss for year - (219,531)
Foreign currency translation adjustment 71,259 71,259
------------
Comprehensive loss (148,272)
------------------------------
Balance at December 31, 1997 93,819 (1,067,637)
Receipt of subscriptions for 1,867,602
common shares of stock - 688,347
Issuance of shares in connection with
acquisition of the Company - -
Net loss for year - (340,115)
Foreign currency translation adjustment (52,897) (52,897)
------------
Comprehensive loss - (393,012)
------------------------------
<CAPTION>
Deficit
Accumulated
Additional Deferred Stock Sub- During the
Common Stock Paid-in Stock Compen- scriptions Development
Shares Par Value Capital Subscribed sation Receivable Stage
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 25,000,000 25,000 45,426 688,347 (34,965) - (1,537,032)
Issuance of stock to co-inventor
(March 1999) 800,000 800 299,200 -
Issuance of stock in exchange for
consulting services (August 1999) 420,168 420 149,580 - - - -
Obligation for stock issuance in
exchange for technology transfer
(October 1999) 2,500,000 2,500 1,872,500 - - - -
Issuance of stock in connection with
1998 subscriptions for 1,877,602
shares of common stock 1,877,602 1,878 686,469 (688,347) - - -
Stock options issued to non
employees (September 1999) - - 802,000 - - (58,083) -
Exercise of options to purchase
900,000 shares at $0.50 (October -
December 1999) 900,000 900 449,100 - - - -
Issuance of stock at $0.75 in
connection with mezzanine
financing (November 1999) 500,000 500 374,500 - - - -
Net loss for the year - - - - - - (4,274,710)
Foreign currency translation adjustment - - - - -
Comprehensive loss - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 31,997,770 $ 31,998 $ 4,678,775 $ - $(34,965) $ (58,083) $ (5,811,742)
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Accumulated
Other Total
Compre- Stockholders'
hensive Equity
Income(loss) (Deficit)
- -------------------------------------------------------------------------
<S> <C> <C>
Balance at December 31, 1998 40,922 (772,302)
Issuance of stock to co-inventor
(March 1999) 300,000
Issuance of stock in exchange for
consulting services (August 1999) - 150,000
Obligation for stock issuance in
exchange for technology transfer
(October 1999) - 1,875,000
Issuance of stock in connection with
1998 subscriptions for 1,877,602
shares of common stock - -
Stock options issued to non
employees (September 1999) - 743,917
Exercise of options to purchase
900,000 shares at $0.50 (October -
December 1999) - 450,000
Issuance of stock and warrants for cash
in connection with equity
financing (November 1999) - 375,000
Net loss for the year (4,274,710)
Foreign currency translation adjustment 121,117 121,117
-----------
Comprehensive loss - (4,153,593)
- ------------------------------------------------------------------------
Balance at December 31, 1999 $ 162,039 $(1,031,978)
- ------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements
17
<PAGE>
ADVANCED LUMITECH, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Company and its Ability to Continue as a Going Concern
The Company is a development stage company, which, through its subsidiary, Swiss
Lumitech, has developed and patented an exclusive new Luminescence product,
which can be applied to a variety of objects in numerous applications. The
Company will market the Luminescence product and related products under the
brand name "Brightec". Although the Company believes it has developed the
Brightec products to a marketable form, it has yet to commercially market the
Brightec products and generate revenues therefrom.
From the period January 1, 1996 to December 31, 1997, the Company's business
strategy was to sell watch dials, on to which the Luminescence product had been
applied, to an affiliated company. Effective December 31, 1997, the Company
ceased such activities and focused its efforts on further developing the
Luminescence product and Brightec products and raising funds to finance its new
business strategy. Accordingly, the Company is classified as a development stage
company in accordance with Statement of Financial Accounting Standards No. 7,
"Accounting and Reporting by Development Stage Enterprises."
The consolidated financial statements have been prepared on the basis that the
Company will continue to operate as a going concern, including the realization
of its assets and settlement of its liabilities at their carrying values in the
ordinary course of business for the foreseeable future. At December 31, 1999,
the Company has yet to commercially market Brightec and generate revenues
therefrom and the Company's operations to date have generated accumulated losses
of $5,811,742. At December 31, 1999, the Company's current liabilities exceed
its current assets by $749,066 and the Company had outstanding advances of
approximately $75,000 above the limit available to it under its line-of-credit
arrangements with a Swiss bank. In addition, at December 31, 1999, Swiss
Lumitech was not in compliance with certain statutory capital requirements under
Swiss law. The Company's ability to remedy this condition is uncertain due to
the Company's current financial condition.
In order to generate future revenues from the sale of Brightec products, the
Company anticipates making significant investments in personnel and resources
over the next 12-month period. The Company also intends to repay a significant
amount of debt, including the bank line-of-credit. The Company expects that it
may require up to approximately $5.0 million of cash or available credit during
the next 12-month period to finance payment of existing liabilities, including
the bank line-of-credit, purchases of raw materials and operating expenses. The
Company is continuing discussions with institutional investors in its effort to
obtain additional financing; however, there is no assurance that such financing
can be obtained.
The ability of the Company to continue to operate as a going concern is
primarily dependent upon the ability of the Company to raise the necessary
financing, to effectively market and produce Brightec products, to establish
profitable operations and to generate positive operating cash flows. If the
Company fails to raise funds, or the Company's line-of-credit is reduced or
terminated, or the Company is unable to generate operating profits and positive
cash flows, there are no assurances that the Company will be able to continue as
a going concern and it may be unable to recover the carrying value of its
assets.
In November 1999, the Company sold an equity unit consisting of 500,00 shares of
its common stock and a warrant to purchase 500,000 shares of common stock at
$1.00 per share for cash of $375,000. In January 2000, the Company sold an
equity unit consisting of 500,000 shares of its common stock and a warrant to
purchase 500,000 shares of common stock at $1.00 per share for cash of $375,000.
Management believes that it will be successful in raising the necessary
financing to fund the Company's operations through the 2000 calendar year,
however, there can be no assurances that such financing can be obtained.
Accordingly, management believes that no adjustments or reclassifications of
recorded assets and liabilities are necessary at this time.
18
<PAGE>
2. Restatement of 1999 Third Quarter Results of Operations
During the fourth quarter of 1999, the Company recorded a non cash charge of
$893,917 for compensation expense associated with options and common stock
granted to consultants, which principally vested upon grant in the third quarter
ended September 30, 1999. A summary of the impact of such restatement for the
three and nine-months ended September 30, 1999 is as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, 1999 September 30, 1999
---------------------- ---------------------
Previously As Previously As
Reported Restated Reported Restated
---------------------- ---------------------
<S> <C> <C> <C> <C>
Operating loss $ 172,561 $1,066,478 $ 967,463 $1,861,380
Net loss $ 180,790 $1,074,707 $ 991,472 $1,885,389
Basic and diluted
loss per share $ 0.00 $ 0.04 $ 0.04 $ 0.07
</TABLE>
3. Summary of Significant Accounting Policies
Basis of Presentation: The accompanying consolidated financial statements
include the accounts of Advanced Lumitech, Inc. and its wholly owned subsidiary,
Lumitech SA. All significant intercompany accounts and transactions have been
eliminated in consolidation.
Effective August 13, 1998, the Company acquired 100% of the then outstanding
common stock of Swiss Lumitech for consideration of 4,000,000 newly issued
common shares ($ 0.001 par value) of the Company. As a result of this
transaction, the shareholders of Swiss Lumitech became majority shareholders of
the Company, owning 80% of the Company's then issued 5,000,000 voting common
shares before giving effect to the previously disclosed 5 for 1 stock split.
For accounting purposes, the acquisition of Swiss Lumitech was treated as a
purchase (reverse acquisition) of the Company by Swiss Lumitech. In a reverse
acquisition, the historical shareholders' equity of the acquiror prior to the
merger is retroactively restated (a recapitalization) for the equivalent number
of shares received in the merger after giving effect to any difference in par
value of the issuers and acquirer's stock by an offset to paid in capital. All
share and per-share information has been presented in the accompanying
consolidated financial statements as if recapitalization had occurred as of the
first day presented in the financial statements. Accordingly, the accompanying
consolidated financial statements and related notes reflect the operations of
the Company combined with the operations of Swiss Lumitech from February 7,
1992, the inception date of Swiss Lumitech, to December 31, 1999.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents: All short-term investments which have an original
maturity of 90 days or less, and are valued at cost plus accrued interest which
approximates market, are considered to be cash equivalents.
Revenue Recognition: The Company recognizes revenue upon product shipment or
when title passes.
Concentrations of Credit Risk: Credit risk results from the possibility that a
loss may occur from the failure of another party to perform according to the
terms of a contract. Financial instruments that potentially subject the
19
<PAGE>
Company to concentrations of credit risk consist principally of cash and cash
equivalents. The Company places its available cash with high quality financial
institutions to mitigate the risk of material loss in this regard. Accordingly,
management believes the likelihood of incurring material losses due to
concentration of credit risk is remote.
Office and Photographic Equipment: Office and photographic equipment are stated
at cost, less accumulated depreciation, which is computed using the
straight-line method over the estimated useful life of the related assets, which
the Company has determined to be five years.
Foreign Currency: From inception to date, the Company's revenues and expenses
have been generated and incurred by Swiss Lumitech, which operates within
Switzerland. Accordingly, the functional currency of the Company is the Swiss
Franc. Foreign currency denominated assets and liabilities are translated into
U.S. dollar equivalents based on exchange rates prevailing at the end of each
period. Revenues and expenses are translated at average exchange rates during
the period. Aggregate foreign exchange gains and losses arising from the
translation of foreign currency denominated assets and liabilities are included
as a component of comprehensive loss. Such realized gains and losses have not
been material to date.
Income Taxes: Deferred tax assets and liabilities are recognized based on
temporary differences between the financial statements and tax basis of assets
and liabilities using enacted tax rates in effect for the year in which the
temporary differences are expected to reverse. A valuation allowance is applied
against net deferred tax assets if, based on available evidence, it is more
likely than not that some or all to the deferred assets will not be realized.
Patent and Patent Applications: The Company capitalizes patent and patent
application costs as incurred, if recoverability is reasonably assured. Such
costs were $169,531 for the year ended December 31, 1999 and $216,535 for the
period from February 7, 1992 to December 31, 1999. These costs have been
expensed due to the uncertainty as to recoverability.
Stock Splits: On August 14, 1998, the Company's Board of Directors approved a
5-for-1 stock split of the Company's issued and outstanding common shares (the
"Stock Split"). Accordingly, the Company's then issued and outstanding share
capital of 5,000,000 shares was increased to 25,000,000. All share and per share
information have been retroactively restated to reflect the stock split.
Earnings Per Share: Earnings per share are presented in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
128"), which requires the presentation of "basic" earnings per share and
"diluted" earnings per share. Basic earnings per share is computed by dividing
income available to common shareholders by the weighted-average shares of common
stock outstanding during the period. For purposes of computing diluted earnings
per share the denominator includes both the weighted-average shares of common
stock outstanding during the period and the weighted average number of potential
shares of common stock, if any. There is no difference between basic and diluted
net loss per share for the Company, since it has incurred losses since
inception.
Segment Information: Effective January 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"). SFAS 131, establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports. If also establishes standards for related disclosures about
products and services, geographic areas and major customers. During the periods
presented in the consolidated financial statements, the Company has operated in
only one operating segment - Luminescence product development. Long-lived assets
are principally located in Switzerland.
Stock Based Compensation: The Company has elected to follow Accounting
Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued to
Employees" in accounting for its stock-based employee compensation plans, rather
than the alternative fair value accounting method provided for under Statement
of Financial Accounting Standard (SFAS) No. 123, "Accounting for Stock-Based
Compensation," as this alternative requires the use of option
20
<PAGE>
valuation models that were not developed for use in valuing employee stock
options. Under APB No. 25, since the exercise price of options granted to
employees under these plans equals the market price of the underlying stock on
the date of grant, no compensation expense is recognized for such grants. Stock-
based compensation represents the cost, based on SFAS 123, of granting options
to consultants in 1999, measured under variable plan accounting and recognized
over the vesting period of the options. The Company recognized compensation
expense of $743,917 in 1999 and has $58,083 of unamortized deferred compensation
at December 31, 1999. Under variable plan accounting, the value of unvested
options will be re-measured and recognized in income at each reporting date
until vesting occurs.
4. New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 will become effective in 2001.
SFAS 133 requires that all derivative instruments be recorded on the balance
sheet at their fair value. Changes in the fair value of derivatives are recorded
each period in current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge transaction and, if it is,
the type of hedge transaction. To date the Company has not utilized derivative
instruments or hedging activities and, therefore, the adoption of SFAS 133 is
not expected to have a material impact on the Company's financial position or
results of operations.
5. Related Party Transactions
The balance sheet classification "Accounts payable to affiliated companies"
includes amounts owed to a Netherlands company whose principal shareholder is a
shareholder of the Company (the "Netherlands Affiliate") for the repurchase of
certain licenses granted by the Company to the Netherlands Affiliate for the use
and exploitation of the Company's Luminescence product (the "Netherlands
Affiliate Product Rights"). In addition, at December 31, 1997, accounts payable
to affiliated companies include amounts owed to a separate entity ("Lumicorp")
controlled by the Company's directors, for the repurchase of certain other
rights relating to the Luminescence product (the "Lumicorp Product Rights"),
which the Company had previously sold or licensed to these entities. At December
31, 1998, the Company had informally agreed to repurchase the Netherlands
Affiliate Product Rights at the equivalent amount the Netherlands Affiliate had
paid to acquire them, plus an additional $70,000 for costs and expenses the
Netherlands Affiliate paid or incurred in the development of processes, products
and markets. The Company repurchased the Lumicorp Product Rights during 1998 for
the equivalent amount Lumicorp previously paid to acquire them. The decision to
repurchase the Product Rights was a direct result of the change in the Company's
strategy, as discussed in Note 1.
During 1999, the Company entered into a technology transfer agreement with Socol
S.A. ("Socol"), whose major shareholder is a shareholder of the Company. This
agreement, which is effective October 1999, provides for the transfer of
production processes and know how developed by Socol using the Lumicorp Products
rights to the Company in exchange for an obligation to issue 2.5 million shares
of common stock with a value of $1,875,000. As of December 31, 1999, and from
the effective date of October 30, 1999, the 2.5 million shares have been
reflected in the accompanying financial statements as outstanding. The shares
were issued in February 2000. The value of the shares has been expensed due to
the uncertainty of the Company's ability to develop production capabilities and
produce product on a commercially viable basis.
The balance sheet classification "Note payable to related party" represents
amounts owed to a director of one of the Company's former significant suppliers.
The note has no stated maturity and has an interest rate of 7%. The borrowings
under this note payable are not secured.
The balance sheet classification "Notes payable to directors" represents amounts
owed to the Company's directors, pursuant to three separate agreements (the
"Director's Note Agreements"). The Director's Note Agreements have no stated
maturity and have an interest rate of 7%. The borrowings under the Director's
Note Agreements are not secured, and the note holders have agreed not to require
payment in cash before January 1, 2001.
21
<PAGE>
6. Income Taxes
The Company has fully reserved for the tax benefits of its net operating losses
at December 31, 1999 because of uncertainty about realization. At December 31,
1999, the Company had net operating loss carryforwards for U.S. federal income
tax purposes of approximately $4.3 million which will expire in varying amounts
through 2017 and foreign net operating losses of approximately $1.5 million at
December 31, 1999 which begin to expire in varying amounts through 2006, if not
utilized. Utilization of net operating loss and tax credit carryforwards will be
subject to substantial annual limitations provided by the Internal Revenue Code
of 1986, as amended. The annual limitation may result in the expiration of net
operating loss and tax credit carryforwards before full utilization.
7. Line of Credit
The Company, through Swiss Lumitech, has a line-of-credit with a Swiss bank.
Pursuant to the terms of the bank line-of-credit, the Company may borrow up to
$300,000, at the December 31, 1999 rate of exchange. At December 31, 1999, the
Company had exceeded such borrowing limit by approximately $75,000. However, the
bank granted a temporary extension, with no stated expiration date, to exceed
the limit by the bank. The line-of-credit agreement contains terms and
conditions, restricting the Swiss Lumitech's ability to pledge its assets as
security for other borrowings and requiring the payment of interest each
quarter. In addition, all accounts receivable generated by the Company are
automatically pledged to the bank pursuant to the terms of the line-of-credit
agreement. At December 31, 1999, the borrowings under the bank line-of-credit
carries interest at 6.35%. The line-of-credit is guaranteed up to the amount
available under the line of credit by a relative of certain directors.
8. Accrued Expenses
At December 31, 1999 and 1998, accrued expenses consists of the following:
December 31,
1999 1998
------------------------
Selling and marketing expenses $391,329 $ 25,000
Professional fees 70,000 25,000
Employee related costs 53,770 --
Other 36,775 --
-------- --------
$551,874 $ 50,000
======== ========
9. Common Stock
At December 31, 1998, the Company and the co-inventor of the Luminescence
product had agreed in principle to an amendment to their agreement that would,
among other things, eliminate an obligation of the Company to pay the co-
inventor royalties calculated as a percentage of sales of products based upon
the Luminescence product, and instead provide for the issuance of common stock
of the Company and the making of cash payments to said co-inventor. On March 31,
1999, the Company and the co-inventor entered into an agreement amending the
earlier royalty agreement pursuant to which the Company (i) agreed to a cash
payment of $160,000 of which the Company has paid the co-inventor $57,000 and
$25,000 in 1999 and 1998, respectively, and committed to pay an additional
$78,000 from time to time as the Company's liquidity and working capital
requirements permit, and (ii) agreed to issue 800,000 shares of the Company's
common stock to the co-inventor. The 800,000 shares of the Company's common
stock were issued on March 31, 1999. The 800,000 shares of the Company's common
stock, with a value of $300,000, and the $125,000 were charged to expense in the
three months ended March 31, 1999. Accounts payable and accrued expenses at
December 31, 1999 include the $78,000 of expenses related to the patent
assignment agreement.
During 1999, the Company issued 2.5 million shares of common stock to Socol (see
Note 5) valued at $1,875,000 in connection with a technology transfer agreement
for production processes and know how. In 1999, the Company also issued 420,168
shares of common stock valued at $150,000 and options to purchase 2.1 million
shares of common stock valued at $802,000 to various consultants for services.
22
<PAGE>
In November 1999, the Company sold an equity unit consisting of 500,000 shares
of its common stock and a warrant to purchase 500,000 shares of common stock at
$1.00 per share for cash of $375,000. In January 2000, the Company sold an
equity unit consisting of 500,000 shares of its common stock and a warrant to
purchase 500,000 shares of common stock at $1.00 per share for cash of $375,000.
10. Stock Options
Stock Option Plan. On September 10, 1999, the Board of Directors adopted the
1999 Stock Option/Stock Issuance Plan (the "Plan"). Pursuant to the Plan,
options to purchase up to 5,000,000 shares of Common Stock were reserved for
issuance to employees and consultants of the Company. Options granted under the
Plan may be either Incentive Stock Options or Non-Qualified Stock Options for
purposes of federal income tax law. Options are generally subject to vesting
over a period of five years from the date of grant and are exercisable only to
the extent vested from time to time. The selection of individuals to receive
awards of options under the Plan and the amount and terms of such awards may be
determined by the Board of Directors of the Company.
Option activity during 1999 was as follows:
<TABLE>
<CAPTION>
Weighted Avg.
Exercise price Number
Per share of Shares
-------------- -----------
<S> <C> <C>
Options granted $ 0.74 3,850,000
Options exercised 0.50 (900,000)
Options canceled 1.00 (150,000)
---------
Options outstanding at December 31, 1999 0.80 2,800,000
---------
Shares reserved for future grants 1,300,000
---------
Options exercisable at December 31, 1999 0.50 1,100,000
---------
</TABLE>
The weighted-average fair value of options granted during fiscal year 1999 was
$0.73.
Pursuant to the requirements of SFAS 123, pro forma net loss and basic and
diluted net loss per share for fiscal 1999 were not materially different from
the reported loss per share and the reported basic and diluted loss per share.
Options exercisable of 1.1 million, held by a consultant, have been excluded
from the calculation as they have been reflected in compensation expense.
The fair value for these options was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions for fiscal year 1999; risk-free interest rate of 6%; no dividend
yield; the volatility factor of the expected market price of the Company's
common stock of 250% and a weighted average expected life of the options of 4
years.
The Company has 8.0 million shares of common stock reserved at December 31, 1999
for the exercise of stock options, commitments to issue common stock and
warrants at December 31, 1999.
23
<PAGE>
11. Commitments
The Company leases office space in Switzerland and the United States under
operating leases. The Swiss lease is cancelable at the end of each 12-month
period ending December. At December 31, 1999, lease commitments under this
agreement amounted to $11,881. The U.S. lease expires in January 2002 and
requires annual rent of $83,000. Future lease commitments are as follows:
Year ending December 31, 2000 $83,000
2001 83,000
2002 83,000
24
<PAGE>
ITEM 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
Part III
Item 10 Directors and Executive Officers of the Registrant
The positions held by each Director and Officer of the Company as of March 31,
2000 are stated below:
<TABLE>
<CAPTION>
Name Age Position with the Company
---- --- -------------------------
<S> <C> <C>
Patrick Planche .......................... 36 Chief Executive Officer, President,
Treasurer and Director
Francois Planche .......................... 43 Secretary and Director
Jose Canales la Rosa....................... 43 Director
</TABLE>
Mr. Patrick Planche has been Chief Executive Officer, President and a
director of the Company since August 1998. He is the President, a director and
co-founder of the Company's wholly owned subsidiary, Lumitech S.A. which was
organized in 1992 under the name OTWD On Time Diffusion S.A. Swiss Lumitech was
engaged in the international publication and distribution of the book A Guide to
Swatchwatches, before redirecting its activities in 1993 to the field of
photoluminescence and graphic arts. Patrick Planche is the brother of Francois
Planche.
