<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-21042
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Molten Metal Technology, Inc.
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-1659959
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
400-2 Totten Pond Road
Waltham, MA 02154
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 487-9700
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, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.01 par value 23,533,040
---------------------------- --------------------------------
Class Outstanding at November 12, 1996
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<TABLE>
MOLTEN METAL TECHNOLOGY, INC.
INDEX
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
Consolidated Balance Sheet - September 30, 1996 and December 31, 1995 3
Consolidated Statement of Operations for the quarters ended
September 30, 1996 and 1995 and for the nine months ended
September 30, 1996 and 1995 4
Consolidated Statement of Cash Flows for the nine months ended
September 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition 9-13
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings *
Item 2. Changes in Securities *
Item 3. Defaults Upon Senior Securities *
Item 4. Submission of Matters to a Vote of Security Holders *
Item 5. Other Information 14-15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
- ----------
</TABLE>
* No information provided due to the inapplicability of item.
2
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MOLTEN METAL TECHNOLOGY, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEET
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------ ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 39,841,221 $ 6,644,856
Short-term investments 147,362,020 79,631,394
Accounts receivable 6,119,569 1,917,858
Accounts receivable from affiliate 27,244,118 15,412,196
Prepaid expenses and other current assets 6,217,995 2,309,398
------------ ------------
Total current assets 226,784,923 105,915,702
Restricted cash and investments 2,336,695 7,432,817
Fixed assets, net 57,491,094 34,679,390
Intangible assets, net 4,846,146 3,501,680
Investment in affiliate 16,099,594 834,794
Other assets 6,033,775 971,618
------------ ------------
$313,592,227 $153,336,001
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 176,158 $ 195,043
Accounts payable 8,770,158 9,827,490
Accrued expenses 4,512,870 1,713,557
Accrued interest 3,610,034 789,455
Deferred revenue from affiliate -- 4,083,334
------------ ------------
Total current liabilities 17,069,220 16,608,879
------------ ------------
Long-term debt 166,509,459 22,883,962
------------ ------------
Due to related parties 1,385,889 1,474,586
------------ ------------
Deferred income from affiliate 6,894,870 2,459,918
------------ ------------
Stockholders' equity:
Preferred stock, $.01 par value, 3,000 shares
authorized, no shares issued or outstanding -- --
Common stock, $.01 par value, 100,000,000 shares
authorized; shares issued and outstanding:
23,528,050 at September 30, 1996 and
22,746,854 at December 31, 1995 235,280 227,469
Additional paid-in capital 159,922,399 146,631,297
Valuation allowance for short-term investments (777,564) (311,163)
Accumulated deficit (37,647,326) (36,638,947)
------------ ------------
Total stockholders' equity 121,732,789 109,908,656
------------ ------------
$313,592,227 $153,336,001
============ ============
</TABLE>
See notes to financial statements.
3
<PAGE> 4
MOLTEN METAL TECHNOLOGY, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
QUARTER ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
----------------------------- -------------------------------
1996 1995 1996 1995
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenue:
Research and development ("R&D") $ 3,187,477 $ 3,310,951 $ 8,230,774 $ 9,987,616
Construction, R&D and consulting from affiliate 6,785,972 7,164,173 37,062,935 9,084,747
Technology transfer and success fees from affiliate 5,583,333 1,750,000 13,083,333 5,250,000
----------- ----------- ----------- -----------
15,556,782 12,225,124 58,377,042 24,322,363
Operating expenses:
Cost of revenue - R&D 3,187,646 3,286,477 8,090,929 9,963,142
Cost of revenue - construction, R&D, consulting,
technology transfer and success fees from affiliate 8,636,726 6,427,468 34,451,636 8,267,965
R&D 4,864,205 2,551,029 14,191,206 8,444,883
Selling, general and administrative ("SG&A") 5,572,523 422,123 10,201,741 3,500,225
----------- ----------- ----------- -----------
22,261,100 12,687,097 66,935,512 30,176,215
Equity income from affiliate 2,818,178 482,512 5,494,214 665,890
----------- ----------- ----------- -----------
Income (loss) from operations (3,886,140) 20,539 (3,064,256) (5,187,962)
Other income (expense):
Interest income 2,846,313 1,460,449 6,431,691 4,212,736
Interest expense (2,268,115) (333,646) (4,375,814) (1,248,935)
----------- ----------- ----------- -----------
Net income (loss) $(3,307,942) $ 1,147,342 $(1,008,379) $(2,224,161)
=========== =========== =========== ===========
Net income (loss) per share $ (0.14) $ 0.04 $ (0.04) $ (0.10)
=========== =========== =========== ===========
Weighted average common and common equivalent
shares outstanding 23,490,753 26,889,434 23,230,088 22,282,540
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
4
<PAGE> 5
MOLTEN METAL TECHNOLOGY, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1996 1995
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,008,379) $(2,224,161)
Adjustments to reconcile net (loss) to net cash used in
operating activities:
Depreciation and amortization 4,301,200 3,494,646
Equity income from affiliate (5,494,214) (665,890)
Compensation expense related to common stock options 305,529 46,872
Increase in accounts receivable (4,201,711) (555,125)
Increase in accounts receivable from affiliate (11,831,922) (7,314,209)
Increase in prepaid expenses and other current assets (3,908,597) (1,113,886)
Decrease (increase) in other assets (874,356) 67,543
Increase (decrease) in accounts payable (1,057,332) 1,401,719
Increase in accrued expenses 2,799,313 4,336,379
Increase (decrease) in accrued interest 2,820,579 (487,214)
Increase (decrease) in deferred revenue (4,083,334) 1,300,001
Increase in deferred income from affiliate 4,434,952 718,839
------------ -----------
Net cash used in operating activities (17,798,272) (994,486)
------------ -----------
Cash flows from investing activities:
Purchase of fixed assets (26,718,793) (12,455,671)
Purchase of intangible assets (1,515,203) (913,632)
Redemption (purchase) of short-term investments, net (68,197,027) 24,877,150
Decrease in restricted cash 5,096,122 2,531,913
------------ -----------
Net cash provided by (used in) investing activities (91,334,901) 14,039,760
------------ -----------
Cash flows from financing activities:
Proceeds from issuances of common stock 3,222,797 1,280,270
Net proceeds from issuance of long-term debt 139,338,826 --
Payments to related parties (88,697) --
Principal repayments of long-term debt (143,388) (320,670)
------------ -----------
Net cash provided by financing activities 142,329,538 959,600
------------ -----------
Increase in cash and cash equivalents 33,196,365 14,004,874
Cash and cash equivalents at beginning of period 6,644,856 12,063,883
------------ -----------
Cash and cash equivalents at end of period $ 39,841,221 $26,068,757
============ ===========
Additional disclosure of non-cash investing and
financing activities
Issuance of common stock in exchange for investment
in affiliate $ 9,770,587 $ --
============ ===========
</TABLE>
See notes to financial statements.
5
<PAGE> 6
MOLTEN METAL TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
Molten Metal Technology, Inc. (the "Company") is an environmental technology
company commercializing pollution prevention and waste recycling methods that
are broadly applicable to a wide variety of hazardous, non-hazardous and
radioactive wastes. The Company developed its core technology, Catalytic
Extraction Processing ("CEP"), to dissolve waste compounds to their constituent
elements in a molten metal bath and reconfigure the elements into useful raw
materials.
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
Net income (loss) per share is determined by dividing net income (loss) by the
weighted average number of common and common equivalent shares outstanding
during the period. Common share equivalents consist of common stock which may be
issuable upon exercise of outstanding stock options and warrants. Common share
equivalents have been excluded from the weighted average number of common shares
in loss periods since their effect is anti-dilutive.
Certain reclassifications have been made for consistent presentation. The
reclassifications have no effect on the net loss for the periods ended September
30, 1995.
The information furnished is unaudited and reflects all adjustments (consisting
of only normal recurring adjustments) which, in the opinion of management, are
necessary for a fair presentation of the financial position and results of
operations for the interim periods. The accompanying financial statements should
be read in conjunction with the Company's audited financial statements and
related footnotes for the year ended December 31, 1995 which are included in the
Company's annual report on Form 10-K for the year ended December 31, 1995. The
results of operations for the periods ended September 30, 1996 are not
necessarily indicative of the results to be expected for the full year.
NOTE 2. EQUITY TRANSACTIONS
During the quarter ended September 30, 1996, 60,574 shares of common stock were
issued upon the exercise of options.
In April 1996, the Company and Lockheed Martin Corporation ("LMC") closed an
agreement to expand their partnership (M4 Environmental L.P. or "M4") through
the acquisition by M4 of the Retech division of Lockheed Environmental Systems &
Technologies Co., an indirect wholly-owned subsidiary of LMC. The Retech
division
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designs and manufactures metallurgical equipment and waste processing systems
that utilize a plasma technology. Under this agreement, LMC contributed
approximately half of the assets of the Retech division to M4, and the Company
purchased substantially all of the remaining assets of the Retech division for
307,735 shares of its common stock, and then immediately contributed these
assets to M4. Pursuant to the agreement, the number of shares issued to LMC will
be adjusted when the value of net contributions from LMC to Retech is
determined.
NOTE 3. LICENSE AGREEMENT
In September 1996, the Company, LMC and M4 entered into an agreement which
expanded M4's CEP license to include the demilitarization of Japanese chemical
weapons. In return for the expansion of the license, the Company will receive a
$5 million initial payment. The Company also will receive an additional $3.5
million upon completion of a technical demonstration by the Company of the
processing of one or more munitions shells containing surrogates of Japanese
chemical weapons. In addition, the Company will receive an ongoing eight percent
royalty on gross revenues of M4 or any sublicensees from any activities related
to the demilitarization of Japanese chemical weapons, and will be paid other
fees for construction of CEP systems, spare parts, and training.
NOTE 4. INVESTMENT IN M4
The Company accounts for its investment in M4 using the equity method. The
Company recognized equity income from M4 of $2,818,000 and $5,494,000 for the
three months and nine months ended September 30, 1996, respectively, reflecting
the Company's share of revenue and other income earned by M4. Under the M4
limited partnership agreement, the Company and LMC share equally in M4's
revenues and other income and all expenses are allocated to LMC until the
capital accounts of the Company and LMC are equal. Thereafter, as long as the
capital accounts of the Company and LMC are equal, the Company and LMC will
share equally in the profits or losses of M4.
<TABLE>
Summarized income statement information of M4 for the periods ended September
30, 1996 is presented below:
<CAPTION>
Quarter ended Nine months ended
September 30, 1996 September 30, 1996
------------------ ------------------
<S> <C> <C>
Revenue $ 5,578,000 $ 10,388,000
Other income 115,000 712,000
------------ ------------
Total revenue and other income $ 5,693,000 $ 11,100,000
Expenses $(15,751,000) $(36,482,000)
------------ ------------
Net loss $(10,058,000) $(25,382,000)
============ ============
The Company's share of M4's
total revenue and other income $ 2,818,000 $ 5,494,000
</TABLE>
7
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NOTE 5. CONVERTIBLE DEBT
In May 1996, the Company issued $143,750,000 of Convertible Subordinated Notes
Due 2006 (the "Notes"). The Notes have a term of ten years and are payable in
full on May 1, 2006. The Notes bear interest at the rate of 5.50% per year
payable semi-annually. The Notes are convertible into shares of the Company's
common stock at a conversion price of $38.75 per share.
NOTE 6. NEW ACCOUNTING PRONOUNCEMENT
Effective January 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 121, `Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of' ("FAS 121"). In accordance with this
standard, the Company periodically assesses whether any events or changes in
circumstances have occurred that would indicate that the carrying amount of a
long-lived asset may not be recoverable. If such an event or change in
circumstance occurs, the Company will evaluate whether the carrying amount of
such assets is recoverable by comparing the net book value of the assets to
estimated future undiscounted cash flows, excluding interest charges,
attributable to such assets. If it is determined that the carrying amount is not
recoverable, the Company will recognize an impairment loss equal to the excess
of the carrying amount of the asset over its fair value. Adoption of FAS 121 did
not have an impact on the Company's financial statements.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
<TABLE>
Revenues for the third quarter of 1996 increased to $15,557,000 from $12,225,000
in the third quarter of 1995 and increased to $58,377,000 for the nine months
ended September 30, 1996 from $24,322,000 for the nine months ended September
30, 1995. The following table compares sources of revenue for the periods ended
September 30, 1996 and 1995:
<CAPTION>
Quarter ended September 30,
---------------------------
1996 1995
---- ----
<S> <C> <C>
Engineering and construction $ 6,148,000 $ 6,755,000
R&D and consulting 3,826,000 3,720,000
Technology transfer and success fees 5,583,000 1,750,000
----------- -----------
$15,557,000 $12,225,000
=========== ===========
<CAPTION>
Nine Months ended September 30,
-------------------------------
1996 1995
---- ----
Engineering and construction $31,873,000 $ 8,376,000
R&D and consulting 13,421,000 10,696,000
Technology transfer and success fees 13,083,000 5,250,000
----------- -----------
$58,377,000 $24,322,000
=========== ===========
</TABLE>
Engineering and construction revenue is from services provided to M4 for the
engineering, design and construction of M4's Technology Center. The decrease for
the quarter ended September 30, 1996 over 1995 reflects a reduction of
construction activities as the Technology Center nears completion. The increase
for the nine months ended September 30, 1996 over 1995 is a result of billings
to M4 during the peak period of construction for the Technology Center. Overall,
the Company expects engineering and construction revenue to decline until it
executes definitive contracts to construct commercial CEP systems for customers
who will be financially liable, in whole or in part, for the construction of
such systems.
R&D and consulting revenue increased from 1995 due to billings under various
development contracts with M4. During the nine months ended September 30, 1996,
the Company recorded $8 million in revenue for the reimbursement of R&D costs
incurred under a cost sharing contract with the United States Department of
Energy (the "DOE") compared to approximately $10 million in the nine months
ended September 30, 1995. The decrease is a result of the Company reaching the
funded contract value during the third quarter of 1996 and not entering into any
arrangements providing for additional funding from the DOE. The Company
currently is in discussions with the DOE regarding additional funding which
could be provided directly to the Company, or to the Company as a subcontractor
to M4 or other third
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parties. Although the DOE reaffirmed its enthusiasm for the Company's CEP
technology in a statement issued in October 1996, there can be no assurances
that the Company will receive additional funding from the DOE, and the Company
does not anticipate receiving any such additional funding in 1996. The Company
expects to continue with planned research and development projects, some of
which will continue to be funded by M4 and some of which will be funded from the
Company's working capital. The Company will continue to seek alternative sources
of funding for these research and development efforts. The Company anticipates
that the amount of externally funded research and development will remain
constant over the next year, although it is expected to decline as a percentage
of revenue.
Technology transfer and success fees increased in the third quarter of 1996 over
1995 due to $5 million of revenue recognized for the sale of a license to M4 for
the Japanese chemical weapons market. During the third quarter of 1996, the
Company recognized the remaining $583,000 of the original $14 million license
fee from M4. This license fee was being recognized over a two year period that
began in August 1994. Also during 1996, the Company recognized $4 million of
plant start-up fees from M4. Under the terms of the M4 limited partnership
agreement, the Company was entitled to a fee of $2 million upon the start-up of
each of the first three CEP plants developed by M4. As of June 30, 1996, the
Company had earned each of these three success fees.
As commercial operations commence at the Company's facilities in Oak Ridge,
Tennessee and Bay City, Texas, the Company expects to generate revenue from
processing and recycling secondary materials and wastes. The Company expects
that revenue from plant operations will be a significant portion of its total
revenue in future periods. To date, however, the Company has not received any
revenue from plant operations. The existence and timing of the Company's
commercial sales and operations and related revenue will depend on a number of
factors, including the ability of the Company and its affiliates to successfully
market, permit and build CEP systems on a timely basis for their target markets,
customer acceptance of the technology, and competition from other companies in
the Company's target markets, and no assurances can be made in this regard.
Cost of revenues for the third quarter of 1996 increased to $11,824,000 from
$9,714,000 in the third quarter of 1995 and increased to $42,543,000 for the
nine months ended September 30, 1996 from $18,231,000 for the nine months ended
September 30, 1995. The increases are primarily attributable to an increase in
engineering and construction activities in connection with the development of
CEP systems for M4 and the deferral of income related to inter-company profit on
the sale of assets to M4, including the deferral of $2.5 million of the initial
$5 million payment for the Japanese chemical weapons market described above.
R&D expenses for the third quarter of 1996 increased to $4,864,000 from
$2,551,000 in the third quarter of 1995, and increased to $14,191,000 for the
nine months ended September 30, 1996 from $8,445,000 for the nine months ended
September 30, 1995. The
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increases reflect an increase in costs associated with the continued development
of CEP and internally funded CEP demonstrations. SG&A expenses for the third
quarter of 1996 increased to $5,573,000 from $422,000 in the third quarter of
1995, and increased to $10,202,000 for the nine months ended September 30, 1996
from $3,500,000 for the nine months ended September 30, 1995. The increase
reflects the hiring of additional personnel, the expansion of corporate
infrastructure and a lower absorption of SG&A expenses into cost of revenue due
to a reduction in cost reimbursement contracts. The Company is making efforts to
decrease SG&A expenses in future periods. See Item 5. Other Information - Recent
Developments - Restructuring. The classification of expenses between cost of
revenue, R&D and SG&A will depend on the number and amount of future cost
reimbursement contracts and the related absorption of R&D and SG&A expenses into
cost of revenue.
The Company accounts for its investment in M4 using the equity method. Equity
income from M4 for the third quarter of 1996 increased to $2,818,000 from
$483,000 in the third quarter of 1995 and increased to $5,494,000 for the nine
months ended September 30, 1996 from $666,000 for the nine months ended
September 30, 1995, reflecting the Company's share of revenue and other income
earned by M4. The increases in 1996 primarily are due to an increase in M4
revenue resulting from the inclusion of the Retech division's operations
subsequent to the acquisition of Retech by M4 in April 1996. Under the M4
limited partnership agreement, the Company and LMC share equally in M4's
revenues and other income and all expenses are allocated to LMC until the
capital accounts of the Company and LMC are equal. Thereafter, as long as the
capital accounts of the Company and LMC are equal, the Company and LMC will
share equally in the profits or losses of M4. The Company anticipates that its
capital account will become equal to LMC's capital account by the end of 1996.
