<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 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 30 June 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ to ________
Commission file number 0-26376
ON TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-3162846
(State of incorporation) (IRS Employer Identification Number)
One Cambridge Center
Cambridge Massachusetts 02142
(617) 374-1400
(Address and telephone of principal executive offices)
___________
Indicate by check mark whether 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
--------
12,280,122 shares of the registrant's Common stock, $0.01 par value, were
outstanding as of July 31, 1997.
THIS DOCUMENT CONTAINS 21 PAGES.
THE EXHIBIT INDEX IS ON PAGE 19.
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ON TECHNOLOGY CORPORATION AND SUBSIDIARIES
FORM 10-Q, June 30, 1997
CONTENTS
Item Number Page
- ----------- ----
PART I: FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Balance sheets:
June 30, 1997 and December 31, 1996 3
Statements of operations:
Three and six months ended June 30, 1997 and 1996 4
Statements of cash flows:
Six months ended June 30, 1997 and 1996 5
Notes to condensed consolidated financial statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-16
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17-18
SIGNATURES 19
EXHIBIT INDEX 20
<PAGE>
ON TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---- ----
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 11,063 $ 20,774
Accounts receivable, net of allowance
for doubtful accounts and sales
returns of $1,320 and $1,057,
respectively 11,234 9,852
Inventories, net 2,557 2,323
Prepaid expenses and other current
assets 3,122 2,537
----------- -----------
Total current assets 27,976 35,486
----------- -----------
Property and equipment, at cost:
Computers and equipment 7,898 6,226
Equipment acquired under capital leases 3,895 3,895
Furniture and fixtures 278 247
----------- -----------
Less - Accumulated depreciation 6,210 4,527
----------- -----------
5,861 5,841
----------- -----------
Direct marketing costs 1,140 1,067
Other assets and deposits 74 86
Purchased intangibles, net of $1,864
and $1,261 of accumulated
amortization, respectively 2,904 1,662
----------- -----------
$ 37,955 $ 44,142
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Current portion of capital lease
obligations $ 863 $ 1,063
Accounts payable 8,108 5,619
Accrued expenses 1,325 2,252
Reserve for distributor inventories 104 204
Deferred revenue 2,057 1,001
----------- -----------
Total current liabilities 12,457 10,139
----------- -----------
Capital lease obligations, net of
current portion 154 510
----------- -----------
Stockholders' Equity:
Common stock, $.01 par value -
Authorized - 20,000,000 shares
Issued and outstanding -12,110,109
shares and 11,008,243 shares,
respectively 123 110
Additional paid in capital 62,580 55,637
Accumulated deficit (37,017) (20,354)
Accumulated deficit of S corporation (354) (354)
Cumulative translation adjustment 59 88
Treasury stock (15,000 and 257,867
shares at cost, respectively) (47) (1,634)
----------- -----------
Total stockholders' equity 25,344 33,493
----------- -----------
$ 37,955 $ 44,142
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements
3
<PAGE>
ON TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
1997 1996 1997 1996
---- ---- ---- ----
Revenue:
- --------
<S> <C> <C> <C> <C>
Net product revenue $ 13,137 $ 13,405 $ 24,597 $ 24,372
Other revenue 1,078 421 2,111 763
------------ ------------ ------------ ------------
Total revenue 14,215 13,826 26,708 25,135
------------ ------------ ------------ ------------
Operating expenses:
- -------------------
Cost of product revenue 2,306 2,520 4,385 5,290
Sales and marketing 7,187 6,577 13,494 12,048
Research and development 3,545 2,317 6,681 4,283
General and administrative 1,222 1,142 2,309 2,089
Charge for purchased research
and development --- --- 15,898 13,285
------------ ------------ ------------ ------------
Income (Loss) from operations (45) 1,270 (16,059) (11,860)
------------ ------------ ------------ ------------
Interest income, net 53 282 175 624
------------ ------------ ------------ ------------
Income (Loss) before provision
for income taxes 8 1,552 (15,884) (11,236)
------------ ------------ ------------ ------------
Provision for income taxes (775) (112) (775) (439)
------------ ------------ ------------ ------------
Net Income (loss) $ (767) $ 1,440 $ (16,659) $ (11,675)
============ ============ ============ ============
Net Income (Loss) per common
share $ (0.06) $ 0.13 $ (1.39) $ (1.08)
============ ============ ============ ============
Weighted average number of
common and common equivalent
shares outstanding 12,092,504 11,284,761 12,005,940 10,823,913
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements
4
<PAGE>
ON TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
--------------
1997 1996
---- ----
<S> <C> <C>
Cash Flows from Operating Activities
Net Loss $ (16,659) $ (11,675)
Adjustments to reconcile net loss
to net cash (used in) provided by
operating activities
Charge for purchased research and
development 15,898 13,285
Depreciation and amortization 2,267 1,641
Change in direct marketing costs (73) (609)
Change in deferred tax asset 1,062 0
Changes in assets and liabilities:
Accounts receivable (112) (1,324)
Inventories (189) (532)
Prepaid expenses and other current
assets (536) (500)
Accounts payable 2,096 839
Accrued expenses (2,337) (336)
Reserve for distributor inventory (100) (334)
Deferred revenue (2,215) (7)
--------- ---------
Net cash (used in) provided by
operating activities (898) 448
--------- ---------
Cash Flows From Investing Activities
Change in other assets and deposits 45 30
Purchase of property and equipment,
net (1,269) (2,898)
Purchase of neTrend Corporation, net 0 (2,260)
Purchase of Leprechaun Software
International, Ltd., net of cash
acquired 0 (786)
Purchase of Technocom plc, net 0 (1,963)
Purchase of Purview Technologies,
Inc., net of cash acquired (1,228) 0
Purchase of csd Software GmbH, net
of cash acquired (5,770) 0
--------- ---------
Net cash used in investing
activities (8,222) (7,877)
--------- ---------
Cash Flows From Financing Activities
Exercise of stock options 8 129
Stock purchase through ESPP 38 33
Purchase of treasury stock (47) (25)
Principal repayments on obligation
under capital lease (556) (586)
--------- ---------
Net cash used in financing
activities (557) (449)
--------- ---------
Net effect of exchange rates on cash &
cash equivalents (34) 0
Net decrease in cash and cash
equivalents (9,711) (7,878)
Cash and cash equivalents, beginning of
period 20,774 33,338
--------- ---------
Cash and cash equivalents, end of period $ 11,063 $ 25,460
========= =========
Supplemental Disclosure of Cash Flow
Information:
Cash paid for -
Interest paid $ 64 $ 136
========= =========
Income taxes paid $ 454 $ 1,151
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements
5
<PAGE>
ON TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FORM 10-Q, June 30, 1997
(dollars in thousands, except per share amount)
(unaudited)
1. Interim Financial Statements
----------------------------
The accompanying consolidated financial statements have been presented
by ON Technology Corporation (together with its consolidated subsidiaries, the
"Company") without audit (except for the balance sheet information as of
December 31, 1996) in accordance with generally accepted accounting principles
for interim financial statements and with the instructions to Form-10Q and
Regulation S-X pertaining to interim financial statements. Accordingly, these
interim financial statements do not include all information and footnotes
required by generally accepted accounting principles for complete financial
statements. The financial statements reflect all adjustments and accruals which
management considers necessary for a fair presentation of financial position as
of June 30, 1997 and December 31, 1996, and results of operations for the three
and six months ended June 30, 1997 and June 30, 1996. The results for the
interim periods presented are not necessarily indicative of results to be
expected for any future period. The financial statements should be read in
conjunction with the audited financial statements and the notes thereto included
in the Company's Form 10-K.
2. Net Income (Loss) Per Common Share
----------------------------------
Net income (loss) per common share is computed using the weighted
average number of common and common equivalent shares outstanding during each
period in accordance with the treasury stock method.
3. Direct Marketing Costs
----------------------
The Company sells its products through various channels, including
free trial direct marketing. The Company incurs substantial costs in advance of
a free trial campaign, including the rental of mailing lists, postage and
printing. In 1994, the Company began capitalizing such costs in accordance with
the American Institute of Certified Public Accountants' (AICPA) Statement of
Position 93-7, Reporting on Advertising Costs. The Company amortizes such costs
over a three month period, which approximates the period of expected revenues.
The Company has recorded approximately $1,140 and $1,067 of capitalized direct
marketing costs in the accompanying condensed consolidated balance sheets at
June 30, 1997 and December 31, 1996, respectively.
4. New Accounting Standards
------------------------
In February 1997, the Financial Standards Board (FASB) issued SFAS No.
128, Earnings Per Share which is effective for the fiscal year ending December
31, 1997 and early adoption is not permitted. The Company does not expect the
adoption of these standards to have a material effect on its financial position
or results of operations.
5. Subsequent Events
-----------------
In connection with a strategic reorganization and restructuring, the
Company expects to record a non-recurring, pre-tax restructuring and related
inventory charge totaling $6.5 million to $7.5 million in the third quarter
ending September 30, 1997. The restructuring charge includes reorganization
costs related to the Company's deemphasis of investment in new customer
acquisitions for the Company's groupware, network management and security
businesses; the Company's realignment of its strategy and organization to focus
on the growth of its new enterprise client management software business; the
Company's exit from the anti-virus business; and the Company's severance costs
related to the reduction of approximately 100 people from the workforce. As
part of this restructuring and reorganization, Mr. Christopher Risley, President
and Chief Executive Officer of the Company, and Mr. John Rizzi, Vice President
of Worldwide Sales, will be departing the Company effective September 1, 1997.
Mr. Herman Delatte, formerly the President of Micrografx, will replace Mr.
Risley as President and Chief Executive Officer of the Company. Mr. Risley will
continue to serve as a member of the Company's Board of Directors. In addition,
the Company's Board of Directors elected Mr. William C. Hulley as Chairman of
the Board in July 1997. Mr. Hulley has been a member of the Company's Board of
Directors since 1994.
6
<PAGE>
ON TECHNOLOGY CORPORATION AND SUBSIDIARIES
Management Discussion and Analysis of Financial Condition and Results of
Operations
FORM 10-Q, June 30, 1997
(unaudited)
Overview
The Company develops, markets and supports communication and network
management software, including client/server tools for group scheduling,
software metering, firewall technology and enterprise client software.