Mr. Francois Planche has been secretary and a director of the Company since
August 1998; and is a director and co-founder of the Company's wholly owned
subsidiary, Swiss Lumitech. He is the author of the reference book, A Guide to
Swatchwatches, which was published and distributed by Swiss Lumitech prior to
its change in strategic direction in 1993 to the field of photoluminescence and
graphic arts. Francois Planche is the brother of Patrick Planche.
Mr. Jose Canales la Rosa has been a director of the Company since August
1998; and, since 1997 has collaborated with Swiss Lumitech in the development of
luminescent pictures for textiles, as well as the industrialization of
manufacturing processes for luminescent printing sheets. Since 1987, Mr. Canales
has been a co-director of Widemax B.V. (Holland), a leading company in the
manufacture of textiles.
All directors are elected each year at the annual meeting of shareholders.
All officers are elected at the first meeting of the Board following the annual
meeting of shareholders and hold office for one year.
Compensation Committee Report on Executive Compensation
The Board of Directors of the Company has not constituted a Compensation
Committee from its members and accordingly the following is the report of the
entire Board of Directors. The Board is responsible for reviewing the
compensation of the executive officers of the Company.
Compensation Philosophy. The Company has not developed a formal plan for the
compensation management, as its primary focus, and application of working
capital, is the development of its products and markets. In structuring any
compensation program for management, however, the Board of Directors will seek
to establish compensation policies that provide management with a performance
incentive, and that align the interests of senior management with stockholder
interests. Such program will include salary and annual incentives as its basic
components and, in
25
<PAGE>
establishing the total amount and mix of these components of compensation, the
Board expects to consider the past performance and anticipated future
contribution of each executive officer.
Salary. The salaries of the executive officers (including the Chief Executive
Officer) are reviewed annually by the Board of Directors. The Board has not
considered compensation levels for comparable positions at similar companies in
determining compensation levels for management. Instead, compensation levels for
executive officers have been based on the Board's assessment of the Company's
liquidity and corresponding ability to compensate its executive officers at any
level.
Annual Incentives. The Board historically has never approved or, thus far, even
considered an executive incentive plan which would provide executive officers
(including the Chief Executive Officer) with the opportunity to earn specified
percentages of their base salary based upon targeted financial goals or the
achievement of individual objectives and a subjective assessment of the
executive's performance. There were no incentive awards or bonuses paid in the
1999 fiscal year.
Compensation of the Chief Executive Officer. Mr. Patrick Planche's salary for
fiscal 1999 was determined by the Board based upon the Company's working capital
limitations, and was not intended to reflect the Board's view of his value to
the Company.
Item 11 Executive Compensation
Director Compensation
- ---------------------
The Company does not currently pay cash compensation to its directors.
Executive Compensation
- ----------------------
The following table sets forth the aggregate cash compensation paid by the
Company with respect to the fiscal years ended December 31, 1999, 1998 and 1997
to the Chief Executive Officer.
Name and Position Year Salary Bonus Other
- ----------------- ---- ------ ----- -----
Patrick Planche 1999 $ 7,500 $0 $0
Chief Executive Officer 1998 14,000 0 0
President and Treasurer 1997 8,000 0 0
Compensation of Executive Officers: There are no employment contracts or
agreements in effect for any officer of the Company. The compensation for
executive officers is reviewed annually. The Board has not considered
compensation levels for comparable positions at similar companies in determining
compensation levels for management. Instead, compensation levels for executive
officers have been based on the Board's assessment of the Company's liquidity
and corresponding ability to compensate its executive officers at any level.
Item 12 Security Ownership of Certain Beneficial Owners
The following table sets forth certain information regarding the Company's
Common Stock owned as of December 31, 1999 by (i) each person (or group of
affiliated persons) known by the Company to be the beneficial owner of more than
5% of the Company's Common Stock (ii) each of the Company's directors, (iii) the
Chief Executive Officer and each of the other individuals named in the Summary
Compensation Table (hereinafter referred to as the "Named Executive Officers")
and (iv) all current executive officers and directors as a group. Except as
otherwise indicated in the footnotes to this table, the Company believes that
each of the person or entities named in this table has sole voting and
investment power with respect to all the shares or Common Stock indicated.
26
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Beneficially
Directors and Named Executive Officers Owned Percent
- -------------------------------------- ----- -------
<S> <C> <C>
Patrick Planche
17A Mocassin Path
South Natick, MA 7,283,750 22.8%
Francois Planche
36 Avenue Cardinal-Mermillod,
1227 Courage, Switzerland 7,283,750 22.8%
Jose Canales la Rosa
Oostrikkerdijk 21 A
5595 SC Leende
The Netherlands 2,040,000 6.4%
All executives officers and directors as a group (3 persons) 16,607,500 51.9%
Additional 5% Stockholders
Holding Canales B.V. (1)
Oostrikkerdijk 21A
5595 SC Leende
The Netherlands 4,000,000 12.5%
Mexor B.V. (1)
Spaarpot 5
5667 KV Geldrop
The Netherlands 1,960,000 6.1%
Orfedor S.A. (1)
23 Rue du Maillard
Senia 410
94567 Rungis Cedex
France 1,960,000 6.1%
Dikran Meguerditch Gabrache (1)
23 Rue du Maillard
Senia 410
94567 Rungis Cedex
France 1,764,000 5.5%
Socol
Rue du Lac 24
1020 Renens
Switzerland 2,500,000 7.8%
</TABLE>
(1) As reported in, and based solely upon, a Schedule 13D, filed with the
Securities and Exchange Commission on April 26, 1999, by Holding Canales
B.V. and others (the "Canales Schedule 13D"). According to the Canales
Schedule 13D, of the 4,000,000 shares of the Company's common stock
owned by Holding Canales B.V., (the "Holding Canales Shares"), (i)
Holding Canales B.V. beneficially owns all 4,000,000 of the Holding
Canales Shares, (ii) Jose Canales la Rosa beneficially owns 2,040,000 of
the Holding Canales Shares, (iii) Mexor B.V. beneficially owns 1,960,000
of the Holding Canales Shares, (iv) Orfedor S.A. beneficially owns
1,960,000 of the Holding Canales Shares, and (v) Dikran Meguerditch
Gabrache beneficially owns 1,764,000 of the Holding Canales Shares. In
each case, the beneficial owner listed above shares voting and
dispositive power over such shares.
27
<PAGE>
Item 13. Certain Relationships and Related Transactions
At December 31, 1998, a company controlled by Jose Canales la Rosa ("Canales"),
one of the Company's directors, had agreed to terminate and cancel a license
arrangement dated June 30, 1997 pursuant to which the he had obtained an
exclusive license to use and exploit the Company's luminescence technology in a
territory comprised of the European countries. Pursuant to said informal
agreement, the Company agreed to the payment of $170,000 to Canales of which
$70,000 was reimbursement for costs and expenses it paid or incurred in the
development of processes, products and markets. By agreement dated March 31,
1999, Canales formally agreed to the termination of its exclusive license in
consideration for which the Company confirmed its agreement to pay $70,000 in
reimbursement of the costs and expenses of Canales, and further agreed to repay
Canales the $100,000 paid by the him to the Company in 1997. Said agreement
contemplates the payment for such amounts, without interest, at any time on or
before March 31, 2004.
During 1999, the Company entered into a technology transfer agreement with Socol
S.A. ("Socol") whose major shareholder is a shareholder of the Company, in which
production processes and know how developed by Socol using the Lumicorp Products
rights was acquired in exchange for an obligation to issue 2.5 million shares of
common stock with a value of $1,875,000.
At December 31, 1999, the Company has amounts owed to two of the Company's
directors, Francois Planche and Jose Canales la Rosa in the amounts of $115,000
and $166,500, respectively, pursuant to two separate agreements (the "Director's
Note Agreements"). The Director's Note Agreements have no stated maturity and
have an interest rate of 7%. The borrowings under the Director's Note Agreements
are not secured, and the note holders have agreed not to require payment in cash
before January 1, 2001.
28
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(A) 1. Financial Statements
The financial statements are listed under Part II, Item 8 of this Report.
2. Financial Statement Schedules
None.
3. Exhibits
The exhibits are listed below under Part IV, Item 14(c) of this Report.
(B) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended December 31,
1999.
(C) Exhibits
The following exhibits are filed as part of this report:
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
3.1 Articles of Incorporation of Advanced Lumitech,
Inc. and all amendments and modifications thereto,
filed with the Secretary of State of the State of
Nevada as of March 29, 1999 (filed as Exhibit 3.1
to the Company's 1998 Form 10-K).
3.2 By-laws of Advanced Lumitech, Inc. (filed as
Exhibit 3.2 to the Company's 1998 Form 10-K).
4 Specimen Certificate representing the Company's
Common Stock (filed as Exhibit 4 to the Company's
1998 Form 10-K).
10.1 Merger Agreement dated as of August 12, 1998, by
and among the company, Lumitech, S.A. and Patrick
Planche, pursuant to which the Company acquired
100% of the issued and outstanding shares of the
common stock of Lumitech, S.A. (filed as Exhibit
10.1 to the Company's 1998 Form 10-K)
10.2 Patent Assignment Agreement respecting the
Company's luminescence technology dates as of
January 16, 1996, as amended on March 31, 1999,
between Jacques-Charles Collett and Lumitech S.A.
(formerly known as OTWD On Time Diffusion S.A.)
(Filed as Exhibit 10.2 to the Company's 1998 Form
10-K)
10.3 Agreement dated as of March 31, 1999, between
Lumitech, S.A. and Luminescent Europe Technologies
B.V. (the "Netherlands Affiliate"), providing for
the termination for all rights and interests of the
Netherlands Affiliate with respect to the Company's
luminescence technology (filed as Exhibit 10.3 to
the Company's 1998 Form 10-K).
29
<PAGE>
10.4 Socol Agreement dated as of March 31, 1999, between the
Company and Socol S.A., pursuant to which Socol disclaims any
interest in the Company's Luminescence product technology
(filed as Exhibit 10.4 to the Company's 1998 Form 10-K).
10.5 Credit Agreement dates as of August 6, 1997, as amended on
September 9, 1998, between Lumitech, S.A. and Credit Suisse
(filed as Exhibit 10.5 to the Company's 1998 Form 10-K).
10.6 Agreement dated as of December 28, 1998, between Lumitech,
S.A. and Lumi Corp., providing for the termination of all
rights and interests of Lumi Corp. with respect to the
Company's luminescence technology (filed as Exhibit 10.6 to
the Company's 1998 Form 10-K).
10.7 Lease by and between Boston Properties Limited Partnership
and Advanced Lumitech, Inc. for corporate office space in
Waltham, MA. (filed herewith)
10.8 Subscription Agreement (filed herewith)
10.9 Warrant Agreement (filed herewith)
23.1 Consent of Independent Auditors (filed herewith)
25 List of Subsidiaries
27 Financial Data Schedule (filed herewith)
30
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ADVANCED LUMITECH, INC.
Date: May 16, 2000 /s/ Patrick Planche
-------------------------------------
Patrick Planche
Principal Executive, Financial and
Accounting Officer
Date: May 16, 2000 /s/ Francois Planche
-------------------------------------
Francois Planche
Director
Date: May 16, 2000 /s/ Jose Canales la Rosa
-------------------------------------
Jose Canales la Rosa
Director
31
<PAGE>
Exhibit 10.7
RESERVOIR PLACE II
WALTHAM, MASSACHUSETTS
LEASE
THIS INSTRUMENT IS AN INDENTURE OF LEASE in which the Landlord and the
Tenant are the parties hereinafter named, and which relates to space in a
certain building (the "Building") known as Reservoir Place II and with an
address at 1601 Trapelo Road, Waltham, Massachusetts.
The parties to this Indenture of Lease hereby agree with each other as
follows:
ARTICLE I
REFERENCE DATA
1.1 Subjects Referred To:
Each reference in this Lease to any of the following subjects shall be
construed to incorporate the data stated for that subject in this Article:
DATE OF LEASE: January 18, 2000
LANDLORD: Boston Properties Limited Partnership, a Delaware
limited partnership, the general partner of which is
Boston Properties, Inc., a Delaware corporation
LANDLORD'S ORIGINAL c/o Boston Properties, Inc.
ADDRESS: 800 Boylston Street, Suite 400
Boston, Massachusetts 02199-8001
TENANT: Advanced Lumitech, Inc.
TENANT'S ORIGINAL 92 High Rock Street
ADDRESS: Needham, MA 02492
TENANT'S CONSTRUCTION
REPRESENTATIVE: _________________
COMMENCEMENT DATE: See Section 2.4
RENT COMMENCEMENT
-1-
<PAGE>
DATE: The earlier of (x) February 1, 2000 or (y) the date
upon which Tenant commences to use the Premises for
the Permitted Use
TERM OR LEASE TERM
(SOMETIMES CALLED
THE ORIGINAL TERM): Twenty-Four (24) calendar months (plus the partial
month, if any, immediately following the
Commencement Date), unless extended or sooner
terminated as provided in this Lease.
EXTENSION OPTION: Not applicable
THE SITE: That certain parcel of land located on Trapelo Road,
Waltham, Middlesex County, Massachusetts, being more
particularly described in Exhibit A attached hereto.
THE BUILDING: The Building known as Reservoir Place II, and
numbered 1601 Trapelo Road, Waltham, Massachusetts,
located on the site and containing the Total
Rentable Floor Area set forth below.
THE ADDITIONAL BUILDING: The other Building known as Reservoir Place I
located on the Site and containing the Total
Rentable Floor Area set forth below.
THE BUILDINGS: The Building and the Additional Building.
THE COMPLEX: The Building and the Additional Building together
with all parking areas, garage, and structures and
the Site.
TENANT'S SPACE: A portion of the second (2nd) floor of the Building
in accordance with the floor plan annexed hereto as
Exhibit D and incorporated herein by reference.
NUMBER OF Privileges for parking ten (10) automobiles, four
PARKING PRIVILEGES: (4) of which are located in the garage below the
Building, and six (6) of which will be located on
the outdoor surface lot.
ANNUAL FIXED RENT: During the Original Term of this Lease at the annual
rate of Eighty-Three Thousand Sixty-One and
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00/100 Dollars ($83,061.00) (being the product of
(i) 33.00 and (ii) the "Rentable Floor Area of
Tenant's Space" (hereinafter defined in this Section
1.1). The monthly installment of annual fixed rent
during the Original Term is $6,921.75.
BASE OPERATING
EXPENSES: Landlord's Operating Expenses (as hereinafter
defined in Section 2.6) for calendar year 2000,
being January 1, 2000 through December 31, 2000.
BASE TAXES: Landlord's Tax Expenses (as hereinafter defined in
Section 2.7) for fiscal tax year 2000, being July 1,
1999 through June 30, 2000.
TENANT ELECTRICITY: Initially as provided in Section 2.8 subject to
adjustment as provided in Section 2.8.
RENTABLE FLOOR AREA 2,517 square feet.
OF TENANT'S SPACE
(SOMETIMES ALSO
CALLED RENTABLE FLOOR
AREA OF THE PREMISES):
TOTAL RENTABLE FLOOR 368,257 square feet.
AREA OF THE BUILDING:
TOTAL RENTABLE FLOOR 161,734 square feet.
AREA OF THE ADDITIONAL
BUILDING:
TOTAL RENTABLE FLOOR 529,991 square feet.
AREA OF THE BUILDINGS:
PERMITTED USE: General office purposes.
INITIAL MINIMUM
LIMITS OF TENANT'S
COMMERCIAL GENERAL
LIABILITY INSURANCE: $2,000,000.00 combined single limit per occurrence
on a per location basis
CO-BROKERS: Grubb & Ellis, Inc. and Spaulding & Slye Colliers
International
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SECURITY DEPOSIT: $13,843.50
1.2 Exhibits. There are incorporated as part of this Lease:
EXHIBIT A Description of Site
EXHIBIT B Tenant Plan and Working Drawing Requirements
EXHIBIT C Landlord's Services
EXHIBIT D Floor Plan
EXHIBIT E Commencement Date Agreement
EXHIBIT F Intentionally Omitted
EXHIBIT G List of Mortgages
1.3 Table of Articles and Sections
ARTICLE I-REFERENCE DATA
1.1 Subjects Referred to
1.2 Exhibits
1.3 Table of Articles and Sections
ARTICLE II-THE BUILDINGS, PREMISES, TERM AND RENT
2.1 The Premises
2.1.1 Relocation of Tenant's Space
2.2 Rights To Use Common Facilities
2.2.1 Tenant's Parking
2.3 Landlord's Reservations
2.4 Habendum
2.5 Monthly Fixed Rent Payments
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2.6 Adjustment for Operating Expenses
2.7 Adjustment for Real Estate Taxes
2.8 Tenant Electricity
ARTICLE III-CONDITION OF PREMISES; TENANT ALTERATIONS
3.1 Condition of Premises
3.2 Intentionally Omitted
3.3 Tenant Alterations and Additions
3.4 General Provisions Applicable to Construction
3.5. Special Allowance
ARTICLE IV-LANDLORD'S COVENANTS; INTERRUPTIONS AND DELAYS
4.1 Landlord's Covenants
4.1.1 Services Furnished by Landlord
4.1.2 Additional Services Available to Tenant
4.1.3 Roof, Exterior Wall, Floor Slab and Common Facility Repairs
4.1.4 Door Signs
4.2 Interruptions and Delays in Services and Repairs, etc.
ARTICLE V-TENANT'S COVENANTS
5.1 Payments
5.2 Repair and Yield Up
5.3 Use
5.4 Obstructions; Items Visible From Exterior; Rules and Regulations
5.5 Safety Appliances; Licenses
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5.6 Assignment; Sublease
5.7 Indemnity; Insurance
5.8 Personal Property at Tenant's Risk
5.9 Right of Entry
5.10 Floor Load; Prevention of Vibration and Noise
5.11 Personal Property Taxes
5.12 Compliance with Laws
5.13 Payment of Litigation Expenses
ARTICLE VI-CASUALTY AND TAKING
6.1 Fire and Casualty-Termination or Restoration; Rent Adjustment
6.2 Uninsured Casualty
6.3 Eminent Domain-Termination or Restoration
6.4 Eminent Domain Damages Reserved
ARTICLE VII-DEFAULT
7.1 Tenant's Default
7.2 Landlord's Default
ARTICLE VIII-MISCELLANEOUS PROVISIONS
8.1 Extra Hazardous Use
8.2 Waiver
8.3 Cumulative Remedies
8.4 Quiet Enjoyment
8.5 Notice To Mortgagee and Ground Lessor
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8.6 Assignment of Rents
8.7 Surrender
8.8 Brokerage
8.9 Invalidity of Particular Provisions
8.10 Provisions Binding, Etc.
8.11 Recording
8.12 Notices
8.13 When Lease Becomes Binding
8.14 Section Headings
8.15 Rights of Mortgagee
8.16 Status Report and Financial Statements
8.17 Self-Help
8.18 Holding Over
8.19 Non-Subrogation
8.20 Intentionally Omitted
8.21 Security Deposit
8.22 Late Payment
8.23 Governing Law
8.24 Additional Rent
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ARTICLE II
BUILDING, PREMISES, TERM AND RENT
2.1 Landlord hereby demises and leases to Tenant, and Tenant hereby hires and
accepts from Landlord, Tenant's Space in the Building excluding exterior
faces of exterior walls, the common stairways and stairwells, elevators
and elevator wells, fan rooms, electric and telephone closets, janitor
closets, freight elevator vestibules, and pipes, ducts, conduits, wires
and appurtenant fixtures serving exclusively or in common other parts of
the Building and if Tenant's Space includes less than the entire rentable
area of any floor, excluding the common corridors, elevator lobbies and
toilets located on such floor.
Tenant's Space with such exclusions is hereinafter sometimes referred to
as the "Premises". The term "Building" means the Building identified on
the first page, and which is the subject of this Lease and being one of
the two (2) Buildings erected on the Site by the Landlord; the term "Site"
means all, and also any part, of the Land described in Exhibit A, plus any
additions or reductions thereto resulting from the change of any abutting
street line and all parking areas and structures. The terms "Property" or
"Complex" means the two (2) Buildings and the Site.
2.1.1 Tenant hereby agrees with Landlord that, upon the request of Landlord made
from time to time, Tenant shall relocate from the Premises then demised to
Tenant under this Lease (the "Original Premises") to other premises (the
"Relocated Premises") within the Building and upon such relocation the
Relocated Premises shall become the premises demised under this Lease and
wherever the term "Premises" is used herein the same thereafter shall mean
and refer to the Relocated Premises. Landlord, at its sole cost and
expense, shall perform the partitioning of the Relocated Premises and
shall place the same into substantially equivalent condition to that in
which the Original Premises were in prior to such relocation, and Landlord
shall also reimburse Tenant for Tenant's reasonable out-of-pocket moving
expenses in so relocating to the Relocated Premises upon billing therefor
from Tenant, which billing shall include reasonable evidence thereof in
the form of paid invoices, receipts and the like. Tenant shall not be
required to vacate the Original Premises and to relocate to the Relocated
Premises until the Relocated Premises shall be substantially complete
subject to punch list items and items of long lead time. Upon any such
relocation the Tenant shall enter into an amendment to this Lease
confirming such relocation, but the Tenant's failure to enter into such
amendment shall not affect in any manner the relocation of the Premises
demised under this Lease from the Original Premises to the Relocated
Premises.