Because M4 is anticipated to have losses for the foreseeable future, the
Company's equity in earnings of M4 could have a material adverse effect on
future results of operations of the Company.
Interest income for the third quarter of 1996 increased to $2,846,000 from
$1,460,000 in the third quarter of 1995 and increased to $6,432,000 for the nine
months ended September 30, 1996 from $4,213,000 for the nine months ended
September 30, 1995. The increases are due to interest earned on the net proceeds
from the issuance of convertible debt in May 1996. Interest expense for the
third quarter of 1996 increased to $2,268,000 from $334,000 in the third quarter
of 1995 and increased to $4,376,000 for the nine months ended September 30, 1996
from $1,249,000 for the nine months ended September 30, 1995. The increases are
due to interest on the convertible debt issued in May 1996.
FINANCIAL CONDITION
As of September 30, 1996, the Company's cash, cash equivalents and short-term
investments increased by approximately $100,927,000 from December 31, 1995. The
increase was primarily a result of the net proceeds from the issuance of the
Company's 5 1/2% Convertible Subordinated Notes Due 2006. The increase was
offset by cash used
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in operations and for the acquisition of fixed assets. For the remainder of 1996
and all of 1997, the Company expects to incur significant additional
expenditures related to the engineering, construction and start-up of commercial
CEP systems owned by itself and through joint ventures. The Company expects that
its total capital expenditures for 1996 will be approximately $85 million, and
for 1997 will be approximately $45 million.
During the third quarter, the Company signed a letter of intent to become full
owner of the waste-processing facility it jointly owns with Scientific Ecology
Group, Inc. (SEG) in Oak Ridge, Tennessee. SEG is a wholly-owned subsidiary of
Westinghouse Electric Corporation. The facility is designed to process certain
low-level radioactive waste from nuclear power plants. Under the terms of the
letter of intent, the Company is negotiating to acquire SEG's half of the
facility and certain associated waste-handling assets. The acquisition
contemplated by the letter of intent is subject to a number of conditions,
including the transfer of required permits and the negotiation and execution of
definitive agreements. There can be no assurances that the parties will be able
to negotiate mutually acceptable agreements to consummate the proposed
transaction.
The Company is currently constructing a CEP plant to process and recycle
secondary materials from chemical manufacturing operations at a facility owned
by Hoechst Celanese Chemical Group in Bay City, Texas.
The Company intends to seek debt financing to finance or re-finance a
substantial portion of the construction and related costs for its facilities in
Oak Ridge, Tennessee and Bay City, Texas. The amount, timing and effect on
liquidity of capital expenditures, including equity contributions to joint
ventures, to be made by the Company in connection with the development of
commercial CEP systems will depend on a number of factors, including the number
of systems to be developed, the timing of the development of such CEP systems,
the terms of the development arrangements with the Company's customers and
partners and the extent to which the Company is able to obtain financing for
such CEP systems.
As of September 30, 1996, accounts receivable and accounts receivable from
affiliate increased by approximately $16,034,000 from December 31, 1995 due to
amounts earned under contracts with M4 and the DOE. As of September 30, 1996,
total accounts receivable were $33,364,000. Of this amount, $6,719,000 was
unbilled at September 30, 1996.
As of September 30, 1996, other assets increased by approximately $5 million
from December 31, 1995 due to costs incurred for issuance of the Company's
5 1/2% Convertible Subordinated Notes Due 2006. The Company's investment in M4
increased by approximately $15.3 million from December 31, 1995 due to the
recognition of the Company's share of M4's revenue and other income ($5.5
million) and the contribution of half of the assets of the Retech division ($9.8
million).
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During 1996, the Company earned revenue from M4 relating to services provided
for the engineering and construction of CEP systems and from technology transfer
and success fees. For revenue amounts that are capitalized by M4, the portion of
the related gross profit that is allocable to the Company's ownership interest
in M4 has been deferred, and will be recognized over the period that the related
assets are depreciated by M4. As of September 30, 1996, the related deferred
income increased by $4,435,000 from December 31, 1995 due to billings under
license agreements and construction contracts with M4.
In September 1996, the Company entered into a seven year lease for additional
office space in Waltham, Massachusetts that will be used for future growth. The
lease term begins when the space is ready for occupancy (currently expected to
be February 1997). Rent under this lease will be approximately $138,000 per
month. The Company does not expect the lease commitment to have a material
effect on liquidity as the Company currently intends to sublease this space
until it is needed. There can be no assurances that the Company will be able to
locate subtenants for the space or enter into satisfactory subleases.
FORWARD-LOOKING STATEMENTS AND RISK FACTORS
Certain statements contained in this Form 10-Q regarding future events or the
future financial performance of the Company are "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. These forward-looking statements include
statements concerning the receipt of research and development funding,
anticipated capital expenditures, decline of engineering and construction
revenues, the acquisition of assets from SEG, anticipated revenues from license
fees and commercial operations, future levels of SG&A expenses, formation of the
Japanese joint venture and expected sales of CEP Systems by that joint venture
over the next ten years, and expectations regarding the capital accounts of M4's
partners and the effect of expected future losses of M4. These forward-looking
statements are based largely on the Company's expectations and are subject to a
number of risks and uncertainties, many of which are beyond the Company's
control. Accordingly, actual results could differ materially from those
contemplated by these forward-looking statements. These risks and uncertainties
include compliance with regulatory requirements, obtaining required permits,
customer acceptance of the Company's technology, successful negotiation and
performance of customer contracts and other agreements, costs of operation of
the Company's facilities, obtaining required funding, successful completion of
technology demonstrations, access to government funding, successful construction
and operation of facilities owned by the Company or its customers, receipt of
necessary approvals, and competition. Additional factors which may cause actual
results to differ are described in the Company's filings with the Securities and
Exchange Commission, including the Form 8-K filed by the Company on July 3,
1996.
13
<PAGE> 14
PART II - OTHER INFORMATION
Item 5. OTHER INFORMATION
Third Quarter Developments
AWARD OF DOE MIXED WASTE CONTRACT. On August 12, 1996, M4 announced that it
had signed a $2.2 million contract with the DOE to conduct proof-of-process
studies using Q-CEP[Trademark] on two mixed hazardous and radioactive waste
streams. The tests will be conducted at M4's Technology Center. Under the terms
of the cost share contract, the DOE will pay 67% of the cost and M4 will pay the
remaining 33%.
HANFORD TANKED WASTE CLEAN UP. On September 26, 1996, the Company announced
that the DOE had chosen a technical team led by LMC to employ Q-CEP for the
clean up of the tanked waste site in Hanford, Washington. The DOE awarded two
contracts for Phase I of the clean up. The LMC team includes Numatec, Fluor
Daniel, Duke Engineering and Services, Babcock & Wilcox, Nukem Nuclear
Technologies, Los Alamos Technical Associates, AEA Technology, OHM Remediation
Services, and M4. Phase IA of the program covers the first 20 months of the
program and includes a $27 million award to each team to prove the efficacy of
their processes. Phase IB covers waste processing of less than 10% of the
stockpile at Hanford over a five to seven year period.
Recent Developments
STOCK BUYBACK ANNOUNCEMENT. On October 22, 1996, the Company announced that
its board of directors had approved a stock repurchase program of up to two
million shares of the Company's common stock, or approximately 8.5% of its
common stock outstanding. Under the program, the Company may buy back stock from
time to time, subject to prevailing market conditions. Purchases may be made on
the open market or in privately negotiated transactions. The Company's goal is
to complete this repurchase program within one year. The Company intends to fund
these share repurchases from its working capital.
JOINT VENTURE WITH NICHIMEN/NKP. On November 12, 1996, the Company
announced that it had signed a definitive agreement to form a joint venture (the
"JV") with two Japanese companies, Nichimen Corporation ("Nichimen") and NKK
Plant Engineering Corporation ("NKP"). Subject to final approval from the
Japanese government and the boards of Nichimen and NKP, the agreement secures
exclusive
14
<PAGE> 15
rights for the JV to introduce the Company's CEP technology to the Japanese
municipal incinerator ash market. Under the agreement, the Company will own 49%
of the JV, will receive a two percent royalty on all revenues, and will receive
a $12.5 million licensing fee, to be paid from profits of the JV. In accordance
with the agreement, the JV expects to purchase a minimum of 29 CEP systems from
the Company over the first ten years of the JV's operations, including an
initial CEP system to be delivered in the first quarter of 1998.
RESTRUCTURING. On November 12, 1996, the Company also announced that as
part of a restructuring to more efficiently pursue opportunities in priority
markets, it would eliminate 58 (out of 480) positions, primarily at the
Company's corporate headquarters in Waltham, Massachusetts. Most of the
eliminations are staff positions from finance and administration, sales and
marketing, and government and regulatory affairs. The Company, however, will
continue hiring to fill positions that are critical to meeting the Company's
technology delivery schedule. Even after the streamlining initiative, the
Company's total workforce has increased by more than 50% since the beginning of
1996.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Agreement for Expansion of License (Japanese Chemical Weapons)
dated as of September 26, 1996 between the Company and M4.
10.2 Lease dated as of September 16, 1996 for 400-1 Totten Pond Road,
Waltham, Massachusetts.
27 Financial Data Schedule
(b) Reports on Form 8-K - None.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MOLTEN METAL TECHNOLOGY, INC.
-----------------------------
Date: November 14, 1996 By: /s/ Benjamin T. Downs
----------------- ---------------------
Benjamin T. Downs
Executive Vice President of Finance
and Administration, Treasurer
(Principal Financial Officer and
Authorized Signatory)
16
<PAGE> 1
Exhibit 10.1
AGREEMENT FOR EXPANSION OF LICENSE
----------------------------------
JAPANESE CHEMICAL WEAPONS
-------------------------
THIS AGREEMENT is made and entered into as of the 26th day of September,
1996, by and between M4 Environmental L.P., a Delaware limited partnership
("M4"), Lockheed Martin Corporation, a Maryland corporation ("LMC"), and Molten
Metal Technology, Inc., a Delaware corporation ("MMT").
WHEREAS, M4, LMC and MMT are parties to a series of agreements including
that certain Partnership Restructuring Agreement dated as of March 15, 1996 (the
"Restructuring Agreement") and that certain Amended and Restated License
Agreement dated as of March 15, 1996 (the "License Agreement") pursuant to which
MMT has licensed to M4 certain rights to MMT's proprietary processing technology
known as Catalytic Extraction Processing ("CEP") with respect to certain
designated feedstocks;
WHEREAS, MMT has offered to expand the license granted to M4 pursuant to
the License Agreement to include Japanese Chemical Weapons (as herein defined)
as a Market Feedstock (as defined in the License Agreement) and M4 has accepted
such offer by MMT; and
WHEREAS, M4, LMC and MMT desire to enter into an agreement which
recognizes that the exclusive license granted to M4 pursuant to the License
Agreement will now include Japanese Chemical Weapons and specifies the
consideration from M4 and MMT for this expansion of M4's license.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements set forth below and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, M4, LMC and MMT agree
as follows:
1. Except as otherwise defined herein, capitalized terms used in this
Agreement without definition shall have the meanings given them in the
Restructuring Agreement and the License Agreement.
2. In the Restructuring Agreement, the License Agreement and the Related
Agreements (where the context requires), the following term shall be added to
the list of "Defined Terms:"
"Japanese Chemical Weapons" means (i) munitions, including artillery
shells, mortar shells and explosives, containing (or formerly containing)
one or more "chemical weapons agents" (as defined in the Chemical Weapons
Convention (formally known as the Convention on the Prohibition of the
<PAGE> 2
Development, Production, Stockpiling and Use of Chemical Weapons and their
Destruction, adopted September 3, 1992 at the Conference on Disarmament at
Geneva, and opened for signature on January 13, 1993 in Paris) and (ii)
bulk stockpiles of such chemical weapons agents; in each case for which
any Japanese Government Authority has accepted, or in the future accepts,
responsibility for the original deployment of such materials and/or the
principal financial responsibility for the processing and destruction of
such materials, irrespective of the location of such materials.
3. In the Restructuring Agreement, the License Agreement and the Related
Agreements (where the context requires), there shall be added a new definition,
"Gross CEP Revenue (Japanese Chemical Weapons)", and the definition of the term
"Market" shall be amended to include Japanese Chemical Weapons as follows:
"Gross CEP Revenue (Japanese Chemical Weapons)" means for any
fiscal year, the total revenues for such fiscal year of the Partnership
and also any sublicensee of the MMT Licensed Property, generated from any
activities directly related to the demilitarization of Japanese Chemical
Weapons, as determined in accordance with GAAP.
"Market" means the environmental remediation, waste management,
decontamination, decommissioning, chemical and biological demilitarization
(including disposal of unexploded ordnance), pollution prevention and
waste minimization needs of the DoD, DOE or USEC anywhere in the world
with respect to Market Feedstocks (other than Japanese Chemical Weapons),
and the demilitarization (including disposal of unexploded ordnance) of
Japanese Chemical Weapons.
4. In the Restructuring Agreement, the License Agreement and the Related
Agreements (where the context requires), the introductory section of the
definition of the term "Market Feedstocks" shall be amended to include Japanese
Chemical Weapons as follows:
"`Market Feedstocks' means Japanese Chemical Weapons, USEC
Feedstocks and any of the following Feedstocks:"
5. As consideration for including Japanese Chemical Weapons in the
Restructuring Agreement, the License Agreement and the Related Agreements as
provided in this Agreement, M4 shall make payments to MMT in accordance with the
following provisions:
(a) $5,000,000 upon execution of this Agreement;
2
<PAGE> 3
(b) $3,500,000 for the technical demonstration by MMT of the
processing of one or more munitions shells containing
surrogates of one or more of the chemical weapons agents
within the definition of "Japanese Chemical Weapons", the
completion of such technical demonstration to be evidenced by
MMT's submission of a written report to M4 describing the
results of such technical demonstration. The parties shall,
not later than 60 days prior to the proposed date of such
technical demonstration, agree on the specifications for such
technical demonstration; and
(c) Eight percent (8%) of the Gross CEP Revenue (Japanese Chemical
Weapons). Such payment obligation by M4 shall be considered a
"Royalty Payment" as defined in Section 5.4 of the License
Agreement and subject to the limitations on payment based in
"Partnership Cash Flow" provide therein. Further, M4 shall not
be required to pay to MMT the 2% Royalty Payment described in
Section 5.4(a)(iii) of the License Agreement with respect to
Gross CEP Revenues (Japanese Chemical Weapons).
In no event shall any portion of the fees paid by M4 to MMT (i)
pursuant to this paragraph 5(a) and (c) be refundable and (ii) pursuant to
paragraph 5(b), if and when paid, be refundable.
6. Any CEP Plants developed by M4 or its sublicensees in connection with
the processing of Japanese Chemical Weapons shall be deemed to be Small CEP
Plants for purposes of the License Agreement, regardless of the actual size of
any such CEP Plant.
7. The parties agree that if and to the extent that the agreements
described herein require additional amendments to the Restructuring Agreement,
the License Agreement or any of the other Related Agreements, the parties will
prepare, execute and deliver such amendments as soon as practicable.
8. This agreement shall be deemed a "Related Agreement" for purposes
of the Restructuring Agreement.
9. This Agreement may be executed in multiple counterparts, each of
which shall be deemed on original, but all of which together shall constitute
one and the same instrument.
3
<PAGE> 4
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by their duly authorized representatives as of the date first set forth
above.
M4 ENVIRONMENTAL L.P.
By: M4 Environmental Management Inc.
as General Partner
By: /s/ J. Robert Merriman
-----------------------------------
Name: J. Robert Merriman
---------------------------------
Title: President
--------------------------------
LOCKHEED MARTIN CORPORATION
By: /s/ Albert Narath
-----------------------------------
Name: Albert Narath
----------------------------------
Title: President & COO, Energy &
Environment Sector
---------------------------------
MOLTEN METAL TECHNOLOGY, INC.
By: /s/ Victor E. Gatto, Jr.
-----------------------------------
Name: Victor E. Gatto, Jr.
----------------------------------
Title: Vice President
---------------------------------
4
<PAGE> 1
Exhibit 10.2
TENANT: MOLTEN METAL TECHNOLOGY, INC.