The Company does not provide forecasts of the future financial
performance of the Company. From time to time, however, the information provided
by the Company or statements made by its employees may contain forward-looking
statements. In particular, statements contained in this Form 10-Q that are not
historical statements (including, but not limited to, statements concerning
estimates of future revenues, operating expense levels and such operating
expense levels relative to the Company's total revenues) constitute forward-
looking statements under the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995.
Results of Operations
The following table sets forth, for the periods indicated, certain
financial data as percentages of the Company's total revenue:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Net product revenue 92.4 % 97.0 % 92.1 % 97.0 %
Other revenue 7.6 % 3.0 % 7.9 % 3.0 %
-------------------------------------------
Total revenue 100.0 % 100.0 % 100.0 % 100.0 %
-------------------------------------------
Operating expenses:
Cost of product revenue 16.2 % 18.2 % 16.4 % 21.0 %
Sales and marketing 50.6 % 47.6 % 50.5 % 47.9 %
Research and development 24.9 % 16.8 % 25.0 % 17.0 %
General and administrative 8.6 % 8.3 % 8.6 % 8.3 %
Charge for purchased R&D 0.0 % 0.0 % 59.5 % 52.9 %
-------------------------------------------
Income (loss) from operations (0.3)% 9.1 % (60.1)% (47.1)%
-------------------------------------------
Interest income, net 0.4 % 2.1 % 0.7 % 2.5 %
-------------------------------------------
Net income (loss) before provision
for income taxes 0.1 % 11.2 % (59.5)% (44.6)%
-------------------------------------------
Provision for income taxes (5.5)% (0.8)% (2.9)% (1.7)%
-------------------------------------------
Net income (loss) (5.4)% 10.4 % (62.4)% (46.3)%
===========================================
</TABLE>
Net Product Revenue. The Company's net product revenue is derived
primarily from the licensing of software products. Net product revenue also
includes revenue from catalog sales of third party products and catalog
advertising space. For the three months ended June 30, net product revenue
decreased $268,000 (2.0%) from 1996 to 1997. The decrease was primarily
attributable to products deemphasized as part of the strategic reorganization
and restructuring of the third quarter of 1996. For the six months ended June
30, net product revenue increased $225,000 (0.9%) from 1996 to 1997. The net
increase was primarily the result of the licensing of communications and network
management software to new customers and to customers upgrading existing
licenses.
Other Revenue. The Company's other revenue consists of rentals of
portions of the Company's customer lists, royalties received in connection with
licensing ON's software to third parties and maintenance revenue. For the three
months ended June 30, other revenue increased $657,000 (156.1%) from 1996 to
1997. For the six months ended June 30, other revenue increases $1,348,000
(176.7%) from 1996 to 1997. This increase is primarily attributed to an
increase in revenue from maintenance contracts for existing customers as well as
those obtained as part of the csd Software GmbH ("csd") acquisition.
7
<PAGE>
Cost of Product Revenue. Cost of product revenue primarily consists
of expenses associated with product documentation, production and fulfillment
costs and royalty fees associated with products that are licensed from third
party developers. In addition, cost of product revenue includes the cost of
third party products resold through the Company's catalog, the cost of producing
the catalog and amortization of purchased intangibles. For the three months
ended June 30, cost of product revenue decreased $214,000 (8.5%) from 1996 to
1997. For the six months ended June 30, cost of product revenue decreased
$905,000 (17.1%) from 1996 to 1997. This decrease was primarily the result of a
$571,000 inventory write-down in 1996 and an increase in product sales with
higher margins.
Sales and Marketing Expense. Sales and marketing expense primarily
consists of compensation and benefits paid to sales and marketing personnel and
the costs of direct mail and telemarketing campaigns including the costs of
product trials requested by potential customers. Sales and marketing expense
also includes the costs of administering the catalog operation, the costs of
public relations, trade shows and conferences, and the telephone and information
technology costs associated with sales activities. For the three months ended
June 30, sales and marketing expenses increased $610,000 (9.3%) from 1996 to
1997. For the six months ended June 30, sales and marketing expenses increased
$1,446,000 (12.0%) from 1996 to 1997. The increase in absolute dollars was
primarily the result of the csd acquisition and the costs associated with
marketing a larger portfolio of products. The Company anticipates that sales
and marketing expense will continue to increase in absolute dollars as the
Company continues to expand marketing efforts, but that sales and marketing
expense will continue to remain approximately the same as a percentage of total
revenue from year to year.
Research and Development Expense. Research and development expense
includes costs associated with the development of new products, the enhancement
of existing products, and the provision of technical support. For the three
months ended June 30, research and development expense increased by $1,228,000
(53.0%) from 1996 to 1997. For the six months ended June 30, research and
development expenses increased by $2,398,000 (56.0%) from 1996 to 1997. The
increase was primarily related to the increase in the size of the product
portfolio, and the associated costs of product development, enhancements and
maintenance relating to products acquired in the acquisition of csd and Purview
Technologies, Inc. The Company plans to continue to make significant
investments in research and development.
General and Administrative Expense. General and administrative
expense includes executive compensation, executive support costs, accounting
operations, planning, and business development operations. For the three months
ended June 30, general and administrative expense increased $80,000 (7.0%) from
1996 to 1997. For the six months ended June 30, general and administrative
expenses increased by $220,000 (10.5%) from 1996 to 1997. The increase in
absolute dollars reflects personnel growth and associated costs in general
support areas, offset by continued efficiency in core administrative operations.
This increase, however, was approximately the same as a percentage of total
revenue from 1996 to 1997. The growth is the direct result of acquisitions of
the LAN software business from Technocom plc. and csd Software GmbH.
Charge for Purchased Research and Development. In connection with the
acquisitions of Purview Technologies, Inc. and csd Software GmbH during the six
months ended June 30, 1997, and the acquisitions of neTrend Corporation,
Leprechaun Software International, Ltd. and the LAN software business of
Technocom plc during the six months ended June 30, 1996, the Company allocated
an aggregate of $15.9 million and $13.3 million, respectively, of the aggregate
purchase price for such acquisitions to acquired incomplete research and
development projects. Accordingly, these costs were expensed as of the
acquisition dates. These allocated costs represent the estimated fair market
value related to the incomplete projects as determined by an independent
appraisal. The development of these projects had not reached technological
feasibility and the technology had no alternative future use. The technology
acquired in these acquisitions has required, and will require, substantial
additional development by the Company.
Interest Income, net. Interest income consists primarily of interest
expense associated with equipment leases and interest income earned on cash and
cash equivalents. For the three months ended June 30, interest income decreased
$229,000 (81.2%) from 1996 to 1997. For the six months ended June 30, interest
income decreased $449,000 (72.0%) from 1996 to 1997. The decrease is the result
of the change in the Company's cash position, primarily effected by cash used in
acquisitions.
8
<PAGE>
Income Taxes. The tax provision for the three and six months ended
June 30, 1996 was calculated based upon the Company's expected 1996 effective
tax rate of 10.7% in 1996, giving benefit to available net operating loss
carryforwards and research and development credits. The tax provision for the
three and six months ended June 30, 1997 represents a tax provision on income in
Germany with no provision or benefit required in the Company's remaining foreign
or domestic operating results.
Liquidity and Capital Resources
The Company has funded its operations to date primarily through cash
flow from operations and public and private placements of capital stock. At June
30, 1996 and June 30, 1997, the Company had available cash and cash equivalents
of $25.5 million and $11.1 million, respectively. The Company has an unused and
available line of credit of $10.0 million with a commercial bank. The Company
can borrow under this line of credit up to the greater of $10.0 million or the
sum of 80% of qualified domestic accounts receivable and 40% of qualified
foreign accounts receivable, as defined in the line of credit agreement.
Advances pursuant to the line of credit are secured by liens granted on the
Company's accounts receivable. At June 30, 1997, the Company did not have an
outstanding balance under the line of credit agreement.
Net cash (used in) provided by operating activities for the six months
ended June 30, 1996 and June 30, 1997, was $0.4 million and $(0.9) million,
respectively. For the six months ended June 30, 1996, net cash (used in)
provided by operating activities consisted primarily of a $13.3 million charge
for purchased research and development, a $1.6 million increase in depreciation
and amortization, and an $0.8 million increase in accounts payable, partially
off-set by a net loss of $(11.7) million. For the six months ended June 30,
1997, net cash (used in) provided by operating activities consisted primarily of
a net loss of ($16.7 million) offset by a charge for purchased research and
development of $15.9 million. Additional factors contributing to net cash (used
in) provided by operating activities included depreciation and amortization of
$2.3 million, an increase in accounts receivable of $0.1 million and accounts
payable of $2 million and a decrease in accrued expenses of $2.3 million. These
changes are primarily the result of the acquisitions of Purview Technologies,
Inc., and csd Software GmbH.
Net cash used in investing activities for the six months ended June
30, 1996 and June 30, 1997 was $7.9 million and $8.2 million, respectively. For
the six months ended June 30, 1996, net cash used in investing activities
consisted of acquisition related direct costs and the cash portion of the
purchase price associated with the acquisitions of neTrend Corporation,
Leprechaun Software International, Ltd. and the LAN Software business of
Technocom plc of $2.2 million, $0.8 million and $2.0 million, respectively. In
addition there were property and equipment purchases of $2.9 million. For the
six months ended June 30, 1997, net cash used in investing activities primarily
reflects purchases of property and equipment of $1.3 million, and direct costs
of the acquisitions of Purview Technologies, Inc. and csd of $1.2 million and
$5.8 million, respectively.
Net cash used in financing activities for the six months ended June
30, 1996 and June 30, 1997 was $0.4 million and $0.6 million, respectively. For
the six months ended June 30, 1996, net cash used in financing activities
consisted of principal repayment on obligations under capital leases of $0.6
million, partially offset by exercises of stock options and stock purchases
through the Company's Employee Stock Purchase Plan ("ESPP") of $0.1 million. For
the six months ended June 30, 1997, net cash used in financing activities
consisted of principal repayment on obligations under capital leases of $0.6
million, partially offset by exercises of stock options and stock purchases
through the ESPP of $0.04 million.