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2.2 Subject to Landlord's right to change or alter any of the following in
Landlord's discretion as herein provided, Tenant shall have, as
appurtenant to the Premises, the non-exclusive right to use in common with
others, but not in a manner or extent that would materially interfere with
the normal operation and use of the Building as a multi-tenant office
building and subject to reasonable rules of general applicability to
tenants of the Building from time to time made by Landlord of which Tenant
is given notice: (a) the common lobbies, corridors, stairways, and
elevators of the Building, and the pipes, ducts, shafts, conduits, wires
and appurtenant meters and equipment serving the Premises in common with
others, (b) the loading areas serving the Building and the common walkways
and driveways necessary for access to the Building, and (c) if the
Premises include less than the entire rentable floor area of any floor,
the common toilets, corridors and elevator lobby of such floor.
Notwithstanding anything to the contrary herein, Landlord has no
obligation to allow any particular telecommunication service provider to
have access to the Building or the Premises. If Landlord permits such
access, Landlord may condition such access upon the payment to Landlord by
the service provider of fees assessed by Landlord in its sole discretion.
2.2.1 In addition, Landlord shall provide to Tenant monthly privileges in
the number specified in Section 1.1 for the parking of automobiles,
in common with use by other tenants from time to time of the
Complex, and on a first-come, first-served basis, and Landlord shall
not be obligated to furnish stalls or spaces on the Site
specifically designated for Tenant's use. Tenant covenants and
agrees that it and all persons claiming by, through and under it,
shall at all times abide by all reasonable rules and regulations
promulgated by Landlord with respect to the use of the parking areas
on the Site. The parking privileges granted herein are
non-transferable except to a permitted assignee or subtenant as
provided in Section 5.6 through Section 5.6.5. Further, Landlord
assumes no responsibility whatsoever for loss or damage due to fire,
theft or otherwise to any automobile(s) parked on the Site or to any
personal property therein, however caused, and Tenant covenants and
agrees, upon request from Landlord from time to time, to notify its
officers, employees, agents and invitees of such limitation of
liability. Tenant acknowledges and agrees that a license only is
hereby granted, and no bailment is intended or shall be created.
2.3 Landlord reserves the right from time to time, without unreasonable
interference with Tenant's use: (a) to install, use, maintain, repair,
replace and relocate for service to the Premises and other parts of the
Building, or either, pipes, ducts, conduits, wires and appurtenant
fixtures, wherever located in the Premises or Building, and (b) to alter
or relocate any other common facility, provided that substitutions are
substantially equivalent or better. Installations, replacements and
relocations referred to in clause (a) above shall be located so far as
practicable in
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the central core area of the Building, above ceiling surfaces, below floor
surfaces or within perimeter walls of the Premises. Except in the case of
emergencies, Landlord agrees to use its best efforts to give Tenant
reasonable advance notice of any of the foregoing activities which require
work in the Premises.
2.4 The Term of this Lease shall be the period specified in Section 1.1 hereof
as the "Lease Term", unless sooner terminated or extended as herein
provided. If Section 1.1 provides for a fixed Commencement Date, then the
Commencement Date of the Lease Term hereof shall be such date. Otherwise,
the Lease Term hereof shall commence on, and the Commencement Date shall
be the day on which the Premises are delivered by Landlord to Tenant.
In the case where the Premises are to be delivered in their AS-IS
condition, the day on which the Premises are delivered by Landlord to
Tenant shall be the date on which the Landlord delivers the Premises to
Tenant free and clear of all other tenants and occupants.
As soon as may be convenient after the Commencement Date has been
determined, Landlord and Tenant agree to join with each other in the
execution, in the form of Exhibit E hereto, of a written Commencement Date
Agreement in which the Commencement Date and specified Lease Term of this
Lease shall be stated. If Tenant shall fail to execute such Agreement, the
Commencement Date and Lease Term shall be as reasonably determined by
Landlord in accordance with the terms of this Lease.
2.5 Tenant agrees to a to Landlord, or as directed by Landlord, at P.O. Box
3557, Boston. MA 02241-3557 or at such other place as Landlord shall from
time to time designate by notice, on the Rent Commencement Date (defined
in Section 1.1 hereof) and thereafter monthly, in advance, on the first
day of each and every calendar month during the Original Term, a sum equal
to one twelfth (1/12th) of the Annual Fixed Rent (sometimes hereinafter
referred to as "fixed rent") and on the first day of each and every
calendar month during the extension option period (if exercised), a sum
equal to one twelfth (1/12th) of the annual fixed rent as determined in
Section 8.20 for the applicable extension option period
Annual Fixed Rent for any partial month shall be paid by Tenant to
Landlord at such rate on a pro rata basis, and, if the Rent Commencement
Date is a day other than the first day of a calendar month, the first
payment which Tenant shall make to Landlord shall be a payment equal to a
proportionate part of such monthly Annual Fixed Rent for the partial month
from the Rent Commencement Date to the first day of the succeeding
calendar month.
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Other charges payable by Tenant on a monthly basis, as hereinafter
provided, likewise shall be prorated, and the first payment on account
thereof shall be determined in similar fashion but shall commence on the
Rent Commencement Date; and other provisions of this Lease calling for
monthly payments shall be read as incorporating this undertaking by
Tenant.
The Annual Fixed Rent and all other charges for which provision is herein
made shall be paid by Tenant to Landlord, without offset, deduction or
abatement except as otherwise specifically set forth in this Lease.
2.6 "Landlord's Operating Expenses" means the cost of operation of the
Building and the Site which shall exclude costs of special services
rendered to tenants (including Tenant) for which a separate charge is
made, but shall include, without limitation, the following: premiums for
insurance carried with respect to the Building and the Site (including,
without limitation, liability insurance, insurance against loss in case of
fire or casualty and insurance of monthly installments of fixed rent and
any additional rent which may be due under this Lease and other leases of
space in the Building for not more than 12 months in the case of both
fixed rent and additional rent and if there be any first mortgage of the
Property, including such insurance as may be required by the holder of
such first mortgage); compensation and all fringe benefits, workmen's
compensation insurance premiums and payroll taxes paid to, for or with
respect to all persons engaged in the operating, maintaining, managing,
insuring or cleaning of the Building or Site, water, sewer, electric, gas,
oil and telephone charges (excluding heating, ventilating and air
conditioning, electricity and utility charges separately chargeable to
tenants); cost of building and cleaning supplies and equipment; cost of
maintenance, cleaning and repairs (other than repairs not properly
chargeable against income or reimbursed from contractors under
guarantees); cost of snow removal and care of landscaping; payments under
service contracts with independent contractors; payments by the Landlord
to the town in which the Complex is located relating to traffic safety,
fire safety, and other governmental services and programs; management fees
at reasonable rates consistent with the type of occupancy and the service
rendered; and all other reasonable and necessary expenses paid in
connection with the operation, cleaning, management, insuring and
maintenance of the Building and the Site and properly chargeable against
income; provided, however, there shall be included (a) depreciation for
capital expenditures made by Landlord (i) to reduce operating expenses if
Landlord shall have reasonably determined that the annual reduction in
operating expenses shall exceed depreciation therefor or (ii) to comply
with applicable laws, rules, regulations, requirements, statutes,
ordinances, by-laws and court decisions of all public authorities which
are now or hereafter in force (herein collectively called "Legal
Requirements"); plus (b) in the case of both (i) and (ii) an interest
factor, reasonably determined by Landlord, as being the interest rate then
charged for long term mortgages by institutional lenders on like
properties within the
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locality in which the Building is located; depreciation in the case of
both (i) and (ii) shall be determined by dividing the original cost of
such capital expenditure by the number of years of useful life of the
capital item acquired and the useful life shall be reasonably determined
by Landlord in accordance with generally accepted accounting principles
and practices in effect at the time of acquisition of the capital item;
and further provided, however, if Landlord reasonably concludes on the
basis of engineering estimates that a particular capital expenditure will
effect savings in other Operating Expenses, including, without limitation,
energy related costs, and that such projected savings will, on an annual
basis ("Projected Annual Savings"), exceed the annual depreciation
therefor, then and in such event the amount of depreciation for such
capital expenditure shall be increased to an amount equal to the Projected
Annual Savings; and in such circumstance, the increased depreciation (in
the amount of the Projected Annual Savings) shall be made for such period
of time as it would take to fully amortize the cost of the item in
question, together with interest thereon at the interest rate as aforesaid
in equal monthly payments, each in the amount of 1/12th of the Projected
Annual Savings, with such payment to be applied first to interest and the
balance to principal.
"Operating Expenses Allocable to the Premises" shall mean (a) the same
proportion of Landlord's Operating Expenses for and pertaining to the
Building as the Rentable Floor Area of Tenant's Space bears to the Total
Rentable Floor Area of the Building plus (b) the same proportion of
Landlord's Operating Expenses for and pertaining to the Site as the
Rentable Floor Area of Tenant's Space bears to the Total Rentable Floor
Area of the Buildings.
"Base Operating Expenses" is hereinbefore defined in Section 1.1.
"Base Operating Expenses Allocable to the Premises" means (i) the same
proportion of Base Operating Expenses for and pertaining to the Building
as the Rentable Floor Area of Tenant's Space bears to the Rentable Floor
Area of the Building plus (ii) the same proportion of Base Operating
Expenses for and pertaining to the Site as the Rentable Floor Area of
Tenant's Space bears to the Rentable Floor Area of the Buildings.
If with respect to any calendar year falling within the Term, or fraction
of a calendar year falling within the Term at the beginning or end
thereof, the Operating Expenses Allocable to the Premises (a) for a full
calendar year exceed Base Operating Expenses Allocable to the Premises, or
for any such fraction of a calendar year exceed the corresponding fraction
of Base Operating Expenses Allocable to the Premises, or (b) for a full
calendar year are less than Base Operating Expenses Allocable to the
Premises, or for any such fraction of a calendar year are less than the
corresponding fraction of Base Operating Expenses Allocable to the
Premises then, in the case of (a) Tenant shall pay to Landlord, as
Additional Rent, the amount of such excess, or in the case of (b) Landlord
shall
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credit eighty percent (80%) of such difference against monthly
installments of fixed rent next thereafter coming due or against any sums
then due from Tenant to Landlord under this Lease (or refund such eighty
percent (80%) if the Term has ended and Tenant has no further obligation
to Landlord). Such payments shall be made at the times and in the manner
hereinafter provided in this Section 2.6. The Base Operating Expenses
Allocable to the Premises do not include any costs in respect of
electricity and HVAC, provision for the payment of which is made in
Section 2.8 of this Lease.
Not later than one hundred twenty (120) days after the end of the first
calendar year or fraction thereof ending December 31 and of each
succeeding calendar year during the Term or fraction thereof at the end of
the Term, Landlord shall render Tenant a statement in reasonable detail
and according to usual accounting practices certified by a representative
of Landlord, showing for the preceding calendar year or fraction thereof,
as the case may be, Landlord's Operating Expenses and Operating Expenses
Allocable to the Premises. Said statement to be rendered to Tenant shall
also show for the preceding year or fraction thereof as the case may be
the amounts of operating expenses already paid by Tenant as additional
rent, and the amount of operating expenses remaining due from, or overpaid
by, Tenant for the year or other period covered by the statement. Within
thirty (30) days after the date of delivery of such statement, Tenant
shall pay to Landlord the balance of the amounts, if any, required to be
paid pursuant to the above provisions of this Section 2.6 with respect to
the preceding year or fraction thereof, or Landlord shall credit any
amounts due from it to Tenant pursuant to the above provisions of this
Section 2.6 against (i) monthly installments of fixed rent next thereafter
coming due or (ii) any sums then due from Tenant to Landlord under this
Lease (or refund such portion of the overpayment as aforesaid if the Term
has ended and Tenant has no further obligation to Landlord).
In addition, Tenant shall make payments monthly on account of Tenant's
share of increases in Landlord's Operating Expenses anticipated for the
then current year at the time and in the fashion herein provided for the
payment of Annual Fixed Rent. The amount to be paid to Landlord shall be
an amount reasonably estimated annually by Landlord to be sufficient to
cover, in the aggregate, a sum equal to Tenant's share of such increases
in Landlord's Operating Expenses for each calendar year during the Term.
Notwithstanding the foregoing provisions, no decrease in Landlord's
Operating Expenses shall result in a reduction of the amount otherwise
payable by Tenant if and to the extent said decrease is attributable to
vacancies in the Buildings rather than to any other causes.
2.7 If with respect to any full Tax Year or fraction of a Tax Year falling
within the Term, Landlord's Tax Expenses Allocable to the Premises as
hereinafter defined
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(a) for a full Tax Year exceed Base Taxes Allocable to the Premises, or
for any such fraction of a Tax Year exceed the corresponding fraction of
Base Taxes Allocable to the Premises, or (b) for a full Tax Year
subsequent to the date of full assessment are less than Base Taxes
Allocable to the Premises, or for any such fraction of a Tax Year
subsequent to the date of full assessment are less than the corresponding
fraction of Base Taxes Allocable to the Premises; then, on or before the
thirtieth (30th) day following receipt by Tenant of the certified
statement referred to below in this Section 2.7, in the case of (a) Tenant
shall pay to Landlord, as Additional Rent, the amount of such excess, or
in the case of (b) Landlord shall credit such difference against monthly
installments of fixed rent next thereafter coming due (or refund such
overpayment if the Term has ended and Tenant has no further obligation to
Landlord). In addition, payments by Tenant on account of increases in real
estate taxes anticipated for the then current year shall be made monthly
at the time and in the fashion herein provided for the payment of fixed
rent. The amount so to be paid to Landlord shall be an amount reasonably
estimated by Landlord to be sufficient to provide Landlord, in the
aggregate, a sum equal to Tenant's share of such increases, at least ten
(10) days before the day on which such payments by Landlord would become
delinquent. Not later than one hundred twenty (120) days after Landlord's
Tax Expenses Allocable to the Premises are determined for the first such
Tax Year or fraction thereof and for each succeeding Tax Year or fraction
thereof during the Term, Landlord shall render Tenant a statement in
reasonable detail certified by a representative of Landlord showing for
the preceding year or fraction thereof, as the case may be, real estate
taxes on the Building and the Site and abatements and refunds of any taxes
and assessments. Expenditures for legal fees and for other expenses
incurred in obtaining the tax refund or abatement may be charged against
the tax refund or abatement before the adjustments are made for the Tax
Year.
To the extent that real estate taxes shall be payable to the taxing
authority in installments with respect to periods less than a Tax Year,
the foregoing statement shall be rendered and payments made on account of
such installments. Notwithstanding the foregoing provisions, no decrease
in Landlord's Tax Expenses with respect to any Tax Year shall result in a
reduction of the amount otherwise payable by Tenant if and to the extent
said decrease is attributable to vacancies in the Building or partial
completion of the Building rather than to any other causes.
Terms used herein are defined as follows:
(i) "Tax Year" means the twelve-month period beginning July 1 each year
during the Term or if the appropriate governmental tax fiscal period
shall begin on any date other than July 1, such other date. If
during the Lease Term the Tax Year is changed by applicable law to
less than a full 12-
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month period, the Base Taxes and Base Taxes Allocable to the
Premises shall each be proportionately reduced.
(ii) "Landlord's Tax Expenses Allocable to the Premises" shall mean (a)
the same proportion of Landlord's Tax Expenses for and pertaining to
the Building as the Rentable Floor Area of Tenant's Space bears to
the Total Rentable Floor Area of the Building plus (b) the same
proportion of Landlord's Tax Expenses for and pertaining to the Site
as the Rentable Floor Area of Tenant's Space bears to the Total
Rentable Floor Area of the Buildings.
(iii) "Landlord's Tax Expenses" with respect to any Tax Year means the
aggregate real estate taxes on the Building and Site with respect to
that Tax Year, reduced by any abatement receipts with respect to
that Tax Year.
(iv) "Base Taxes" is hereinbefore defined in Section 1.1.
(v) "Base Taxes Allocable to the Premises" means (i) the same proportion
of Base Taxes for and pertaining to the Building as the Rentable
Floor Area of Tenant's Space bears to the Total Rentable Floor Area
of the Building, plus (ii) the same proportion of Base Taxes for and
pertaining to the Site as the Rentable Floor Area of Tenant's Space
bears to the Total Rentable Floor Area of the Buildings.
(vi) "Real estate taxes" means all taxes and special assessments of every
kind and nature assessed by any governmental authority on the
Building or Site which the Landlord shall become obligated to pay
because of or in connection with the ownership, leasing and
operation of the Site, the Building and the Property (including
without limitation, if applicable, the excise prescribed by Mass
Gen. Laws (Ter Ed) Chapter 121A, Section 10 and amounts in excess
thereof paid to the City of Waltham pursuant to agreement between
Landlord and the City) and reasonable expenses of any proceedings
for abatement of taxes. The amount of special taxes or special
assessments to be included shall be limited to the amount of the
installment (plus any interest, other than penalty interest, payable
thereon) of such special tax or special assessment required to be
paid during the year in respect of which such taxes are being
determined. There shall be excluded from such taxes all income,
estate, succession, inheritance and transfer taxes; provided,
however, that if at any time during the Term the present system of
ad valorem taxation of real property shall be changed so that in
lieu of the whole or any part of the ad valorem tax on real property
there shall be assessed on Landlord a capital levy or other tax on
the gross rents received with respect to the Site or Building or
Property, or a federal,
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state, county, municipal, or other local income, franchise, excise
or similar tax, assessment, levy or charge distinct from any now in
effect in the jurisdiction in which the Property is located)
measured by or based, in whole or in part, upon any such gross
rents, then any and all of such taxes, assessments, levies or
charges, to the extent so measured or based, shall be deemed to be
included within the term "real estate taxes" but only to the extent
that the same would be payable if the Site and Buildings were the
only property of Landlord.
2.8 Tenant shall pay to Landlord, as Additional Rent, Tenant's Proportionate
Share (hereinafter defined) of the cost incurred by the Landlord in
furnishing electricity and heating, ventilating and air conditioning
("HVAC") to the Building and the Site, including common areas and
facilities and space occupied by tenants, (but expressly excluding utility
charges separately chargeable to tenants for additional or special
services), and Tenant shall pay on account thereof, at the time that
monthly installments of Annual Fixed Rent are due and payable, as
Additional Rent, an amount equal to 1/12th (prorated for any partial
month) of the amount estimated by Landlord from time to time as the
Tenant's Proportionate Share of the annual cost thereof. If with respect
to any calendar year falling within the Term or fraction of a calendar
year falling within the Term at the beginning or end thereof, the Tenant's
Proportionate Share of the cost of furnishing electricity and HVAC to the
Building and the Site exceeds the amounts payable on account thereof, then
Tenant shall pay to Landlord, as Additional Rent, on or before the
thirtieth (30th) day following receipt by Tenant of the statement referred
to below in this Section 2.8, Tenant's Proportionate Share of the amount
of such excess. For and with respect to the electricity and HVAC of the
Building, the Tenant's Proportionate Share shall be a fraction, the
numerator of which is the Rentable Floor Area of Tenant's Space and the
denominator of which is the Total Rentable Floor Area of the Building, and
for and with respect to the electricity for the Site the Tenant's
Proportionate Share shall be a fraction, the numerator of which is the
Rentable Floor Area of Tenant's Space and the denominator of which is the
Total Rentable Floor Area of the Buildings.
Not later than one hundred twenty (120) days after the end of the first
calendar year or fraction thereof ending December 31 and of each
succeeding calendar year during the Term or fraction thereof at the end of
the Term, Landlord shall render Tenant a reasonably detailed accounting
certified by a representative of Landlord showing for the preceding
calendar year, or fraction thereof, as the case may be, the costs of
furnishing electricity and HVAC to the Building and the Site. Said
statement to be rendered to Tenant also shall show for the preceding year
or fraction thereof, as the case may be, the amount already paid by Tenant
on account of electricity and HVAC, and the amount remaining due from, or
overpaid by, Tenant for the year or other period covered by the statement.
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ARTICLE III
CONDITION OF PREMISES; ALTERATIONS BY TENANT
3.1 SUBSTANTIAL COMPLETION.
(A) Tenant shall accept the Premises in their AS-IS condition without any
obligation on the Landlord's part to perform any additions, alterations,
improvements, demolition or other work therein or pertaining thereto.
Tenant, at its sole cost and expense, shall perform all work necessary to
prepare the Premises for Tenant's occupancy in accordance with plans and
specifications prepared by an architect, licensed by the Commonwealth of
Massachusetts and reasonably approved by Landlord, such plans and
specifications to be subject to the reasonable approval of the Landlord.