LEASE OF
400-1 TOTTEN POND ROAD
WALTHAM, MASSACHUSETTS
TABLE OF CONTENTS
ARTICLE 1
BASIC LEASE PROVISIONS......................................... 1
ARTICLE 2
PREMISES AND APPURTENANT RIGHTS................................ 3
ARTICLE 3
BASIC RENT; LANDLORD'S USE OF SPACE............................ 4
ARTICLE 4
COMMENCEMENT AND CONDITION..................................... 5
ARTICLE 5
USE OF PREMISES................................................ 9
ARTICLE 6
ASSIGNMENT AND SUBLETTING...................................... 11
ARTICLE 7
RESPONSIBILITY FOR REPAIRS AND CONDITION OF PREMISES;
SERVICES TO BE FURNISHED BY LANDLORD........................... 14
ARTICLE 8
REAL ESTATE TAXES.............................................. 17
ARTICLE 9
OPERATING AND UTILITY EXPENSES................................. 19
ARTICLE 10
INDEMNITY AND PUBLIC LIABILITY INSURANCE....................... 21
ARTICLE 11
LANDLORD'S ACCESS TO PREMISES.................................. 22
ARTICLE 12
i
<PAGE> 2
FIRE, EMINENT DOMAIN, ETC...................................... 22
ARTICLE 13
DEFAULT........................................................ 24
ARTICLE 14
MISCELLANEOUS PROVISIONS....................................... 29
14.1 EXTRA HAZARDOUS USE
-------------------
14.2 WAIVER
------
14.3 COVENANT OF QUIET ENJOYMENT
---------------------------
14.4 LIMITATION OF LIABILITY
-----------------------
14.5 NOTICE TO MORTGAGEE OR GROUND LESSOR
------------------------------------
14.6 ASSIGNMENT OF RENTS AND TRANSFER OF TITLE
-----------------------------------------
14.7 RULES AND REGULATIONS
---------------------
14.8 ADDITIONAL CHARGES
------------------
14.9 INVALIDITY OF PARTICULAR PROVISIONS
-----------------------------------
14.10 PROVISIONS BINDING, ETC
-----------------------
14.11 RECORDING
---------
14.12 NOTICES
-------
14.13 WHEN LEASE BECOMES BINDING
--------------------------
14.14 PARAGRAPH HEADINGS AND INTERPRETATION OF SECTIONS
-------------------------------------------------
14.15 RIGHTS OF MORTGAGEE OR GROUND LESSOR
------------------------------------
14.16 STATUS REPORT
-------------
14.17 SECURITY DEPOSIT
----------------
14.18 REMEDYING DEFAULTS
------------------
14.19 HOLDING OVER
------------
14.20 WAIVER OF SUBROGATION
---------------------
14.21 SURRENDER OF PREMISES
---------------------
14.22 BROKERAGE
---------
14.23 GOVERNING LAW
-------------
ARTICLE 15
OPTION TO EXTEND............................................... 37
ARTICLE 16
FAIR MARKET RENTAL VALUE....................................... 38
EXHIBIT OC
EXHIBIT RR
EXHIBIT IR
EXHIBIT CL
EXHIBIT PL
EXHIBIT SNDA
ii
<PAGE> 3
EXHIBIT LOC
EXHIBIT BB
EXHIBIT TS
EXHIBIT CAF
iii
<PAGE> 4
L E A S E
---------
THIS INSTRUMENT IS A LEASE, dated as of September 16, 1996, in which the
Landlord and the Tenant are the parties hereinafter named, and which relates to
space in the building (the "Building") located at 400-1 Totten Pond Road,
Waltham, Massachusetts. The parties to this instrument hereby agree with each
other as follows:
ARTICLE 1
---------
BASIC LEASE PROVISIONS
----------------------
1.1 INTRODUCTION. The following set forth basic data and, where
appropriate, constitute definitions of the terms hereinafter listed.
1.2 BASIC DATA.
-----------
Landlord: 400/460 Totten Pond Road Limited Partnership, a Delaware
limited partnership.
Landlord's Original Address: c/o Leggat McCall Properties, L.P., 10
Post Office Square, Boston, MA 02109.
Tenant: MOLTEN METAL TECHNOLOGY, INC., a Delaware corporation.
Tenant's Original Address: 400-2 Totten Pond Road, Waltham,
Massachusetts.
Guarantor: None.
Basic Rent: (i) For the period commencing on the Commencement Date and
expiring on the day immediately preceding the sixth anniversary of the
Commencement Date, $1,656,226.00 ($22.00 per square foot of Premises Rentable
Area) per annum, (ii) for the remainder of the Initial Term, $1,731,509.00
($23.00 per square foot of Premises Rentable Area) per annum, as all of the same
may be adjusted and/or abated pursuant to Sections 4.2 and .
Premises Rentable Area: Agreed to be 75,283 square feet.
Permitted Uses: Executive or professional offices, subject to the
provisions of Section 5.1(a).
Escalation Factor: With respect to (i) Park Costs (as defined in Exhibit
OC), 27%, (ii) 400 Costs, 50%, and (iii) Building Costs, 100%.
Initial Term: The period commencing on the Commencement Date and
expiring at the close of the day immediately preceding the seventh anniversary
of the Commencement Date, as determined in accordance with Section 4.2, except
that if the Commencement Date shall be other than the first day of a calendar
month, the expiration of the Initial Term shall be at the close of the day on
the last day of the calendar month on which such anniversary shall fall,
provided further that, if as a result of any construction delay, as described
1
<PAGE> 5
in Section 4.2, Tenant is granted any period of "free rent," then the Initial
Term shall be extended until the last day of the calendar month in which the
last day of such free rent period occurs.
Security Deposit: $414,056.50, subject to the provisions of Section
14.17.
Base Operating Expenses: The actual Operating Expenses incurred for the
calendar year ending December 31, 1997, exclusive of the cost of electricity and
all other utilities provided to the Building and the surrounding areas of the
Property, to be paid for separately by Tenant pursuant to Section 7.5; PROVIDED
THAT, if during any portion of the calendar year ending December 31, 1997, less
than all of the TPR Properties are occupied by tenants or, if Landlord was not
supplying all tenants with the services being supplied to Tenant hereunder, then
the Operating Expenses actually incurred shall be reasonably extrapolated by
Landlord on an item-by-item basis to the reasonable Operating Expenses that
would have been incurred if the TPR Properties were fully occupied and such
services were being supplied to all tenants, and such extrapolated Operating
Expenses shall, for all purposes hereof, be deemed to be the Base Operating
Expenses hereunder. If and when Landlord discontinues providing the traffic
control services referred to in Section 7.4(b)(vi), Base Operating Expenses
shall thereafter be reduced by the amount theretofore included in Base Operating
Expenses for such services.
Base Taxes: Base Taxes shall be the product of (i) Taxes actually
assessed with respect to the Property for the fiscal year ending June 30, 1999
(as the same may be reduced by the amount of any abatement), multiplied by (ii)
0.96, but in no event shall Base Taxes be less than Taxes actually assessed with
respect to the Property for the fiscal year ending June 30, 1998 (as the same
may be reduced by the amount of any abatement).
Broker: Fallon, Hines & O'Connor.
1.3 ADDITIONAL DEFINITIONS.
-----------------------
Agent: Leggat McCall Properties Management, L.P., 460 Totten Pond Road,
Waltham, MA, Attn: Property Manager, or such other person or entity from time to
time designated by Landlord.
Business Days: All days except Saturday, Sunday, New Year's Day, Martin
Luther King Day, President's Day, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans' Day, Thanksgiving Day, Christmas Day (and the following
day when any such day occurs on Sunday).
Commencement Date: As defined in Section 4.1.
Construction Deadline: As defined in Section 4.2.
Default of Tenant: As defined in Section 13.1.
Escalation Charges: The amounts prescribed in Sections 8.1 and 9.2.
Extended Term: As defined in Section 15.1.
Fair Market Rental Value: As determined in accordance with Section 17.1.
2
<PAGE> 6
Force Majeure: Collectively and individually, strike or other labor
trouble, fire or other casualty, governmental preemption of priorities or other
controls in connection with a national or other public emergency or shortages of
fuel, supplies or labor resulting therefrom, or any other cause, whether similar
or dissimilar, beyond Landlord's reasonable control.
Initial Public Liability Insurance: $2,000,000 per occurrence/
$10,000,000 aggregate (combined single limit) for property damage, bodily injury
or death.
Landlord's Loan: As defined in Section 4.2.
Landlord's Work: As defined in Section 4.2.
Operating Expenses: As determined in accordance with Section 9.1 and
EXHIBIT OC.
Operating Year: As defined in Section 9.1.
Premises: The entire ground, second, third and fourth floors of the
Building, except as provided otherwise in Section 2.2.
Property: The Building and the land parcel on which it is located
(including adjacent sidewalks).
Proposed Space: As defined in Section 18.1.
Substantial Completion Date: As defined in Section 4.2.
Target Date: As defined in Section 4.2.
Tax Year: As defined in Section 8.1.
Taxes: As determined in accordance with Section 8.1.
Tenant's Removable Property: As defined in Section 5.2.
Term of this Lease: The Initial Term and any extension thereof in
accordance with the provisions hereof.
TPR Properties: Properties owned by Landlord or an affiliate of Landlord
and currently known as 400-1, 400-2 and 460 Totten Pond Road, Waltham,
Massachusetts.
ARTICLE 2
---------
PREMISES AND APPURTENANT RIGHTS
-------------------------------
2.1 LEASE OF PREMISES. Landlord hereby demises and leases to Tenant for the
Term of this Lease and upon the terms and conditions hereinafter set
forth, and Tenant hereby accepts from Landlord, the Premises.
3
<PAGE> 7
2.2 APPURTENANT RIGHTS AND RESERVATIONS. (a) Tenant shall have, as
appurtenant to the Premises, the non-exclusive right to use, and permit
its invitees to use in common with others, public or common walkways
necessary for access to the Building; but such rights shall always be
subject to reasonable rules and regulations from time to time
established by Landlord pursuant to Section 14.7 and to the right of
Landlord to designate and change from time to time areas and facilities
so to be used (provided that no such change shall have the effect of
materially interfering with or impairing Tenant's rights under this
Lease, including without limitation free access to the Building and use
and enjoyment of the Premises.
(b) Excepted and excluded from the Premises are the structural elements
of the Building, including without limitation the roof, exterior walls,
foundations and exterior windows (except the inner surface thereof), and
any space in the Premises used for shafts, stacks, pipes, conduits, fan
rooms, ducts, electric or other utilities, sinks or other Building
facilities, but the exterior entry doors (and related glass and finish
work), interior partitions and doors, hung ceilings and lobby areas are
a part thereof. Landlord shall have the right, in connection with
Landlord's maintenance and repair obligations, to place in the Premises
(but in such manner as to reduce to a minimum interference with Tenant's
use of the Premises) interior storm windows, utility lines, equipment,
stacks, pipes, conduits, ducts and the like. In addition, but subject to
Tenant's reasonable security restrictions set forth in Exhibit TS,
Landlord and its agents, employees and contractors shall have the right
to pass through that portion of the Premises located on the ground floor
of the Building to gain access to the first floor mechanical and
electrical rooms. In the event that Tenant shall install any hung
ceilings or walls in the Premises, Tenant shall install and maintain, as
Landlord may require, proper access panels therein to afford access to
any facilities above the ceiling or within or behind the walls.
(c) Tenant shall also have the right (subject to reasonable rules and
regulations from time to time established by Landlord) to use, on an
non-exclusive, unreserved basis, up to four (4) parking spaces located
on the Property for each 1,000 square feet of Premises Rentable Area, or
301 spaces. Landlord shall not be responsible for policing the parking
areas or for restricting access thereto by parties other than tenants of
Landlord's buildings. Such spaces shall be used for private automobiles,
only and not for delivery trucks.
ARTICLE 3
---------
BASIC RENT; LANDLORD'S USE OF SPACE
-----------------------------------
3.1 PAYMENT. (a) Tenant agrees to pay to Landlord, or as directed by
Landlord, commencing on the Commencement Date without offset, abatement
(except as provided in Section 12.1), deduction or demand, the Basic
Rent. Such Basic Rent shall be payable in equal monthly installments, in
advance, on the first day of each and every calendar month during the
Term of this Lease, to Landlord at P.O. Box 3737, Boston, MA 02241-3737,
or at such other place as Landlord shall from time to time designate by
notice, in lawful money of the United States. In the event that, twice
during any twelve-month period, any installment of Basic Rent is not
paid within five (5) Business Days after the due date, then with each
succeeding late payment (until Tenant shall have made eleven consecutive
timely payments), Tenant shall pay, in an addition to any charges under
Section 14.18, at Landlord's request an administrative fee equal to 5%
of the overdue payment, which Landlord and Tenant expressly agree shall
not be deemed a penalty. Landlord and Tenant agree that
4
<PAGE> 8
all amounts due from Tenant under or in respect of this Lease, whether
labelled Basic Rent, Escalation Charges, additional charges or
otherwise, shall be considered as rental reserved under this Lease for
all purposes, including without limitation regulations promulgated
pursuant to the Bankruptcy Code, and including further without
limitation Section 502(b) thereof.
(b) Basic Rent for any partial month shall be pro-rated on a daily
basis, and if the first day on which Tenant must pay Basic Rent shall be
other than the first day of a calendar month, the first payment which
Tenant shall make to Landlord shall be equal to a proportionate part of
the monthly installment of Basic Rent for the partial month from the
first day on which Tenant must pay Basic Rent to the last day of the
month in which such day occurs.
ARTICLE 4
---------
COMMENCEMENT AND CONDITION
--------------------------
4.1 COMMENCEMENT DATE. The Commencement Date shall be the last to occur of:
------------------
(a) February 1, 1997, or
(b) the eighth day following the Substantial Completion Date of any
portion of the Premises, as defined in Section 4.2(c).
Notwithstanding the foregoing, but subject to paragraph (d) below, if
Tenant's personnel shall occupy all or any part of the Premises for the
conduct of its business prior to the Commencement Date as determined
pursuant to the preceding sentence, such date of occupancy shall, for
all purposes of this Lease, be the Commencement Date. Promptly upon the
occurrence of the Commencement Date and the expiration of any free rent
periods described in Sections 4.2(e) and 4.5, Landlord and Tenant shall
enter into a letter agreement substantially in the form annexed hereto
as EXHIBIT CL, but the failure by either party to execute such a letter
shall have no effect on the Commencement Date, as hereinabove
determined.
4.2 PREPARATION OF THE PREMISES. (a) Tenant is currently having full
construction drawings and plans (the "Plans") for the layout of the
Premises prepared, which Plans shall conform to the requirements set
forth in part III of EXHIBIT RR, and be submitted to Landlord for its
approval on or before October 1, 1996 (the "Plan Submission Date"),
which approval shall not be unreasonably withheld or delayed. Failure by
Landlord to disapprove any submission of the Plans within ten (10)
Business Days after submission shall constitute approval thereof. Any
disapproval shall be accompanied by a reasonably specific statement of
reasons therefor. Promptly upon receipt of any such disapproval, Tenant
shall, within ten (10) Business Days, revise the Plans to address
Landlord's reasons for disapproval and resubmit the same to Landlord. At
such time as the Plans are completed and approved by Landlord, Landlord
and Tenant shall sign a letter agreement substantially in the form of
EXHIBIT PL, identifying the Plans and reciting such approval, and a copy
of such letter shall be appended to each counterpart of this Lease.
(b) Promptly after (i) approval of the Plans, (ii) issuance by the City
of Waltham of a building permit and any other licenses or approvals
necessary under applicable law for Landlord's Work to
5
<PAGE> 9
commence, and (iii) payment by Tenant of any excess cost referred to
below (and execution of a work letter if requested by Landlord),
Landlord shall exercise all reasonable efforts to substantially complete
the work ("Landlord's Work") specified therein on or before January 24,
1997 (the "Target Date," as it may be extended pursuant to Section 4.4).
Tenant shall have no claim against Landlord for failure to complete such
Work on or before the Target Date, except the right to the "free rent"
period, and the right to terminate this Lease, both as hereinafter
described. Upon completion and approval of the Plans, Landlord shall
enter into a so-called "Cost-Plus" construction contract with Landlord's
contractor, which contract shall also provide for a guaranteed maximum
price (the "GMP"). The construction contract shall provide that the
contractor shall bear any financial responsibility for excess of the
actual cost of performing Landlord's Work over and above the GMP, except
in the event of change orders. To the extent that the GMP set forth in
the construction contract exceeds an amount ("Landlord's Contribution")
equal to $1,693,867.50 ($22.50 per square foot of Premises Rentable
Area), Tenant shall (subject to the provisions of paragraph (c) below)
pay such excess to Landlord within 5 days after the date Tenant's Plans
are approved and the GMP is established (or such later time as Landlord
advises Tenant of the amount of such excess). Tenant shall, if requested
by Landlord, execute a work letter confirming such excess costs prior to
the time Landlord shall be required to commence work. In the event that
the actual cost to Landlord of completing Landlord's Work exceeds
Landlord's Contribution, but is less than the GMP, then Landlord shall
refund such difference within fifteen (15) days after Landlord shall
advise Tenant of such actual cost. In the event that the actual cost to
Landlord of completing Landlord's Work is less than Landlord's
Contribution, then Landlord shall credit against payments of Basic Rent
subsequently coming due the amount by which Landlord's Contribution
exceeds such cost. In addition, if after approval of the Plans, Tenant
shall request any changes in Landlord's Work, which changes will result
in an increase in the GMP, as a condition to Landlord's obligation to
agree to such change, Tenant shall pay to Landlord any such increase in
the GMP, such payment to be made within five (5) days after Landlord
advises Tenant of the amount of such increase. For purposes of computing
the cost of performing Landlord's Work: (i) up to $376,415.00 ($5.00 per
square foot of Premises Rentable Area) of the total Landlord's
Contribution may be applied to so-called "soft" costs, including
architectural and engineering services, moving into the Premises,
installing cabling and other telecommunication equipment, but excluding
Tenant's furniture, fixtures and equipment; and (ii) construction
management fees paid by Landlord shall not be included in the cost of
such Work. Landlord's Work does not include the work ("Base Building
Work") currently being undertaken by Landlord, which is identified on
EXHIBIT BB hereto, and the cost of performing the Base Building Work
shall not be deemed to be included in the cost of performing Landlord's
Work. If and to the extent that Tenant may elect to have Landlord
perform Landlord's Work in less than all of the Premises, for purposes
of this Article 4, wherever amounts are computed on the basis of "per
square foot of Premises Rentable Area," the same shall refer to the
number of square feet of Premises Rentable Area as to which Landlord's
Work is actually being performed.
(c) The Premises shall be deemed ready for occupancy on the first day
(the "Substantial Completion Date") as of which: (i) Landlord's Work has
been completed except for items of work (and, if applicable, adjustment
of equipment and fixtures) which can be completed after occupancy has
been taken without causing undue interference with Tenant's use of the
Premises (i.e. so-called "punch list" items); (ii) a certificate of use
and occupancy (which may be temporary) has been issued therefor; and
(iii) Tenant has been given notice thereof ("Substantial Completion").
Landlord shall expeditiously (but in any event within 60 days) complete
all "punch list" items and Tenant shall afford Landlord access to the
Premises for such purposes. Tenant acknowledges that, given the scope of
Landlord's Work, it is possible that Substantial Completion may occur as
to certain
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portions of the Building before all of Landlord's Work is substantially
complete. If (i) Tenant shall desire to occupy a portion of the Premises
prior to Substantial Completion of all of Landlord's Work, and (ii)
Landlord, in its sole and absolute discretion, determines that partial
occupancy by Tenant of such portions of the Building as shall have been
substantially complete will not interfere with or delay the remainder of
Landlord's Work, Landlord may give Tenant notice thereof and, subject to
Section 4.1(a), Tenant may occupy that portion of the Premises as to
which Substantial Completion has occurred, and the Substantial
Completion Date shall be deemed to have occurred as to such portion, and
all payments of Basic Rent, Escalation Charges and the like shall be
prorated according to the amount of space as to which Substantial
Completion shall have been achieved.