The Company believes that its existing cash balances, funds generated
from operations, and borrowings under its line of credit will be sufficient to
finance the Company's operations for the next twelve months. In the event the
Company acquires one or more businesses or products, the Company's capital
requirements could increase substantially, and there can be no assurance that
additional capital will be available on terms acceptable to the Company, if at
all.
Certain Factors That May Affect Future Results
The risk factors discussed below, among other factors (including the
accuracy of the Company's internal estimates of revenue and operating expense
levels), may cause the Company's actual results to differ materially from the
results
9
<PAGE>
stated in the forward-looking statements contained in this Form 10-Q. The
following discussion of the Company's risk factors should be read in conjunction
with the Company's financial statements and related notes thereto contained in
the Company's Annual Report on Form 10-K for the year ended December 31, 1996.
Risks Associated with Strategic Restructuring
In July of 1997, the Company announced and implemented a
reorganization and restructuring of its operations. This action was designed to
(i) realign the Company's strategy and organization to focus on its new
enterprise client management software business, (ii) exit the anti-virus
business and (iii) deemphasize investment in new customer acquisitions for the
Company's groupware, network management and security businesses. As part of this
reorganization and restructuring, Mr. Christopher Risley will no longer serve as
President and Chief Executive Officer of the Company effective September 1, 1997
and Mr. John Rizzi will also leave the Company's employ as of September 1, 1997.
Mr. Risley will, however, continue to serve as a member of the Company's Board
of Directors. See "Dependence on Key Employees" and "Subsequent Events".
Moreover, there can be no assurance that the Company will be
successful in developing and expanding its new enterprise client management
software business. The Company's decision to deemphasize customer acquisition
investment in its groupware, network management and security businesses is
expected to result in a significant sales decline for those businesses. There
can be no assurance that the growth, if any, in the Company's new enterprise
client management software business will offset, either in whole or in part, the
decline in revenues from the Company's other businesses. The elimination of the
Company's anti-virus business will adversely impact total sales. There can be no
assurance that the Company will not engage in further reorganizations and
restructuring in the future.
Variability of Quarterly Operating Results
The Company's licensing activity and results of operations can
fluctuate significantly on a quarterly basis. Causes of such fluctuations may
include, among other factors, the volume and timing of new and repeat orders,
the introduction or announcement of new products or product enhancements by ON
or third parties, failure to ship trials, changes in response rates to the
Company's mailings and telemarketing programs, interruption in the Company's
overnight delivery, telephone or internal networks and databases, work
stoppages, changes in product prices, changes in operating expenses, changes in
product mix, change in international sales, seasonality, trends in the computer
industry, unavailability of product, potential software viruses and perceived
threats thereof, customer order deferrals, general economic conditions,
extraordinary events such as acquisitions or litigation and the occurrence of
unexpected events. While to date, the Company has not experienced any
significant failure to ship trials, work stoppages or unavailability of
products, there can be no assurance any of such events will not occur in the
future. The occurrence of any such event could have a material adverse effect on
the Company's business, financial condition or results of operations. Because of
the nature of its distribution methods, the Company has virtually no backlog and
generally cannot predict when users will license products. Historically, repeat
orders have accounted for a significant portion of the Company's total revenue;
however, there can be no assurance that the Company will be able to sustain
current repeat order rates in the future. Furthermore, since the Company's cost
of total revenue is relatively low and its operating expenses are relatively
fixed, any revenue shortfall in a quarter will result in a substantially similar
shortfall in net income. In addition, significant quarterly fluctuations in
licensing activity will cause significant fluctuations in the Company's cash
flows and the cash and cash equivalents, accounts receivable and deferred
revenue accounts on the Company's balance sheet.
The Company's business has experienced, and is expected to continue to
experience, seasonality, due in part to customer buying patterns. In recent
years, the Company generally has had greater demand for its products in the
fourth quarter and has had weaker demand for its products during the first
quarter. These fluctuations are caused primarily by customer budgeting and
purchasing patterns. The Company believes this pattern will continue.
The Company believes that period-to-period comparisons of its
financial results should not be relied upon as an indication of future
performance.
10
<PAGE>
Risks Associated with Rapid Technological Change
The communications and network management software markets are
characterized by rapid technological developments, changes in customer
requirements, evolving industry standards and frequent new product
introductions. The Company's future success will depend, in part, upon its
ability to enhance its existing applications, develop and introduce new products
that take advantage of technological advances, and respond promptly to new
customer requirements and evolving industry standards. While the Company
believes that it currently offers a broad product line in the communications and
network management software markets, these markets are continuing to evolve and
customer requirements are continuing to change. In response to these changes
the Company believes that it will need to continue to expand its product
offerings. The Company has identified a number of enhancements to its existing
products offerings which it believes are important to its continued success in
the communications and network management software markets, including products
for Windows 95 and Windows NT and Internet-enabling products. There can be no
assurance that the Company will be successful in developing and marketing, on a
timely basis, enhancements to its existing products or new products, or that its
new products will adequately address the changing needs of the marketplace.
Failure by the Company in any of these areas could materially and adversely
affect the Company's business, financial condition or results of operations. In
addition, from time to time the Company or its competitors may announce new
products with capabilities or technologies that could have a potential to
replace or shorten the life cycles of the Company's existing products or render
such products obsolete. There can be no assurance that announcements by the
Company or its competitors of new products will not cause customers to defer
purchasing the Company's existing products. In addition, there can be no
assurance that future changes in DOS, Windows, NetWare or other popular
operating systems would not result in incompatibility with the Company's
products. The Company's failure to introduce new products on a timely basis
that are compatible with operating systems and environments preferred by desktop
computer users would have a material adverse effect on the Company's business,
financial condition and results of operations.
Competitive Risks
The market for the Company's products is highly competitive, and the
Company expects competition to increase in the future. The Company believes
that the principal competitive factors affecting the market for its products
include performance, functionality, ease of use, ease of installation, quality,
customer support, breadth of product line, speed of product delivery, frequency
of upgrades and updates, brand name recognition, company reputation and price.
Certain of the criteria upon which the performance and quality of the Company's
communications and network management software compete include speed of
response, ease of use, ease of installation, interoperability with other
messaging systems and simplicity of administration. The Company believes that
it generally competes favorably with respect to each of these factors; however,
there can be no assurance that the Company will be able to continue to compete
successfully against current and future competitors. Certain of the Company's
competitors have been in the market longer than the Company, and other
competitors are larger and may have greater name recognition than the Company.
As is the case in many segments of the software industry, the Company may
encounter increasing price competition in the future. This could reduce average
selling prices and, therefore, profit margins. Competitive pressures could
result not only in sustained price reductions but also in a decline in sales
volume, which could adversely affect the Company's business, financial condition
or results of operations. There can be no assurance that the Company will
continue to compete effectively against existing and potential competitors in
the communications and network management software markets, many of whom have
substantially greater financial, technical, marketing and support resources and
name recognition than the Company. In addition, there can be no assurance that
software vendors who currently use traditional distribution methods will not in
the future decide to compete more directly with the Company by utilizing free
trial marketing. See "--Risks Associated with Free Trial Marketing."
Both the communications software market and the network management
software market are highly fragmented, with products offered by many vendors.
The Company's products compete with offerings from software, shareware and
freeware developers. Shareware is software that is made available electronically
on bulletin board systems. Shareware users are encouraged to evaluate the
software for a short period of time and then either cease using it or pay a
license fee. In the group scheduling market, the Company also competes with
personal information manager products ("PIMs") that have been enhanced to
include some group scheduling features. Certain competitors have in the past
bundled communications and network management software with their operating
system products or software application suite offerings and have publicly
announced, or the Company believes are likely to provide, such bundles with
future offerings. There can be no assurance that the Company can continue to
compete effectively against
11
<PAGE>
communications software which is included free with the operating system, as
these bundled products are improved in the future. In addition, the trend toward
enterprise-wide communications software solutions may result in a consolidation
of the communications software market around a smaller number of vendors who are
able to provide all of the necessary software and support capabilities. While
the Company intends to pursue this market for enterprise-wide communications
software solutions, there can be no assurance that the Company will be
successful in this effort.
Historically, the Company's international revenue has been generated
primarily through independent distributors in Europe, Australia, Israel, Central
and South Africa and South America, certain of which are bound by contracts with
the Company but which generally do not represent the Company exclusively. The
competitive environment for communications software tools internationally is
similar to that in North America. The Company has only recently begun to
compete in Asian markets, which have significantly lagged behind North America
and Europe in their adoption of LAN technology. There can be no assurance that
the Company will be able to continue to compete successfully in international
markets.
The widespread inclusion of the functionality of the Company's
products as standard features of operating systems software could render the
Company's products obsolete and unmarketable, particularly if the quality of
such functionality were comparable to that of the Company's products. If the
Company were unable to develop new communications and network management
software to further enhance operating systems and to replace successfully any
obsolete products, the Company's business, financial condition and results of
operations would be materially and adversely affected.
Risks Associated with Product Development
The Company has in the past experienced delays in software
development, and there can be no assurance that it will not experience further
delays in connection with its current or future product development activities.
The Company puts all of its products through alpha and beta test cycles and
makes significant efforts to debug all products before commercial release. The
Company makes well-marked alpha and beta versions of its software available for
evaluation and testing and solicits and responds to input from evaluators.
However, there can be no assurance that the Company's products will not contain
undetected errors or version compatibility issues, particularly when first
introduced or when new versions are released, resulting in loss of or delay in
market acceptance. Delays and difficulties associated with new product
introductions or product enhancements could have a material adverse effect on
the Company's business, financial condition or results of operations.
In addition to developing new products, the Company's internal
development staff is focused on developing upgrades and updates to existing
products and modifying, enhancing and completing any acquired products and
incomplete projects. Future enhancements may, among other things, include
additional functionality, respond to user problems or address issues of
compatibility with changing operating systems and environments. The Company
believes that the ability to provide these enhancements to users frequently and
at a low cost is key to its success. Failure to release such enhancements on a
timely basis could have a material adverse effect on the Company's business,
financial condition or results of operation. There can be no assurance that the
Company will be successful in these efforts.