Tenant shall submit to Landlord a detailed floor plan layout together with
working drawings (the "Tenant's Submission") for work to be performed by
Tenant to prepare the Premises for Tenant's occupancy. Such floor plan
layout and working drawings (the "Plans") shall contain at least the
information required by, and shall conform to the requirements of, Exhibit
B. Provided that the Plans contain at least the information required by,
and conform to the requirements of, said Exhibit B, Landlord's approval of
the Plans shall not be unreasonably withheld or delayed; however,
Landlord's determination of matters relating to aesthetic issues relating
to alterations or changes which are visible outside the Premises shall be
in Landlord's sole discretion. If Landlord disapproves of any Plans, then
Tenant shall promptly have the Plans revised by its architect to
incorporate all objections and conditions presented by Landlord and shall
resubmit such plans to Landlord no later than five (5) days after Landlord
has submitted to Tenant its objections and conditions. Such process shall
be followed until the Plans shall have been approved by the Landlord
without objection or condition.
Once the Plans have been approved by Landlord, Tenant, at its sole cost
and expense, shall promptly, and with all due diligence, perform the work
necessary to prepare the Premises for Tenant's occupancy as set forth on
the Plans, and, in connection therewith, the Tenant shall obtain all
necessary governmental permits and approvals for such work. All of such
work shall be performed strictly in accordance with the Plans and in
accordance with applicable Legal Requirements (as defined in Section 3.3
hereof) and Insurance Requirements (as defined in Section 3.3 hereof).
Tenant shall have such work performed by contractors, reasonably approved
by Landlord, which contractors shall provide to Landlord such insurance as
the Landlord may reasonably require. Landlord shall have the right to
provide such rules and regulations relative to the performance of such
work and any other work which the Tenant may perform under this Lease and
Tenant shall abide by all such reasonable rules and regulations and shall
cause all of its contractors to so abide. It shall be Tenant's obligation
to obtain a certificate
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of occupancy or other like governmental approval for the use and occupancy
of the Premises, and Tenant shall not open for business in the Premises
until and unless it has obtained such approval and has submitted to
Landlord a copy of the same together with waivers of lien from all of
Tenant's contractors in form adequate for recording purposes. Tenant shall
also prepare and submit to Landlord promptly after the Tenant's work is
substantially complete a set of as-built plans showing the work performed
by Tenant to the Premises.
3.2 Intentionally Omitted.
3.3 This Section 3.3 shall apply before and during the Term. All construction
work required or permitted by this Lease shall be done in a good and
workmanlike manner and in compliance with all applicable laws, ordinances,
rules, regulations, statutes, by-laws, court decisions, and orders and
requirements of all public authorities ("Legal Requirements") and all
Insurance Requirements (as defined in this Section 3.3 hereof). All of
Tenant's work shall be coordinated with any work being performed by or for
Landlord and in such manner as to maintain harmonious labor relations.
Each party may inspect the work of the other at reasonable times and shall
promptly give notice of observed defects. Each party authorizes the other
to rely in connection with design and construction upon approval and other
actions on the party's behalf by any Construction Representative of the
party named in Section 1.1 or any person hereafter designated in
substitution or addition by notice to the party relying. Tenant shall not
make alterations and additions to Tenant's space except in accordance with
plans and specifications therefor first approved by Landlord, which
approval shall not be unreasonably withheld. However, Landlord's
determination of matters relating to aesthetic issues relating to
alterations, additions or improvements which are visible outside the
Premises shall be in Landlord's sole discretion. Without limiting such
standard Landlord shall not be deemed unreasonable for withholding
approval of any alterations or additions (including, without limitation,
any alterations or additions to be performed by Tenant under Section 3.1)
which (a) involve or, in Landlord's opinion, might affect any structural
or exterior element of the Building, any area or element outside of the
Premises, or any facility serving any area of the Building outside of the
Premises, or (b) will delay completion of the Premises or Building, or (c)
will require unusual expense to readapt the Premises to normal office use
on Lease termination or increase the cost of construction or of insurance
or taxes on the Building or of the services called for by Section 4.1
unless Tenant first gives assurance acceptable to Landlord for payment of
such increased cost and that such readaptation will be made prior to such
termination without expense to Landlord, or (d) are inconsistent, in
Landlord's judgment, with alterations satisfying Landlord's standards for
new alterations in the Building. Landlord's review and approval of any
such plans and specifications and consent to perform work described
therein shall not be deemed an agreement by Landlord that such plans,
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specifications and work conform with applicable Legal Requirements and
requirements of insurers of the Building (herein called "Insurance
Requirements") nor deemed a waiver of Tenant's obligations under this
Lease with respect to applicable Legal Requirements and Insurance
Requirements nor impose any liability or obligation upon Landlord with
respect to the completeness, design sufficiency or compliance of such
plans, specifications and work with applicable Legal Requirements and
Insurance Requirements. All alterations and additions shall be part of the
Building unless and until Landlord shall specify the same for removal
pursuant to Section 5.2. All of Tenant's alterations and additions and
installation of furnishings shall be coordinated with any work being
performed by Landlord and in such manner as to maintain harmonious labor
relations and not to damage the Buildings or Site or interfere with
construction or operation of the Buildings and other improvements to the
Site and, except for installation of furnishings, shall be performed by
Landlord's general contractor or by contractors or workmen first approved
by Landlord. Except for work by Landlord's general contractor, Tenant,
before its work is started, shall secure all licenses and permits
necessary therefor; deliver to Landlord a statement of the names of all
its contractors and subcontractors and the estimated cost of all labor and
material to be furnished by them and security satisfactory to Landlord
protecting Landlord against liens arising out of the furnishing of such
labor and material; and cause each contractor to carry workmen's
compensation insurance in statutory amounts covering all the contractor's
and subcontractor's employees and commercial general liability insurance
or comprehensive general liability insurance with a broad form
comprehensive liability endorsement with such limits as Landlord may
reasonably require, but in no event less than $5,000,000.00 combined
single limit per occurrence on a per location basis (all such insurance to
be written in companies approved by Landlord and naming and insuring
Landlord and Landlord's managing agent as additional insureds and insuring
Tenant as well as the contractors), and to deliver to Landlord
certificates of all such insurance. Tenant agrees to pay promptly when due
the entire cost of any work done on the Premises by Tenant, its agents,
employees, or independent contractors, and not to cause or permit any
liens for labor or materials performed or furnished in connection
therewith to attach to the Premises or the Buildings or the Site and
immediately to discharge any such liens which may so attach. Tenant shall
pay, as additional rent, 100% of any real estate taxes on the Complex
which shall, at any time after commencement of the Term, result from any
alteration, addition or improvement to the Premises made by Tenant.
3.4 All construction work required or permitted by this Lease shall be done in
a good and workmanlike manner and in compliance with all applicable Legal
Requirements and Insurance Requirements now or hereafter in force. Each
party may inspect the work of the other at reasonable times and shall
promptly give notice of observed defects.
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ARTICLE IV
LANDLORD'S COVENANTS; INTERRUPTIONS AND DELAYS
4.1 Landlord covenants:
4.1.1 To furnish services, utilities, facilities and supplies set forth in
Exhibit C equal to those customarily provided by landlords in high
quality buildings in the Boston West Suburban Market subject to
escalation reimbursement in accordance with Section 2.6.
4.1.2 To furnish, at Tenant's expense, reasonable additional Building
operation services which are usual and customary in similar office
buildings in the Boston West Suburban Market upon reasonable advance
request of Tenant at reasonable and equitable rates from time to
time established by Landlord.
4.1.3 Subject to the escalation provisions of Section 2.6 and except as
otherwise provided in Article VI, (i) to make such repairs to the
roof, exterior walls, floor slabs and common areas and facilities as
may be necessary to keep them in serviceable condition and (ii) to
maintain the Building (exclusive of Tenant's responsibilities under
this Lease) in a first class manner comparable to the maintenance of
similar properties in the Boston West Suburban Market.
4.1.4 To provide and install, at Landlord's expense for the initial
installation (all changes thereafter at Tenant's expense), letters
or numerals on doors in the Premises to identify Tenant's official
name and Building address; all such letters and numerals shall be in
the building standard graphics and no others shall be used or
permitted on the Premises.
4.2 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 the necessity of Landlord or its agents entering the Premises
for any of the purposes in this Lease authorized, or for repairing the
Premises or any portion of the Building or Site however the necessity may
occur. In case Landlord is prevented or delayed from making any repairs,
alterations or improvements, or furnishing any services or performing any
other covenant or duty to be performed on Landlord's part by reason of any
cause reasonably beyond Landlord's control, including without limitation
strike, lockout, breakdown, accident, order or regulation of or by any
Governmental authority, or failure of supply, or inability by the exercise
of reasonable diligence to obtain supplies, parts or employees necessary
to furnish such services, or because of war or other emergency, or for any
cause due to any act or neglect of Tenant or Tenant's servants, agents,
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employees, licensees or any person claiming by, through or under Tenant,
or other causes reasonably beyond Landlord's control, Landlord shall not
be liable to Tenant therefor, nor, except as expressly otherwise provided
in Article VI, 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; provided, however, that in each instance of stoppage,
Landlord shall exercise reasonable diligence to eliminate the cause
thereof. Except in case of emergency repairs, Landlord will give Tenant
reasonable advance notice of any contemplated stoppage and will use
reasonable efforts to avoid unnecessary inconvenience to Tenant by reason
thereof.
ARTICLE V
TENANT'S COVENANTS
Tenant covenants during the term and such further time as Tenant occupies
any part of the Premises:
5.1 To pay when due all fixed rent and additional rent and all charges for
utility services rendered to the Premises (except as otherwise provided in
Exhibit C) and, as further additional rent, all charges for additional
services rendered pursuant to Section 4.1.2.
5.2 Except as otherwise provided in Article VI and Section 4.1.3 to keep the
Premises in good order, repair and condition, reasonable wear and tear
only excepted, and all glass in windows (except glass in exterior walls
unless the damage thereto is attributable to Tenant's negligence or
misuse) and doors of the Premises whole and in good condition with glass
of the same type and quality as that injured or broken, damage by fire or
taking under the power of eminent domain only excepted, and at the
expiration or termination of this Lease peaceably to yield up the Premises
all construction, work, improvements, and all alterations and additions
thereto in good order, repair and condition, reasonable wear and tear only
excepted, first removing all goods and effects of Tenant and, to the
extent specified by Landlord by notice to Tenant given at least ten (10)
days before such expiration or termination, the wiring for Tenant's
computer, telephone and other communication systems and equipment and all
alterations and additions made by Tenant and all partitions, and repairing
any damage caused by such removal and restoring the Premises and leaving
them clean and neat. Tenant shall not permit or commit any waste, and
Tenant shall be responsible for the cost of repairs which may be made
necessary by reason of damage to common areas in the Building, to
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the Site or to the other building caused by Tenant, Tenant's agents,
employees, contractors, sublessees, licensees, concessionaires or
invitees. Tenant shall maintain all its equipment, furniture and
furnishings in good order and repair.
5.3 Continuously from the commencement of the Term to use and occupy the
Premises for the Permitted Uses only, and not to injure or deface the
Premises, Building, the Additional Building, the Site or any other part of
the Complex nor to permit in the Premises or on the Site any auction sale,
vending machine, or inflammable fluids or chemicals, or nuisance, or the
emission from the Premises of any objectionable noise or odor, nor to use
or devote the Premises or any part thereof for any purpose other than the
Permitted Uses, nor any use thereof which is inconsistent with the
maintenance of the Building as an office building of the first class in
the quality of its maintenance, use and occupancy, or which is improper,
offensive, contrary to law or ordinance or liable 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.
Further, (i) Tenant shall not, nor shall Tenant permit its employees,
invitees, agents, independent contractors, contractors, assignees or
subtenants to, keep, maintain, store or dispose of (into the sewage or
waste disposal system or otherwise) or engage in any activity which might
produce or generate any substance which is or may hereafter be classified
as a hazardous material, waste or substance (collectively "Hazardous
Materials"), under federal, state or local laws, rules and regulations,
including, without limitation, 42 U.S.C. Section 6901 et seq., 42 U.S.C.
Section 9601 et seq., 42 U.S.C. Section 2601 et seq., 49 U.S.C. Section
1802 et seq. and Massachusetts General Laws, Chapter 21E and the rules and
regulations promulgated under any of the foregoing, as such laws, rules
and regulations may be amended from time to time (collectively "Hazardous
Materials Laws"), (ii) Tenant shall immediately notify Landlord of any
incident in, on or about the Premises, the Building or the Site that would
require the filing of a notice under any Hazardous Materials Laws, (iii)
Tenant shall comply and shall cause its employees, invitees, agents,
independent contractors, contractors, assignees and subtenants to comply
with each of the foregoing and (iv) Landlord shall have the right to make
such inspections (including testing) as Landlord shall elect from time to
time to determine that Tenant is complying with the foregoing.
5.4 Not to obstruct in any manner any portion of the Building not hereby
leased or any portion thereof or of the other building or of the Site used
by Tenant in common with others; not without prior consent of Landlord to
permit the painting or placing of any signs, curtains, blinds, shades,
awnings, aerials or flagpoles, or the like, visible from outside the
Premises; and to comply with all reasonable Rules and Regulations now or
hereafter made by Landlord, of which Tenant has been given notice, for the
care and use of the Building and Site and their facilities and approaches;
Landlord shall not be liable to Tenant for the failure of other occupants
of the Buildings to conform to such rules and regulations.
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5.5 To keep the Premises equipped with all safety appliances required by any
public authority because of any use made by Tenant other than normal
office use, 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 Use.
5.6 Except as otherwise expressly provided herein, Tenant covenants and agrees
that it shall not assign, mortgage, pledge, hypothecate or otherwise
transfer this Lease and/or Tenant's interest in this Lease or sublet
(which term, without limitation, shall include granting of concessions,
licenses or the like) the whole or any part of the Premises. Any
assignment, mortgage, pledge, hypothecation, transfer or subletting not
expressly permitted in or consented to by Landlord under Sections
5.6.1-5.6.5 shall be void, ab initio; shall be of no force and effect; and
shall confer no rights on or in favor of third parties. In addition,
Landlord shall be entitled to seek specific performance of, and other
equitable relief with respect to, the provisions hereof.
5.6.1 Notwithstanding the foregoing provisions of Section 5.6 above and
the provisions of Section 5.6.2 below, but subject to the provisions
of Sections 5.6.3, 5.6.4 and 5.6.5, below Tenant shall have the
right to assign this Lease or to sublet the Premises (in whole or in
part) to any parent or subsidiary corporation of Tenant or to any
corporation into which Tenant may be converted or with which it may
merge, provided that the entity to which this Lease is so assigned
or which so sublets the Premises has a credit worthiness (e.g.
assets on a pro forma basis using generally accepted accounting
principles consistently applied and using the most recent financial
statements) which is the same or better than the Tenant as of the
Date of this Lease. If any parent or subsidiary corporation of
Tenant to which this Lease is assigned or the Premises sublet (in
whole or in part) shall cease to be such a parent or subsidiary
corporation, such cessation shall be considered an assignment or
subletting requiring Landlord's consent.
5.6.1.1 Notwithstanding the provisions of Section 5.6 above, in
the event Tenant desires to assign this Lease or to sublet
the whole (but not part) of the Premises (no partial
subletting being permitted other than as provided in
Section 5.6.1), Tenant shall notify Landlord thereof in
writing and Landlord shall have the right at its sole
option, to be exercised within thirty (30) days after
receipt of Tenant's notice, to terminate this Lease as of
a date specified in a notice to Tenant, which date shall
not be earlier than sixty (60) days nor later than one
hundred and twenty (120) days after
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Landlord's notice to Tenant; provided, however, that upon
the termination date as set forth in Landlord's notice,
all obligations relating to the period after such
termination date (but not those relating to the period
before such termination date) shall cease and promptly
upon being billed therefor by Landlord, Tenant shall make
final payment of all rent and additional rent due from
Tenant through the termination date. In the event that
Landlord shall not exercise its termination rights as
aforesaid, or shall fail to give any or timely notice
pursuant to this Section the provisions of Sections
5.6.2-5.6.5 shall be applicable. This Section 5.6.1.1
shall not be applicable to an assignment or sublease
pursuant to Section 5.6.1.
5.6.2 Notwithstanding the provisions of Section 5.6 above but subject to
the provisions of this Section 5.6.2 and the provisions of Sections
5.6.3, 5.6.4 and 5.6.5 below, in the event that Landlord shall not
have exercised the termination right as set forth in Section
5.6.1.1, or shall have failed to give any or timely notice under
Section 5.6.1.1, then for a period of ninety (90) days (i) after the
receipt of Landlord's notice stating that Landlord does not elect
the termination right, or (ii) after the expiration of the thirty
(30) day period referred to in Section 5.6.1.1 in the event Landlord
shall not give any or timely notice under Section 5.6.1.1, as the
case may be, Tenant shall have the right to assign this Lease or
sublet the whole (but not part) of the Premises in accordance with
Tenant's notice to Landlord given as provided in Section 5.6.3
provided that, in each instance, Tenant first obtains the express
prior written consent of Landlord, which consent shall not be
unreasonably withheld or delayed. Without limiting the foregoing
standard, Landlord shall not be deemed to be unreasonably
withholding its consent to such a proposed assignment or subleasing
if:
(a) the proposed assignee or subtenant is not of a character
consistent with the operation of a first class office building (by
way of example Landlord shall not be deemed to be unreasonably
withholding its consent to an assignment or subleasing to any
governmental agency), or
(b) the proposed assignee or subtenant is not of good character and
reputation, or
(c) the proposed assignee or subtenant does not possess adequate
financial capability to perform the Tenant obligations as and when
due or required, or
(d) the assignee or subtenant proposes to use the Premises (or part
thereof) for a purpose other than the purpose for which the Premises
may be used as stated in Section 1.1 hereof, or
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(e) the character of the business to be conducted or the proposed
use of the Premises by the proposed subtenant or assignee shall (i)
be likely to increase Landlord's Operating Expenses beyond that
which Landlord now incurs for use by Tenant; (ii) be likely to
increase the burden on elevators or other Building systems or
equipment over the burden prior to such proposed subletting or
assignment; or (iii) violate or be likely to violate any provisions
or restrictions contained herein relating to the use or occupancy of
the Premises, or
(f) there shall be existing an Event of Default (defined in Section
7.1) or
(g) the proposed subtenant or assignee is a tenant or subtenant of
any portion of the Property (or any entity affiliated or related to
a tenant or subtenant of the Property) or is (or within the previous
sixty (60) days has been) in active negotiation with Landlord or any
affiliate of Landlord for other premises in the Site or in buildings
nearby the Site.
5.6.3 Tenant shall give Landlord prior notice of any proposed sublease or
assignment, and said notice shall specify the provisions of the
proposed assignment or subletting, including (a) the name and
address of the proposed assignee or subtenant, (b) in the case of a
proposed assignment or subletting pursuant to Section 5.6.2, such
information as to the proposed assignee's or proposed subtenant's
net worth and financial capability and standing as may reasonably be
required for Landlord to make the determination referred to in
Section 5.6.2 above (provided, however, that Landlord shall hold
such information confidential having the right to release same to
its officers, accountants, attorneys and mortgage lenders on a
confidential basis), (c) all of the terms and provisions upon which
the proposed assignment or subletting is to be made, (d) in the case
of a proposed assignment or subletting pursuant to Section 5.6.2,
all other information necessary to make the determination referred
to in Section 5.6.2 above and (e) in the case of a proposed
assignment or subletting pursuant to Section 5.6.1 above, such
information as may be reasonably required by Landlord to determine
that such proposed assignment or subletting complies with the
requirements of said Section 5.6.1. No partial subletting shall be
permitted.
If Landlord shall consent to the proposed assignment or subletting,
as the case may be, then, in such event, Tenant may thereafter
sublease (the whole but (except in the case of a partial sublease
under Section 5.6.1) not part of the Premises) or assign pursuant to
Tenant's notice, as given hereunder; provided, however, that if such
assignment or sublease shall
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not be executed and delivered to Landlord within ninety (90) days
after the date of Landlord's consent, the consent shall be deemed
null and void and the provisions of Section 5.6.1.1 shall be
applicable.
5.6.4 In addition, in the case of any assignment or subleasing as to which
Landlord may consent (other than an assignment or subletting
permitted under Section 5.6.1 hereof) such consent shall be upon the
express and further condition, covenant and agreement, and Tenant
hereby covenants and agrees that, in addition to the Annual Fixed
Rent, additional rent and other charges to be paid pursuant to this
Lease, one hundred percent (100%) of the "Assignment/Sublease
Profits" (hereinafter defined), if any, shall be paid to Landlord.
The "Assignment/Sublease Profits" shall be the excess, if any, of
(a) the "Assignment/Sublease Net Revenues" as hereinafter defined
over (b) the Annual Fixed Rent and additional rent and other charges
provided in this Lease (provided, however, that for the purpose of
calculating the Assignment/Sublease Profits in the case of a
sublease, appropriate proportions in the applicable Annual Fixed
Rent, additional rent and other charges under this Lease shall be
made based on the percentage of the Premises subleased and on the
terms of the sublease). The "Assignment/Sublease Net Revenues" shall
be the fixed rent, additional rent and all other charges and sums
payable either initially or over the term of the sublease or
assignment plus all other profits and increases to be derived by
Tenant as a result of such subletting or assignment, less the
reasonable costs of Tenant incurred in such subleasing or assignment
(the definition of which shall include but not necessarily be
limited to rent concessions, brokerage commissions and alteration
allowances) amortized over the term of the sublease or assignment.