(d) If the Substantial Completion Date has not occurred on or before the
thirtieth (30th) day after the Target Date (as so extended), then for
each day after such 30th day that Substantial Completion is not
achieved, Tenant shall not be required to pay Basic Rent or Escalation
Charges for one (1) day after the Commencement Date. Further, if the
Substantial Completion Date has not occurred on or before the sixtieth
(60th) day after the Target Date (as so extended), then for each day
after such 60th day that Substantial Completion is not achieved, Tenant
shall not be required to pay Basic Rent or Escalation Charges for one
and one-half (1 1/2) days after the Commencement Date. If the
Substantial Completion Date has not occurred on or before the ninetieth
(90th) day (the "Construction Deadline") after the Target Date (as so
extended), Tenant shall have the right to terminate this Lease by giving
notice to Landlord, not later than thirty (30) days after the
Construction Deadline, of Tenant's desire so to do; and this Lease shall
cease and come to an end without further liability or obligation on the
part of either party thirty (30) days after the giving of such notice,
unless, within such additional 30-day period, Landlord substantially
completes Landlord's Work; and such rights of free rent and termination
shall be Tenant's sole and exclusive remedies at law or in equity for
Landlord's failure so to complete such Work within such time.
4.3 CONCLUSIVENESS OF LANDLORD'S PERFORMANCE. Except to the extent to which
Tenant shall have given Landlord notice, not later than the end of the
fourth full calendar month of the Term of this Lease next beginning
after the Commencement Date, of respects in which Landlord has not
performed Landlord's Work, Tenant shall have no claim that Landlord has
failed to perform any of Landlord's Work. Except for Landlord's Work and
the Base Building Work, and except as expressly provided herein, the
Premises are being leased in their condition AS IS WITHOUT
REPRESENTATION OR WARRANTY by Landlord. Tenant acknowledges that it has
inspected the Premises and, except for Landlord's Work and the Base
Building Work, has found the same satisfactory. Notwithstanding the
foregoing, Landlord hereby represents and warrants to Tenant that: (i)
Landlord's Work and the Base Building Work will be undertaken in
accordance with all applicable laws, codes and ordinances, including
without limitation the Americans With Disabilities Act of 1990, and (ii)
Landlord has not received from any governmental agency having
jurisdiction any written notice to the effect that the Premises are in
violation of any applicable law, code or ordinance, which violation
remains outstanding as of the date hereof. To the extent that Tenant
will be responsible for maintenance and/or repair of any item of work
included in Landlord's Work or the Base Building Work, then Landlord
shall use reasonable efforts to obtain from Landlord's contractor a
warranty for the benefit of Tenant covering such items.
4.4 TENANT'S DELAYS. (a) If a delay shall occur in the Substantial
Completion Date as the result of:
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<PAGE> 11
(i) any written request by Tenant that Landlord delay in the
commencement or completion of Landlord's Work for any reason;
(ii) failure by Tenant to (x) submit the Plans on or before the
Plan Submission Date, and revise the same to satisfy
Landlord's reasonable objections within the time periods set
forth above, or (y) enter into a work letter if so requested
by Landlord, or (z) any change by Tenant in any of the Plans
after approval or deemed approval thereof by Landlord;
(iii) any other act or omission of Tenant or its officers, agents,
servants or contractors, provided that no act or omission
shall be deemed a cause for delay except to the extent that
Landlord shall have given Tenant written notice thereof within
two (2) Business Days after Landlord becomes aware of the
delay;
(iv) any special requirement of the Plans not in accordance with
Landlord's building standards, which Landlord shall have
identified prior to commencement of Landlord's Work as a
potential cause for delay; or
(v) any reasonably necessary displacement of any of Landlord's
Work from its place in Landlord's construction schedule
resulting from any of the causes for delay referred to in
clauses (i), (ii), (iii) or (iv) of this paragraph and the
fitting of such Work back into such schedule;
AND, as a result of such delay, Substantial Completion does not occur
before February 24, 1997, then Tenant shall, commencing on February 24,
1997, pay to Landlord for each day of such delay the amount of Basic
Rent, Escalation Charges and other charges that would have been payable
hereunder had the Tenant's obligation to pay Basic Rent commenced on
February 24, 1997 (without regard to any "free rent" period).
(b) If a delay in the Substantial Completion Date, or if any substantial
portion of such delay, is the result of Force Majeure, and such delay
would not have occurred but for a delay described in paragraph (a), such
delay shall be deemed added to the delay described in that paragraph.
(c) The delays referred to in paragraphs (a) and (b) are herein
referred to collectively and individually as "Tenant's Delay."
(d) If, as a result of Tenant's Delay(s), the Substantial Completion
Date is delayed in the aggregate for more than one hundred twenty (120)
days, Landlord may (but shall not be required to) at any time thereafter
terminate this Lease by giving written notice of such termination to
Tenant and thereupon this Lease shall terminate without further
liability or obligation on the part of either party, except that Tenant
shall pay to Landlord the cost theretofore incurred by Landlord in
performing Landlord's Work, plus an amount equal to Landlord's
out-of-pocket expenses incurred in connection with this Lease,
including, without limitation, brokerage and legal fees, together with
any amount required to be paid pursuant to paragraph (a) through the
effective termination date.
(e) The Target Date shall automatically be extended for the period of
any delays caused by Tenant's Delay(s) or Force Majeure.
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ARTICLE 5
---------
USE OF PREMISES
---------------
5.1 PERMITTED USE. (a) Tenant agrees that the Premises shall be used and
occupied by Tenant only for Permitted Uses specifically excluding,
without limitation, use for medical, dental, governmental, utility
company or employment agency offices, provided that use of the Premises
for offices for a governmental agency with whom Tenant has an ongoing
relationship in the course of the conduct of Tenant's business shall not
be prohibited hereby.
(b) Tenant agrees to conform to the following provisions during the
Term of this Lease:
(i) Tenant shall cause all freight to be delivered to or removed
from the Premises in accordance with reasonable rules and
regulations established by Landlord therefor;
(ii) Tenant will not place on the exterior of the Premises
(including both interior and exterior surfaces of doors and interior
surfaces of windows) or on any part of the Building outside the
Premises, any signs, symbol, advertisement or the like visible to
public view outside of the Premises. Notwithstanding the foregoing,
Landlord agrees that, so long as Tenant actually occupies at least
fifty-one percent (51%) of Premises Rentable Area, Tenant shall have
the right to place one sign, bearing Tenant's name and logo, on the
exterior of the Building, provided that (i) Tenant shall comply with
all applicable laws, regulations and ordinances and shall obtain at
its expense any necessary permits or approvals, and (ii) Landlord
shall have first approved detailed plans and specifications
therefor, which shall show, at a minimum, the size and style of such
sign, the materials to be used, and the method of affixation. Tenant
shall remove such sign (and repair any damage arising from such
sign) upon the request of Landlord at the expiration or earlier
termination of this Lease, or if Tenant shall cease to occupy at
least fifty-one percent (51%) of Premises Rentable Area. Landlord
agrees to construct and maintain, at its sole cost and expense, a
tenant directory at the driveway entrance to the business park of
which the Building is a part, on which will be placed Tenant's name
and the location of the Premises;
(iii) Tenant shall not perform any act or carry on any practice
which may injure the Premises, or any other part of the Building, or
cause any offensive odors or loud noise or constitute a nuisance or
a menace to any other tenant or tenants or other persons; and
(iv) Tenant shall, in its use of the Premises, comply with the
requirements of all applicable governmental laws, rules and
regulations, including without limitation the Americans With
Disabilities Act of 1990.
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5.2 INSTALLATIONS AND ALTERATIONS BY TENANT. (a) Tenant shall make no
alterations, additions (including, for the purposes hereof, wall-to-wall
carpeting), or improvements in or to the Premises (including any
improvements other than Landlord's Work necessary for Tenant's initial
occupancy of the Premises) without Landlord's prior written consent,
which consent shall not be unreasonably withheld or delayed with respect
to non-structural alterations, additions and improvements that do not
affect the Building's electrical, plumbing or mechanical systems.
Notwithstanding the foregoing, Tenant may, without Landlord's prior
written consent, make non-structural alterations to the Premises which
do not materially or adversely affect the Building's electrical,
plumbing or mechanical systems, and which do not involve the expenditure
of $15,000 or more for any given alteration (or series of related
alterations), provided that Tenant shall notify Landlord of the same in
advance, describing in reasonable detail the nature of the work to be
done and the cost thereof. To the extent that, under applicable laws or
codes or, consistent with sound and accepted building management and
construction practices, plans, specifications, drawings or the like
would be prepared in connection with work such as that being proposed,
Tenant shall have such plans, specifications or drawings prepared
(meeting the requirements set forth in the rules and regulations from
time to time in effect) and approved in advance by Landlord (such
approval not to be unreasonably withheld or delayed), and any such
alterations, additions or improvements shall be in accordance with the
same. In addition, to the extent that any permits or approvals are
required in connection with such alterations, additions or improvements,
copies thereof shall be delivered to Landlord in advance of commencement
of work. Such work shall (i) be performed in a good and workmanlike
manner and in compliance with all applicable laws, (ii) be made at
Tenant's sole cost and expense and in such a manner as Landlord may from
time to time reasonably designate, (iii) be made only in accordance with
the rules and regulations from time to time in effect with respect
thereto, and (iv) become part of the Premises and the property of
Landlord. If any alterations or improvements shall involve the removal
of fixtures, equipment or other property in the Premises which are not
Tenant's Removable Property, such fixtures, equipment or property shall
be promptly replaced by Tenant at its expense with new fixtures,
equipment or property of like utility and of at least equal quality.
(b) All articles of personal property and all business fixtures,
machinery and equipment and furniture owned or installed by Tenant
solely at its expense in the Premises ("Tenant's Removable Property")
shall remain the property of Tenant and may be removed by Tenant at any
time prior to the expiration of this Lease, provided that Tenant, at its
expense, shall repair any damage to the Building caused by such removal.
(c) Notice is hereby given that Landlord shall not be liable for any
labor or materials furnished or to be furnished to Tenant upon credit,
and that no mechanic's or other lien for any such labor or materials
shall attach to or affect the reversion or other estate or interest of
Landlord in and to the Premises. To the maximum extent permitted by law,
before such time as any contractor commences to perform work on behalf
of Tenant, such contractor (and any subcontractors) shall furnish a
written statement acknowledging the provisions set forth in the prior
clause. Whenever and as often as any mechanic's lien shall have been
filed against the Property based upon any act or interest of Tenant or
of anyone claiming through Tenant, Tenant shall forthwith take such
action by bonding, deposit or payment as will remove or satisfy the
lien.
(d) In the course of any work being undertaken by either Landlord or
Tenant, each party shall use all reasonable efforts to coordinate with
the other as to possible labor problems of which such party becomes
aware.
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ARTICLE 6
---------
ASSIGNMENT AND SUBLETTING
-------------------------
6.1 PROHIBITION. (a) Except as expressly permitted in this Article 6, Tenant
covenants and agrees that whether voluntarily, involuntarily, by
operation of law or otherwise neither this Lease nor the term and estate
hereby granted, nor any interest herein or therein, will be assigned,
mortgaged, pledged, encumbered or otherwise transferred and that neither
the Premises nor any part thereof will be encumbered in any manner by
reason of any act or omission on the part of Tenant, or used or occupied
or permitted to be used or occupied, by anyone other than Tenant, or for
any use or purpose other than a Permitted Use, or be sublet (which term,
without limitation, shall include granting of concessions, licenses and
the like) in whole or in part, or be offered or advertised for
assignment or subletting. Without limiting the foregoing, any agreement
pursuant to which: (x) Tenant is relieved from the obligation to pay, or
a third party agrees to pay on Tenant's behalf, all or any portion of
Basic Rent, Escalation Charges or other charges due under this Lease;
and/or (y) a third party undertakes or is granted the right to assign or
attempt to assign this Lease or sublet or attempt to sublet all or any
portion of the Premises, shall for all purposes hereof be deemed to be
an assignment of this Lease and subject to the provisions of this
Article 6. The provisions of this paragraph (a) shall apply to a
transfer (by one or more transfers) of a majority of the stock or
partnership interests or other evidences of ownership of Tenant as if
such transfer were an assignment of this Lease.
(b) The provisions of paragraph (a) shall not apply to either:
transactions with an entity into or with which Tenant is merged or
consolidated, or to which substantially all of Tenant's assets are
transferred; or transactions with any entity which controls or is
controlled by Tenant or is under common control with Tenant; provided
that in either such event:
(i) the successor to Tenant has a net worth and working capital,
computed in accordance with generally accepted accounting principles
consistently applied, sufficient in Landlord's reasonable judgment
to assure the future performance by assignee of Tenant's obligations
under this Lease,
(ii) proof satisfactory to Landlord of such net worth shall have
been delivered to Landlord at least 10 days prior to the effective
date of any such transaction, and
(iii) the assignee agrees directly with Landlord, by written
instrument in form reasonably satisfactory to Landlord, to be bound
by all the obligations of Tenant hereunder including, without
limitation, the covenant against further assignment and subletting.
(c) If, in violation of this Article 6, this Lease be assigned, or if
the Premises or any part thereof be sublet or occupied by anyone other
than Tenant, Landlord may, at any time and from time to time, collect
rent and other charges from the assignee, subtenant or occupant, and
apply the net amount collected to the rent and other charges herein
reserved, but no such assignment, subletting, occupancy, collection or
modification of any provisions of this Lease shall be deemed a waiver of
this covenant, or the acceptance of the assignee, subtenant or occupant
as a tenant or a release of
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<PAGE> 15
Tenant from the further performance of covenants on the part of Tenant
to be performed hereunder. Any consent by Landlord to a particular
subletting or occupancy shall not in any way diminish the prohibition
stated in paragraph (a) of this Section 6.1 or the continuing liability
of the original named Tenant. No assignment or subletting hereunder
shall relieve Tenant from its obligations hereunder and Tenant shall
remain fully and primarily liable therefor. No such assignment,
subletting, or occupancy shall affect or be contrary to Permitted Uses.
Any consent by Landlord to a particular assignment, subletting or
occupancy shall be revocable, and any assignment, subletting or
occupancy shall be void ab initio, if the same shall fail to require
that such assignee, subtenant or occupant agree therein to be
independently bound by and upon all of the covenants, agreements, terms,
provisions and conditions set forth in this Lease on the part of Tenant
to be kept and performed.
6.2 CONSENT TO SUBLEASE. Notwithstanding the prohibition set forth in
Section 6.1(a), Landlord shall not unreasonably withhold its consent to
one or more sublettings requested by Tenant, provided further that:
(i) The business of each proposed subtenant and its use of the
Premises shall be consistent with the Permitted Uses.
(ii) Neither the proposed subtenant, nor any person who directly or
indirectly, controls, is controlled by, or is under common control
with, the proposed subtenant or any person who controls the proposed
subtenant, shall be (A) a government (or subdivision or agency
thereof), except as otherwise provided in Section 5.1, or (B) an
occupant of any TPR Property;
(iii) The form of the proposed sublease shall be reasonably
satisfactory to Landlord and shall comply with the applicable
provisions of this Article 6;
(iv) No proposed sublease for which the sublet space shall be
physically segregated shall cover less than 5,000 square feet of
Premises Rentable Area; and
(v) not later than thirty (30) days prior to the proposed
commencement of such sublease, Landlord shall have received
information reasonably sufficient to determine compliance with the
foregoing conditions.
Moreover, notwithstanding such sublease, Tenant shall in all cases
remain fully and primarily liable hereunder. Landlord agrees to respond
with reasonable promptness to any request by Tenant for any consent
described above.
6.3 EXCESS PAYMENTS. In the event that Tenant shall enter into one or more
subleases pursuant to Section 6.2, if the rent and other sums (including
without limitation the fair value of any services provided by such
subtenant for Tenant) on account of any such sublease exceed the Basic
Rent and Escalation Charges allocable to that portion of the Premises
subject to such sublease, plus actual out-of-pocket third party expenses
reasonably incurred in connection with such sublease (such expenses to
be pro-rated evenly over the term of such sublease), including without
limitation reasonable brokerage commissions actually paid to a licensed
broker, Tenant shall pay to Landlord, as an
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<PAGE> 16
additional charge, 50% of such excess, such amount to be paid monthly
with payments by Tenant of Basic Rent hereunder.
6.4 TERMINATION. Notwithstanding any other provision of this Article VI to
the contrary, if and at each such time as Tenant shall intend to enter
into any sublease, which sublease either (i) covers all or substantially
all of the Premises, or (ii) covers less than all or substantially all
of the Premises, but covers at least twenty-five percent (25%)of
Premises Rentable Area, and has a term (including options to extend or
renew) covering all or substantially all of the remainder of the Term of
this Lease (excluding any extension options with respect to which Tenant
shall not then have exercised its options), then Tenant shall give
Landlord notice of such intent not earlier than sixty (60), and not
later than thirty (30), days prior to the effective date of such
proposed sublease, and Landlord may then elect to terminate this Lease
(if less than all or substantially all of the Premises are covered by
such sublease, then such termination shall affect only that portion of
the Premises proposed to be covered by such sublease) by giving notice
to Tenant of such election not later than fifteen (15) days after
receipt of Tenant's notice and, upon the giving of such notice by
Landlord, this Lease shall terminate with respect to such portion thirty
(30) days after the giving of such notice by Landlord with the same
force and effect as if such date were the date originally set forth
herein as the expiration date hereof. If Landlord shall elect to
terminate this Lease with respect to any portion of the Premises as
hereinabove provided, then (A) from and after the effective date of such
termination, the definitions of Basic Rent, Premises, Premises Rentable
Area and Escalation Factor shall be adjusted to reflect that portion of
the Premises that remains subject to this Lease after such termination,
and (B) Tenant shall pay to Landlord, as an additional charge, any costs
incurred by Landlord in connection with physically separating such
terminated portion from the remainder of the Premises and complying with
any laws, regulations and requirements of governmental authorities
regarding the creation of multi-tenant floors.