The Company licenses SofTrack from a third party. The license expires
in December of 1999. If the Company believes that this licensed product
continues to be valuable after the expiration of the initial license term, it
will seek to extend the term of the license. There can be no assurance that the
Company will be able to extend the term of the expiring license, or that the
economic arrangements for such extensions would be comparable to the
arrangements in effect during the initial license term.
12
<PAGE>
Risks of Inclusion of Communications Software and Network Management Software in
System Software and Application Suites
In the future, vendors of operating system software and groups of
applications sold for a single price (generally referred to as application
suites) may continue to enhance their products to include certain functions that
are currently provided most often by communications and network management
software. These vendors may also bundle these products in their application
suites at no additional charge. The widespread inclusion of the functions
provided by the Company's products as standard features of operating system
software could, particularly if the quality of such functions were comparable to
that of the Company's products, render the Company's products obsolete and
unmarketable. Furthermore, even if the communications and network management
software functions provided as standard features by operating systems are more
limited than that of the Company's products, there is no assurance that a
significant number of customers would not elect to accept such functions in lieu
of purchasing additional software. If the Company were unable to develop new
communications software and network management software products to further
enhance operating systems and to replace successfully any obsolete products, the
Company's business, financial condition and results of operations would be
materially and adversely affected.
Dependence on Emergence of Network Management Software
The market for the Company's network management software is new and
evolving, and its growth depends upon the broader market acceptance of network
management software. In addition, there are a number of potential approaches to
the market, including incorporating network management software into network
operating systems. Therefore, even if network management software products gain
broader market acceptance, there can be no assurance that the Company's products
will be chosen by organizations which acquire network management software.
Moreover, a change in the licensing policies of Microsoft or other software
vendors which changes the basis on which concurrent users are measured or priced
could adversely effect the Company's network management software products.
Furthermore, to the extent that the network management software market does
develop, the Company expects that competition will increase. See "- Competitive
Risks," and "-- Risks of Inclusion of Communications Software and Network
Management Software in System Software and Application Suites."
Risks Associated with Free Trial Marketing
The Company provides its customers with 30-day free trials of all of
the Company's principal products ("Free Trial Marketing"). The trials are full
featured versions of the product that are internally designed to cease operation
in 30 days. The Company uses Free Trial Marketing as its primary sales channel.
The Company depends on direct mail, trade shows and telemarketing to find
prospects and install trials. This model represents a significant departure from
marketing strategies relying on a direct sales force, exclusive distributor
relationships and magazine space advertising. While to date this marketing
strategy has successfully resulted in the licensing of the Company's products by
corporate, government and institutional users, given the relatively unproven
nature of this form of marketing, there can be no assurance that this strategy
will continue to be effective in the future for either current or new products.
The failure of this strategy to continue to effectively generate license revenue
would have a material adverse effect on the Company's business, financial
condition and results of operations. The Company's distribution strategy may
make its products less attractive to customers who prefer to purchase through
traditional channels and, as a result, may have the effect of limiting the
Company's potential market. In addition, as mailings are mailed repeatedly to
the same customers, responsiveness to particular offers and products declines.
There can be no assurance that the Company will be able to sustain current
response rates to its mailings in the future. In addition, there can be no
assurance that the Company can continue to create sufficient attractive offers
and to introduce interesting products at a rate sufficient to support the
Company's growth plan or even current revenue. The Company's growth depends both
on its ability to select names from rented lists and to grow its "house list."
The availability and relevance of rentable names to the Company's products are
not certain. In addition, since the ability of the Company to grow its house
list is dependent on the supply of rentable names, house list growth cannot be
assured.
The Company depends on the distribution of Free Trial Marketing disks
to accomplish much of its marketing. If some of the Company's Free Trial
Marketing disks were to become infected with a computer virus, they would cause
difficulties for prospects and could damage the Company's reputation. The
Company does extensive testing for viruses. The Company's use of outside
fulfillment contractors increases the risk that a virus could be shipped
undetected on disks bearing the Company's label. There can be no assurance that
ON would be able to collect adequate compensation
13
<PAGE>
from such fulfillment contractors if such virus infected disks bearing the
Company's label were shipped.
The Company fulfills orders received directly from customers through a
third-party fulfillment contractor, which warehouses the Company's products and
ships them directly to ON's customers. In the event that either the customer
fulfillment contractor or the private use database firm experience a substantial
business interruption, whether through business failure or interruption or some
natural calamity, or the Company's relationship with either of such parties is
terminated for any reason, the Company's ability to continue to mail free trial
offers to prospective customers and to fulfill orders placed by customers would
be adversely affected.
In both the domestic and international markets, increases in postal
rates (including modifications in the classification of mail) or telephone
rates, or changes in postage or telephone regulations which prohibit unsolicited
direct mail or unsolicited telephone calls, could significantly impact the
economics of the Company's Free Trial Marketing strategy. In addition, it is
possible that other software vendors could adopt all or parts of the Company's
strategy and compete more directly or effectively with the Company.
Risks Associated with Potential Acquisitions
The Company may in the future undertake additional acquisitions that
could present challenges to the Company's management, such as integrating and
incorporating new operations, product lines, technologies and personnel. If the
Company's management is unable to manage these challenges, the Company's
business, financial condition or results of operations could be materially
adversely affected. Any acquisition, depending on its size, could result in
significant dilution to the Company's stockholders. Furthermore, there can be no
assurance that any acquired products will gain acceptance in the Company's
markets.
Risks Associated with Past Acquisitions
The Company has in the past made a number of acquisitions that have
been and are being integrated and incorporated into the Company's operations,
along with the acquired product lines, technologies and personnel. If the
Company's management is unable to continue to manage these challenges, the
Company's business, financial condition or results of operations could be
materially adversely affected. There can be no assurance that any acquired
products will gain acceptance in the Company's markets.
Risks of Indirect Channels of Distribution
The Company markets its products through distributors and resellers in
addition to its Free Trial Marketing strategy. These distributors and resellers
also sell other products that are complementary to, or compete with, those of
ON. There can be no assurance that these distributors and resellers will not
give greater priority to products of other suppliers. They have no long-term
obligation to purchase products from the Company. Since the Company's
agreements with its distributors provide for a right of return, revenue
recognized upon sales to distributors is subject to a reserve for returns.
Although management believes that the current reserve balance is adequate to
cover this exposure, there can be no assurance that in any future period
reserves for returns will be adequate. In addition, the Company may be unaware
of the nature and scope of the representations made to customers by these
distributors and resellers. For example, they could make representations to
customers about the Company's current and future products which are inaccurate
or incomplete. This could result in the products not meeting the customers'
expectations or requirements. Although the Company's agreements with its
distributors generally provide the Company with recourse against unauthorized
action taken by the distributors, there can be no assurance that the Company
could recover adequate compensation to cover the damage caused by an inaccurate
representation. See "-Risks Associated with International Revenue."
14
<PAGE>
Risks Associated with Protection of Proprietary Technology
The Company's success is heavily dependent upon its proprietary
software technology. The Company relies on a combination of contractual rights,
trademarks, trade secrets and copyrights to establish and protect its
proprietary rights in its software. The Company has not to date registered any
of its copyrights. The Company has obtained registrations in the United States
for the following trademarks: ON Technology, Notework, Meeting Maker, ON
Technology & Design, ON Location, Instant Update and Da Vinci Systems. The
Company uses a printed "shrink-wrap" license for users of its products
distributed through traditional distribution channels in order to protect its
copyrights and trade secrets in those products. Since these shrink-wrap licenses
are not signed by the licensee, many authorities believe that they may not be
enforceable under many state laws and the laws of many foreign jurisdictions. If
such licenses are not enforceable, the user would not be bound by the terms
thereof, including the terms which seek to protect the Company's proprietary
technology. There can be no assurance that the Company's proprietary technology
will be protected by the use of the printed shrink-wrap licenses. If the printed
shrink-wrap licenses prove to be unenforceable, this may have a material adverse
effect on the Company's business, financial condition and results of operations.
In addition, the laws of some foreign countries either do not protect
the Company's proprietary rights or offer only limited protection for those
rights. Furthermore, the Company has obtained only four foreign registrations of
its Notework mark and two foreign registrations of its Meeting Maker mark due to
the significant costs involved in obtaining foreign registrations. As a result,
the Company may not be able to prevent a third party from using its trademarks
in many foreign jurisdictions. If such licenses are not enforceable, the user
would not be bound by the terms thereof, including the terms which seek to
protect the Company's proprietary technology.
There can be no assurance that the steps taken by the Company to
protect its proprietary software technology will be adequate to deter
misappropriation of this technology. In addition, the Company does provide
customer support to unlicensed users during the Free Trial Marketing period.
Lesser sensitivity by corporate, government or institutional users to avoiding
copyright infringement could have a material adverse effect on the Company's
business, financial condition and results of operation. While the Company to
date has not taken any legal action to enforce its intellectual property rights
against infringing users, it believes, based upon current interpretations of
law, that its use of Free Trial Marketing and the widespread availability of its
trials do not significantly impact its ability to enforce its intellectual
property rights against infringing users, including corporate, institutional and
government entities. However, there is no assurance that a court or other
authority may not rule otherwise in the future. Such a ruling would have a
material adverse effect on the Company's business, financial condition and
results of operations.
There has been substantial litigation in the software industry
involving intellectual property rights of technology companies, although, to
date, the Company has not been subject to any such litigation. Although the
Company does not believe that it is infringing the intellectual property rights
of others, there can be no assurance that such claims, if asserted, would not
have a material adverse effect on the Company's business, financial condition
and results of operations. In addition, as the Company may acquire or license a
portion of the software included in its future products from third parties, its
exposure to infringement actions may increase because the Company must rely upon
such third parties for information as to the origin and ownership of any
software being acquired. The Company generally obtains representations as to the
origin and ownership of such acquired or licensed software and generally obtains
indemnification to cover any breach of such representations. However, there can
be no assurance that such representations are accurate or that such
indemnification will provide adequate compensation for a breach of such
representations. In the future, litigation may be necessary to enforce and
protect trade secrets and other intellectual property rights owned by the
Company. The Company may also be subject to litigation to defend against claimed
infringement of the rights of others or to determine the scope and validity of
the proprietary rights of others. Any such litigation could be costly and cause
diversion of management's attention, either of which could have a material
adverse effect on the Company's business, financial condition or results of
operations. Adverse determinations in such litigation could result in the loss
of the Company's proprietary rights, subject the Company to significant
liabilities, require the Company to seek licenses from third parties or prevent
the Company from manufacturing or selling its products, any one of which could
have a material adverse effect on the Company's business, financial condition or
results of operations. Furthermore, there can be no assurance that any necessary
licenses will be available on reasonable terms, or at all.