All payments of the Assignment/Sublease Profits due Landlord shall
be made within ten (10) days of receipt of same by Tenant.
5.6.5 (A) It shall be a condition of the validity of any assignment or
subletting permitted under Section 5.6.1 above, or consented to
under Section 5.6.2 above, that both Tenant and the assignee or
sublessee agree directly with Landlord in a separate written
instrument reasonably satisfactory to Landlord which contains terms
and provisions reasonably required by Landlord, including, without
limitation, the agreement of the assignee or sublessee to be bound
by all the obligations of the Tenant hereunder, including, without
limitation, the obligation to pay the rent and other amounts
provided for under this Lease (but in the case of a partial
subletting pursuant to Section 5.6.1, such subtenant shall agree on
a pro rata basis to be so bound) including the provisions of
Sections 5.6 through
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5.6.5 hereof, but such assignment or subletting shall not relieve
the Tenant named herein of any of the obligations of the Tenant
hereunder, Tenant shall remain fully and primarily liable therefor
and the liability of Tenant and such assignee (or subtenant, as the
case may be) shall be joint and several. Further, and
notwithstanding the foregoing, the provisions hereof shall not
constitute a recognition of the assignment or the assignee
thereunder or the sublease or the subtenant thereunder, as the case
may be, and at Landlord's option, upon the termination of the Lease,
the assignment or sublease shall be terminated.
(B) As Additional Rent, Tenant shall reimburse Landlord promptly for
reasonable out of pocket legal and other expenses incurred by
Landlord in connection with any request by Tenant for consent to
assignment or subletting.
(C) If this Lease be assigned, or if the Premises or any part
thereof be sublet or occupied by anyone other than Tenant, Landlord
may upon prior notice to Tenant, at any time and from time to time,
collect rent and other charges from the assignee, sublessee or
occupant and apply the net amount collected to the rent and other
charges herein reserved, but no such assignment, subletting,
occupancy or collection shall be deemed a waiver of this covenant,
or a waiver of the provisions of Sections 5.6 through 5.6.5 hereof,
or the acceptance of the assignee, sublessee or occupant as a tenant
or a release of Tenant from the further performance by Tenant of
covenants on the part of Tenant herein contained, the Tenant herein
named to remain primarily liable under this Lease.
(D) No an assignment or subletting under any of the provisions of
Sections 5.6.1 or 5.6.2 shall in any way be construed to relieve
Tenant from obtaining the express consent in writing to Landlord to
any further assignment or subletting.
5.7 To defend with counsel first approved by Landlord (which approval shall
not be unreasonably withheld or delayed), save harmless, and indemnify
Landlord from any liability for injury, loss, accident or damage to any
person or property, and from any claims, actions, proceedings and expenses
and costs in connection therewith (including without limitation reasonable
counsel fees) (i) arising from or claimed to have arisen from (a) the
omission, fault, willful act, negligence or other misconduct of Tenant or
Tenant's contractors, licensees, invitees, agents, servants, independent
contractors or employees or (b) any use made or thing done or occurring on
the Premises not due to the omission, fault, willful act, negligence or
other misconduct of Landlord, or (ii) resulting from the failure of Tenant
to perform and discharge its covenants and obligations under this Lease;
to maintain commercial general liability insurance or comprehensive
general liability
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insurance written on an occurrence basis with a broad form comprehensive
liability endorsement covering the Premises insuring Landlord and
Landlord's managing agent (and such persons as are in privity of estate
with Landlord and Landlord's managing agent as may be set out in notice
from time to time) as additional insureds as well as Tenant with limits
which shall, at the commencement of the Term, be at least equal to those
stated in Section 1.1 and from time to time during the Term shall be for
such higher limits, if any, as are customarily carried in Greater Boston
with respect to similar properties or which may reasonably be required by
Landlord, and workmen's compensation insurance with statutory limits
covering all of Tenant's employees working in the Premises, and to deposit
with Landlord on or before the Commencement Date and concurrent with all
renewals thereof, certificates for such insurance bearing the endorsement
that the policies will not be canceled until after thirty (30) days'
written notice to Landlord. All insurance required to be maintained by
Tenant pursuant to this Lease shall be maintained with responsible
companies qualified to do business, and in good standing, in the
Commonwealth of Massachusetts and which have a rating of at least "A-" and
are within a financial size category of not less than "Class VIII" in the
most current Best's Key Rating Guide or such similar rating as may be
reasonably selected by Landlord if such Guide is no longer published.
5.8 That all of the furnishings, fixtures, equipment, effects and property of
every kind, nature and description of Tenant and of all persons claiming
by, through or under Tenant which, during the continuance of this Lease or
any occupancy of the Premises by Tenant or anyone claiming under Tenant,
may be on the Premises or elsewhere in the Building or on the Site, shall
be at the sole risk and hazard of Tenant, and if the whole or any part
thereof shall be destroyed or damaged by fire, water or otherwise, or by
the leakage or bursting of water pipes, steam pipes, or other pipes, by
theft or from any other cause, no part of said loss or damage is to be
charged to or be borne by Landlord, except that Landlord shall in no event
be indemnified or held harmless or exonerated from any liability to Tenant
or to any other person, for any injury, loss, damage or liability to the
extent such indemnity, hold harmless or exoneration is prohibited by law.
Further, Tenant, at Tenant's expense, shall maintain at all times during
the Term of this Lease insurance against loss or damage covered by the
so-called "all risk" type insurance coverage with respect to Tenant's
fixtures, equipment, goods, wares and merchandise, tenant improvements
made by or paid for by Tenant, and other property of Tenant (collectively
"Tenant's Property"). Such insurance shall be in an amount at least equal
to the full replacement cost of Tenant's Property.
5.9 To permit Landlord and its agents to examine the Premises at reasonable
times and, if Landlord shall so elect, to make any repairs or replacements
Landlord may deem necessary; to remove, at Tenant's expense, any
alterations, addition, signs, curtains, blinds, shades, awnings, aerials,
flagpoles, or the like not consented to in
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writing; and to show the Premises to prospective tenants during the eleven
(11) months preceding expiration of the Term and to prospective purchasers
and mortgagees at all reasonable times.
5.10 Not to place a load upon the Premises exceeding an average rate of 70
pounds of live load per square foot of floor area (partitions shall be
considered as part of the live load); 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 time as Landlord shall in each instance authorize;
Tenant's business machines and mechanical equipment which cause vibration
or noise that may be transmitted to the Building structure or to any other
space in the Building shall be so installed, maintained and used by Tenant
so as to eliminate such vibration or noise.
5.11 To pay promptly when due all taxes which may be imposed upon Tenant's
Property in the Premises to whomever assessed.
5.12 To comply with all applicable Legal Requirements now or hereafter in force
which shall impose a duty on Landlord or Tenant relating to or as a result
of the use or occupancy of the Premises; provided that Tenant shall not be
required to make any alterations or additions to the structure, roof,
exterior and load bearing walls, foundation, structural floor slabs and
other structural elements of the Building unless the same are required by
such Legal Requirements as a result of or in connection with Tenant's use
or occupancy of the Premises beyond normal use of space of this kind.
Tenant shall promptly pay all fines, penalties and damages that may arise
out of or be imposed because of its failure to comply with the provisions
of this Section 5.12.
5.13 As Additional Rent, to pay all reasonable costs, counsel and other fees
incurred by Landlord in connection with the successful enforcement by
Landlord of any obligations of Tenant under this Lease or in connection
with any bankruptcy case involving Tenant or any guarantor.
ARTICLE VI
CASUALTY AND TAKING
6.1 In case during the Lease Term the Building is damaged by fire or casualty
and such fire or casualty damage cannot, in the ordinary course,
reasonably be expected to be repaired within one hundred twenty (120) days
from the time that repair work would commence as reasonably determined by
Landlord, Landlord may, at its election, terminate this Lease by notice
given to Tenant within sixty (60) days after the date of such fire or
other casualty, specifying the effective date of termination. The
effective date of termination specified by Landlord shall not
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be less than thirty (30) days nor more than forty-five (45) days after the
date of notice of such termination.
In case during the last year of the Lease Term, the Premises are damaged
by fire or casualty and such fire or casualty damage cannot, in the
ordinary course, reasonably be expected to be repaired within one hundred
fifty (150) days (and/or as to special work or work which requires long
lead time then if such work cannot reasonably be expected to be repaired
within such additional time as is reasonable under the circumstances given
the nature of the work) from the time that repair work would commence as
reasonably determined by Landlord, Tenant may, at its election, terminate
this Lease by notice given to Landlord within sixty (60) days after the
date of such fire or other casualty, specifying the effective date of
termination. The effective date of termination specified by Tenant shall
be not less than thirty (30) days nor more than forty-five (45) days after
the date of notice of such termination.
Unless terminated pursuant to the foregoing provisions, this Lease shall
remain in full force and effect following any such damage subject,
however, to the following provisions.
If the Building or any part thereof is damaged by fire or casualty and
this Lease is not so terminated, or Landlord or Tenant have no right to
terminate this Lease, and in any such case the holder of any mortgage
which includes the Building as a part of the mortgaged premises or any
ground lessor of any ground lease which includes the Site as part of the
demised premises allows the net insurance proceeds to be applied to the
restoration of the Building (and/or the Site), Landlord promptly after
such damage and the determination of the net amount of insurance proceeds
available shall use due diligence to restore the Premises and the Building
in the event of damage thereto (excluding Tenant's Property) into proper
condition for use and occupation and a just proportion of the Annual Fixed
Rent, Tenant's share of Operating Costs and Tenant's share of real estate
taxes according to the nature and extent of the injury to the Premises
shall be abated until the Premises shall have been put by Landlord
substantially into such condition except for punch list items and long
lead items. Notwithstanding anything herein contained to the contrary,
Landlord shall not be obligated to expend for such repair and restoration
any amount in excess of the net insurance proceeds.
Where Landlord is obligated or otherwise elects to effect restoration of
the Premises, unless such restoration is completed within one (1) year
from the date of the casualty or taking, such period to be subject,
however, to extension where the delay in completion of such work is due to
causes beyond Landlord's reasonable control (but in no event beyond
eighteen (18) months from the date of the casualty or taking), Tenant
shall have the right to terminate this Lease at any
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time after the expiration of such one-year (as extended) period until the
restoration is substantially completed, such termination to take effect as
of the thirtieth (30th) day after the date of receipt by Landlord of
Tenant's notice, with the same force and effect as if such date were the
date originally established as the expiration date hereof unless, within
thirty (30) days after Landlord's receipt of Tenant's notice, such
restoration is substantially completed, in which case Tenant's notice of
termination shall be of no force and effect and this Lease and the Lease
Term shall continue in full force and effect.
6.2 Notwithstanding anything to the contrary contained in this Lease, if the
Building or the Premises shall be substantially damaged by fire or
casualty as the result of a risk not covered by the forms of casualty
insurance at the time maintained by Landlord and such fire or casualty
damage cannot, in the ordinary course, reasonably be expected to be
repaired within thirty (30) days from the time that repair work would
commence, Landlord may, at its election, terminate the Term of this Lease
by notice to the Tenant given within thirty (30) days after such loss. If
Landlord shall give such notice, then this Lease shall terminate as of the
date of such notice with the same force and effect as if such date were
the date originally established as the expiration date hereof.
6.3 If the entire Building, or such portion of the Premises as to render the
balance (if reconstructed to the maximum extent practicable in the
circumstances) unsuitable for Tenant's purposes, shall be taken by
condemnation or right of eminent domain, Landlord or Tenant shall have the
right to terminate this Lease by notice to the other of its desire to do
so, provided that such notice is given not later than thirty (30) days
after Tenant has been deprived of possession. If either party shall give
such notice, then this Lease shall terminate as of the date of such notice
with the same force and effect as if such date were the date originally
established as the expiration date hereof.
Further, if so much of the Building or Site shall be so taken that
continued operation of the Building would be uneconomic as a result of the
taking, Landlord shall have the right to terminate this Lease by giving
notice to Tenant of Landlord's desire to do so not later than thirty (30)
days after Tenant has been deprived of possession of the Premises (or such
portion thereof as may be taken). If Landlord shall give such notice, then
this Lease shall terminate as of the date of such notice with the same
force and effect as if such date were the date originally established as
the expiration date hereof
Should any part of the Premises be so taken or condemned during the Lease
Term hereof, and should this Lease not be terminated in accordance with
the foregoing provisions, and the holder of any mortgage which includes
the Premises as part of the mortgaged premises or any ground lessor of any
ground lease which includes the Site as part of the demised premises
allows the net condemnation proceeds to
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be applied to the restoration of the Building, Landlord agrees that after
the determination of the net amount of condemnation proceeds available to
Landlord, Landlord shall use due diligence to put what may remain of the
Premises into proper condition for use and occupation as nearly like the
condition of the Premises prior to such taking as shall be practicable
(excluding Tenant's Property). Notwithstanding the foregoing, Landlord
shall not be obligated to expend for such repair and restoration any
amount in excess of the net condemnation proceeds made available to it.
If the Premises shall be affected by any exercise of the power of eminent
domain, then the Annual Fixed Rent, Tenant's share of operating costs and
Tenant's share of real estate taxes shall be justly and equitably abated
and reduced according to the nature and extent of the loss of use thereof
suffered by Tenant; and in case of a taking which permanently reduces the
Rentable Floor Area of the Premises, a just proportion of the Annual Fixed
Rent, Tenant's share of operating costs and Tenant's share of real estate
taxes shall be abated for the remainder of the Lease Term.
6.4 Landlord shall have and hereby reserves to itself any and all rights to
receive awards made for damages to the Premises, the Buildings, the
Complex and the Site 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 pursuance of public or other authority. Tenant
hereby grants, releases and assigns to Landlord all Tenant's rights to
such awards, and covenants to execute and deliver such further assignments
and assurances thereof as Landlord may from time to time request, and if
Tenant shall fail to execute and deliver the same within fifteen (15) days
after notice from Landlord, Tenant hereby covenants and agrees that
Landlord shall be irrevocably designated and appointed as its
attorney-in-fact to execute and deliver in Tenant's name and behalf all
such further assignments thereof which conform with the provisions hereof.
Nothing contained herein shall be construed to prevent Tenant from
prosecuting in any condemnation proceeding a claim for the value of any of
Tenant's usual trade fixtures installed in the Premises by Tenant at
Tenant's expense and for relocation and moving expenses, provided that
such action and any resulting award shall not affect or diminish the
amount of compensation otherwise recoverable by Landlord from the taking
authority.
ARTICLE VII
DEFAULT
7.1 (a) If at any time subsequent to the date of this Lease any one or more of
the following events (herein sometimes called an "Event of Default") shall
occur:
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(i) Tenant shall fail to pay any installment of the Annual Fixed
Rent, Additional Rent or other charges for which provision is made herein
on or before the date on which the same become due and payable, and the
same continues for five (5) business days after notice from Landlord
thereof, or
(ii) Landlord having rightfully given the notice specified in
subdivision (a) above three times in any calendar year, Tenant shall
thereafter in the same calendar year fail to pay the Annual Fixed Rent,
Additional Rent or any other monetary amount due under this Lease on or
before the date on which the same become due and payable, or,
(iii) Tenant shall neglect or fail to perform or observe any other
requirement, term, covenant or condition of this Lease (not hereinabove in
this Section 7.1(a) specifically referred to) on Tenant's part to be
performed or observed and Tenant shall fail to remedy the same within
thirty (30) days after notice to Tenant specifying such neglect or
failure, or if such neglect or failure is of such a nature that Tenant
cannot reasonably remedy the same within such thirty (30) day period,
Tenant shall fail to commence promptly to remedy the same and to prosecute
such remedy to completion with diligence and continuity; or
(iv) Tenant's leasehold interest in the Premises shall be taken on
execution or by other process of law directed against Tenant; or
(v) Tenant shall make an assignment for the benefit of creditors or
shall file a voluntary petition in bankruptcy or shall be adjudicated
bankrupt or insolvent, or shall file any petition or answer seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief for itself under any present or future
Federal, State or other statute, law or regulation for the relief of
debtors, or shall seek or consent to or acquiesce in the appointment of
any trustee, receiver or liquidator of Tenant or of all or any substantial
part of its properties, or shall admit in writing its inability to pay its
debts generally as they become due; or
(vi) A petition shall be filed against Tenant in bankruptcy or under
any other law seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under any
present or future Federal, State or other statute, law or regulation and
shall remain undismissed or unstayed for an aggregate of sixty (60) days
(whether or not consecutive), or if any debtor in possession (whether or
not Tenant) trustee, receiver or liquidator of Tenant or of all or any
substantial part of its properties or of the Premises shall be appointed
without the consent or acquiescence of Tenant and such appointment shall
remain unvacated or unstayed for an aggregate of sixty (60) days (whether
or not consecutive).
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then, and in any of said cases (notwithstanding any license of a former
breach of covenant or waiver of the benefit hereof or consent in a former
instance), Landlord lawfully may, immediately or at any time thereafter,
and without demand or further notice terminate this Lease by notice to
Tenant, specifying a date not less than five (5) days after the giving of
such notice on which this Lease shall terminate, and this Lease shall come
to an end on the date specified therein as fully and completely as if such
date were the date herein originally fixed for the expiration of the Lease
Term (Tenant hereby waiving any rights of redemption), and Tenant will
then quit and surrender the Premises to Landlord, but Tenant shall remain
liable as hereinafter provided.
(b) If this Lease shall have been terminated as provided in this Article,
then Landlord may, without notice, re-enter the Premises, either by force,
summary proceedings, ejectment or otherwise, and remove and dispossess
Tenant and all other persons and any and all property from the same, as if
this Lease had not been made, and Tenant hereby waives the service of
notice of intention to re-enter or to institute legal proceedings to that
end.
(c) In the event that this Lease is terminated under any of the provisions
contained in Section 7.1 (a) or shall be otherwise terminated by breach of
any obligation of Tenant, Tenant covenants and agrees forthwith to pay and
be liable for, on the days originally fixed herein for the payment
thereof, amounts equal to the several installments of rent and other
charges reserved as they would, under the terms of this Lease, become due
if this Lease had not been terminated or if Landlord had not entered or
re-entered, as aforesaid, and whether the Premises be relet or remain
vacant, in whole or in part, or for a period less than the remainder of
the Term, and for the whole thereof, but in the event the Premises be
relet by Landlord, Tenant shall be entitled to a credit in the net amount
of rent and other charges received by Landlord in reletting, after
deduction of all expenses incurred in reletting the Premises (including,
without limitation, remodeling costs, brokerage fees and the like), and in
collecting the rent in connection therewith, in the following manner:
Amounts received by Landlord after reletting shall first be applied
against such Landlord's expenses, until the same are recovered, and until
such recovery, Tenant shall pay, as of each day when a payment would fall
due under this Lease, the amount which Tenant is obligated to pay under
the terms of this Lease (Tenant's liability prior to any such reletting
and such recovery not in any way to be diminished as a result of the fact
that such reletting might be for a rent higher than the rent provided for
in this Lease); when and if such expenses have been completely recovered,
the amounts received from reletting by Landlord as have not previously
been applied shall be credited against Tenant's obligations as of
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each day when a payment would fall due under this Lease, and only the net
amount thereof shall be payable by Tenant. Further, amounts received by
Landlord from such reletting for any period shall be credited only against
obligations of Tenant allocable to such period, and shall not be credited
against obligations of Tenant hereunder accruing subsequent or prior to
such period; nor shall any credit of any kind be due for any period after
the date when the term of this Lease is scheduled to expire according to
its terms.
(d) (i) Landlord may elect, as an alternative, to have Tenant pay
liquidated damages, which election may be made by notice given to
Tenant at any time after the termination of this Lease under Section
7.2, above, and whether or not Landlord shall have collected any
damages as hereinbefore provided in this Article VII, and in lieu of
all other such damages beyond the date of such notice. Upon such
notice, Tenant shall promptly pay to Landlord, as liquidated
damages, in addition to any damages collected or due from Tenant
from any period prior to such notice and all expenses which Landlord
may have incurred with respect to the collection of such damages,
such a sum as at the time of such notice represents the amount of
the excess, if any, of (a) the discounted present value, at a
discount rate of 6%, of the Annual Fixed Rent, Additional Rent and
other charges which would have been payable by Tenant under this
Lease for the remainder of the Lease Term if the Lease terms had
been fully complied with by Tenant, over and above (b) the
discounted present value, at a discount rate of 6%, of the Annual
Fixed Rent, Additional Rent and other charges that would be received
by Landlord if the Premises were re- leased at the time of such
notice for the remainder of the Lease Term at the fair market value
(including provisions regarding periodic increases in Annual Fixed
Rent if such are applicable) prevailing at the time of such notice
as reasonably determined by Landlord.
(ii) For the purposes of this Article, if Landlord elects to require
Tenant to pay damages in accordance with the immediately preceding
paragraph, the total rent shall be computed by assuming that
Tenant's share of excess taxes, Tenant's share of excess operating
costs and Tenant's share of excess electrical costs would be, for
the balance of the unexpired Term from the date of such notice, the
amount thereof (if any) for the immediately preceding annual period
payable by Tenant to Landlord.