6.5 MISCELLANEOUS. (a) Any sublease consented to by Landlord shall be
expressly subject and subordinate to all of the covenants, agreements,
terms, provisions and conditions contained in this Lease. Any proposed
sub-sublease or proposed assignment of a sublease shall be subject to
the provisions of this Article. Tenant shall reimburse Landlord on
demand, as an additional charge, for any out-of-pocket costs (including
reasonable attorneys' fees and expenses) incurred by Landlord in
connection with any actual or proposed assignment or sublease, whether
or not consummated, including the costs of making investigations as to
the acceptability of the proposed assignee or subtenant. Any sublease to
which Landlord gives its consent shall not be valid or binding on
Landlord unless and until Tenant and the sublessee execute a consent
agreement in form and substance reasonably satisfactory to Landlord.
(b) Notwithstanding any sublease, or any amendments or modifications
subsequent thereto, Tenant will remain fully liable for the payment of
Basic Rent, Escalation Charges and other charges and for the performance
of all other obligations of Tenant contained in this Lease. Any act or
omission of any subtenant, or of anyone claiming under or through any
subtenant, that violates any of the obligations of this Lease shall be
deemed a violation of this Lease by Tenant.
(c) The consent by Landlord to any sublease shall not relieve Tenant or
any person claiming through or under Tenant of the obligation to obtain
the consent of Landlord, pursuant to the provisions of this Article, to
any subsequent sublease.
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<PAGE> 17
(d) With respect to each and every sublease authorized by Landlord under
the provisions of this Article, it is further agreed that any such
sublease shall provide that: (i) the term of the sublease must end no
later than one day before the last day of the Term of this Lease; (ii)
no sublease shall be valid, and no subtenant shall take possession of
all or any part of the Premises until a fully executed counterpart of
such sublease has been delivered to Landlord; (iii) each sublease shall
provide that it is subject and subordinate to this Lease; (iv) Landlord
may enforce the provisions of the sublease, including collection of
rents; (v) in the event of termination of this Lease or reentry or
repossession of the Premises by Landlord, Landlord may, at its option,
take over all of the right, title and interest of Tenant, as sublessor,
under such sublease, and such subtenant shall, at Landlord's option,
attorn to Landlord but nevertheless Landlord shall not (A) be liable for
any previous act or omission of Tenant under such sublease; (B) be
subject to any defense or offset previously accrued in favor of the
subtenant against Tenant; or (C) be bound by any previous modification
of such sublease made without Landlord's written consent or by any
previous prepayment of more than one month's rent.
6.6 ACCEPTANCE OF RENT. If this Lease is assigned, whether or not in
violation of the provisions of this Lease, Landlord may collect rent
from the assignee. If all or any part of the Premises are sublet,
whether or not in violation of this Lease, Landlord may, after default
by Tenant and expiration of Tenant's time to cure such default, collect
rent from the subtenant. In either event, Landlord may apply the net
amount collected to payment of Rents, but no such assignment,
subletting, or collection shall be deemed a waiver of any of the
provisions of this Article, an acceptance of the assignee or subtenant
as a lessee, or a release of Tenant from the performance by Tenant of
Tenant's obligations under this Lease.
ARTICLE 7
---------
RESPONSIBILITY FOR REPAIRS AND CONDITION OF PREMISES;
-----------------------------------------------------
SERVICES TO BE FURNISHED BY LANDLORD
------------------------------------
7.1 LANDLORD REPAIRS. (a) Except as otherwise provided in this Lease,
Landlord agrees, at its sole cost and expense (subject to Article 9) to
keep in good order, condition and repair the roof, exterior walls
(including exterior glass) and structure of the Building (including all
plumbing, mechanical and electrical systems installed by Landlord, but
specifically excluding any supplemental heating, ventilation or air
conditioning equipment or systems installed at Tenant's request or as a
result of Tenant's requirements in excess of building standard design
criteria), all insofar as they affect the Premises, except that Landlord
shall in no event be responsible to Tenant for the repair of glass in
the Premises, or any condition in the Premises or the Building caused by
any act or neglect of Tenant, its agents, employees, invitees or
contractors. Landlord shall not be responsible to make any improvements
or repairs to the Building other than as expressly in this Section 7.1
provided, unless expressly provided otherwise in this Lease.
(b) Landlord shall never be liable for any failure to make repairs which
Landlord has undertaken to make under the provisions of this Section 7.1
or elsewhere in this Lease, unless Tenant has given notice to Landlord
of the need to make such repairs, and Landlord has failed to commence to
make such repairs within a reasonable time after receipt of such notice,
or fails to proceed with reasonable diligence to complete such repairs.
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<PAGE> 18
7.2 TENANT'S AGREEMENT. (a) Tenant will keep neat and clean and maintain in
good order, condition and repair the Premises and every part thereof,
excepting only those repairs for which Landlord is responsible under the
terms of this Lease, reasonable wear and tear of the Premises, and
damage by fire or other casualty or as a consequence of the exercise of
the power of eminent domain; and shall surrender the Premises, at the
end of the Term, in such condition. Without limitation, Tenant shall
continually during the Term of this Lease maintain the Premises in
accordance with all laws, codes and ordinances from time to time in
effect and all directions, rules and regulations of the proper officers
of governmental agencies having jurisdiction, and the standards
recommended by the Boston Board of Fire Underwriters, and shall, at
Tenant's expense, obtain all permits, licenses and the like required by
applicable law. To the extent that the Premises constitute a "Place of
Public Accommodation" within the meaning of the Americans With
Disabilities Act of 1990, Tenant shall be responsible, subject to the
requirements of Section 5.2, for making the Premises comply with such
Act. Notwithstanding the foregoing or the provisions of Article XII, to
the maximum extent this provision may be enforceable according to law,
Tenant shall be responsible for the cost of repairs which may be made
necessary by reason of damage to the Building caused by any act or
neglect of Tenant, or its contractors or invitees (including any damage
by fire or other casualty arising therefrom) and, if the premium or
rates payable with respect to any policy or policies of insurance
purchased by Landlord or Agent with respect to the Property increases as
a result of payment by the insurer of any claim arising from the any act
or neglect of Tenant, or its contractors or invitees, Tenant shall be
pay such increase, from time to time, within fifteen (15) days after
demand therefor by Landlord, as an additional charge.
(b) If repairs are required to be made by Tenant pursuant to the terms
hereof, Landlord may demand that Tenant make the same forthwith, and if
Tenant refuses or neglects to commence such repairs and complete the
same with reasonable dispatch, after such demand (except in the case of
an emergency, in which event Landlord may make such repairs
immediately), Landlord may (but shall not be required to do so) make or
cause such repairs to be made (the provisions of Section 14.18 being
applicable to the costs thereof), and shall not be responsible to Tenant
for any loss or damage whatsoever that may accrue to Tenant's stock or
business by reason thereof.
7.3 FLOOR LOAD - HEAVY MACHINERY. (a) Tenant shall not place a load upon any
floor in the Premises exceeding the lesser of fifty (50) pounds per
square foot, live load, or that which is allowed by law. Landlord
reserves the right to prescribe the weight and position of all business
machines and mechanical equipment, including safes, which shall be
placed so as to distribute the weight. Business machines and mechanical
equipment shall be placed and maintained by Tenant at Tenant's expense
in settings sufficient, in Landlord's judgment, to absorb and prevent
vibration, noise and annoyance. Tenant shall not move any safe, heavy
machinery, heavy equipment, freight, bulky matter or fixtures into or
out of the Building without Landlord's prior consent, which consent may
include a requirement to provide insurance, naming Landlord as an
insured, in such amounts as Landlord may deem reasonable.
(b) If any such safe, machinery, equipment, freight, bulky matter or
fixtures requires special handling, Tenant agrees to employ only persons
holding a Master Rigger's License to do such work, and that all work in
connection therewith shall comply with applicable laws and regulations.
Any such moving shall be at the sole risk and hazard of Tenant, and
Tenant will exonerate, indemnify and save Landlord harmless against and
from any liability, loss, injury, claim or suit resulting directly or
indirectly from such moving.
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7.4 BUILDING SERVICES. (a) Landlord shall furnish, 24 hours per day, 7 days
per week, heating and cooling as normal seasonal changes may require to
provide reasonably comfortable space temperature and ventilation for
occupants of the Premises under normal business operation at an
occupancy of not more than one person per 150 square feet of Premises
Rentable Area and an electrical load not exceeding 6.0 watts per square
foot of Premises Rentable Area. In the event Tenant introduces into the
Premises personnel or equipment which overloads the capacity of the
Building system or in any other way interferes with the system's ability
to perform adequately its proper functions, supplementary systems may,
if and as needed, at Landlord's option, be provided by Landlord, at
Tenant's expense.
(b) Landlord shall also provide:
(i) Passenger elevator service from the existing passenger
elevator system.
(ii) Domestic water service (at temperatures supplied by the city in
which the Property is located) for drinking, lavatory and toilet
purposes, and connection to the municipal sewer system.
(iii) Snow and ice removal to the walks, driveways and parking areas
which Tenant is entitled to use under this Lease, and landscaping of
the surrounding grounds.
(iv) Free access to the Premises at all times, subject to security
precautions from time to time in effect, and subject always to
restrictions based on emergency conditions.
(v) Nightly cleaning and janitorial services to the Building on
Business Days, provided the same are kept in reasonable order by
Tenant, and window-washing, all substantially in accordance with the
cleaning standards from time to time in effect for the Building.
(vi) Until such time as a traffic signal (or other similar traffic
control system) is installed at the entrance to the Property, or
until such other traffic abatement measures as the City of Waltham
may deem appropriate are completed, the services of a police or
other appropriate traffic control officer at the entrance to the
Property between the hours of 4:30 and 6:30 p.m. on Business Days
(provided that, if Tenant shall desire that such services continue
after such signal, system or measures are in place, Landlord shall
continue such services at the sole cost and expense of Tenant).
(c) Landlord shall have no obligation whatsoever to provide any security
for the Premises or the Property. If and to the extent that Tenant
desires to provide security for the Premises or for Tenant's employees
and invitees or their property, Tenant shall be responsible for so
doing. Tenant agrees that, as between Landlord and Tenant, it is
Tenant's responsibility to advise its agents, employees, contractors and
invitees as to the foregoing and as to necessary and appropriate safety
precautions. Without in any way limiting the operation of Article 10
hereof, Tenant, for itself and its agents, employees, contractors and
invitees, hereby expressly waives any claim, action, cause
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of action or other right which may accrue or arise against Landlord as a
result of any damage or injury to the person or property of Tenant or
any such agent, invitee, contractor or employee, except to the extent
that the same arises from the negligent act or omission of Landlord or
its agents, employees or contractors, and will indemnify and hold
Landlord harmless from and against any loss, cost, damage or expense
suffered by Landlord as a result of any such claim, action, cause of
action or other right.
7.5 UTILITIES. (a) Tenant acknowledges that Basic Rent does not include the
cost of providing any electricity to the Premises and the Property.
Tenant shall pay for all utilities provided separately to the Premises,
and in addition, Tenant shall pay one-half (1/2) of the cost of
providing parking lot and other exterior lighting on the Property and
the adjacent property on which 400-2 Totten Pond Road is located.
Landlord shall arrange for Tenant's reasonable and customary
requirements for utilities, including, but not limited to, gas, water,
electricity (up to 6.0 watts per square foot of Premises Rentable Area),
sewer charges, and the like, including all utilities necessary for
heating and air-conditioning the Building, and Tenant shall reimburse
Landlord for the costs and expenses incurred in connection therewith, as
an additional charge, within fifteen (15) days after receipt of
Landlord's invoice therefor. Except to the extent that the same arises
from the grossly negligent or willful and wrongful act or omission of
Landlord or its agents, employees or contractors, Landlord shall have no
liability for interruption or unavailability of any utility or service.
Landlord shall purchase and install, at Tenant's expense, all lamps,
tubes, bulbs, starters and ballasts for the Premises, and shall operate
the utility systems for only their intended uses, consistent with
accepted building operating standards.
ARTICLE 8
---------
REAL ESTATE TAXES
-----------------
8.1 PAYMENTS ON ACCOUNT OF REAL ESTATE TAXES. (a) For the purposes of this
Article, the term "Tax Year" shall mean the twelve-month period
commencing on the July 1 immediately preceding the Commencement Date and
each twelve-month period thereafter commencing during the Term of this
Lease; and the term "Taxes" shall mean an amount equal to fifty percent
(50%) of real estate taxes assessed with respect to the Property and
400-2 Totten Pond Road for any Tax Year commencing with the Tax Year
beginning July 1, 1997. If the Property shall hereafter be assessed as a
taxable parcel separate and apart from 400-2 Totten Pond Road, then 100%
thereof shall be included in the definition of "Taxes."
(b) In the event that for any reason, Taxes during any Tax Year shall
exceed Base Taxes, Tenant shall pay to Landlord, as an Escalation
Charge, an amount equal to (i) the excess of Taxes over Base Taxes for
such Tax Year, multiplied by (ii) the Escalation Factor, such amount to
be apportioned for any portion of a Tax Year in which the Commencement
Date falls or the Term of this Lease ends.
(c) Estimated payments by Tenant on account of Taxes shall be made,
commencing July 1, 1998, on the first day of each and every calendar
month during the Term of this Lease, in the fashion herein provided for
the payment of Basic Rent. The monthly amount so to be paid to Landlord
shall be sufficient to provide Landlord by the time real estate tax
payments are due with a sum equal to
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Tenant's required payments, as estimated by Landlord from time to time,
on account of Taxes for the then current Tax Year. Promptly after
receipt by Landlord of bills for such Taxes, Landlord shall advise
Tenant of the amount thereof and the computation of Tenant's payment on
account thereof. If estimated payments theretofore made by Tenant for
the Tax Year covered by such bills exceed the required payments on
account thereof for such Year, Landlord shall credit the amount of
overpayment against subsequent obligations of Tenant on account of Basic
Rent for the next succeeding month (or refund such overpayment if the
Term of this Lease has ended and Tenant has no further obligation to
Landlord); but if the required payments on account thereof for such Year
are greater than estimated payments theretofore made on account thereof
for such Year, Tenant shall make payment to Landlord within 30 days
after being so advised by Landlord.
8.2 ABATEMENT. (a) If Landlord shall receive any tax refund or reimbursement
of Taxes or sum in lieu thereof with respect to any Tax Year, then out
of any balance remaining thereof after deducting Landlord's expenses
reasonably incurred in obtaining such refund, Landlord shall pay to
Tenant, provided there does not then exist a Default of Tenant, an
amount equal to such refund or reimbursement or sum in lieu thereof
(together with Tenant's share of any interest actually received by
Landlord in connection with such abatement) multiplied by the Escalation
Factor; provided, that in no event shall Tenant be entitled to receive
more than the payments made by Tenant on account of Taxes for such Tax
Year pursuant to paragraph (b) of Section 8.1 or to receive any payments
or abatement of Basic Rent if Taxes for any year are less than Base
Taxes or Base Taxes are abated.
(b) Landlord shall advise Tenant as to any arrangement that has been
entered into by Landlord with relevant taxing authorities as to
assessments for any particular Tax Year(s). So long as Landlord has not
entered into any such arrangement for any Tax Year in question, and
provided that Tenant requests in writing that Landlord do so (which
request is received not less than seven (7) days prior to the last date
on which real estate tax abatement proceedings for a particular Tax Year
may be commenced), and Tenant agrees therein to make the payment
referred to below), Landlord will institute and prosecute proceedings
for an abatement of Taxes for such Tax Year. The manner and method of
conducting such proceedings shall be solely within the reasonable
judgment and discretion of Landlord, provided that Landlord shall not
cancel or withdraw any such proceedings unless Landlord shall, at least
fifteen (15) days prior thereto have notified Tenant of its intention so
to do and Tenant shall have failed during such period to notify Landlord
of its intention to continue such proceedings at its cost and expense.
The obligation of Landlord to prosecute such proceedings shall not be
applicable to any proceeding beyond the Appellate Tax Board. From time
to time, upon ten (10) days' notice, Tenant shall pay to Landlord the
actual and reasonable cost and expense incurred by Landlord in
connection with such proceedings. It is understood and agreed that
Tenant shall be responsible for the entire cost and expense of such
proceeding, and not only 50% thereof. If Tenant shall fail to make any
such payment within such 10-day period, Landlord shall thereafter be
free from any further obligations under this paragraph. In the event
that Landlord is successful in obtaining an abatement, any costs
theretofore advanced by Tenant shall (to the extent of the amount of the
amount refunded in account of such abatement) be repaid to Tenant prior
to distributing the net proceeds of such abatement to Tenant and tenants
of 400-2 Totten Pond Road entitled thereto.
8.3 ALTERNATE TAXES. (a) If some method or type of taxation shall replace
the current method of assessment of real estate taxes in whole or part,
or the type thereof, or if additional types of taxes are imposed upon
the Property or Landlord, Tenant agrees that such taxes or other charges
shall be deemed to be, and shall be, Taxes hereunder and Tenant shall
pay an equitable share of the same as an additional charge computed in a
fashion consistent with the method of computation herein
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provided, to the end that Tenant's share thereof shall be, to the
maximum extent practicable, comparable to that which Tenant would bear
under the foregoing provisions.
(b) If a tax (other than a Federal or State net income tax) is assessed
on account of the rents or other charges payable by Tenant to Landlord
under this Lease, Tenant agrees to pay the same as an additional charge
within ten (10) days after billing therefor, unless applicable law
prohibits the payment of such tax by Tenant.
ARTICLE 9
---------
OPERATING AND UTILITY EXPENSES
------------------------------
9.1 DEFINITIONS. For the purposes of this Article, the following terms
shall have the following respective meanings:
Operating Year: Each calendar year in which any part of the Term of
this Lease shall fall.