Risks Associated with International Revenue
15
<PAGE>
In 1996 and in the six months ended June 30, 1997, total revenue from
international licenses (license revenue from outside the United States)
represented approximately 18% and 39%, respectively, of the Company's total
revenue. The Company expects that total revenue from international licenses
will increase in future years; however, there can be no assurance that the
Company will be successful in penetrating international markets. Substantially
all of the Company's license fees are in United States dollars. Risks inherent
in the Company's international sales generally include the impact of fluctuating
exchange rates or demand for its products, longer payment cycles, greater
difficulty in protecting intellectual property, greater difficulty in accounts
receivable collection, unexpected changes in regulatory requirements,
seasonality due to the slowdown in European business activity during the third
quarter, and tariffs and other trade barriers. There can be no assurance that
these factors will not have a material adverse effect on the Company's future
international license revenue. Further, in countries with a high incidence of
software piracy, the Company may experience a higher rate of piracy of its
products.
In addition, a significant portion of the Company's international
revenue is generated through independent distributors and resellers. Since these
distributors and resellers are not employees of the Company and are not required
to offer the Company's products exclusively, there can be no assurance that they
will continue to market the Company's products. Also, despite the Company's
substantial dependence in the international market upon the marketing, sales and
customer support of its distributors and resellers, the Company currently has
limited control over its distributors and resellers, and the Company may be
unaware of the nature and scope of the representations made to customers by
these agents. For example, independent agents could make representations to
customers about the Company's current and future products which are inaccurate
or incomplete, which could result in the products not meeting customers'
expectations or requirements.
Dependence upon Key Personnel
The Company's success depends to a significant extent upon a number of
key technical and management employees. Messrs. Christopher Risley and John
Rizzi, President and Vice President of Worldwide Sales, respectively, will each
be terminating their employment relationships with the Company effective as of
September 1, 1997. While the Company's employees are required to sign standard
agreements concerning confidentiality and ownership of inventions, the
employees, with the exception of Messrs. Risley, Platzman, Bogdan, Rizzi,
O'Sullivan and Green, are generally not otherwise subject to employment
agreements or noncompetition covenants. The loss of the services of any of the
Company's key employees, including the departures of Messrs. Risley and Rizzi as
part of the Company's strategic restructuring, could have a material adverse
effect on the Company's business, financial condition or results of operation.
The Company does not maintain life insurance policies on key employees. The
Company's success also depends in large part upon its ability to attract and
retain highly skilled technical, managerial, sales and marketing personnel.
Competition in the software industry for such personnel is intense. There can be
no assurance that the Company will be successful in retaining its existing key
personnel and in attracting and retaining the personnel it requires. See also
"Risks Associated with Strategic Restructuring".
Volatility of Stock Price
The trading price of the Company's Common Stock has been, and in the
future may be, subject to wide fluctuations in response to actual or anticipated
quarterly operating results of the Company, announcements of technological
innovations or new applications by the Company or its competitors and general
market conditions in the software industry, as well as other events or factors.
In addition, stock markets have experienced extreme price and volume trading
volatility in recent years. This volatility has had a substantial effect on the
market price of many technology companies and has often been unrelated to the
operating performance of those companies. This volatility may adversely effect
the market price of the Company's Common Stock.
16
<PAGE>
ON TECHNOLOGY CORPORATION AND SUBSIDIARIES
FORM 10-Q, June 30, 1997
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
On March 28, 1997, the Board of Directors caused to be distributed to
stockholders as of March 7, 1997, a Notice of Annual Meeting of Stockholders,
proxy and Proxy Statement for Annual Meeting held on April 30, 1997. As of the
record date, 12,094,767 shares of common stock (excluding treasury shares) were
outstanding and entitled to vote.
At the meeting, the stockholders acted upon the following proposals:
(I) election of two Class II directors; (ii) approval and ratification of an
amendment to the Company's 1992 Employee and Consultant Stock Option Plan (the
"Stock Option Plan") to increase the number of shares authorized for issuance
under the Stock Option Plan from 2,550,000 shares to 3,300,000 shares; and (iii)
ratification of the selection of Arthur Andersen LLP as the independent auditors
of the Company for the fiscal year ending December 31, 1997.
All of the above matters were approved by the stockholders. Vote "For"
represents affirmative votes and do not include abstentions or broker non-votes.
In cases where a signed proxy was submitted, the shares represented by the proxy
were vote "For" each proposal in the manner disclosed in the Proxy Statement and
Proxy.
<TABLE>
<CAPTION>
The voting results were as follows:
Broker
Matter For Against Withheld Abstain Non-Votes
------ -- ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
I. Election of Class II Directors
Michael J. Zak 8,901,556 0 23,189 N/A N/A
Brian T. Horey 8,901,556 0 23,189 N/A N/A
II. Approval of Amendment to 1992 6,649,230 846,740 N/A 14,493 1,414,782
Employee and Consultant Stock
Option Plan
III. Ratification of Independent Auditors 8,917,390 3,000 N/A 4,355 500
</TABLE>
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits listed in the accompanying Exhibit Index on page 19
are filed or incorporated by reference as part of this Report.
17
<PAGE>
(b) Reports on Form 8-K
The Company filed a current report on form 8-K dated August 5,
1997 in connection with the Company's announcement of a strategic reorganization
and restructuring.
18
<PAGE>
ON TECHNOLOGY CORPORATION AND SUBSIDIARIES
FORM 10-Q, June 30, 1997
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.
ON TECHNOLOGY CORPORATION
/s/ Christopher A. Risley
-------------------------------------
Date: August 13, 1997 Name: Christopher A. Risley
Title: Chief Executive Officer
/s/ John M. Bogdan
------------------------------------
Date: August 13, 1997 Name: John M. Bogdan
Title: Vice President of Finance
and Chief Financial Officer
19
<PAGE>
ON TECHNOLOGY CORPORATION AND SUBSIDIARIES
FORM 10-Q, June 30, 1997
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.1 Lease between Phoenix Limited Partnership, and ON
Technology Corporation, Tenant, dated November 5,
1996
10.2 Sublease between DaVinci Systems Corporation and
Northern Telecom Inc., dated November 7, 1996
10.3 Sublease between Camp Dresser & McKee Inc. and ON
Technology Corporation, dated October 13, 1995
11.0 Computation of Net Income (loss) per share
27.0 Financial Data Schedule
</TABLE>
20
<PAGE>
EXHIBIT 10.1
TWO HANNOVER SQUARE
RALEIGH, NORTH CAROLINA
LEASE BETWEEN
PHOENIX LIMITED PARTNERSHIP OF RALEIGH, Landlord,
AND
ON Technology Corporation, Tenant
-------------------------
DATED November 5, 1996
----------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
1. Principal Terms...................................................... 1
2. Premises............................................................. 2
3. Term................................................................. 2
4. Condition of Premises; Completion of Work............................ 3
5. Rent................................................................. 7
6. Operating Expense Payments........................................... 8
7. Use.................................................................. 9
8. Assignment, Mortgaging and Subletting................................ 10
9. Repairs.............................................................. 11
10. Access............................................................... 12
11. Common Facilities/Landlord's Maintenance............................. 12
12. Utilities and Services............................................... 12
13. Alterations.......................................................... 14
14. Insurance............................................................ 15
15. Non-Liability and Indemnification.................................... 17
16. Casualty Damage...................................................... 18
17. Eminent Domain....................................................... 19
18. Events of Default.................................................... 19
19. Landlord's Remedies.................................................. 21
20. Landlord's Defaults.................................................. 21
21. Subordination and Attornment......................................... 22
22. Surrender............................................................ 22
23. Holding Over......................................................... 23
24. Quiet Enjoyment...................................................... 23
25. Security Deposit..................................................... 23
26. Rules and Regulations................................................ 24
27. Miscellaneous........................................................ 24
28. Exhibits............................................................. 28
Exhibit A - Description of Premises.................................. A-1
Exhibit A-1 - Premises, Plans and Specifications..................... A-2
Exhibit B - Rules and Regulations.................................... B-1
Exhibit C - Cleaning Standards....................................... C-1
Exhibit D - Operating Expenses....................................... D-1
Exhibit E - Renewal of Term.......................................... E-1
Exhibit F - Basic Rent............................................... F-1
Exhibit G - Guaranty of Lease........................................ G-l
Exhibit H - Other Terms.............................................. H-1
Glossary of Terms............................................. Glossary -1
</TABLE>
[NOTE: Exhibits that are not attached hereto and do not form a part of
this Lease are crossed out above.]
INITIALS /s/ JMB
-----------
i
<PAGE>
LEASE AGREEMENT
----- ---------
THIS LEASE AGREEMENT is made and entered into as of this 5th day of
November, 1996, by and between PHOENIX LIMITED PARTNERSHIP OF RALEIGH, a
Delaware Limited Partnership, Landlord, and ON Technology Corporation, a
-------------
Delaware Corporation, Tenant.
- --------------------
WITNESSETH :
-----------
1. Principal Terms. The following terms shall have the meaning set forth below
---------------
for all purposes in this Lease:
(a) Tenant: ON Technology Corporation
(b) Tenant's Notice Address: One Cambridge Center, Cambridge, MA 02142-1604
or such other address as Tenant shall give in accordance with Paragraph 27 (k).
(c) Landlord: Phoenix Limited Partnership of Raleigh, a Delaware limited
partnership.
(d) Landlord's Notice Address: Suite 2310, Two Hannover Square, Raleigh,
NC 27601, or such other address as Landlord shall give in accordance with
Paragraph 27 (k).