(e) In case of any Event of Default, re-entry, dispossession by summary
proceedings or otherwise, Landlord may (i) re-let the Premises or any part
or parts thereof, either in the name of Landlord or otherwise, 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
of this Lease and may
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grant concessions or free rent to the extent that Landlord considers
advisable or necessary to re-let the same and (ii) may make such
alterations, repairs and decorations in the Premises as Landlord in its
sole judgment considers advisable or necessary for the purpose of
reletting the Premises; and the making of such alterations, repairs and
decorations shall not operate or be construed to release Tenant from
liability hereunder as aforesaid. Landlord shall in no event be liable in
any way whatsoever for failure to re-let the Premises, or, in the event
that the Premises are re-let, for failure to collect the rent under
re-letting. Tenant, for itself and any and all persons claiming through or
under Tenant, including its creditors, upon the termination of this Lease
and of the term of this Lease in accordance with the terms hereof, or in
the event of entry of judgment for the recovery of the possession of the
Premises in any action or proceeding, or if Landlord shall enter the
Premises by process of law or otherwise, hereby waives any right of
redemption provided or permitted by any statute, law or decision now or
hereafter in force, and does hereby waive, surrender and give up all
rights or privileges which it or they may or might have under and by
reason of any present or future law or decision, to redeem the Premises or
for a continuation of this Lease for the term of this Lease hereby demised
after having been dispossessed or ejected therefrom by process of law, or
otherwise.
(f) The specified remedies to which Landlord may resort hereunder are not
intended to be exclusive of any remedies or means of redress to which
Landlord may at any time be entitled lawfully, and Landlord may invoke any
remedy (including the remedy of specific performance) allowed at law or in
equity as if specific remedies were not herein provided for. Further,
nothing contained in this Lease shall limit or prejudice the right of
Landlord to prove for 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.
7.2 Landlord shall in no event be in default in the performance of any of
Landlord's obligations hereunder unless and until Landlord shall have
failed to perform such obligations within thirty (30) days, or such
additional time as is reasonably required to correct any such default,
after notice by Tenant to Landlord properly specifying wherein Landlord
has failed to perform any such obligation.
ARTICLE VIII
MISCELLANEOUS
8.1 Tenant covenants and agrees that Tenant will not do or permit anything to
be done in or upon the Premises, or bring in anything or keep anything
therein, which shall
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increase the rate of insurance on the Premises or on the Building above
the standard rate applicable to premises being occupied for the use to
which Tenant has agreed to devote the Premises; and Tenant further agrees
that, in the event that Tenant shall do any of the foregoing, Tenant will
promptly pay to Landlord, on demand, any such increase resulting
therefrom, which shall be due and payable as additional rent thereunder.
8.2 Failure on the part of Landlord or Tenant to complain of any action or
non-action on the part of the other, no matter how long the same may
continue, shall never be a waiver by Tenant or Landlord, respectively, of
any of its rights hereunder. Further, no waiver at any time of any of the
provisions hereof by Landlord or Tenant shall be construed as a waiver of
any of the other provisions hereof, and a waiver at any time of any of the
provisions hereof shall not be construed as a waiver at any subsequent
time of the same provisions. The consent or approval of Landlord or Tenant
to or of any action by the other requiring such consent or approval shall
not be construed to waive or render unnecessary Landlord's or Tenant's
consent or approval to or of subsequent similar act by the other. Further,
the acceptance by Landlord of Annual Fixed Rent, Additional Rent or any
other charges paid by Tenant under this Lease shall not be or be deemed to
be a waiver by Landlord of any default by Tenant, whether or not Landlord
knows of such default, except for such defaults as to which such payment
relates.
No payment by Tenant, or acceptance by Landlord, of a lesser amount than
shall be due from Tenant to Landlord shall be treated otherwise than as a
payment on account. The acceptance by Landlord of a check for a lesser
amount with an endorsement or statement thereon, or upon any letter
accompanying such check, that such lesser amount is payment in full, shall
be given no effect, and Landlord may accept such check without prejudice
to any other rights or remedies which Landlord may have against Tenant.
8.3 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 such party 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.
8.4 Tenant, subject to the terms and provisions of this Lease on payment of
the rent and observing, keeping and performing all of the terms and
provisions of this Lease on Tenant's part to be observed, kept and
performed, shall lawfully, peaceably and quietly have, hold, occupy and
enjoy the Premises during the Term, without hindrance or ejection by any
persons lawfully claiming under Landlord to
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have title to the Premises superior to Tenant, subject, however, to the
terms of this Lease; the foregoing covenant of quiet enjoyment is in lieu
of any other covenant, express or implied; and it is understood and agreed
that this covenant and any and all other covenants of Landlord contained
in this Lease shall be binding upon Landlord and Landlord's successors
only with respect to breaches occurring during Landlord's or Landlord's
successors' respective ownership of Landlord's interest hereunder,
including ground or master lessees, to the extent of their respective
interests, as and when they shall acquire same and then only for so long
as they shall retain such interest.
Further, Tenant specifically agrees to look solely to Landlord's then
equity interest in the Building at the time owned, or in which Landlord
holds an interest as ground lessee, for recovery of any judgment from
Landlord; it being specifically agreed that neither Landlord (original or
successor), nor any beneficiary of any Trust of which any person holding
Landlord's interest is Trustee, nor any member, manager, partner, director
or stockholder nor Landlord's managing agent shall ever be personally
liable for any such judgment, or for the payment of any monetary
obligation to Tenant. The provision contained in the foregoing sentence is
not intended to, and shall not, limit any right that Tenant might
otherwise have to obtain injunctive relief against Landlord or Landlord's
successors in interest, or any action not involving the personal liability
of Landlord (original or successor), any successor Trustee to the persons
named herein as Landlord, or any beneficiary of any Trust of which any
person holding Landlord's interest is Trustee, or of any manager, member,
partner, director or stockholder of Landlord or of Landlord's managing
agent, to respond in monetary damages from Landlord's assets other than
Landlord's equity interest aforesaid in the Building. In no event shall
Landlord ever be liable to Tenant for any indirect or consequential
damages or lost profits suffered by Tenant from whatever cause or loss of
profits or the like. In the event that Landlord shall be determined to
have acted unreasonably in withholding any consent or approval under this
Lease, the sole recourse and remedy of the Tenant in respect thereof shall
be to specifically enforce Landlord's obligation to grant such consent or
approval, and in no event shall the Landlord be responsible for any
damages of whatever nature in respect of its failure to give such consent
or approval nor shall the same otherwise affect the obligations of the
Tenant under this Lease or act as any termination of this Lease.
8.5 After receiving notice from any person, firm or other entity that it holds
a mortgage which includes the Premises as part of the mortgaged premises,
or that it is the ground lessor under a lease with Landlord, as ground
lessee, which includes the Premises as a part of the mortgaged premises,
no notice from Tenant to Landlord shall be effective unless and until a
copy of the same is given to such holder or ground lessor, and the curing
of any of Landlord's defaults by such holder or ground lessor within a
reasonable time thereafter (including a reasonable
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time to obtain possession of the premises if the mortgagee or ground
lessor elects to do so) shall be treated as performance by Landlord. For
the purposes of this Section 8.5 or Section 8.15, the term "mortgage"
includes a mortgage on a leasehold interest of Landlord (but not one on
Tenant's leasehold interest). If any mortgage is listed on Exhibit G then
the same shall constitute notice from the holder of such mortgage for the
purposes of this Section 8.5. Further no Annual Fixed Rent or Additional
Rent may be paid by Tenant more than thirty (30) days in advance except
with the prior written consent of all holder(s) of such mortgages and
ground leases, and any such payment without such consent shall not be
binding on such holder(s).
8.6 With reference to any assignment by Landlord of Landlord's interest in
this Lease, or the rents payable hereunder, conditional in nature or
otherwise, which assignment is made to the holder of a mortgage or ground
lease on property which includes the Premises, Tenant agrees:
(a) That the execution thereof by Landlord, and the acceptance thereof by
the holder of such mortgage or the ground lessor, shall never be treated
as an assumption by such holder or ground lessor of any of the obligations
of Landlord hereunder, unless such holder, or ground lessor, shall, by
notice sent to Tenant, specifically otherwise elect; and
(b) That, except as aforesaid, such holder or ground lessor shall be
treated as having assumed Landlord's obligations hereunder only upon
foreclosure of such holder's mortgage and the taking of possession of the
Premises, or, in the case of a ground lessor, the assumption of Landlord's
position hereunder by such ground lessor.
In no event shall the acquisition of title to the Building and the land on
which the same is located by a purchaser which, simultaneously therewith,
leases the entire Building or such land back to the seller thereof be
treated as an assumption by such purchaser-lessor, by operation of law or
otherwise, of Landlord's obligations hereunder, but Tenant shall look
solely to such seller-lessee, and its successors from time to time in
title, for performance of Landlord's obligations hereunder subject to the
provisions of Section 8.4 hereof. In any such event, this Lease shall be
subject and subordinate to the lease to such purchaser provided that such
purchaser agrees to recognize the right of Tenant to use and occupy the
Premises upon the payment of rent and other charges payable by Tenant
under this Lease and the performance by Tenant of Tenant's obligations
hereunder and provided that Tenant agrees to attorn to such purchaser. For
all purposes, such seller-lessee, and its successors in title, shall be
the landlord hereunder unless and until Landlord's position shall have
been assumed by such purchaser-lessor.
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8.7 (A) No act or thing done by Landlord during the Lease Term shall be deemed
an acceptance of a surrender of the Premises, and no agreement to accept
such surrender shall be valid, unless in writing signed by Landlord. No
employee of Landlord or of Landlord's agents shall have any power to
accept the keys of the Premises prior to the termination of this Lease,
provided, however, that the foregoing shall not apply to the delivery of
keys to Landlord or its agents in its (or their) capacity as managing
agent or for purpose of emergency access. In any event, however, the
delivery of keys to any employee of Landlord or of Landlord's agents shall
not operate as a termination of the Lease or a surrender of the Premises.
(B) Upon the expiration or earlier termination of the Lease Term, Tenant
shall surrender the Premises to Landlord in the condition as required by
Sections 3.3 and 5.2, first removing all goods and effects of Tenant and
completing such other removals as may be permitted or required pursuant to
Section 5.2.
8.8 (A) Tenant warrants and represents that Tenant has not dealt with any
broker in connection with the consummation of this Lease other than the
broker, person or firm, if any, designated in Section 1.1 hereof; and in
the event any claim is made against the Landlord relative to dealings by
Tenant with brokers other than the Brokers, if any, designated in Section
1.1 hereof, Tenant shall defend the claim against Landlord with counsel of
Tenant's selection first approved by Landlord (which approval will not be
unreasonably withheld) and save harmless and indemnify Landlord on account
of loss, cost or damage which may arise by reason of such claim.
(B) Landlord warrants and represents that Landlord has not dealt with any
broker in connection with the consummation of this Lease other than the
broker, person or firm, if any, designated in Section 1.1 hereof; and in
the event any claim is made against the Tenant relative to dealings by
Landlord with brokers other than the Brokers, if any, designated in
Section 1.1 hereof, Landlord shall defend the claim against Tenant with
counsel of Landlord's selection and save harmless and indemnify Tenant on
account of loss, cost or damage which may arise by reason of such claim.
Landlord agrees that it shall be solely responsible for the payment of
brokerage commissions to the Broker, if any, designated in Section 1.1
hereof.
8.9 If any term or provision of this Lease, or the application thereof to any
person or circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this Lease, or the application of such term or provision
to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Lease shall be valid and be enforced to the fullest
extent permitted by law.
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8.10 The obligations of this Lease shall run with the land, and except as
herein otherwise provided, the terms hereof shall be binding upon and
shall inure to the benefit of the successors and assigns, respectively, of
Landlord and Tenant and, if Tenant shall be an individual, upon and to his
heirs, executors, administrators, successors and assigns. Each term and
each provision of this Lease to be performed by Tenant shall be construed
to be both a covenant and a condition. The reference contained to
successors and assigns of Tenant is not intended to constitute a consent
to subletting or assignment by Tenant, but has reference only to those
instances in which Landlord may have later given consent to a particular
assignment as required by the provisions of Article V hereof.
8.11 Tenant agrees not to record the within Lease, but each party hereto
agrees, on the request of the other, to execute a so-called Notice of
Lease or short form lease in form recordable and complying with applicable
law and reasonably satisfactory to both Landlord's and Tenant's attorneys.
In no event shall such document set forth rent or other charges payable by
Tenant under this Lease; and any such document shall expressly state that
it is executed pursuant to the provisions contained in this Lease, and is
not intended to vary the terms and conditions of this Lease.
8.12 Whenever, by the terms of this Lease, notice shall or may be given either
to Landlord or to Tenant, such notice shall be in writing and shall be
sent by registered or certified mail postage prepaid:
If intended for Landlord, addressed to Landlord at the address set forth
on the first page of this Lease (or to such other address or addresses as
may from time to time hereafter be designated by Landlord by like notice)
with a copy to Landlord, Attention: General Counsel.
If intended for Tenant, addressed to Tenant at the address set forth on
the second page of this Lease except that from and after the Commencement
Date the address of Tenant shall be the Premises (or to such other address
or addresses as may from time to time hereafter be designated by Tenant by
like notice).
Except as otherwise provided herein, all such notices shall be effective
when received; provided, that (i) if receipt is refused, notice shall be
effective upon the first occasion that such receipt is refused or (ii) if
the notice is unable to be delivered due to a change of address of which
no notice was given, notice shall be effective upon the date such delivery
was attempted.
Where provision is made for the attention of an individual or department,
the notice shall be effective only if the wrapper in which such notice is
sent is addressed to the attention of such individual or department.
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Any notice given by an attorney on behalf of Landlord or by Landlord's
managing agent shall be considered as given by Landlord and shall be fully
effective.
Time is of the essence with respect to any and all notices and periods for
giving notice or taking any action thereto under this Lease.
8.13 Employees or agents of Landlord have no authority to make or agree to make
a lease or any other agreement or undertaking in connection herewith. The
submission of this document for examination and negotiation does not
constitute an offer to lease, or a reservation of, or option for, the
Premises, and this document shall become effective and binding only upon
the execution and delivery hereof by both Landlord and Tenant. All
negotiations, considerations, representations and understandings between
Landlord and Tenant are incorporated herein and may be modified or altered
only by written agreement between Landlord and Tenant, and no act or
omission of any employee or agent of Landlord shall alter, change or
modify any of the provisions hereof.
8.14 The titles of the Articles throughout this Lease are for convenience and
reference only, and the words contained therein shall in no way be held to
explain, modify, amplify or aid in the interpretation, construction or
meaning of the provisions of this Lease.
8.15 This Lease shall be subject and subordinate to any mortgage now or
hereafter on the Site or the Building, or both, and to each advance made
or hereafter to be made under any mortgage, and to all renewals,
modifications, consolidations, replacements and extensions thereof and all
substitutions therefor provided that in the case of a future mortgage the
holder of such mortgage agrees to recognize the rights of Tenant under
this Lease (including the right to use and occupy the Premises) upon the
payment of rent and other charges payable by Tenant under this Lease and
the performance by Tenant of Tenant's obligations hereunder. In
confirmation of such subordination and recognition, Tenant shall execute
and deliver promptly such instruments of subordination and recognition as
such mortgagee may reasonably request. Tenant hereby appoints such
mortgagee (from time to time) as Tenant's attorney-in-fact to execute such
subordination upon default of Tenant in complying with such mortgagee's
(from time to time) request. In the event that any mortgagee or its
respective successor in title shall succeed to the interest of Landlord,
then, this Lease shall nevertheless continue in full force and effect and
Tenant shall and does hereby agree to attorn to such mortgagee or
successor and to recognize such mortgagee or successor as its landlord. If
any holder of a mortgage which includes the Premises, executed and
recorded prior to the date of this Lease, shall so elect, this Lease and
the rights of Tenant hereunder, shall be superior in right to the rights
of such holder, with the same force and effect as if this Lease had been
executed, delivered and recorded, or a statutory Notice hereof recorded,
prior to the execution, delivery and
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recording of any such mortgage. The election of any such holder shall
become effective upon either notice from such holder to Tenant in the same
fashion as notices from Landlord to Tenant are to be given hereunder or by
the recording in the appropriate registry or recorder's office of an
instrument in which such holder subordinates its rights under such
mortgage to this Lease.
If in connection with obtaining financing for the Building or Complex, a
bank, insurance company, pension trust or other institutional lender shall
request reasonable modifications in this Lease as a condition to such
financing, Tenant will not unreasonably withhold, delay or condition its
consent thereto, provided that such modifications do not increase the
monetary obligations of Tenant hereunder or materially adversely affect
the leasehold interest hereby created.
8.16 Recognizing that Landlord may find it necessary to establish to third
parties, such as accountants, banks, potential or existing mortgagees,
potential purchasers or the like, the then current status of performance
hereunder, Tenant, within ten (10) days after the request of Landlord made
from time to time, will furnish to Landlord, or any existing or potential
holder of any mortgage encumbering the Premises, the Building, the Site
and/or the Complex or any potential purchaser of the Premises, the
Building, the Site and/or the Complex, (each an "Interested Party"), a
statement of the status of any matter pertaining to this Lease, including,
without limitation, acknowledgments that (or the extent to which) each
party is in compliance with its obligations under the terms of this Lease.
In addition, Tenant shall deliver to Landlord, or any Interested Party
designated by Landlord, financial statements of Tenant and any guarantor
of Tenant's obligations under this Lease, as reasonably requested by
Landlord, including, but not limited to financial statements for the past
three (3) years. Any such status statement or financial statement
delivered by Tenant pursuant to this Section 8.16 may be relied upon by
any Interested Party.
8.17 If Tenant shall at any time default in the performance of any obligation
under this Lease, 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 payment of
money or perform any other act. All sums so paid by Landlord (together
with interest at the rate of two and one-half percentage points over the
then prevailing prime or base rate in Boston as set by BankBoston, N.A.,
or its successor) (but in no event greater than the maximum rate permitted
by applicable law) and all 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.
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8.18 Any holding over by Tenant after the expiration of the term of this Lease
shall be treated as a tenancy at sufferance and shall be on the terms and
conditions as set forth in this Lease, as far as applicable except that
Tenant shall pay as a use and occupancy charge an amount equal to the
greater of (x) 200% of the Annual Fixed Rent and Additional Rent
calculated (on a daily basis) at the highest rate payable under the terms
of this Lease or (y) the fair market rental value of the Premises, in each
case for the period measured from the day on which Tenant's hold-over
commences and terminating on the day on which Tenant vacates the Premises.
In addition, Tenant shall save Landlord, its agents and employees harmless
and will exonerate, defend and indemnify Landlord, its agents and
employees from and against any and all damages which Landlord may suffer
on account of Tenant's hold-over in the Premises after the expiration or
prior termination of the term of this Lease. Nothing in the foregoing nor
any other term or provision of this Lease shall be deemed to permit Tenant
to retain possession of the Premises or hold over in the Premises after
the expiration or earlier termination of the Lease Term. All property
which remains in the Building or the Premises after the expiration or
termination of this Lease shall be conclusively deemed to be abandoned and
may either be retained by Landlord as its property or sold or otherwise
disposed of in such manner as Landlord may see fit. If any part thereof
shall be sold, then Landlord may receive the proceeds of such sale and
apply the same, at its option against the expenses of the sale, the cost
of moving and storage, any arrears of rent or other charges payable
hereunder by Tenant to Landlord and any damages to which Landlord may be
entitled under this Lease and at law and in equity.
8.19 Any insurance carried by either party with respect to the Premises or
property therein or occurrences thereon shall, if it can be so written
without additional premium or with an additional premium which the other
party agrees to pay, 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 occurrence 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 such insurance to the extent of the
indemnification received thereunder. This waiver of rights by Tenant shall
apply to, and be for the benefit of, Landlord's managing agent.
8.20 Intentionally Omitted.
8.21 If; in Section 1.1 hereof, a security deposit is specified, Tenant agrees
that the same will be paid upon execution and delivery of this Lease, and
that Landlord shall hold the same, throughout the term of this Lease
(including any extension thereof), as security for the performance by
Tenant of all obligations on the part of Tenant to be kept and performed.
Landlord shall have the right from time to time without prejudice to any
other remedy Landlord may have on account thereof, to
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apply such deposit, or any part thereof; to Landlord's damages arising
from any default on the part of Tenant. If Landlord so applies all or any
portion of such deposit, Tenant shall within seven (7) days after notice
from Landlord deliver cash to Landlord in an amount sufficient to restore
such deposit to the full amount stated in Section 1.1. Tenant not then
being in default and having performed all of its obligations under this
Lease, including the payment of all Annual Fixed Rent, Landlord shall
return the deposit, or so much thereof as shall not have theretofore been
applied in accordance with the terms of this Section 8.21, to Tenant on
the expiration or earlier termination of the term of this Lease and
surrender possession of the Premises by Tenant to Landlord in the
condition required in the Lease at such time. While Landlord holds such
deposit, Landlord shall have no obligation to pay interest on the same and
shall have the right to commingle the same with Landlord's other funds. If
Landlord conveys Landlord's interest under this Lease, the deposit, or any
part thereof not previously applied, may be turned over by Landlord to
Landlord's grantee, and, if so turned over, Tenant agrees to look solely
to such grantee for proper application of the deposit in accordance with
the terms of this Section 8.21, and the return thereof in accordance
herewith, and Landlord shall have no further liability therefor.
Neither the holder of any mortgage nor the lessor in any ground lease on
property which includes the Premises shall ever be responsible to Tenant
for the return or application of any such deposit, whether or not it
succeeds to the position of Landlord hereunder, unless such deposit shall
have been received in hand by such holder or ground lessor.