Operating Expenses: aggregate costs or expenses reasonably incurred by
Landlord with respect to the operation, administration, cleaning,
repair, maintenance and management of the TPR Properties, all as set
forth in EXHIBIT OC annexed hereto; provided that, if during any portion
of any Operating Year for which Operating Expenses are being computed,
less than all of the TPR Properties are occupied by tenants or if
Landlord was not supplying all tenants with the services being supplied
to Tenant hereunder, actual Operating Expenses incurred shall be
reasonably extrapolated by Landlord on an item-by-item basis to the
reasonable Operating Expenses that would have been incurred if the TPR
Properties were fully occupied and such services were being supplied to
all tenants, and such extrapolated Operating Expenses shall, for all
purposes hereof, be deemed to be the Operating Expenses for such
Operating Year.
9.2 TENANT'S PAYMENTS. (a) In the event that, for any Operating Year,
Operating Expenses shall exceed Base Operating Expenses, Tenant shall
pay to Landlord, as an Escalation Charge, an amount equal to (i) such
excess Operating Expenses multiplied by (ii) the Escalation Factor, such
amount to be apportioned for any portion of an Operating Year in which
the Commencement Date falls or the Term of this Lease ends.
(b) Estimated payments by Tenant on account of Operating Expenses shall
be made, commencing January 1, 1998, on the first day of each and every
calendar month during the Term of this Lease, in the fashion herein
provided for the payment of Basic Rent. The monthly amount so to be paid
to Landlord shall be sufficient to provide Landlord by the end of each
Operating Year a sum equal to Tenant's required payments, as estimated
by Landlord from time to time during each Operating Year, on account of
Operating Expenses for such Operating Year. If Tenant so requests,
Landlord shall submit to Tenant, prior to the time at which any
estimated increase becomes effective, reasonable budget information as
to those items of Operating Expenses for which Landlord has estimated an
increase. After the end of each Operating Year, Landlord shall submit to
Tenant a reasonably detailed accounting of Operating Expenses for such
Year, and Landlord shall certify to the accuracy thereof. If estimated
payments theretofore made for such Year by Tenant exceed Tenant's
required payment on account thereof for such Year, according to such
statement, Landlord
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shall credit the amount of overpayment against subsequent obligations of
Tenant with respect to Operating Expenses (or refund such overpayment if
the Term of this Lease has ended and Tenant has no further obligation to
Landlord); but, if the required payments on account thereof for such
Year are greater than the estimated payments (if any) theretofore made
on account thereof for such Year, Tenant shall make payment to Landlord
within 30 days after being so advised by Landlord. Landlord shall have
the same rights and remedies for the nonpayment by Tenant of any
payments due on account of Operating Expenses as Landlord has hereunder
for the failure of Tenant to pay Basic Rent.
9.3 TENANT AUDIT RIGHTS. (a) If Tenant shall so request, within 60 days
after receipt of any accounting required to be presented by Landlord
hereunder, Landlord shall permit Tenant, at Tenant's expense and during
normal business hours, to review at Landlord's office Landlord's
invoices relating to Operating Expenses for the Operating Year in
respect of which such accounting was prepared for the purpose of
verifying any accounting that Landlord is required to give hereunder.
Any such request shall be accompanied by a statement setting forth, in
reasonable detail, the particular respects which Tenant disputes or
questions such accounting. In making any such examination, Tenant
agrees, and shall cause its auditors, accountants and any other
employees, agents or contractors having access to such information to
agree, to keep strictly confidential (i) any and all information
contained in such books and records, and (ii) the circumstances and
details pertaining to such examination, including without limitation the
nature of any dispute in respect of Operating Expenses and the nature or
details of any settlement thereof; and Tenant will confirm and cause its
auditors, accountants, employees, agents and contractors to confirm such
agreement in writing, if so requested by Landlord, prior to such
examination. If Tenant shall not request any such review within the
60-day period hereinabove referred to, then Landlord's accounting shall
be binding and conclusive. During the pendency of any such examination,
Tenant shall make all payments claimed by Landlord to be due, such
payments to be without prejudice to Tenant's position.
(b) If Tenant elects to conduct such an examination, as provided in
paragraph (a), then any such accounting by Landlord shall be binding and
conclusive upon Tenant unless, within one hundred fifty (150) days after
receipt of such accounting, Tenant shall notify Landlord in writing that
Tenant disputes the correctness of such accounting, specifying the
particular respects in which the accounting is claimed to be incorrect.
If such dispute has not been resolved by agreement within thirty (30)
days after Tenant's notice of such dispute, then Tenant may, within
thirty (30) additional days after the expiration of the first such
30-day period, submit the matter to arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association,
except that there shall be only one arbitrator, who shall have had at
least ten (10) years' experience as a certified property manager in
buildings similar to the Building and in the same general location and
market. If Tenant shall fail to submit the matter to arbitration within
such additional 30-day period, then the accounting shall be conclusively
deemed to be correct. Pending resolution by agreement or arbitration,
Tenant shall make any payments claimed by Landlord to be due on account
of Operating Expenses, such payment to be without prejudice to Tenant's
position. Any decision by an arbitrator shall be final and binding on
the parties. If the dispute shall be resolved in Tenant's favor,
Landlord shall forthwith credit the amount overpaid by Tenant against
amounts subsequently coming due on account of Operating Expenses. Each
party shall bear one-half (1/2) of the cost of such arbitrator.
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ARTICLE 10
----------
INDEMNITY AND PUBLIC LIABILITY INSURANCE
----------------------------------------
10.1 INDEMNITY. (a) Except to the extent that such claims arise from the
negligent acts or omissions of Landlord or its agents or employees,
Tenant agrees to indemnify and save harmless Landlord from and against
all claims, loss, cost, damage or expense of whatever nature arising:
(i) from any accident, injury or damage whatsoever to any person, or to
the property of any person, occurring in or about the Premises after the
Commencement Date or the date on which Tenant first occupies any part of
the Premises (whichever occurs first); (ii) from any accident, injury or
damage occurring outside of the Premises but on the Property where such
accident, damage or injury results or is claimed to have resulted from
an act or omission on the part of Tenant or Tenant's agents or employees
or independent contractors; or (iii) in connection with the conduct or
management of the Premises or of any business therein, or any thing or
work whatsoever done, or any condition created (other than by Landlord)
in or about the Premises; and, in any case, occurring after the date of
this Lease until the end of the Term of this Lease and thereafter so
long as Tenant is in occupancy of any part of the Premises. This
indemnity and hold harmless agreement shall include indemnity against
all losses, costs, damages,expenses and liabilities incurred in or in
connection with any such claim or proceeding brought thereon, and the
defense thereof, including, without limitation, reasonable attorneys'
fees and costs at both the trial and appellate levels.
(b) Landlord agrees to indemnify and save harmless Tenant from and
against all claims, loss, cost, damage or expense of whatever nature
arising from any accident, injury or damage, to the extent that such
accident, damage or injury results from an act or omission on the part
of Landlord or Landlord's agents or employees and occurring after the
date of this Lease until the end of the Term of this Lease. This
indemnity and hold harmless agreement shall include indemnity against
all losses, costs, damages, expenses and liabilities incurred in or in
connection with any such claim or proceeding brought thereon, and the
defense thereof, including, without limitation, reasonable attorneys'
fees and costs at both the trial and appellate levels.
10.2 PUBLIC LIABILITY INSURANCE. Tenant agrees to maintain in full force from
the date upon which Tenant first enters the Premises for any reason,
throughout the Term of this Lease, and thereafter so long as Tenant is
in occupancy of any part of the Premises, a policy of commercial general
liability and property damage insurance (including broad form
contractual liability, independent contractor's hazard and completed
operations coverage) under which Tenant is named as an insured and
Landlord, Agent (and such other persons as are in privity of estate with
Landlord as may be set out in a notice from time to time) are named as
additional insureds, and under which the insurer agrees to indemnify and
hold Landlord, Agent and those in privity of estate with Landlord,
harmless from and against all cost, expense and/or liability arising out
of or based upon any and all claims, accidents, injuries and damages set
forth in Section 10.1. Each such policy shall be non-cancelable and
non-amendable with respect to Landlord, Agent and Landlord's said
designees without thirty (30) days' prior notice, shall be written on an
"occurrence" basis, and shall be in at least the amounts of the Initial
Public Liability Insurance specified in Section 1.3 or such greater
amounts as Landlord shall from time to time request, and a duplicate
original thereof shall be delivered to Landlord.
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10.3 TENANT'S RISK. Tenant agrees to use and occupy the Premises and to use
such other portions of the Property as Tenant is herein given the right
to use at Tenant's own risk. Except to the extent that such claims arise
from the negligent or wrongful acts or omissions of Landlord or its
agents or employees, neither Landlord nor Landlord's insurers shall have
any responsibility or liability for any loss of or damage to Tenant's
Removable Property. Tenant shall carry "all-risk" property insurance on
a "replacement cost" basis, insuring Tenant's Removable Property and any
alterations, additions or improvements installed by Tenant pursuant to
Section 5.2, to the extent that the same have not become the property of
Landlord, and other so-called improvements and betterments. The
provisions of this Section 10.3 shall be applicable from and after the
execution of this Lease and until the end of the Term of this Lease, and
during such further period as Tenant may use or be in occupancy of any
part of the Premises or of the Building.
10.4 INJURY CAUSED BY THIRD PARTIES. Except to the extent that such claims
arise from the negligent acts or omissions of Landlord or its agents or
employees, Tenant agrees that Landlord shall not be responsible or
liable to Tenant, or to those claiming by, through or under Tenant, for
any loss or damage that may be occasioned by or through the acts or
omissions of persons occupying adjoining premises or any part of the
Property adjacent to or connecting with the Premises or any part of the
Property or otherwise.
ARTICLE 11
----------
LANDLORD'S ACCESS TO PREMISES
-----------------------------
11.1 LANDLORD'S RIGHTS. Landlord and Agent shall have the right, subject to
Tenant's reasonable security restrictions set forth in EXHIBIT TS, to
enter the Premises at all reasonable hours for the purpose of inspecting
or making repairs to the same, and Landlord and Agent shall also have
the right, subject to such restrictions, to make access available at all
reasonable hours to prospective or existing mortgagees, purchasers or,
during the last twelve months of the Term of this Lease, tenants of any
part of the TPR Properties.
ARTICLE 12
----------
FIRE, EMINENT DOMAIN, ETC.
--------------------------
12.1 ABATEMENT OF RENT. If the Premises shall be damaged by fire or casualty,
Basic Rent and Escalation Charges payable by Tenant shall abate
proportionately for the period in which, by reason of such damage, there
is substantial interference with Tenant's use of the Premises, having
regard for the extent to which Tenant may be required to discontinue
Tenant's use of all or a portion of the Premises, but such abatement or
reduction shall end if and when Landlord shall have substantially
restored the Premises (excluding any alterations, additions or
improvements made by Tenant pursuant to Section 5.2) to the condition in
which they were prior to such damage. If the Premises shall be affected
by any exercise of the power of eminent domain, Basic Rent and
Escalation Charges payable by Tenant shall be justly and equitably
abated and reduced according to the nature and extent of the loss of use
thereof suffered by Tenant. In no event shall Landlord
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have any liability for damages to Tenant for inconvenience, annoyance,
or interruption of business arising from such fire, casualty or eminent
domain.
12.2 RIGHTS OF TERMINATION. (a) If the Premises or the Building are
substantially damaged by fire or casualty (the term "substantially
damaged" meaning damage of such a character that the same cannot, in
ordinary course, reasonably be expected to be repaired within one
hundred eighty (180) days from the time that repair work would
commence), or if any part of the Building is taken by any exercise of
the right of eminent domain, then Landlord shall have the right to
terminate this Lease (even if Landlord's entire interest in the Premises
may have been divested) by giving notice of Landlord's election so to do
within sixty (60) days after the occurrence of such casualty or the
effective date of such taking, whereupon this Lease shall terminate 30
days after 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.
(b) If Landlord does not elect to terminate this Lease pursuant to
paragraph (a), then Landlord shall obtain from Landlord's architect or
engineer, and deliver to Tenant, a written and stamped determination and
certification as to such architect's or engineer's opinion as to the
time that would reasonably be required to substantially complete the
necessary repair and restoration of such damage. If such certification
reflects that such damage cannot reasonably be expected to be
substantially repaired within nine (9) months from date of commencement
of such work, Tenant shall have the right to terminate this Lease by
giving notice to Landlord thereof within fifteen (15) days after the
receipt of such certification. This Lease shall cease and come to an end
without further liability or obligation on the part of either party
thirty (30) days after such giving of notice by Tenant.
12.3 RESTORATION. If this Lease shall not have been terminated pursuant to
Section 12.2, Landlord shall thereafter use due diligence to restore the
Premises (excluding any alterations, additions or improvements made by
Tenant pursuant to Section 5.2, except those that have been sufficiently
incorporated into the Premises as to become a part thereof and be
covered by Landlord's property damage insurance) to proper condition for
Tenant's use and occupation, provided that Landlord's obligation shall
be limited to the amount of insurance proceeds available therefor. If,
for any reason, such restoration shall not be substantially completed
within nine months after the expiration of the 90-day period referred to
in Section (which nine-month period may be extended for such periods of
time as Landlord is prevented from proceeding with or completing such
restoration for any cause beyond Landlord's reasonable control, but in
no event for more than an additional three months), Tenant shall have
the right to terminate this Lease by giving notice to Landlord thereof
within thirty (30) days after the expiration of such period (as so
extended) provided that such restoration is not completed within such
period. This Lease shall cease and come to an end without further
liability or obligation on the part of either party thirty (30) days
after such giving of notice by Tenant unless, within such 30-day period,
Landlord substantially completes such restoration. Such right of
termination shall be Tenant's sole and exclusive remedy at law or in
equity for Landlord's failure so to complete such restoration, and time
shall be of the essence with respect thereto.
12.4 AWARD. Landlord shall have and hereby reserves and excepts, and Tenant
hereby grants and assigns to Landlord, all rights to recover for damages
to the Property and the leasehold interest hereby created, and to
compensation accrued or hereafter to accrue by reason of such taking,
damage or destruction, and by way of confirming the foregoing, Tenant
hereby grants and assigns,
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and covenants with Landlord to grant and assign to Landlord, all rights
to such damages or compensation, and covenants to deliver such further
assignments and assurances thereof as Landlord may from time to time
request, and Tenant hereby irrevocably appoints Landlord its
attorney-in-fact to execute and deliver in Tenant's name all such
assignments and assurances. Nothing contained herein shall be construed
to prevent Tenant from prosecuting in any condemnation proceedings a
claim for the value of any of Tenant's Removable Property installed in
the Premises by Tenant at Tenant's expense and for relocation expenses,
provided that such action shall not affect the amount of compensation
otherwise recoverable by Landlord from the taking authority.
12.5 LANDLORD'S INSURANCE. Landlord agrees to maintain in full force and
effect, during the Term of this Lease, property damage insurance with
such deductibles and in such amounts as may from time to time be carried
by reasonably prudent owners of similar buildings in the area in which
the Property is located, provided that in no event shall Landlord be
required to carry other than fire and extended coverage insurance or
insurance in amounts greater than the actual insurable cash value of the
Building (excluding footings and foundations). Landlord may satisfy such
insurance requirements by including the Property in a so-called
"blanket" insurance policy, provided that the amount of coverage
allocated to the Property shall fulfill the foregoing requirements.
ARTICLE 13
----------
DEFAULT
-------
13.1 TENANT'S DEFAULT. (a) If at any time subsequent to the date of this
Lease any one or more of the following events (herein referred to as a
"Default of Tenant") shall happen:
(i) Tenant shall fail to pay the Basic Rent, Escalation Charges or
additional charges hereunder when due and such failure shall
continue for five (5) full Business Days after notice to Tenant from
Landlord; or
(ii) Tenant shall neglect or fail to perform or observe any other
covenant herein contained 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 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
(iii) Tenant's leasehold interest in the Premises shall be taken on
execution or by other process of law directed against Tenant; or
(iv) Tenant shall make an assignment for the benefit of creditors or
shall be adjudicated 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 (other than the Bankruptcy Code, as
hereinafter defined), or shall seek or consent to or
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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
(v) An Event of Bankruptcy (as hereinafter defined) shall occur
with respect to Tenant; or
(vi) There shall exist any Default of Tenant under that certain
other lease (the "400-2 Lease"), dated as of March 4, 1996, by and
between Landlord and Tenant (whether or not Landlord shall exercise
any or all of its rights under the 400-2 Lease as a result of such
Default of Tenant), it being agreed and understood by Landlord and
Tenant that a Default of Tenant hereunder shall likewise constitute
a Default of Tenant under the 400-2 Lease; or
(vii) A petition shall be filed against Tenant under any law (other
than the Bankruptcy Code) 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
trustee, conservator, receiver or liquidator of Tenant or of all or
any substantial part of its properties 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);
then in any such case Landlord may 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 Term of this Lease, and Tenant will then quit and surrender the
Premises to Landlord, but Tenant shall remain liable as hereinafter
provided.
(b) For purposes of clause (a)(v) above, an "Event of Bankruptcy" means
the filing of a voluntary petition by Tenant, or the entry of an order
for relief against Tenant, under Chapter 7, 11, or 13 of the Bankruptcy
Code, and the term "Bankruptcy Code" means 11 U.S.C [Section] 101, ET
SEQ.. If an Event of Bankruptcy occurs, then the trustee of Tenant's
bankruptcy estate or Tenant as debtor-in-possession may (subject to
final approval of the court) assume this Lease, and may subsequently
assign it, only if it does the following within 60 days after the date
of the filing of the voluntary petition, the entry of the order for
relief (or such additional time as a court of competent jurisdiction
may grant, for cause, upon a motion made within the original 60-day
period):
(i) file a motion to assume the Lease with the appropriate court;
(ii) satisfy all of the following conditions, which Landlord and
Tenant acknowledge to be commercially reasonable:
(A) cure all Defaults of Tenant under this Lease or provide
Landlord with Adequate Assurance (as defined below) that
it will (x) cure all monetary Defaults of Tenant
hereunder within 10 days from the date of the
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assumption; and (y) cure all nonmonetary Defaults of
Tenant hereunder within 30 days from the date of the
assumption;
(B) compensate Landlord and any other person or entity, or
provide Landlord with Adequate Assurance that within 10
days after the date of the assumption, it will
compensate Landlord and such other person or entity, for
any pecuniary loss that Landlord and such other person
or entity incurred as a result of any Default of Tenant,
the trustee, or the debtor-in-possession;
(C) provide Landlord with Adequate Assurance of Future
Performance (as defined below) of all of Tenant's
obligations under this Lease; and
(D) deliver to Landlord a written statement that the
conditions herein have been satisfied.