(e) Premises: approximately 6,840 rentable (6,000 useable) square feet,
----- -----
designated as Suite 1600, Two Hannover Square, as depicted on Exhibit A (see
----
attached) annexed hereto.
(f) Term: 5 years commencing and expiring as set forth in Paragraph 3(a)
hereof.
(g) Commencement Date: The date that is the earlier of (i) the later of (A)
December 1, 1996 or (B) the date on which the Premises are Ready for Occupancy,
- ----------------
as determined pursuant to Paragraph 3(b) hereof, or (ii) the date upon which
Tenant shall first occupy any part of the Premises for any purpose other than
preparing the same for Tenant's initial occupancy.
(h) Expiration Date: The date which is the date immediately preceding the
5th year anniversary of the Commencement Date, or if the Commencement Date
- ---
occurs other than on the first day of a calendar month, the Expiration Date
shall be the last day of the calendar month in which such anniversary occurs.
(i) Basic Rent: That amount set forth on Exhibit F attached hereto.
<PAGE>
(j) Additional Rent: All sums of money whatsoever other than Basic Rent
due and payable by Tenant to Landlord under this Lease.
(k) Security Deposit: The sum of $0.00 to be held and used in accordance
-----
with Paragraph 25 hereof.
(1) Base Factor: $6.00 per rentable square foot, which is the total
-----
estimated annual Operating Expenses for the Land and Building as if at least 95%
occupied and which is included in Basic Rent.
(m) Tenant's Proportionate Share: 1.584% Said percentage shall not
------
increase as a result of a reduction in the Rentable Square Feet of the Building.
(n) Upfit Allowance: $26.00 per rentable square foot or $177,840.00.
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(o) Design Completion Date: October 31, 1996.
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All other capitalized terms used throughout this Lease shall have the meanings
set forth in the Glossary of Terms attached hereto and incorporated herein by
reference.
2. Premises. Landlord hereby leases to Tenant and Tenant hereby leases from
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Landlord the Premises, together with the right to the use of and benefit from,
in common with others, the Public Areas.
3. Term.
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(a) The Term of this Lease shall commence on the Commencement Date, and
shall end on the Expiration Date, unless the Term shall sooner terminate
pursuant to any of the terms of this Lease or pursuant to law. On the
Commencement Date, Tenant and Landlord shall execute a certificate in form
satisfactory to Landlord confirming the Commencement Date and such other facts
as Landlord shall reasonably require.
(b) The Premises shall be deemed conclusively Ready for Occupancy when the
Work with respect to the Premises has been substantially completed. The Premises
shall be deemed "substantially completed" for the purpose of this Lease when (i)
Landlord has completed the construction of the Premises in substantial
accordance with the requirements of this Lease, excluding punch list items,
unless such items are significant or numerous enough that their completion would
substantially disrupt the ordinary use of the premises for the purposes
intended, (ii) Landlord has obtained a permanent Certificate of Occupancy for
the Premises (if required by the City of Raleigh) and (iii) the Premises are
available for safe occupancy by Tenant and suitable for office purposes.
Notwithstanding the foregoing, if there is a delay in making the Premises Ready
for Occupancy due to any reason
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set forth in Paragraph 4(h) hereof, then the Premises shall be deemed Ready for
Occupancy on the date when the Premises would have been ready but for such delay
even though no certificate of compliance has been issued or work to be done by
Landlord has not been commenced or completed, and the additional cost to
Landlord to complete the Premises and the Building occasioned by such delay
shall be promptly paid by Tenant to Landlord on demand as Additional Rent
hereunder. For the purposes of the preceding sentence, the phrase "additional
cost to Landlord" shall mean the actual cost above such cost that would have
been the aggregate cost to Landlord of completing Landlord's Work had there been
no such delay. Tenant hereby indemnifies Landlord against any direct loss, cost
or expense arising out of any such delay provided any such delay does not result
from the negligence or willful misconduct of Landlord, its employees, or agents
or the negligence or willful misconduct of Landlord's contractors. Landlord, at
its option, may, by notice to Tenant, given within 30 days after the
Commencement Date is determined, extend the Term for the period of days equal to
such delay in making the Premises Ready for Occupancy plus the number of days
necessary in order for the Term to end on the last day of a calendar month.
Nothing contained in this subparagraph shall limit or prejudice any of the other
rights of Landlord hereunder.
(c) If the Commencement Date shall not have occurred on or before 60 days
after the date stated in clause (i) (A) of Paragraph 1(g) hereof other than for
reasons described in Paragraph 4(h) hereof, Tenant may terminate this Lease by
delivering written notice to Landlord of its desire to terminate, and upon the
effective date of this notice, this Lease shall be deemed canceled and of no
further force and effect.
4. Condition of Premises; Completion of Work.
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(a) Landlord and Tenant shall diligently pursue the preparation of all
plans and specifications for the build-out or upfit of the Premises. All such
plans and specifications shall have the approval of both Landlord and Tenant,
which approval shall not be unreasonably withheld or delayed by either party.
Complete plans and specifications and the cost estimate for the Work shall be
approved by Landlord and Tenant no later than the Design Completion Date in
accordance with the procedure set forth in Paragraph 4(b) below, at which time
such plans and specifications shall be deemed Tenant's Plans.
(b) As soon as practicable after the execution of this Lease, Tenant, at
its expense, shall provide Landlord with instructions sufficient to enable
Landlord's architect or engineer to prepare complete plans and specifications
for the build-out or upfit Tenant desires. Such plans and specifications and the
cost estimate therefor shall then be prepared by Landlord's architect or
engineer and submitted to Landlord and Tenant for preliminary approval.
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When the plans and specifications and cost estimates therefor are so approved by
Landlord and Tenant, Landlord shall obtain from its general contractor a
quotation of the cost of the build-out or upfit under the plans and
specifications. If Landlord approves such quotation and the cost of such build-
out or upfit does not exceed the Upfit Allowance, such plans and specifications
shall thereupon be deemed to be Tenant's Plans, and Landlord shall be authorized
to proceed with the build-out or upfit of the Premises in accordance with the
Tenant's Plans. Notwithstanding the foregoing, if after the quotation, the cost
of such build-out or upfit exceeds the Upfit Allowance, Landlord shall submit
the same to Tenant for approval and upon written approval of such quotation by
Tenant, such plans and specifications shall thereupon be deemed to be Tenant's
Plans and Landlord shall be authorized to proceed with the build-out or upfit of
the Premises in accordance with the Tenant's Plans. If Tenant disapproves such
quotation, or fails to approve or disapprove such quotation within fourteen (14)
days after submission thereof by Landlord, Landlord shall not be obligated to
proceed with any improvement of the Premises until such time as Landlord and
Tenant approve a price for the Work. Landlord agrees to provide Tenant with a
Building Standard build-out, and absorb any additional costs exceeding the Upfit
Allowance, based on construction of the Premises detailed in Exhibit A, even if
the total cost of construction exceeds $26.00 per rentable square foot. Any
construction that is not Building Standard, shall be subject to the approval
process outlined above.
(c) Landlord, through its employees, agents, and contractors,
shall perform Landlord's Work as shown on the Tenant's Plans without cost to
Tenant in a good and workmanlike manner in accordance with all Legal
Requirements and Insurance Requirements, free of all defects, using good and new
materials. Subject to Paragraph 4(j) hereof, all Tenant's Work shall be
performed by Landlord, through its employees, agents, and contractors, at
Tenant's sole cost and expense, and to the extent that Landlord incurs any costs
or expenses for Tenant's Work or any costs or expenses in connection with
Tenant's Plans in excess of the Upfit Allowance, such costs shall be deemed
Additional Rent and reimbursed to Landlord within fifteen (15) days of demand
therefor. At Tenant's option, Landlord agrees to finance any additional costs
for Tenant's Work over any of the Upfit Allowance not used for Landlord's Work
up to $5.00 per rentable square foot by increasing the Basic Rent by an amount
equal to those excess costs plus a 9% interest factor amortized over the lease
term.
(d) All engineering required for any of Tenant's layouts,
Tenant's Plans or Tenant's installations (including the coordinating of
Landlord's Work) shall be performed by Landlord's engineers only, the cost
thereof to be included as part of the Upfit Allowance.
(e) Landlord shall file with the appropriate governmental
authority or authorities such of Tenant's Plans (including
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modifications approved by Landlord and Tenant) and shall take such other action
as shall be necessary to obtain and maintain all governmental permits and
authorizations which may be required in connection with the Work. All filing
fees and other costs for any work other than Landlord's Work in connection
therewith shall be reimbursed by Tenant to Landlord within fifteen (15) days
after submission of bills therefor. Tenant shall cooperate with Landlord in
connection with the aforesaid.
(f) All work required by Tenant's Changes, not covered by the
upfit allowance, subject to the applicable provisions of this Lease, shall be
performed by Landlord after Tenant has approved in writing the cost and schedule
impact thereof and any such Change Costs related thereto which are not financed
in 4(c) above, shall be paid by Tenant to Landlord within fifteen (15) days of
demand therefor, and all such Change Costs constituting Additional Rent
hereunder.
(g) By occupying the Premises or any portion thereof, Tenant
shall be deemed to have accepted the Premises, or such portion, and to have
acknowledged that the same and the Building fully comply with Landlord's
obligations under the Lease to construct and deliver the Premises, or such
portion in accordance with Tenant's Plans, as amended. Notwithstanding the
foregoing, the taking of occupancy shall not be deemed to be conclusive evidence
as against Tenant that Landlord shall have satisfactorily completed all of the
Work with respect to (i) portions of the Work not completed because under good
construction scheduling practice such work should be done after completion of
still uncompleted finishing or other work to be done by or on behalf of Tenant,
(ii) any details of construction of the Work, items of decoration included in
the Work or mechanical adjustment of items included in the Work provided Tenant
gives Landlord notice thereof within 30 days after the Commencement Date, or
(iii) Latent Defects provided (A) Tenant within 6 months of the Commencement
Date uses reasonable efforts to identify Latent Defects and Tenant notifies
Landlord in writing of any such Latent Defects no later than six (6) months
after the Commencement Date, (B) the expert certifies to Landlord that there are
Latent Defects in the Work, and (C) Tenant gives Landlord notice of such Latent
Defects within 6 months of the Commencement Date. Landlord agrees promptly to
complete items (i), (ii), and (iii) above and Landlord shall have the right,
upon reasonable prior notice and at times reasonably convenient to Tenant and
Landlord, to enter the Premises to complete or repair any such unfinished items
and Latent Defects and entry by Landlord, its agents, servants, employees or
contractors for such purpose shall not constitute an actual or constructive
eviction in whole or in part, or entitle Tenant to any abatement or diminution
of rent or relieve Tenant of any of its obligations hereunder, or impose any
liability upon Landlord or its agents, servants, employees or contractors.