8.22 If Landlord shall not have received any payment or installment of Annual
Fixed Rent or Additional Rent on or before the date (the "Due Date") on
which the same first becomes payable under this Lease, the amount of such
payment or installment shall bear interest from the Due Date through and
including the date such payment or installment is received by Landlord, at
a rate equal to the lesser of (i) the rate announced by BankBoston, N.A.
or its successor from time to time as its prime or base rate (or if such
rate is no longer available, a comparable rate reasonably selected by
Landlord), plus two percent (2%), or (ii) the maximum applicable legal
rate, if any. Such interest shall be deemed additional rent and shall be
paid by Tenant to Landlord upon demand.
8.23 This Lease shall be governed exclusively by the provisions hereof and by
the law of the Commonwealth of Massachusetts, as the same may from time to
time exist.
8.24 Each and every payment and expenditure, other than Annual Fixed Rent,
shall be deemed to be Additional Rent hereunder, whether or not the
provisions requiring payment of such amounts specifically so state, and
shall be payable, unless otherwise provided in this Lease, within ten (10)
days after written demand by
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Landlord, and in the case of the non-payment of any such amount, Landlord
shall have, in addition to all of its other rights and remedies, all the
rights and remedies available to Landlord hereunder or by law in the case
of non-payment of Annual Fixed Rent. Unless expressly otherwise provided
in this Lease, the performance and observance by Tenant of all the terms,
covenants and conditions of this Lease to be performed and observed by
Tenant shall be at Tenant's sole cost and expense. If Tenant has not
objected to any statement of Additional Rent which is rendered by Landlord
to Tenant within ninety (90) days after Landlord has rendered the same to
Tenant, then the same shall be deemed to be a final account between
Landlord and Tenant not subject to any further dispute. In the event that
Tenant shall seek Landlord's consent or approval under this Lease, then
Tenant shall reimburse Landlord, upon demand, as Additional Rent, for all
reasonable costs and expenses, including legal and architectural costs and
expenses, incurred by Landlord in processing such request, whether or not
such consent or approval shall be given.
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EXECUTED as a sealed instrument in two or more counterparts each of which
shall be deemed to be an original.
WITNESS: LANDLORD:
BOSTON PROPERTIES LIMITED
PARTNERSHIP
By BOSTON PROPERTIES, INC.,
Its general partner
/s/ S. J. Murphy By /s/ Claude B. Hooper
- --------------------------- -----------------------------
Name CLAUDE B. HOOPER
-----------------------------
Title Vice President
-----------------------------
TENANT:
ADVANCED LUMITECH, INC.
By /s/ Patrick Planche
-----------------------------
Name PATRICK PLANCHE
-----------------------------
Title PRESIDENT
-----------------------------
(OR VICE PRESIDENT)
-----------------------------
HERETO DULY AUTHORIZED
ATTEST:
/s/ Patrick Planche
- ---------------------------
Name PATRICK PLANCHE By /s/ Patrick Planche
---------------------- -----------------------------
Title SECRETARY Name PATRICK PLANCHE
---------------------- -----------------------------
(ASSISTANT SECRETARY) Title TREASURER
-----------------------------
(OR ASSISTANT TREASURER)
-----------------------------
HERETO DULY AUTHORIZED
(CORPORATE SEAL) /s/ Alan M. Cregg
-----------------------------
Name Alan M. Cregg
-----------------------------
Title Attorney for Advanced Lumitech, Inc.
-----------------------------
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EXHIBIT A
Description
A parcel of land (the "Land") in Waltham and Lexington, Middlesex County,
Massachusetts containing 34.372 acres and shown on that certain plan entitled
"Plan of Land in Waltham and Lexington, Middlesex Co., Mass.", dated March
6,1986, prepared by Land Surveys Incorporated, recorded with the Middlesex South
District Registry of Deeds (the "Registry") in Book 17090, Page End (the
"Plan"), bounded and described as follows:
EASTERLY by the Northern Circumferential Highway (Route 128) by
two lines measuring 1,067.16 feet and 127.72 feet;
SOUTHEASTERLY
AND SOUTHERLY by the ramp to Trapelo Road and Trapelo Road by five
lines measuring 309.05 feet, 262.57 feet, 122.01 feet,
78.18 feet, and 8.38 feet;
NORTHWESTERLY by land N/F Reservoir Place Realty Trust, 110 feet;
SOUTHERLY by land N/F Reservoir Place Realty Trust, 96.07 feet,
and by land N/F William and Louise Butler, 99 feet;
NORTHWESTERLY by land N/F Thomas P. and Sandra H. Kehoe, 105 feet;
SOUTHERLY 62 feet,
SOUTHEASTERLY 39.27 feet and 160 feet, and
NORTH-EASTERLY 39.27 feet, all by land of N/F Thomas P, and Sandra H.
Kehoe;
SOUTHWESTERLY by Trapelo Road, 95 feet;
NORTHWESTERLY 39.27 feet and 100 feet, and
SOUTHWESTERLY 102.57 feet, all by land N/F Leonard and Evalyn Weld;
NORTHWESTERLY 275 feet, and
SOUTHWESTERLY 122.35, by land N/F Robert L. and Barbara T. Anderson;
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NORTHWESTERLY by two lines measuring 235.15 feet and 284.27 feet, by
lands N/F Edward J. and Beverly J. Mirabito, Carol Lane,
N/F Charles J. Senior, Jr., N/F Donald and Shirley
Gibbs, N/F Raymond R. and Bridget Picard, and N/F Henry
F. Miller;
WESTERLY by five lines measuring 580.06 feet, 25 feet, 128.21
feet, 344.66 feet and 9.12 feet, by lands N/F Henry P,
Miller, N/F John H. and Nancy Russell, N/F Frederick and
Anne Creamer, N/F J.S.C. Realty Trust, N/F Santo and
Catherine Lafauci, N/F Jean Yves and Annette Morn, N/F
Helen K. Hickey, Priscilla Lane, N/F Stanley C. and
Louise H. Whynock, and the City of Waltham;
NORTHEASTERLY 692.16 feet by land N/F The C-R Trust;
EASTERLY 137.39 feet by Route 128;
SOUTHWESTERLY by two lines measuring 336.67 feet and 286.94 feet by
land N/F Tracer Lane Trust;
EASTERLY by two lines measuring 506.14 feet and 325.94 feet, by
land N/F Tracer Lane Trust;
NORTHERLY 45 feet,
WESTERLY 27 feet, and
NORTHERLY 555.01 feet, all by land N/F Tracer Lane Trust.
Together with the right, in common with others, to use Tracer Lane, a
private way, throughout its entire length over the Land, for access to and from
Trapelo Road, a public way, and for all other purposes for which public ways are
normally used in the City of Waltham and the Town of Lexington, as shown on the
Plan.
Together with the appurtenant right in common with others to use that
portion of the Land located within the easement granted to Boston Edison Company
by a Grant of Easement dated October 2, 1946 and recorded in the Registry in
Book 7098, Page 118, for all purposes allowed under an Agreement with Boston
Edison Company and Albamont Properties, Inc. dated January 31, 1975 and recorded
in the Registry in Book 12771, Page 538.
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Together with the appurtenant right and easement, in common with others,
to discharge surface water contained in an Easement Indenture among Tracerlab,
Inc. et al. dated January 9, 1957 and recorded in the Registry in Book 8892,
Page 112.
Together with the appurtenant rights and easements, in common with others,
granted to the owner of the Land in (a) an Indenture among Boston Edison Company
et al. Dated September 19, 1966 and recorded in the Registry in Book 11258, Page
79, (b) a Utilities Maintenance Agreement among LFE Inc. et al dated September
19, 1966 and recorded in the Registry in Book 11258, Page 92, and (c) an
Easement Indenture among 128 Realty Corporation et al. dated September 19, 1966
and recorded in the Registry in Book 11258, Page 061.
Together with the right and easement, in common with others, granted the
owner of the Land in an Agreement dated May 12,1975 and recorded in the Registry
in Book 12892, Page 410.
Together with the right to terminate the Agreement between Leonard N. Weld et
ux. dated April 9,1974 and recorded in the Registry in Book 12627, Page 235.
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EXHIBIT B
TENANT PLAN AND WORKING DRAWING REQUIREMENTS
1. Floor plan indicating location of partitions and doors (details required of
partition and door types).
2. Location of standard electrical convenience outlets and telephone outlets.
3. Location and details of special electrical outlets; (e.g. Xerox), including
voltage, amperage, phase and NEMA configuration of outlets.
4. Reflected ceiling plan showing layout of standard ceiling and lighting
fixtures. Partitions to be shown lightly with switches located indicating
fixtures to be controlled.
5. Locations and details of special ceiling conditions, lighting fixtures,
speakers, etc.
6. Location and heat load in BTU/Hr. of all special air conditioning and
ventilating requirements and all necessary HVAC mechanical drawings.
7. Location and details of special structural requirements, e.g., slab
penetrations and areas with floor loadings exceeding a live load of 70 lbs./s.f.
8. Locations and details of all plumbing fixtures; sinks, drinking fountains,
etc.
9. Location and specifications of floor coverings, e.g., vinyl tile, carpet,
ceramic tile, etc.
10. Finish schedule plan indicating wall covering, paint or paneling with paint
colors referenced to standard color system.
11. Details and specifications of special millwork, glass partitions, rolling
doors and grilles, blackboards, shelves, etc.
12. Hardware schedule indicating door number keyed to plan, size, hardware
required including butts, latchsets or locksets, closures, stops, and any
special items such as thresholds, soundproofing, etc. Keying schedule is
required.
13. Verified dimensions of all built-in equipment (file cabinets, lockers, plan
files, etc).
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14. Location of any special soundproofing requirements.
15. All drawings to be uniform size (30" X 42") and shall incorporate the
standard project electrical and plumbing symbols and be at a scale of 1/8" = 1'
or larger.
16. Drawing submittal shall include one sepia and one blue line print of each
drawing.
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EXHIBIT C
LANDLORD SERVICES
RESERVOIR PLACE
I. CLEANING:
Cleaning and janitor services as provided below:
A. OFFICE AREAS:
Daily: (Monday through Friday, inclusive, holidays excepted).
1. Empty all waste receptacles and ashtrays and remove waste
material from the Premises; wash receptacles as necessary.
2. Sweep and dust mop all uncarpeted areas using a dust-treated
mop.
3- Vacuum all rugs and carpeted areas.
4. Hand dust and wipe clean with treated cloths all horizontal
surfaces, including furniture, office equipment, window sills,
door ledges, chair rails, and convector tops, within normal
reach.
5. Wash clean all water fountains and sanitize.
6. Move and dust under all desk equipment and telephones and
replace same (but not computer terminals, specialized
equipment or other materials).
7. Wipe clean all chrome and other bright work.
8. Hand dust grill work within normal reach.
9. Main doors to premises shall be locked and lights shut off
upon completion of cleaning.
Weekly:
1. Dust coat racks and the like.
2. Spot clean entrance doors, light switches and doorways.
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Quarterly:
1. Render high dusting not reached in daily cleaning to include:
a) dusting all pictures, frames, charts, graphs and similar
wall hangings.
b) dusting of all vertical surfaces, such as walls,
partitions, doors and door frames, etc.
c) dusting all pipes, ducts and moldings.
d) dusting of all vertical blinds.
e) dust all ventilating, air conditioning, louvers and
grills.
2. Spray buff all resilient floors.
B. LAVATORIES:
Daily: (Monday through Friday, inclusive, holidays excepted).
1. Sweep and damp mop.
2. Clean all mirrors, powder shelves, dispensers and receptacles,
bright work, flushometers, piping and toilet seat hinges.
3. Wash both sides of all toilet seats.
4. Wash all basins, bowls and urinals.
5. Dust and clean all powder room fixtures.
6. Empty and clean paper towel and sanitary disposal receptacles.
7. Remove waste paper and refuse.
8. Refill tissue holders, soap dispensers, towel dispensers,
sanitary dispensers; materials to be furnished by Landlord,
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Monthly:
1. Machine scrub lavatory floors.
2. Wash all partitions and tile walls in lavatories.
3. Dust all lighting fixtures and grills in lavatories.
C. MAIN LOBBIES, ELEVATORS, STAIRWELLS AND COMMON CORRIDORS:
Daily: (Monday through Friday, inclusive, holidays excepted).
1. Sweep and damp mop all floors, empty and clean waste
receptacles, dispose of waste.
2. Clean elevators, wash or vacuum floors, wipe down walls and
doors.
3. Spot clean any metal work inside lobbies.
4. Spot clean any metal work surrounding building entrance doors.
5. Sweep all stairwells and dust handrails.
Monthly:
1. All resilient tile floors in public areas to be spray buffed.
D. WINDOW CLEANING:
All exterior windows shall be washed on the inside and outside
surfaces no less than three (3) times per year.
II. HVAC:
A. Heating, ventilating and air conditioning equipment will be provided
with sufficient capacity to accommodate a maximum population density
of one (1) person per one hundred fifty (150) square feet of useable
floor area served, and a combined lighting and standard electrical
load of 3.0 watts per square foot of useable floor area. In the
event Tenant introduces into
-55-
<PAGE>
the Premises personnel or equipment which overloads the system's
ability to adequately perform its proper functions, Landlord shall
so notify Tenant in writing and supplementary system(s) may be
required and installed by Landlord at Tenant's expense, if within
fifteen (15) days Tenant has not modified its use so as not to cause
such overload.
Operating criteria of the basic system are in accordance with the
Massachusetts Energy Code and shall not be less than the following:
i) Cooling season indoor conditions of not in excess of 78
degrees Fahrenheit when outdoor conditions are 91 degrees
Fahrenheit drybulb and 73 degrees Fahrenheit wetbulb.
ii) Heating season minimum room temperature of 70 degrees
Fahrenheit when outdoor conditions are 6 degrees Fahrenheit
drybulb.
B. Landlord shall provide heating, ventilating and air conditioning as
normal seasonal charges may require during Normal Building Operating
Hours (8:00 a.m. to 6:00 p.m., Monday through Friday, and 8:00 a.m.
to 1:00 p.m. on Saturdays, legal holidays in all cases excepted).
If Tenant shall require air conditioning (during the air
conditioning season) or heating or ventilating during any season
outside Normal Building Operating Hours, Landlord shall use
landlord's best efforts to furnish such services for the area or
areas specified by written request of Tenant delivered to the
Building Superintendent or the Landlord before 3:00 p.m. of the
business day preceding the extra usage. For such services, Tenant
shall pay Landlord, as additional rent, upon receipt of billing, a
sum equal to the cost incurred by Landlord.
III. ELECTRICAL SERVICES:
A. Landlord shall provide electric power for a combined load of 3.0
watts per square foot of useable area for lighting and for office
machines through standard receptacles for the typical office space.
B. Landlord, at its option, may require separate metering and direct
billing to Tenant for the electric power required for any special
equipment (such as computers and reproduction equipment) that
requires either 3-phase electric power or any voltage other than
120, or for any other usage in excess of 3.0 watts per square foot.
-56-
<PAGE>
C. Landlord will furnish and install, at Tenant's expense, all
replacement lighting tubes, lamps and ballasts required by Tenant.
Landlord will clean lighting fixtures on a regularly scheduled
basis at Tenant's expense.
IV. ELEVATORS:
Provide passenger elevator service.
V. WATER:
Provide hot water for lavatory purposes and cold water for drinking,
lavatory and toilet purposes.
VI. CARD ACCESS SYSTEM:
Landlord will provide a card access system at one entry door of the
building.
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<PAGE>
EXHIBIT D
PREMISES
[GRAPHIC: FLOOR PLAN]
2,517 RSF
RESERVOIR PLACE II
1601 TRAPELO ROAD - SECOND FLOOR [GRAPHIC]
WALTHAM, MA
<PAGE>
EXHIBIT F
INTENTIONALLY OMITTED
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<PAGE>
EXHIBIT G
LIST OF MORTGAGEES
Security Agreement and Mortgage Deed, dated 10/30/96 recorded in the South
Middlesex Registry of Deeds at Book 26791, Page 101, affected by Amended and
Restated Mortgage Deed from Landlord to Teachers Insurance and Annuity
Association of America, dated 11/3/98 recorded with said Deeds, said mortgagee
having an address Attn: Joan Herman, Sr. Investment Analyst, 730 Third Avenue,
New York, NY 10017.
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<PAGE>
Exhibit 10.8
- ------------
Exact name of Investor as it
should appear on Stock Certificate:
ADVANCED LUMITECH, INC.
SUBSCRIPTION AGREEMENT
----------------------
SUBSCRIPTION AGREEMENT by and between the investor named above (the "Investor")
and Advanced Lumitech, Inc., a Nevada corporation with offices at 36 Avenue
Cardinal - Mermillod, Carouge, Switzerland 1227 (the "Company"). This
Subscription Agreement shall be deemed to include the attached Terms and
Conditions which hereby are incorporated by reference.
A. Aggregate Investment: $ 375,000 representing the cost to the Investor of
the Common Shares described below, plus
(assuming exercise in full of the A Warrants) an
additional $500,000
Securities: (a) 500,000 shares of the Common Stock,
$.001 par value, of the Company,
priced at $.75 per share (the
"Shares").
(b) Warrants to purchase 500,000 shares
of the Common Stock of the Company,
exercisable at $1.00 per share (the
"A Warrants").
B. Address of Principal Office
Or Residence:_____________________
C. Accredited Investor Status (initial as many as apply):
_____ The Investor is a natural person whose individual net worth, or
joint net worth with the Investor's spouse, exceeds $1,000,000;
_____ The Investor is a natural person who had an individual income in
excess of $200,000 in each of 1997 and 1998 or joint income with
that person's spouse in excess of $300,000 in each of those years
and has a reasonable expectation of reaching the same income
level in 1999.
_____ The Investor is a trust or other entity of which each beneficiary
or equity holder as an individual or joint (together with such
beneficiary's spouse) net worth in excess of $1,000,000, or (b)
expects to have an annual income in 1999, and represents that
such beneficiary had an annual income in each of 1997 and 1998,
in excess of $200,000 (or joint annual income in excess of
$300,000).
_____ The Investor is a trust which has total assets in excess of
$5,000,000 and which was not formed for the specific purpose of
acquiring the securities offered hereby, whose purchase is
directed by a "sophisticated person" (who has completed the
Investor Questionnaire in connection with this Subscription).
32
<PAGE>
The Investor acknowledges that he has received and reviewed this Agreement in
its entirety, including without limitation the representations and warranties
set out in Section 3 below. The Investor and the Company each executes this
Agreement as an instrument under seal.
__________________________
[Investor's Name and Title]
By: ___________________________
[Signature]
The Company hereby accepts this subscription subject to the terms and conditions
set forth in this Agreement as of this 24 day of January, 2000.
ADVANCED LUMITECH, INC.
By: _________________________
33
<PAGE>
1. Subscription. Subject to the terms and conditions of this Agreement, the
------------
Investor irrevocably subscribes for and agrees to purchase the Shares and the A
Warrants (collectively, the "Securities"), described in Section A above for the
purchase price set forth in such Section.
2. Acceptance of Subscription.
--------------------------
This Subscription is made subject to the following terms and conditions:
a. This subscription shall be deemed accepted by the Company upon execution by
the Company of the cover page of this Subscription Agreement.
b. Upon the sale by the Company to the Investor of the Securities, the Investor
will receive a copy of this Subscription Agreement executed by an officer on
behalf of the Company.
3. Representations and Warranties of the Investor. The Investor understands
----------------------------------------------
and acknowledges that (a) the Shares are being offered and sold under one or
more of the exemptions from registration provided for in Section 4(2) or Section
3(b) of the Securities Act of 1933, as from time to time amended (the
"Securities Act"), including Regulation D promulgated thereunder, and any
applicable state securities laws, (b) he or it is purchasing the Shares without
being offered or furnished any offering literature or prospectus other than the
reports filed by the Company from time to time with the United States Securities
and Exchange Commission, including the Company's Annual Report on Form 10-K for
the year ended December 31, 1998, and the Company's quarterly reports on Form
10-Q for the quarters and three and six month periods ended March 31, 1999 and
June 30, 1999, respectively (collectively, the "Reports"), and (c) this
transaction has not been reviewed or approved by the United States Securities
and Exchange Commission or by any regulatory authority charged with the
administration of the securities laws of any state or foreign country. The
Investor also represents and warrants as follows:
3.1. Citizenship, Age and Residence. He or it is at least 21 years of age, and
------------------------------
is a bona fide resident and domiciliary (not a temporary or transient resident)
of the State or Country and at the address described in Section B and has no
present intention of becoming a resident of any other State or other
jurisdiction.
3.2. Suitability. The Investor understands and has fully considered for purposes
-----------
of this investment the risks of this investment and understands that (i) this
investment is suitable only for an investor who is able to bear the economic
consequences of losing his or her entire investment, (ii) the purchase of the
Shares and the Shares issuable upon exercise of the Warrants (the "Warrant
Shares") is a speculative investment which involves a high degree of risk of
loss by the Investor of his or its entire investment, and (iii) there are
substantial restrictions on the transferability of the Shares and the Warrant
Shares. Furthermore, the Investor represents that he or it has sufficient liquid
assets so that the lack of liquidity associated with this investment will not
cause any undue financial difficulties or affect the ability of the Investor to
provide for his or its current needs and possible financial contingencies.