(c) For purposes only of the foregoing paragraph (b), and in addition to
any other requirements under the Bankruptcy Code, any future federal
bankruptcy law and applicable case law, "Adequate Assurance" means at
least meeting the following conditions, which Landlord and Tenant
acknowledge to be commercially reasonable:
(i) entering an order segregating sufficient cash to pay Landlord
and any other person or entity under paragraph (b) above, and
(ii) granting to Landlord a valid first lien and security interest
(in form acceptable to Landlord) in all property comprising
the Tenant's "property of the estate," as that term is defined
in Section 541 of the Bankruptcy Code, which lien and security
interest secures the trustee's or debtor-in-possession's
obligation to cure the monetary and nonmonetary defaults under
the Lease within the periods set forth in paragraph (b) above;
(d) For purposes only of paragraph (b), and in addition to any other
requirements under the Bankruptcy Code, any future federal bankruptcy
law and applicable case law, "Adequate Assurance of Future Performance"
means at least meeting the following conditions, which Landlord and
Tenant acknowledge to be commercially reasonable:
(i) the trustee or debtor-in-possession depositing with Landlord,
as security for the timely payment of rent and other monetary
obligations, an amount equal to the sum of two (2) months'
Basic Rent plus an amount equal to two (2) months'
installments on account of Operating Expenses and Taxes,
computed in accordance with Articles 8 and 9;
(ii) the trustee or the debtor-in-possession agreeing to pay in
advance, on each day that the Basic Rent is payable, the
monthly installments on account of Operating Expenses and
Taxes, computed in accordance with Articles 8 and 9 hereof;
(iii) the trustee or debtor-in-possession providing adequate
assurance of the source of the rent and other consideration
due under this Lease;
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(iv) Tenant's bankruptcy estate and the trustee or
debtor-in-possession providing Adequate Assurance that the
bankruptcy estate (and any successor after the conclusion of
the Tenant's bankruptcy proceedings) will continue to have
sufficient unencumbered assets after the payment of all
secured obligations and administrative expenses to assure
Landlord that the bankruptcy estate (and any successor after
the conclusion of the Tenant's bankruptcy proceedings) will
have sufficient funds to fulfill Tenant's obligations
hereunder; and
(e) If the trustee or the debtor-in-possession assumes the Lease under
paragraph (b) above and applicable bankruptcy law, it may assign its
interest in this Lease only if the proposed assignee first provides
Landlord with Adequate Assurance of Future Performance of all of
Tenant's obligations under the Lease, and if Landlord determines, in the
exercise of its reasonable business judgment, that the assignment of
this Lease will not breach any other lease, or any mortgage, financing
agreement, or other agreement relating to the Property by which Landlord
or the Property is then bound (and Landlord shall not be required to
obtain consents or waivers from any third party required under any
lease, mortgage, financing agreement, or other such agreement by which
Landlord is then bound).
(f) For purposes only of paragraph (e) above, and in addition to any
other requirements under the Bankruptcy Code, any future federal
bankruptcy law and applicable case law, "Adequate Assurance of Future
Performance" means at least the satisfaction of the following
conditions, which Landlord and Tenant acknowledge to be commercially
reasonable:
(i) the proposed assignee submitting a current financial
statement, audited by a certified public accountant, that
allows a net worth and working capital in amounts determined
in the reasonable business judgment of Landlord to be
sufficient to assure the future performance by the assignee of
Tenant's obligation under this Lease; and
(ii) if requested by Landlord in the exercise of its reasonable
business judgment, the proposed assignee obtaining a guarantee
(in form and substance satisfactory to Landlord) from one or
more persons who satisfy Landlord's standards of
creditworthiness;
(g) If this Lease shall have been terminated as provided in this
Article, or if any execution or attachment shall be issued against
Tenant or any of Tenant's property whereupon the Premises shall be taken
or occupied by someone other than Tenant, then Landlord may re-enter the
Premises, either by 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.
(h) In the event of any termination, Tenant shall pay the Basic Rent,
Escalation Charges and other sums payable hereunder up to the time of
such termination, and thereafter Tenant, until the end of what would
have been the Term of this Lease in the absence of such termination, and
whether or not the Premises shall have been relet, shall be liable to
Landlord for, and shall pay to Landlord, as liquidated current damages:
(x) the Basic Rent, Escalation Charges and other sums that would be
payable hereunder if such termination had not occurred, less the net
proceeds, if any, of any reletting of the Premises, after deducting all
expenses in connection with such reletting, including, without
limitation, all repossession costs, brokerage commissions, legal
expenses, attorneys' fees, advertising, expenses of employees,
alteration costs and expenses of preparation for
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such reletting; and (y) if, in accordance with Section 3.1(a), Tenant
commenced payment of the full amount of Basic Rent on any day other than
the Commencement Date, the amount of Basic Rent that would have been
payable during the period beginning on the Commencement Date and ending
on the day Tenant commenced payment of the full amount of Basic Rent
under such Section 3.1(a). Tenant shall pay the portion of such current
damages referred to in clause (x) above to Landlord monthly on the days
which the Basic Rent would have been payable hereunder if this Lease had
not been terminated, and Tenant shall pay the portion of such current
damages referred to in clause (y) above to Landlord upon such
termination.
(i) At any time after such termination, whether or not Landlord shall
have collected any such current damages, as liquidated final damages and
in lieu of all such current damages beyond the date of such demand, at
Landlord's election Tenant shall pay to Landlord an amount equal to the
excess, if any, of the Basic Rent, Escalation Charges and other sums as
hereinbefore provided which would be payable hereunder from the date of
such demand assuming that, for the purposes of this paragraph, annual
payments by Tenant on account of Taxes and Operating Expenses would be
the same as the payments required for the immediately preceding
Operating or Tax Year for what would be the then unexpired Term of this
Lease if the same remained in effect, over the then fair net rental
value of the Premises for the same period.
(j) In case of any Default by Tenant, re-entry, expiration and
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
grant concessions or free rent to the extent that Landlord considers
advisable and necessary to re-let the same and (ii) may make such
reasonable alterations, repairs and decorations in the Premises as
Landlord in its sole judgment considers advisable and 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 such re-letting. Tenant hereby expressly waives any and all
rights of redemption granted by or under any present or future laws in
the event of Tenant being evicted or dispossessed, or in the event of
Landlord obtaining possession of the Premises, by reason of the
violation by Tenant of any of the covenants and conditions of this
Lease.
(k) 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.
(l) All costs and expenses incurred by or on behalf of Landlord
(including, without limitation, attorneys' fees and expenses at both the
trial and appellate levels) in enforcing its rights hereunder or
occasioned by any Default of Tenant shall be paid by Tenant.
13.2 LANDLORD'S DEFAULT. 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 if such failure is of such a nature that Landlord cannot
reasonably remedy the same within such thirty (30) day period, Landlord
shall fail to commence
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promptly (and in any event within such thirty (30) day period) to remedy
the same and to prosecute such remedy to completion with diligence and
continuity.
ARTICLE 14
----------
MISCELLANEOUS PROVISIONS
------------------------
14.1 EXTRA HAZARDOUS USE. 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 increase the rate of
property or liability insurance on the Premises or the Property above
the standard rate applicable to Premises being occupied for Permitted
Uses; 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
an additional charge hereunder.
14.2 WAIVER. (a) 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 the other's 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 any subsequent similar act by the other.
(b) 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 of the earliest installment of any payment
due from Tenant under the provisions hereof. 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.
14.3 COVENANT OF QUIET ENJOYMENT. Tenant, subject to the terms and provisions
of this Lease, on payment of the Basic Rent and Escalation Charges and
observing, keeping and performing all of the other 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 hereof, without hindrance or ejection by any
persons lawfully claiming under Landlord to have title to the Premises
superior to Tenant; the foregoing covenant of quiet enjoyment is in lieu
of any other covenant, express or implied.
14.4 LIMITATION OF LIABILITY. (a) Tenant specifically agrees to look solely
to Landlord's then equity interest in the TPR Properties at the time
owned, for recovery of any judgment from Landlord; it being specifically
agreed that Landlord (original or successor) shall never 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
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Tenant might otherwise have to obtain injunctive relief against Landlord
or Landlord's successors in interest, or to take any action not
involving the personal liability of Landlord (original or successor) to
respond in monetary damages from Landlord's assets other than Landlord's
equity interest in the TPR Properties.
(b) With respect to any services or utilities to be furnished by
Landlord to Tenant, Landlord shall in no event be liable for failure to
furnish the same when prevented from doing so by strike, lockout,
breakdown, accident, order or regulation of or by any governmental
authority, or failure of supply, or failure whenever and for so long as
may be necessary by reason of the making of repairs or changes which
Landlord is required or is permitted by this Lease or by law to make or
in good faith deems necessary, 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
other cause beyond Landlord's reasonable control, or for any cause due
to any act or neglect of Tenant or Tenant's servants, agents, employees,
licensees or any person claiming by, through or under Tenant, nor shall
any such failure give rise to any claim in Tenant's favor that Tenant
has been evicted, either constructively or actually, partially or
wholly. Notwithstanding the foregoing to the contrary, if, due to any
event or circumstance described above or any Force Majeure, Tenant is
prevented from receiving essential services or utilities that Landlord
is obligated to perform or deliver under this Lease, and such
interruption of essential services or utilities renders the Premises
untenantable, and if such interruption shall continue for a period of
five (5) consecutive days after notice thereof from Tenant to Landlord
that the Premises are untenantable as a result thereof, Basic Rent and
Escalation Charges shall abate commencing on the sixth day after such
notice (and, if less than all of the Premises are affected by such
interruption, such abatement shall be pro-rated according to the area so
affected) until such time as such services or utilities are restored.
The foregoing shall not apply to repairs or changes necessitated by fire
or other casualty, or by the exercise of the right of eminent domain,
which shall be governed by Article 12. Tenant's rights herein granted
shall be Tenant's sole remedies for such interruption.
(c) In no event shall either party ever be liable to the other for any
loss of business or any other indirect or consequential damages suffered
by the other from whatever cause.
(d) Except with respect to requests by Tenant for Landlord's consent to
a sublease permitted under Article 6, where provision is made in this
Lease for Landlord's consent and Tenant shall request such consent and
Landlord shall fail or refuse to give such consent, Tenant shall not be
entitled to any damages for any withholding by Landlord of its consent,
it being intended that Tenant's sole remedy shall be an action for
specific performance or injunction, and that such remedy shall be
available only in those cases where Landlord has expressly agreed in
writing not to unreasonably withhold its consent. Furthermore, whenever
Tenant requests Landlord's consent or approval (whether or not provided
for herein), Tenant shall pay to Landlord, on demand, as an additional
charge, any expenses reasonably incurred by Landlord (including without
limitation legal fees and costs, if any) in connection therewith.
(e) With respect to any repairs or restoration which are required or
permitted to be made by Landlord, the same may be made during normal
business hours and Landlord shall have no liability for damages to
Tenant for inconvenience, annoyance or interruption of business arising
therefrom. Landlord agrees, however, in the course of such work, to use
all reasonable efforts not to unreasonably interfere with Tenant's
operation in the Premises.
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14.5 NOTICE TO MORTGAGEE OR GROUND LESSOR. After receiving notice from any
person, firm or other entity that it holds a mortgage or a ground lease
which includes the Premises, no notice from Tenant to Landlord alleging
any default by Landlord shall be effective unless and until a copy of
the same is given to such holder or ground lessor (provided Tenant shall
have been furnished with the name and address of such holder or ground
lessor), and the curing of any of Landlord's defaults by such holder or
ground lessor shall be treated as performance by Landlord.
14.6 ASSIGNMENT OF RENTS AND TRANSFER OF TITLE. (a) 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 on property which
includes the Premises, Tenant agrees that the execution thereof by
Landlord, and the acceptance thereof by the holder of such mortgage
shall never be treated as an assumption by such holder of any of the
obligations of Landlord hereunder unless such holder shall, by notice
sent to Tenant, specifically otherwise elect and that, except as
aforesaid, such holder shall be treated as having assumed Landlord's
obligations hereunder only upon foreclosure of such holder's mortgage
and/or the taking of possession of the Premises for the purpose of
foreclosing.
(b) In no event shall the acquisition of Landlord's interest in the
Property by a purchaser which, simultaneously therewith, leases
Landlord's entire interest in the Property back to the seller thereof be
treated as an assumption 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. In any such event, this
Lease shall be subject and subordinate to the lease 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. Notwithstanding the
foregoing, Landlord agrees to obtain the written agreement of the
purchaser-lessor that, subject to such reasonable qualifications as such
purchaser-lessor may reasonably impose, in the event that the
purchaser-lessor shall succeed to the interests of Landlord hereunder
pursuant to such lease, then so long as no Default of Tenant exists
hereunder, Tenant's right to possession of the Premises shall not be
disturbed and Tenant's other rights hereunder shall not be adversely
affected by termination of such lease.
(c) Except as provided in paragraph (b) of this Section, in the event of
any transfer of title to the Property by Landlord, Landlord shall
thereafter be entirely freed and relieved from the performance and
observance of all covenants and obligations hereunder, except to the
extent that Tenant shall have given Landlord written notice, prior to
the date of such transfer, of any claim.
14.7 RULES AND REGULATIONS. Tenant shall abide by rules and regulations from
time to time established by Landlord, it being agreed that such rules
and regulations will be established and applied by Landlord in a
non-discriminatory fashion, such that all rules and regulations shall be
generally applicable to other tenants, if any, of similar nature to the
Tenant named herein, of the Building. Landlord agrees to use reasonable
efforts to insure that any such rules and regulations are uniformly
enforced, but Landlord shall not be liable to Tenant for violation of
the same by any other tenant or occupant of the Building, or persons
having business with them. In the event that there shall be a conflict
between such rules and regulations and the provisions of this Lease, the
provisions of this Lease shall control. Rules and Regulations currently
in effect are set forth in EXHIBIT RR.
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14.8 ADDITIONAL CHARGES. If Tenant shall fail to pay when due any sums under
this Lease designated as an Escalation Charge or additional charge,
Landlord shall have the same rights and remedies as Landlord has
hereunder for failure to pay Basic Rent.
14.9 INVALIDITY OF PARTICULAR PROVISIONS. 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.
14.10 PROVISIONS BINDING, ETC. 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 (except in
the case of Tenant, ONLY such assigns as may be permitted hereunder)
and, if Tenant shall be an individual, upon and to his heirs, executors,
administrators, successors and permitted 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 assignment by Tenant, but has reference only to those instances in
which Landlord may later give consent to a particular assignment as
required by those provisions of Article 6 hereof.
14.11 RECORDING. Tenant agrees not to record this Lease, but, if the Term of
this Lease (including any extended term) is seven (7) years or longer,
each party hereto agrees, on the request of the other, to execute a
so-called notice of lease in recordable form and complying with
applicable law and reasonably satisfactory to Landlord's attorneys. In
no event shall such document set forth the 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.
14.12 NOTICES. Whenever, by the terms of this Lease, notices 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,
return receipt requested:
If intended for Landlord, addressed to Landlord at Landlord's Original
Address and marked: "Attention: Asset Manager, 400/460 Totten Pond
Road," with a copy to Stephen T. Langer, Esq., Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., One Financial Center, Boston, MA 02111
(or to such other address or addresses as may from time to time
hereafter be designated by Landlord by like notice).
If intended for Tenant, addressed to Tenant at Tenant's Original Address
(or to such other address or addresses as may from time to time
hereafter be designated by Tenant by like notice), with a copy to
Douglas M. Henry, Esq., Bingham, Dana & Gould, 150 Federal Street,
Boston, MA 02110.
All such notices shall be effective when deposited in the United States
Mail within the Continental United States, provided that the same are
received in ordinary course at the address to which the same were sent.
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14.13 WHEN LEASE BECOMES BINDING. 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 this Lease expressly supersedes any proposals or
other written documents relating hereto. This Lease 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.
14.14 PARAGRAPH HEADINGS AND INTERPRETATION OF SECTIONS. The paragraph
headings throughout this instrument 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. The provisions of this Lease
shall be construed as a whole, according to their common meaning (except
where a precise legal interpretation is clearly evidenced), and not for
or against either party. Use in this Lease of the words "including,"
"such as" or words of similar import, when followed by any general term,
statement or matter, shall not be construed to limit such term,
statement or matter to the specified item(s), whether or not language of
non-limitation, such as "without limitation" or "including, but not
limited to," or words of similar import, are used with reference
thereto, but rather shall be deemed to refer to all other terms or
matters that could fall within a reasonably broad scope of such term,
statement or matter.
14.15 RIGHTS OF MORTGAGEE OR GROUND LESSOR. This Lease shall be subordinate to
any mortgage or ground lease from time to time encumbering the Premises,
whether executed and delivered prior to or subsequent to the date of
this Lease, if the holder of such mortgage or ground lease shall so
elect. If this Lease is subordinate to any mortgage or ground lease and
the holder thereof (or successor) shall succeed to the interest of
Landlord, at the election of such holder (or successor) Tenant shall
attorn to such holder and this Lease shall continue in full force and
effect between such holder (or successor) and Tenant. Tenant agrees to
execute such instruments of subordination or attornment in confirmation
of the foregoing agreement as such holder may request. Notwithstanding
the foregoing, if the holder of such mortgage elects to make this Lease
subordinate as aforesaid, then upon the written request of Tenant,
Landlord shall obtain the holder's written agreement (substantially in
the form annexed hereto as EXHIBIT SNDA) that, subject to such
reasonable qualifications as such holder may reasonably impose, in the
event that the holder shall succeed to the interests of Landlord
hereunder pursuant to such mortgage, ground lease or other encumbrance,
so long as no Default of Tenant exists hereunder, Tenant's right to
possession of the Premises shall not be disturbed and Tenant's other
rights hereunder shall not be adversely affected by any foreclosure of
such mortgage or encumbrance or by termination of such ground lease.