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(h) (i) If a delay shall occur in the completion of the Work as
the result of (A) Tenant's failure to approve plans, specifications and cost
estimates within seven (7) days of submission thereof by Landlord; (B) any
Tenant's Changes or other change by Tenant in Tenant's Plans or any other plan,
specification or finish information furnished by Tenant; (C) the quality of
performance or completion of work by a person, firm or corporation employed by
Tenant; (D) the fact that non-Building Standard work requires lead time to
obtain or construction time to perform, in excess of that required for Building
Standard work, with reasonable diligence in obtaining and performing the same on
the part of Landlord; (E) work is to be done by or on behalf of Tenant (other
than by Landlord) which under good construction scheduling practices should be
completed before some portion of the Work is done, and such work by Tenant is
not completed on schedule or it delays the completion of the Work; or (F) any
other act or omission of Tenant, its agents, employees or contractors, then at
Landlord's option, the calculation of the Commencement Date shall be made as if
such delays had not occurred.
(ii) If a delay in the completion of the Work, or any
portion of such delay, is the result of Unavoidable Delays, then any such delay,
which would not have occurred but for a delay described in Subparagraph (i) of
this Paragraph 4(h) shall be deemed to be a delay described in Subparagraph (i).
(iii) Notwithstanding the foregoing to the contrary, there
shall be no delay as described in (i) or (ii) hereinabove to the extent there is
concurrent delay caused by or attributable to Landlord, its agents, employees or
contractors and Tenant gives written notice of such delays to Landlord promptly
after Tenant becomes aware of such delays.
(i) Landlord may make such changes in the plans and
specifications to the Tenant's Plans, but only such changes that (a) to the
extent the same shall be necessary to comply with Legal Requirements or
Insurance Requirements, and (b) with the prior written consent of Tenant, which
consent Tenant agrees not to unreasonably withhold or delay. If Tenant fails to
respond to a request for such consent within the period of seven (7) days after
such request is made, such consent shall be deemed given by Tenant. In addition,
Landlord, may substitute for Building Standard other materials of comparable
kind and quality after having obtained the prior written consent of Tenant,
which consent Tenant agrees not to unreasonably withhold or delay.
(j) If Tenant wishes to do work which is of a special nature,
and not part of Landlord's Work, through its own employees or contractors (such
as special mill work, cabinet work, special decorative effects, or wiring of
Tenant's telephone, telecommunications or computer systems), then Tenant shall
give a notice thereof to Landlord specifying in detail such special work
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and the names of the contractors Tenant proposes to use for such work, which
contractors shall be subject to Landlord's prior approval, which shall not be
unreasonably withheld. If Landlord consents thereto, which consent shall not be
unreasonably withheld, delayed or conditioned, the work involved shall be
performed by Tenant's contractor in accordance with the requirements of this
Paragraph 4 and Paragraph 13 hereof. If Landlord fails to respond to a request
for such consent within the period of seven (7) days after such request is made,
such consent shall be deemed given by Landlord. Tenant shall adopt a schedule in
conformance with the schedule of the Work in such a manner as to maintain
harmonious labor relations and as not to interfere with or delay the Work.
Landlord agrees to provide access to the Premises during Business Hours any time
after ten (10) business days before the Premises are scheduled to be completed.
5. Rent.
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(a) Tenant shall pay to Landlord without notice or demand or set-
off, in lawful money of the United States of America at the office of Landlord
or at such other place as Landlord may designate, Rent as follows:
(i) Basic Rent, which shall be payable in advance in monthly
installments beginning on the Commencement Date and continuing on the first day
of each calendar month thereafter during the Term; and
(ii) Additional Rent, which shall be payable within the time
limitations elsewhere provided in this Lease, or if no such time limit is
elsewhere provided, within fifteen (15) days notice from Landlord to Tenant as
to the amount due and payable.
(b) Notwithstanding and not to the exclusion of any other
remedies for Tenant's default, if any installment of Basic Rent or of Additional
Rent payable under Paragraph 6(c) remains unpaid for a period of 5 days after
such installment shall have become due or any payment of Additional Rent (other
than that payable under Paragraph 6(c)) remains unpaid for a period of fifteen
(15) days after such installment or payment shall have become due, Tenant shall
pay interest thereon at a rate equal to the lesser of 2% per annum above the
prime rate as announced by NationsBank of North Carolina, N.A., or its
successors, or the maximum contractual rate permitted by applicable North
Carolina law, from the date on which such installment or payment is due to the
date of payment thereof. Such interest shall be deemed Additional Rent. If the
Commencement Date shall occur on a day other than the first day of a calendar
month, the monthly installment of Basic Rent and any monthly installment of
Additional Rent payable under Paragraph 60c for the unexpired portion of the
month in which the Commencement Date occurs shall be prorated on the basis of
the actual number of calendar days in such month.
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6. Operating Expense Payments.
--------------------------
(a) Subject to Paragraph 6(e), if Operating Expenses payable in
any calendar year falling wholly or partially within the Term shall be in such
amount as shall constitute an increase above the Base Factor, Tenant shall pay
as Additional Rent for such calendar year Tenant's Operating Payment.
(b) Notwithstanding any other provision contained herein to the
contrary, if the Building is not fully occupied during any calendar year or if
the entire Building is not provided with building standard service during any
calendar year, then for purposes of the computation of Tenant's Operating
Payment, each component of Operating Expenses including, but not limited to,
electrical power, management fees, insurance, janitorial expenses, on-site
labor, shall be computed for such year as though 95% of the entire Building had
been provided with building standard services during such year.
(c) Landlord may, with respect to any calendar year, furnish to
Tenant a reasonable estimate of Tenant's Operating Payment for such year, and
upon receipt of such estimate, Tenant will thereafter pay to Landlord on the
first day of each month during such year an amount equal to one-twelfth of such
estimate. Landlord may revise such estimate from time to time. Until such
estimate has been furnished to Tenant, Tenant shall pay to Landlord, on the
first day of each month during such year, an amount equal to one-twelfth of the
Tenant's Operating Payment for the previous calendar year. Within ninety (90)
days of the end of each calendar year, Landlord shall furnish Tenant with a
reconciliation statement, with supporting documents reasonably satisfactory to
Tenant, setting forth the Tenant's Operating Payment for such prior calendar
year and the amounts paid by Tenant on account thereof. Tenant may, at its cost,
review all paid invoices and other calculations furnished by Landlord and
Landlord's books pertaining to Operating Expenses. Any deficiency in the payment
of Tenant's Operating Payment pursuant to such statement shall be payable within
thirty (30) days after receipt of such statement, and the amount of any
overpayment by Tenant shall be applied to the next month's installment of
Tenant's Operating Payment then due, with the residual thereafter, if any,
refunded by Landlord to Tenant within thirty (30) days after delivery of such
statement.
(d) Any Additional Rent payable by Tenant pursuant to this
Paragraph 6 shall be collectible by Landlord in the same manner as Basic Rent.
(e) If the Commencement Date or the Expiration Date shall occur
on a date other than January 1 or December 31, respectively, any Tenant's
Operating Payment for the calendar year in which the Commencement Date or
Expiration Date shall occur, as the case may
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be, shall be prorated based upon actual number of days. In no event shall Basic
Rent ever be reduced by operation of this Paragraph 6. The rights and
obligations of Landlord and Tenant under the provisions of this Paragraph 6 with
respect to any Additional Rent shall survive the Expiration Date or any sooner
termination of the Term.
(f) Tenant will be responsible for ad valorem taxes on its personal
property and on the value of leasehold improvements in the Premises made after
the Commencement Date. If the taxing authorities do not separately assess
Tenant's leasehold improvements, Landlord may make reasonable allocation of the
ad valorem taxes allocated to the Building to give effect to this paragraph).
7. Use.
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(a) Tenant covenants that throughout the Term it will use the Premises for
general, clerical, administrative, and executive offices consistent with a first
class office building in the Raleigh area, including, without limitation,
software development, training and sales and for no other purpose.
(b) Tenant, at its sole cost and expense, shall comply with all Legal
Requirements and all Insurance Requirements, provided Landlord notifies Tenant
of such requirements, solely relating to or affecting Tenant's particular use of
the Premises and provided such requirements are not to alter or correct the
build-out or upfit done by the Landlord or to otherwise comply with Legal
Requirements or Insurance Requirements applicable to tenants generally.
(c) If anything is done, omitted to be done, or suffered to be done by
Tenant, or kept or suffered by Tenant to be kept in, upon or about the Premises
that shall cause the rate of fire or other insurance on the Premises or the
Building in companies acceptable to Landlord to be increased, Tenant shall pay
the entire amount of such increase promptly upon Landlord's demand therefor as
Additional Rent or Tenant shall promptly alter its practices so that the rate
shall not be so increased. In determining whether increased premiums are a
result of something done, omitted or suffered to be done or kept or suffered to
be kept in, upon or about the Premises by Tenant, a schedule issued by the
organization computing the insurance rate of the Building showing the various
components of such rate, shall be conclusive evidence of the several items and
charges which make up such rate. Landlord agrees that there shall be no such
increase if Tenant uses the Premises in accordance with Paragraph 7(a) above.
(d) Tenant shall not place a load upon any floor that exceeds either the
floor load per square foot that such floor was designed to carry or which is
allowed by any Legal Requirement. Business
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machines and mechanical equipment in the Premises shall be placed and maintained
by Tenant at Tenant's sole expense, in such manner as shall be sufficient, in
Landlord's reasonable judgment to prevent unreasonable or uncustomary vibration,
noise, annoyance or inconvenience to Landlord and the other tenants.