3.3. Access to Information. The Investor, in making his decision to purchase the
---------------------
Securities, has relied solely upon the Investor's independent investigations and
has, if requested, been given (i) access to all material information of the
Company; (ii) access to all material contracts and documents relating to the
transaction described herein; and (iii) an opportunity to ask questions of, and
to receive answers from, the appropriate executive officers and other persons
acting on behalf of the Company concerning the Company and its prospects and the
terms and conditions of this offering, and to obtain any additional information,
to the extent such persons possess such information or can acquire it without
unreasonable effort or expense, necessary to verify the accuracy of the
information set forth in the Reports. The Investor acknowledges that no valid
request to the Company by the Investor for information of any kind about the
Company has been refused or denied by the Company or remains unfulfilled as of
the date of this Agreement.
3.4. Investment Intent. The Shares, and upon their exercise, the Warrant Shares,
-----------------
are being or will be acquired by the Investor solely for the Investor's own
personal account, for investment purposes only, and not with a view to, or in
connection with, any resale or distribution of the Shares or the Warrant Shares;
the Investor has no contract,
34
<PAGE>
undertaking, understanding, agreement or arrangement, formal or informal, with
any person to sell, transfer or pledge to any person any of the Shares or the
Warrant Shares or any interest or rights in any of the Shares or the Warrant
Shares; the Investor has no present plans to enter into any such obligation; and
the Investor understands the legal consequences of the representations and
warranties made by him or her in this Agreement to mean that he or she must bear
the economic risk of the investment for an indefinite period of time because
neither the Shares nor the Warrant Shares have been registered under the
Securities Act and applicable state securities laws and, therefore, cannot be
sold unless they are subsequently registered under the Securities Act and
applicable state securities laws (which the Company is not obligated, and has no
current intention, to do) or unless an exemption from such registration becomes
available.
3.5. Additional Representations. (a) the Investor certifies that it
--------------------------
is not a natural person resident of the United States, partnership or
corporation organized in the United States, or trust of which the trustee is a
natural person resident of the United States (each of the foregoing, a "U.S.
Person"), and certifies further that it is not acquiring the Shares or the
Warrant Shares for the account or benefit of any U.S. Person or is a U.S. Person
who purchased securities in a transaction that did not require registration
under the Act;
(b) the Investor agrees to resell the Shares or the
Warrant Shares only in accordance with the provisions of the Regulation S
promulgated under the Act, pursuant to registration under the Act, or pursuant
to an available exemption from registration;
(c) the Investor acknowledges that certificates evidencing
the Shares and the Warrant Shares acquired by such Investor shall contain a
legend to the effect that transfer is prohibited except in accordance with the
provisions of said Regulation S.
3.6. No Brokers. The Investor has not engaged any broker, dealer,
----------
finder, commission agent or other similar person in connection with the offer,
offer for sale, or sale of the Shares or the Warrant Shares and is not under any
obligation to pay any broker's fee or commission in connection with his
investment.
3.7. Review of Reports. The Investor has carefully read the Reports. In
-----------------
evaluating the suitability of an investment in the Company, the Investor has not
relied upon any representations or other information (whether oral or written)
other than as set forth in the Reports or as contained in any documents or
answers to questions furnished by the Company.
3.8. Sophistication of Investor. The Investor either (i) has a preexisting
--------------------------
personal or business relationship with the Company or its controlling persons,
such as would enable a reasonably prudent purchaser to be aware of the character
and general business and financial circumstances of the Company or its
controlling persons, or (ii) by reason of his or her business or financial
experience, individually or in conjunction with his or her unaffiliated
professional advisors, the Investor is capable of evaluating the merits and
risks of an investment in the Shares and the Warrant Shares, making an informed
investment decision and protecting his or her own interests.
3.09. Accuracy of Information. All of the information set forth on the cover
-----------------------
page of this Agreement, including without limitation the Accredited Investor
Status indicated as applicable to the Investor, is true and correct in all
respects.
3.11. Securities Act Compliance. The Investor understands that the easiest way
-------------------------
to sell its Shares in the future would be to sell in an underwritten public
offering of the Company's securities (as contemplated by the Registration Rights
Agreement among the Investor, certain other investors and the Company) or to a
purchaser of the entire Company or its business. In the absence of a public
offering or such a sale, however, the Investor may sell his or its Shares or
Warrant Shares in compliance with various private sale exemptions under
applicable securities laws. Accordingly, the Investor understands that neither
the Shares nor the Warrant Shares have been registered under the Securities Act,
by reason of a specific exemption under the provisions of the Securities Act
which depends in part upon the investment intent and the representations and
warranties of the Investor made in this Agreement. The
35
<PAGE>
Investor further understands that the Company may place certain legends on the
certificate(s) for the Shares and the Warrant Shares as required by applicable
laws, including a legend in form substantially as follows:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), or applicable state securities laws and none of such
securities, nor any interest therein, may be sold, transferred,
assigned, made the subject of any security interest, or otherwise
disposed of, without an effective registration statement for such
securities under the Act and applicable state securities laws, or
an opinion of counsel in form and substance satisfactory to the
Company that registration is not required under the Act or such
state securities laws.
4. Miscellaneous.
-------------
4.1. Notices. All notices or other communications given or made hereunder shall
-------
be in writing and shall be delivered or mailed by registered or first class
mail, postage prepaid or express overnight courier service, to the address set
forth on the cover page hereof.
4.2. Legal Fees. The Company shall be responsible for the reasonable fees and
----------
disbursements of Investor's counsel in connection with the transactions
described in or contemplated by this Subscription Agreement.
4.3. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Massachusetts, excluding its
conflicts of laws rules.
4.4. Entire Agreement. This Agreement constitutes the entire agreement between
----------------
the parties with respect to the subject matter hereof and may be amended or
superseded only by a writing executed by the parties.
5. Continuing Effect of Representations, Warranties and Acknowledgments.
--------------------------------------------------------------------
The Investor agrees that the representations and warranties of Section 3 and
Section 4, respectively, are true and accurate as of the date of this
Subscription Agreement and shall be true and accurate as of the date of delivery
to and acceptance by the Company of this Subscription Agreement, and shall
survive such delivery and acceptance. If in any respect such representations,
warranties and acknowledgements shall not be true and accurate prior to such
delivery and acceptance, the Investor shall give immediate written notice of
such fact to the Company, specifying which representations and warranties and
acknowledgements are not true and accurate and the reasons therefor.
6. Indemnification. The Investor understands the meaning and legal consequences
---------------
of the representations and warranties contained in Section 3, and agrees to
indemnify and hold harmless the Company, its officers or any of its
directors, affiliates, controlling shareholders, counsel, agents, or
employees from and against any and all loss, damage or liability (including
costs and reasonable attorney's fees) due to or arising out of a breach of
any representation, warranty or acknowledgment of the Investor contained in
this Agreement.
36
<PAGE>
Exhibit 10.9
ADVANCED LUMITECH, INC.
THIS WARRANT AND THE SECURITIES PURCHASED UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
Warrant to Purchase_____ shares
"A" Warrant to Purchase Common Stock
of
ADVANCED LUMITECH, INC.
THIS CERTIFIES that _______________________ or any subsequent holder hereof
("Holder"), has the right to purchase from ADVANCED LUMITECH, INC., a Nevada
corporation (the "Company"), up to ______ fully paid and nonassessable shares of
the Company's common stock, $.001 par value per share, with one "B" Warrant
attached per share ("Common Stock"), subject to adjustment as provided herein,
at a price equal to the Exercise Price as defined in Section 3 below, at any
time beginning on the Date of Issuance (defined below) and ending at 5:00 p.m.,
New York, New York time, on September 30, 1999 (the "Exercise Period").
Holder agrees with the Company that this Warrant to Purchase Common Stock of
Advanced Lumitech, Inc. (this "Warrant") is issued and all rights hereunder
shall be held subject to all of the conditions, limitations and provisions set
forth herein.
1. DATE OF ISSUANCE.
This Warrant shall be deemed to be issued on September 15, 1999 ("Date of
Issuance").
2. EXERCISE.
(a) MANNER OF EXERCISE. During the Exercise Period, this Warrant may be
exercised as to all or any lesser number of full shares of Common Stock covered
hereby upon surrender of this Warrant, with the Exercise Form attached hereto as
Exhibit A (the "Exercise Form") duly executed, together with the full Exercise
Price (as defined below) for each share of Common Stock as to which this Warrant
is exercised, at the office of the Company, Avenue Cardinal-Mermillod 36, 1227
Carouge, Geneva, Switzerland; Attention: President, Telephone No. (41-22) 301-
0360, Telecopy No. (41-22) 301-0361, or at such other office or agency as the
Company may designate in writing, by overnight mail, with an advance copy of the
Exercise Form sent to the Company by facsimile (such surrender and payment of
the Exercise Price hereinafter called the "Exercise of this Warrant").
(b) DATE OF EXERCISE. The "Date of Exercise" of the Warrant shall be
defined as the date that the advance copy of the Exercise Form is sent by
facsimile to the Company, provided that the original Warrant and
1
<PAGE>
Exercise Form are received by the Company as soon as practicable thereafter.
Alternatively, the Date of Exercise shall be defined as the date the original
Exercise Form is received by the Company, if Holder has not sent advance notice
by facsimile.
(c) CANCELLATION OF WARRANT. This Warrant shall be canceled upon the
Exercise of this Warrant, and, as soon as practical after the Date of Exercise,
Holder shall be entitled to receive Common Stock for the number of shares
purchased upon such Exercise of this Warrant, and if this Warrant is not
exercised in full, Holder shall be entitled to receive a new Warrant (containing
terms identical to this Warrant) representing any unexercised portion of this
Warrant in addition to such Common Stock.
(d) HOLDER OF RECORD. Each person in whose name any Warrant for shares of
Common Stock is issued shall, for all purposes, be deemed to be the Holder of
record of such shares on the Date of Exercise of this Warrant, irrespective of
the date of delivery of the Common Stock purchased upon the Exercise of this
Warrant. Nothing in this Warrant shall be construed as conferring upon Holder
any rights as a stockholder of the Company.
3. PAYMENT OF WARRANT EXERCISE PRICE.
The Exercise Price shall equal $0.75 per share ("Exercise Price").
Payment of the Exercise Price may be made by either of the following, or a
combination thereof, at the election of Holder: cash, certified check, cashiers
check or wire transfer.
4. TRANSFER AND REGISTRATION.
(a) TRANSFER RIGHTS. Subject to the provisions of Section 8 of this
Warrant, this Warrant may be transferred on the books of the Company, in whole
or in part, in person or by attorney, upon surrender of this Warrant properly
endorsed. This Warrant shall be canceled upon such surrender and, as soon as
practicable thereafter, the person to whom such transfer is made shall be
entitled to receive a new Warrant or Warrants as to the portion of this Warrant
transferred and Holder shall be entitled to receive a new Warrant as to the
portion hereof retained.
(b) REGISTRABLE SECURITIES. The Common Stock issuable upon the exercise of
this Warrant constitutes "Registrable Securities" under that certain
Registration Rights Agreement dated on or about __________________, 1999 between
the Company and the Holders and, accordingly, has the benefit of the
registration rights pursuant to that agreement.
5. ANTI-DILUTION ADJUSTMENTS.
(a) STOCK DIVIDEND. If the Company shall at any time declare a dividend
payable in shares of Common Stock, then Holder, upon Exercise of this Warrant
after the record date for the determination of holders of Common Stock entitled
to receive such dividend, shall be entitled to receive upon Exercise of this
Warrant, in addition to the number of shares of Common Stock as to which this
Warrant is exercised, such additional shares of Common Stock as such Holder
would have received had this Warrant been exercised immediately prior to such
record date and the Exercise Price will be proportionately adjusted.
2
<PAGE>
(b) RECAPITALIZATION OR RECLASSIFICATION. If the Company shall at any time
the Warrants are outstanding effect a recapitalization, reclassification or
other similar transaction of such character that the shares of Common Stock
shall be changed into or become exchangeable for a larger or smaller number of
shares, then upon the effective date thereof, the number of shares of Common
Stock which Holder shall be entitled to purchase upon Exercise of this Warrant
shall be increased or decreased, as the case may be, in direct proportion to the
increase or decrease in the number of shares of Common Stock by reason of such
recapitalization, reclassification or similar transaction, and the Exercise
Price shall be, in the case of an increase in the number of shares,
proportionally decreased and, in the case of decrease in the number of shares,
proportionally increased. The Company shall give Holder same notice it provides
to holders of Common Stock of any transaction described in this Section 5 (b).
(c) DISTRIBUTIONS. If the Company shall at any time the Warrants are
outstanding distribute for no consideration to holders of Common Stock cash,
evidences of indebtedness or other securities or assets (other than cash
dividends or distributions payable out of earned surplus or net profits for the
current or preceding year) then, in any such case, Holder shall be entitled to
receive, upon Exercise of this Warrant, with respect to each share of Common
Stock issuable upon such exercise, the amount of cash or evidences of
indebtedness or other securities or assets which Holder would have been entitled
to receive with respect to each such share of Common Stock as a result of the
happening of such event had this Warrant been exercised immediately prior to the
record date or other date fixing shareholders to be affected by such event (the
"Determination Date") or, in lieu thereof, if the Board of Directors of the
Company should so determine at the time of such distribution, a reduced Exercise
Price determined by multiplying the Exercise Price on the Determination Date by
a fraction, the numerator of which is the result of such Exercise Price reduced
by the value of such distribution applicable to one share of Common Stock (such
value to be determined by the Board of Directors of the Company in its
discretion) and the denominator of which is such Exercise Price.
(d) NOTICE OF CONSOLIDATION OR MERGER. In the event of a merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock shall be changed into
the same or a different number of shares of the same or another class or classes
of stock or securities or other assets of the Company or another entity or there
is a sale of all or substantially all the Company's assets (a "Corporate
Change"), then this Warrant shall be exercisable into such class and type of
securities or other assets as Holder would have received had Holder exercised
this Warrant immediately prior to such Corporate Change; provided, however, that
Company may not affect any Corporate Change unless it first shall have given
thirty (30) business days notice to Holder hereof of any Corporate Change.
(e) EXERCISE PRICE ADJUSTED. As used in this Warrant, the term "Exercise
Price" shall mean the purchase price per share specified in Section 3 of this
Warrant, until the occurrence of an event stated in subsection (a), (b) or (c)
of this Section 5, and thereafter shall mean said price as adjusted from time to
time in accordance with the provisions of said subsection. No such adjustment
under this Section 5 shall be made unless such adjustment would change the
Exercise Price at the time by $.01 or more; provided, however, that all
adjustments not so made shall be deferred and made when the aggregate thereof
would change the Exercise Price at the time by $.01 or more. No adjustment made
3
<PAGE>
pursuant to any provision of this Section 5 shall have the net effect of
increasing the Exercise Price. The number of shares of Common Stock subject
hereto shall increase proportionately with each decrease in the Exercise Price.
(f) ADJUSTMENTS: ADDITIONAL SHARES, SECURITIES OR ASSETS. In the event
that at any time, as a result of an adjustment made pursuant to this Section 5,
Holder shall, upon Exercise of this Warrant, become entitled to receive shares
and/or other securities or assets (other than Common Stock) then, wherever
appropriate, all references herein to shares of Common Stock shall be deemed to
refer to and include such shares and/or other securities or assets; and
thereafter the number of such shares and/or other securities or assets shall be
subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 5.
6. FRACTIONAL INTERESTS.
No fractional shares or scrip representing fractional shares shall be
issuable upon the Exercise of this Warrant, but on Exercise of this Warrant,
Holder may purchase only a whole number of shares of Common Stock, if, on
Exercise of this Warrant, Holder would be entitled to a fractional share of
Common Stock or a right to acquire a fractional share of Common Stock, such
fractional share shall be disregarded and the number of shares of Common Stock
issuable upon exercise shall be the next higher number of shares.
7. RESERVATION OF SHARES.
The Company shall at all times reserve for issuance such number of
authorized and unissued shares of Common Stock (or other securities substituted
therefor as herein above provided) as shall be sufficient for the Exercise of
this Warrant and payment of the Exercise Price. The Company covenants and agrees
that upon the Exercise of this Warrant, all shares of Common Stock issuable upon
such exercise shall be duly and validly issued, fully paid, nonassessable and
not subject to preemptive rights, rights of first refusal or similar rights of
any person or entity.
8. RESTRICTIONS ON TRANSFER.
(a) REGISTRATION OR EXAMINATION REQUIRED. This Warrant has been issued in
a transaction exempt from the registration requirements of the Act by virtue of
Regulation D and is exempt from state registration under applicable state laws.
The Warrant and the Common Stock issuable upon the Exercise of this Warrant may
not be sold except pursuant to an effective registration statement or an
exemption to the registration requirements of the Act and applicable state laws.
(b) ASSIGNMENT. If Holder can provide the Company with reasonably
satisfactory evidence that the conditions of (a) above regarding registration or
exemption have been satisfied, Holder may sell, transfer, assign, pledge or
otherwise dispose of this Warrant, in whole or in part. Holder shall deliver a
written notice to Company, substantially in the form of the Assignment attached
hereto as Exhibit B, indicating the person or persons to whom the Warrant shall
be assigned and the respective number of warrants to be assigned to each
assignee. The Company shall effect the assignment within ten (10) days, and
shall deliver to the assignee(s) designated by Holder a Warrant or Warrants of
like tenor and terms for the appropriate number of shares.
4
<PAGE>
9. BENEFITS OF THIS WARRANT.
Nothing in this Warrant shall be construed to confer upon any person
other than the Company and Holder any legal or equitable right, remedy or claim
under this Warrant and this Warrant shall be for the sole and exclusive benefit
of the Company and Holder.
10. APPLICABLE LAW.
This Warrant is issued under and shall for all purposes be governed by
and construed in accordance with the laws of the state of Nevada, without giving
effect to conflict of law provisions thereof.
11. LOSS OF WARRANT.
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity or security reasonable to the Company, and upon
surrender and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver a new Warrant of like tenor and date.
12. NOTICE OR DEMANDS.
Notices or demands pursuant to this Warrant to be given or made by Holder to or
on the Company shall be sufficiently given or made if sent by certified or
registered mail, return receipt requested, postage prepaid, and addressed, until
another address is designated in writing by the Company, to Attention:
_______________________________________________________________________________
_____________. Notices or demands pursuant to this Warrant to be given or made
by the Company to or on Holder shall be sufficiently given or made if sent by
certified or registered mail, return receipt requested, postage prepaid, and
addressed, to the address of Holder set forth in the Company's records, until
another address is designated in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of
the_____day of ____, 19__.
ADVANCED LUMITECH, INC.
By: ______________________
Patrick Planche, President
5
<PAGE>
EXHIBIT A
EXERCISE FORM
TO: ADVANCED LUMITECH, INC.
The undersigned hereby irrevocably exercises the right to purchase the
shares of common stock, with "B" Warrant attached (the "Common Stock") of
ADVANCED LUMITECH, INC., a Nevada corporation (the "Company"), evidenced by the
attached warrant (the "Warrant"), and herewith makes payment of the exercise
price with respect to such shares in full, all in accordance with the conditions
and provisions of said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise dispose of
any of the Common Stock or Warrants obtained on exercise of this Warrant, except
in accordance with the provisions of Section 8 (a) of the Warrant.
2. The undersigned requests that stock certificates for such shares, with "B"
Warrants attached, be issued , and a warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant in the name of the undersigned
and delivered to the undersigned at the address set forth below:
Dated:
_______________________________________
Signature
_______________________________________
Print Name
_______________________________________
Address
_______________________________________
NOTICE
The signature to the foregoing Exercise Form must correspond to the name as
written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
6
<PAGE>
EXHIBIT B
ASSIGNMENT
(To be executed by the registered holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned holder of the attached warrant (the
"Warrant") hereby sells, assigns and transfers unto the person or persons below
named the right to purchase _____ shares, with attached "B" Warrants, of the
common stock of ADVANCED LUMITECH, INC., evidenced by the attached Warrant and
does hereby irrevocably constitute and appoint _________________________
attorney to transfer the said Warrant on the books of the Company, with full
power of substitution in the premises.
Dated:
_______________________________________
Signature
Fill in for new registration of Warrant:
_______________________________________
Name
_______________________________________
Address
_______________________________________
Please print name and address of assignee
(including zip code number)
________________________________________________________________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as written
upon the face of the attached Warrant in every particular, without alteration or
enlargement or any change whatsoever.
7
<PAGE>
Exhibit 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statement (form
S-8 No. 33-88023), pertaining to the 1999 Stock Option/Stock Issuance Plan, of
our report dated April 5, 2000, with respect to the consolidated financial
statements, as amended, of Advanced Lumitech, Inc. included in this Form 10-K/A
for the year ended December 31, 1999.
/s/ Ernst & Young LLP
Boston, Massachusetts
May 16, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 490,276
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 499,623
<PP&E> 76,815
<DEPRECIATION> (38,454)
<TOTAL-ASSETS> 537,984
<CURRENT-LIABILITIES> 1,248,689
<BONDS> 0
0
0
<COMMON> 31,998
<OTHER-SE> 4,747,766
<TOTAL-LIABILITY-AND-EQUITY> 537,984
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 4,197,927
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76,783
<INCOME-PRETAX> (4,274,710)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,274,710)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,274,710)
<EPS-BASIC> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