14.16 STATUS REPORT. Recognizing that both parties may find it necessary to
establish to third parties, such as accountants, banks, mortgagees,
ground lessors, or the like, the then current status of performance
hereunder, either party, on the request of the other made from time to
time, will promptly furnish to Landlord, or the holder of any mortgage
or ground lease encumbering the Premises, or to Tenant, as the case may
be, 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.
14.17 SECURITY DEPOSIT. (a) Subject to Section 14.17(b), the security deposit
will be paid upon execution and delivery of this Lease, and Landlord
shall hold the same throughout the Term of this
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Lease as security for the performance by Tenant of all obligations on
the part of Tenant hereunder. Landlord shall have the right from time to
time without prejudice to any other remedy Landlord may have on account
thereof, to apply such deposit, or any part thereof, to Landlord's
damages arising from, or to cure, any Default of Tenant hereunder or
under any other such lease or occupancy agreement. If Landlord shall so
apply any or all of such deposit, Tenant shall immediately deposit with
Landlord the amount so applied to be held as security hereunder. If at
each such time there then exists no Default of Tenant (or event or
circumstance which, with the passage of time or the giving of notice, or
both, would constitute a Default of Tenant), Landlord shall return the
deposit, or so much thereof as shall have theretofore not been applied
in accordance with the terms of this Section 14.7, to Tenant as
follows: (i) on each of the third, fourth, fifth and sixth
anniversaries of the Commencement Date, an amount equal to one-quarter
(1/4) of the excess of the initial security deposit over one (1)
month's Basic Rent; and (ii) the remainder on the expiration or earlier
termination of the Term of this Lease and surrender of possession of
the Premises by Tenant to Landlord at such time. While Landlord holds
such deposit, Landlord shall hold the same in a separate account in a
Massachusetts bank, or in a non-Massachusetts bank acceptable to
Landlord and Tenant, and shall pay to Tenant's account the amount of
any interest actually paid by such bank with respect thereto (after
deducting any fees or other charges imposed on Landlord in respect of
such account). Tenant hereby certifies that it is aware that the
Federal Deposit Insurance Corporation ("FDIC") coverages apply only to
a cumulative maximum amount of $100,000 for each individual deposit for
all of depositor's accounts at the same or related institution. Tenant
further understands that certain banking instruments such as, but not
limited to, repurchase agreements and letters of credit, are not
covered at all by FDIC insurance. Further, Tenant agrees that Landlord
assumes no responsibility for, nor will Tenant hold Landlord liable
for, any loss occurring which arises from the fact that the amount of
the security deposit exceeds $100,000 or from the fact that the excess
amount will not be insured by FDIC, or that FDIC insurance is not
available on certain types of bank instruments. If Landlord conveys
Landlord's interest under this Lease, and the transferee agrees to
assume Landlord's obligations under this Lease, the deposit, or any
part thereof not previously applied, shall 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 14.7, and the return thereof
in accordance herewith. The holder of a mortgage shall not 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 actually received in
hand by such holder.
(b) Landlord may, in its sole discretion, require that instead of a cash
security deposit, Tenant shall, upon execution and delivery of this
Lease, deposit with Landlord a clean, irrevocable, unconditional letter
of credit, with a right of assignment (without charge or cost to
Landlord) to any successor to Landlord's interests hereunder, in favor
of Landlord in the amount of the security deposit. In the event that
Landlord so requires, Landlord agrees to pay the letter of credit fee
charged by the issuing bank in respect thereof. Such letter of credit,
and any replacement thereof, shall be drawn on a Massachusetts bank
approved by Landlord from time to time. The form of the Letter of Credit
annexed hereto as EXHIBIT LOC is acceptable to Landlord. In the event of
a material adverse change in the financial position of any bank which
has issued a letter of credit hereunder, Landlord reserves the right, on
any scheduled expiration or renewal date of any such letter (or, in the
event that Landlord reasonably determines that the condition of the
issuing bank is in imminent danger of insolvency, upon 10 days' notice),
to request that Tenant change the issuing bank to another bank
reasonably approved by Landlord. Regardless of whether Landlord shall
have previously requested that Tenant change issuing banks, if the bank
on which the original letter of
34
<PAGE> 38
credit or any replacement letter is drawn is declared insolvent or
placed into conservatorship or receivership, Tenant shall, within 20
days thereafter, replace the then-outstanding letter of credit with a
like letter of credit from another bank acceptable to Landlord, and
Landlord shall reimburse Tenant for any issuance fees as hereinabove
provided.
(c) The letter of credit shall contain a clause whereby the issuing bank
agrees to automatically extend the term of the letter of credit from
year to year throughout the Initial Term (and any Extended Term) unless,
not less than sixty (60) days prior to the date on which the letter
would expire absent such extension, the issuing bank gives notice to
Landlord, by certified or registered mail, of non-extension. In the
event of notice from the issuing bank of non-extension, Tenant shall,
not later than twenty (20) Business Days prior to the date on which the
outstanding letter shall expire without extension, obtain a replacement
letter of credit from a Massachusetts bank acceptable to Landlord, under
all of the terms and conditions set forth above. Upon (i) the occurrence
of a Default of Tenant hereunder, or (ii) the failure of Tenant to
replace any such letter at least twenty (20) Business Days prior to its
expiration, and written certification thereof by Landlord to the issuing
bank, Landlord may at its election draw the full amount or any part
thereof, and hold, use and apply the proceeds thereof as if such
proceeds were originally deposited with Landlord in cash under this
Section. In the event that Landlord draws any such letter of credit,
Landlord may elect to use such proceeds (or any excess proceeds after
application) to obtain from another Massachusetts bank a replacement
letter of credit, and the cost of such replacement shall be deducted
from the available balance and reimbursed by Tenant. Tenant hereby
agrees, if so requested by Landlord, to enter into a letter of credit
agreement with the bank so designated by Landlord, failing which
Landlord may do so in Tenant's name and behalf. The order in which
Landlord applies the proceeds of the cash security deposit and the
proceeds of the letter of credit shall be determined by Landlord from
time to time in its sole and unfettered discretion.
(d) From and after the time at which Landlord shall have drawn all or
any portion of the proceeds of such a letter of credit, if Landlord
shall not elect to obtain its own replacement letter of credit, Landlord
shall have the right from time to time without prejudice to any other
remedy Landlord may have on account thereof, to apply such proceeds, or
any part thereof, to Landlord's damages arising from any then existing
or subsequently occurring Default of Tenant hereunder. While Landlord
holds any unapplied proceeds, Landlord shall maintain a separate account
and pay interest thereon as provided in paragraph (a). There then
existing no Default of Tenant hereunder or under any other leases or
occupancy agreements that may hereafter be entered into between Landlord
and Tenant relative to the TPR Properties, Landlord shall return to
Tenant the proceeds thereof (or, if not drawn upon, any letter of
credit), or so much thereof as shall not have theretofore been applied
in accordance with the terms of this Section 14.17, provided that as to
the partial reductions in the amount of the security deposit referred to
in paragraph (a), such reductions shall be effected by amendments to the
letter of credit reflecting the reduced requirements. If Landlord
conveys Landlord's interest under this Lease, and the transferee agrees
to assume Landlord's obligations under this Lease, the proceeds (or, if
not drawn upon, any letter of credit), or any part thereof not
previously applied, shall be turned over by Landlord to Landlord's
grantee, and, when actually turned over, Tenant agrees to look solely to
such grantee for proper application of the proceeds in accordance with
the terms of this Section 14.17, and the return thereof in accordance
herewith. The holder of a mortgage shall not be responsible to Tenant
for the return of any letter of credit or application of any such
proceeds, whether or not it succeeds to the position of Landlord
hereunder, unless such proceeds or letter of credit shall have actually
been received by such holder.
35
<PAGE> 39
14.18 REMEDYING DEFAULTS. Landlord shall have the right, but shall not be
required, to pay such sums or do any act which requires the expenditure
of monies which may be necessary or appropriate by reason of the failure
or neglect of Tenant to perform any of the provisions of this Lease, and
in the event of the exercise of such right by Landlord, Tenant agrees to
pay to Landlord forthwith upon demand all such sums, together with
interest thereon at a rate equal to 3% over the base rate in effect from
time to time at The First National Bank of Boston (but in no event more
than 18% per annum), as an additional charge. Any payment of Basic Rent,
Escalation Charges or other sums payable hereunder not paid when due
shall, at the option of Landlord, bear interest at a rate equal to 3%
over the base rate in effect from time to time at The First National
Bank of Boston (but in no event more than 18% per annum) from the due
date thereof and shall be payable forthwith on demand by Landlord, as an
additional charge.
14.19 HOLDING OVER. Any holding over by Tenant after the expiration of the
term of this Lease shall be treated as a daily tenancy at sufferance at
a rate equal to one and one-half (1 1/2) times the Basic Rent then in
effect plus Escalation Charges and other charges herein provided
(prorated on a daily basis). Tenant shall also pay to Landlord all
direct damages sustained by reason of any such holding over. Otherwise,
such holding over shall be on the terms and conditions set forth in this
Lease as far as applicable.
14.20 WAIVER OF SUBROGATION. Insofar as, and to the extent that, the following
provision shall not make it impossible to secure insurance coverage
obtainable from responsible insurance companies doing business in the
locality in which the Property is located (even though extra premium may
result therefrom) Landlord and Tenant: (i) mutually agree that, with
respect to any damage to property, the loss from which is covered by
insurance then being carried by them, respectively, the one carrying
such insurance and suffering such loss releases the other of and from,
and forever waives, any and all claims with respect to such loss, but
only to the extent of the limits of insurance carried with respect
thereto, less the amount of any deductible; and (ii) mutually agree that
any property damage insurance carried by either shall provide for the
waiver by the insurance carrier of any right of subrogation against the
other.
14.21 SURRENDER OF PREMISES. Upon the expiration or earlier termination of the
Term of this Lease, Tenant shall peaceably quit and surrender to
Landlord the Premises in neat and clean condition and in good order,
condition and repair, together with all alterations, additions and
improvements which may have been made or installed in, on or to the
Premises prior to or during the Term of this Lease, excepting only
ordinary wear and use and damage by fire or other casualty for which,
under other provisions of this Lease, Tenant has no responsibility of
repair or restoration. If Tenant (or Landlord, acting at the request of
Tenant) shall have installed an "internal" staircase in the Building,
then Tenant shall be required to remove the same and repair and restore
any floor openings and other affected areas to their prior condition.
Also, Tenant shall remove all of Tenant's Removable Property and, to the
extent specified by Landlord (as of the date Landlord approved any such
alteration or addition, if approval thereof was required under Section
5.2), all alterations and additions made by Tenant and all partitions
wholly within the Premises unless installed initially by Landlord in
preparing the Premises for Tenant's occupancy; and shall repair any
damages to the Premises or the Building caused by such removal. Any
Tenant's Removable Property which shall remain in the Building or on the
Premises after the expiration or termination of the Term of this Lease
shall be deemed conclusively to have been abandoned, and either may be
retained by Landlord as its property or may be disposed of in such
manner as Landlord may see fit, at Tenant's sole cost and expense.
36
<PAGE> 40
14.22 BROKERAGE. Tenant warrants and represents that Tenant has dealt with no
broker in connection with the consummation of this Lease other than
Broker, and, in the event of any brokerage claims against Landlord
predicated upon prior dealings with Tenant, Tenant agrees to defend the
same and indemnify Landlord against any such claim (except any claim by
Broker, who shall be paid by Landlord).
14.23 GOVERNING LAW. This Lease shall be governed exclusively by the
provisions hereof and by the laws of the Commonwealth of Massachusetts
as the same may from time to time exist.
ARTICLE 15
----------
OPTION TO EXTEND
----------------
15.1 TENANT'S RIGHT. Provided that, at the time of such exercise, (i) there
exists no Default of Tenant; (ii) this Lease is still in full force and
effect; and (iii) Tenant actually occupies at least sixty percent (60%)
of Premises Rentable Area, Tenant shall have the right to extend the
Term of this Lease as to the Premises originally leased hereunder for
one extended term (the "Extended Term") of five (5) years. The Extended
Term shall commence on the day immediately following the expiration date
of the Initial Term, and shall end on the day immediately preceding the
fifth anniversary of the first day of the Extended Term. Tenant shall
exercise such option by giving Landlord notice of its desire to do so,
not later than twelve (12) months prior to the expiration of the Initial
Term, it being agreed that time shall be of the essence with respect to
the giving of such notice. The giving of such notice shall automatically
extend the Term of this Lease for the Extended Term, and no instrument
of renewal need be executed. In the event that Tenant fails to give such
notice to Landlord, the Term of this Lease shall automatically terminate
at the end of the Initial Term, and Tenant shall have no further right
or option to extend the Term of this Lease. The Extended Term shall be
on all the terms and conditions of this Lease, except that: (i) Landlord
shall have no obligation to pay any construction or improvements
allowance, or to perform any alterations or improvements to the
Premises, with respect to the Extended Term; and (ii) the Basic Rent for
the Extended Term shall be determined in accordance with section 15.2.
15.2 EXTENDED TERM RENT. (a) The Basic Rent for the Extended Term shall be
the product of (x) the Fair Market Rental Value of the Premises (as
hereinafter defined) as of the commencement of the Extended Term,
determined without regard to Tenant's right to extend, as agreed by the
parties, and (y) 0.95. In no event, however, shall the Basic Rent for
the Extended Term (which does not include Escalation Charges) be less
than the sum of (i) $22.15 per square foot of Premises Rentable Area,
Plus (ii) all accrued Escalation Charges payable as of the last day of
the Initial Term. During the Extended Term, Escalation Charges shall be
calculated using new Base Taxes and Base Operating Expenses, which shall
be established according to the fiscal year ending June 30, 2005 and the
calendar year ending December 31, 2004, respectively.
37
<PAGE> 41
ARTICLE 16
----------
FAIR MARKET RENTAL VALUE
------------------------
16.1 DEFINITION. (a) The term "Fair Market Rental Value" shall mean the
annual fixed rent that a willing tenant would pay and a willing landlord
would accept, each acting in its own best interest and without duress,
in an arms-length lease of the premises in question as of the date (the
"Determination Date") on which the same is to become effective. If
Landlord and Tenant shall fail to agree upon the Fair Market Rental
Value within six (6) months before the Determination Date, then Landlord
and Tenant each shall give notice (the "Determination Notice") to the
other setting forth their respective determinations of the Fair Market
Rental Value, and, subject to the provisions of paragraph (b) below,
either party may apply to the American Arbitration Association or any
successor thereto for the designation of an arbitrator satisfactory to
both parties to render a final determination of the Fair Market Rental
Value. The arbitrator shall be a real estate appraiser or consultant who
shall have at least ten (10) years' continuous experience as a
commercial real estate broker or appraiser, and having significant
experience with property similar to the Building in the greater Boston
area. The arbitrator shall conduct such hearings and investigations as
the arbitrator shall deem appropriate and shall, within thirty (30) days
after having been appointed, choose one of the determinations set forth
in either Landlord's or Tenant's Determination Notice, and that choice
by the arbitrator shall be binding upon Landlord and Tenant. The
arbitrator may take into account factors such as (but not limited to)
the then condition of the applicable space and the level of any
leasehold improvement allowances or other inducements then normally
being offered to prospective tenants. Each party shall pay its own
counsel fees and expenses, if any, in connection with any arbitration
under this paragraph (a), and the parties shall share equally all other
expenses and fees of any such arbitration. The determination rendered in
accordance with the provisions of this paragraph (a) shall be final and
binding in fixing the Fair Market Rental Value. The arbitrator shall not
have the power to add to, modify, or change any of the provisions of
this Lease.
(b) In the event that the determination of the Fair Market Rental Value
set forth in the Landlord's and Tenant's Determination Notices shall
differ by less than five percent (5%) per square foot of Premises
Rentable Area per annum for each year for which the same is being
determined, then the Fair Market Rental Value shall not be determined by
arbitration, but shall instead be set by taking the average of the
determinations set forth in Landlord's and Tenant's Determination
Notices. Only if the determinations set forth in Landlord's and Tenant's
Determination Notices shall differ by more than 5% per square foot of
Premises Rentable area per annum for any year for which the same is
being determined shall the actual determination of Fair Market Rental
Value be made by an arbitrator as set forth in paragraph (a) above.
(c) If for any reason the Fair Market Rental Value shall not have been
determined prior to the Determination Date, then, until the Fair Market
Rental Value and, accordingly, the Basic Rent, shall have been finally
determined, Tenant shall pay Basic Rent at the rate quoted by Landlord
in Landlord's Determination Notice. Upon final determination of the Fair
Market Rental Value, an appropriate adjustment to the Basic Rent
theretofore paid by Tenant from and after the Determination Date shall
be made reflecting such final determination, and Landlord or Tenant, as
the case may be, shall promptly credit or pay, respectively, to the
other any overpayment of deficiency, as the case may be, in the payment
of Basic Rent from the Determination Date to the date of such final
determination.
38
<PAGE> 42
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
duly executed, under seal, by persons hereunto duly authorized, in multiple
copies, each to be considered an original hereof, as of the date first set forth
above.
LANDLORD: 400/460 TOTTEN POND ROAD
--------- LIMITED PARTNERSHIP
By: Leggat McCall Properties, Inc.,
General Partner
By: /s/ F. X. Jacoby
-------------------------------
Hereunto Duly Authorized
TENANT: MOLTEN METAL TECHNOLOGY, INC.
-------
By: /s/ Kathy Santoro
-------------------------------
(Vice) President
By: /s/ Benjamin T. Downs
-------------------------------
(Assistant) Treasurer
39
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