(e) Tenant shall not cause or permit any material amounts of any Hazardous
Substance to be used, stored, generated or disposed of on or in the Premises,
the Building, or the Land in violation of any applicable law by Tenant, Tenant's
agents, employees, contractors or invitees. If Hazardous Substances are used,
stored, generated or disposed of on or in the Premises, the Building or the Land
by Tenant, Tenant's agents, employees, contractors or invitees, or if the
Premises, the Building, or the Land become contaminated in any manner for which
Tenant is legally liable, Tenant shall indemnify and hold harmless the Landlord
from any and all claims, damages, fines, judgments, penalties, costs,
liabilities or losses (including, without limitation, a decrease in value of the
Building or the Land, damages due to loss or restriction of rentable or usable
space, or any damages due to adverse impact on marketing of the space, and any
and all sums paid for settlement of claims, reasonable attorneys' fees,
consultant and expert fees) arising during or after the Term and arising as a
result of such contamination by Tenant. This indemnification includes, without
limitation, any and all costs incurred due to any investigation of the site or
any cleanup, removal or restoration mandated by a federal, state or local agency
or political subdivision and shall expressly survive expiration or termination
of this Lease. Without limitation of the foregoing, if Tenant causes or permits
the presence of any Hazardous Substance on the Premises, the Building or the
Land in violation of any applicable law, and such results in contamination,
Tenant shall promptly, at its sole expense, take any and all necessary actions
to return the Premises to the condition existing prior to the presence of any
such Hazardous Substance on the Premises, the Building or the Land. Tenant shall
first obtain Landlord's approval for any such remedial action.
8. Assignment, Mortgaging and Subletting.
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(a) Tenant shall not (i) assign or otherwise transfer this Lease or the
Term and estate hereby granted, (ii) sublet all or part of the Premises or allow
the same to be used or occupied by others or in violation of Paragraph 7 hereof,
or (iii) mortgage, pledge, or encumber this Lease or all or any part of the
Premises in any manner by reason of any act or omission on the part of Tenant,
without the prior written consent of Landlord in each instance, which consent
shall not be unreasonably withheld, delayed or conditioned.
(b) If this Lease is assigned, whether or not in violation of the terms of
this Lease, Landlord may collect rent from the
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assignee. If the Premises or any part thereof be sublet or be used or occupied
by anybody other than Tenant, whether or not in violation of this Lease,
Landlord may, after default by Tenant and expiration of Tenant's time to cure
such default, if any, collect rent from the subtenant or occupant. In either
event, Landlord may apply the net amount collected to the Rent herein reserved.
The consent by Landlord to an assignment, transfer, encumbering or subletting
pursuant to any provision of this Lease shall not in any way be considered to
relieve Tenant from obtaining the express prior consent of Landlord to any other
or further assignment, transfer, encumbering or subletting. Neither any
assignment of this Lease nor any subletting, occupancy or use of the Premises or
any part thereof by any person other than Tenant, nor any collection of rent by
Landlord from any person other than Tenant, nor any application of any Rent as
provided in this Paragraph 8 shall, under any circumstances be deemed a waiver
of any of the provisions of Paragraph 8(a) hereof, or relieve, impair, release,
or discharge Tenant of its obligations fully to perform the terms of this Lease
on Tenant's part to be performed and Tenant shall remain fully and primarily
liable therefor.
(c) No assignment (whether or not consented to by Landlord) shall be valid
unless, within ten (10) days after the execution thereof, Tenant shall deliver
to Landlord a duplicate original instrument of assignment and assumption in form
and substance reasonably satisfactory to Landlord, duly executed by Tenant and
by the assignee, in which such assignee shall assume performance of all terms of
this Lease on Tenant's part to be performed.
9. Repairs. If Tenant shall have failed to cure an event of default
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described in Paragraph 18(d) hereinbelow, Tenant shall pay to Landlord, promptly
upon demand, all reasonable costs and expenses incurred by Landlord in
connection with all repairs, replacements and alterations to the Premises and
the Building, whether such repairs, replacements, and alterations are interior
or exterior, structural, or otherwise, ordinary or extraordinary, the need for
which arises out of (i) the installation, use, operation, or existence of
Tenant's alterations or personal property, or the moving of the same in or out
of the Building or the Premises by Tenant or any of its subtenants or any of its
or their employees, agents, contractors, licensees or invitees, (ii) the acts,
omissions, negligence or misuse of Tenant or any of its subtenants or any of its
or their employees, agents, contractors, licensees or invitees or their use or
occupancy or manner of use or occupancy of the Premises, or (iii) the
performance by Tenant of its obligations pursuant to the provisions of Paragraph
7(b) hereof. If events described in the preceding sentence occur then, Tenant,
at its sole cost and expense, shall promptly replace scratched, damaged or
broken doors and glass in and about the Premises and shall be responsible for
all repairs and maintenance of wall and floor coverings in the Premises, normal
wear and tear and damage by fire or other casualty or by Landlord, or its
agents, employees or
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contractors excluded. Tenant shall not be obligated to repair or replace window
glass on the exterior walls of the Premises unless the need for repair or
replacement is caused by the acts, omissions, negligence or misuse of Tenant or
any of its subtenants, employees, agents, contractors, licensees or invitees.
10. Access. Upon reasonable notice to Tenant, Landlord or its representatives
------
or designees may enter the Premises at reasonable times under the circumstances,
whether or not during business hours, to inspect the Premises, to enforce any
provisions of this Lease, to make or cause to be made such repairs as Landlord
may deem necessary or desirable, to cure defaults of Tenant pursuant to the
rights granted Landlord under this Lease, to repair any utility lines or system
or systems servicing other parts of the Building, to rectify any condition in
the Premises adversely affecting other occupants of the Building, or, upon prior
reasonable notice to Tenant, to exhibit the Premises to others during the last
six (6) months of the lease. If Tenant, its agents or employees shall not be
present or shall not permit an entry into the Premises at any time when such
entry shall be permissible, in the case of an emergency, Landlord may use a
master key (or master code, card or switch if Tenant's security system is other
than conventional locks and keys), or forcibly enter the Premises.
11. Common Facilities / Landlord's Maintenance.
------------------------------------------
(a) Landlord shall have the right at any time, without the same
constituting an eviction and without incurring liability to Tenant therefor, to
change the arrangement and/or location of the Public Areas, provided such
changes do not materially interfere with or adversely impact Tenant's access and
use of the Premises. The Public Areas shall at all times be maintained by
Landlord in a first class condition comparable to other similar buildings in the
market and be subject to the exclusive control and management of Landlord.
(b) Landlord, at is sole cost and expense, shall comply with all Legal and
Insurance Requirements, relating to the operation of the Building and the Public
Areas.
12. Utilities and Services.
----------------------
(a) Except as otherwise provided herein, Landlord shall maintain and
operate the heating, ventilating and air-conditioning systems and shall furnish
heat, outside air, and air-conditioning to the Premises during Business Hours,
except to the extent reduced service is required by any governmental body.
(b) If Tenant requests heating, ventilating, or air-conditioning services
during other than Business Hours,
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Landlord shall make the same available to Tenant in accordance with such
request, provided that Tenant shall pay to Landlord, as Additional Rent,
Landlord's charges therefor, which must approximate actual electricity cost plus
a reasonable allowance for equipment wear and tear and overhead. Landlord's
current charge is $15.00 per hour but Landlord does not guarantee that rate
throughout the Term of the Lease.
(c) Notwithstanding the foregoing provisions of this Paragraph 12, Landlord
shall not be responsible if the normal operation of the Building heating,
ventilating and air-conditioning system shall fail to provide conditioned air at
reasonable temperatures, pressures or degrees of humidity or in reasonable
volumes or velocities in any portion of the Premises (i) which shall have an
electrical load in excess of 4.5 watts per square foot of usable area of the
Premises for all purposes (including lighting and power), or which shall have a
human occupancy factor in excess of one person per 100 square feet of usable
area of the Premises (the average electrical load and human occupancy factors
for which such system is designed), or (ii) because of any rearrangement of
partitioning or other improvements, alterations, changes, or additions other
than Landlord's Work. Tenant shall cooperate fully with Landlord at all times
and abide by all regulations and requirements which Landlord may reasonably
prescribe for the proper functioning and protection of the heating, ventilating,
and air-conditioning system.
(d) Landlord shall provide elevator service during Business Hours and shall
have at least one passenger elevator subject to call at all other times.
(e) Landlord shall provide janitorial services to the Premises in
accordance with the schedule of services set forth in Exhibit C annexed hereto.
(f) Landlord shall furnish water to each floor on which the Premises are
located for normal drinking, lavatory, and cleaning purposes.
(g) Landlord shall furnish electrical energy reasonably required, subject
to the provisions herein, in connection with the use and occupancy of the
Premises for the operation of such lighting, electrical appliances and equipment
as Landlord may permit to be installed in the Premises.
(h) Tenant covenants that at no time shall the use of electrical energy in
the Premises exceed 4.5 watts per square foot of usable area (consisting of 3.0
watts per square foot for lighting and 1.5 watts per square foot for power
(electric outlets)). Tenant shall not, without the prior consent of Landlord,
(i) make or perform, or permit the making or performing of, any alteration to
wiring installations or other electrical facilities in or serving the Premises
or any additions to the
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electrical fixtures; or (ii) install and/or use business machines, office
equipment, or other appliances in the Premises which utilize electrical energy
other than small business machines normally used in executive and administrative
offices, including software development. Should Landlord grant such consent, all
additional risers or other equipment required therefore, including, without
limitation, air-conditioning equipment, shall be provided by Landlord and the
cost thereof shall be paid by Tenant within fifteen (15) days after being billed
therefor. Landlord may grant such consent, subject to terms and conditions as
are necessary in the opinion of the Landlord to assure Landlord will be
reimbursed by Tenant for installation of such alterations, wiring, other
facilities, or such fixtures, appliances, or equipment and additional electrical
service to be furnished by Landlord. Landlord agrees to provide Tenant with the
number of dedicated circuits, each consisting of 20 amps, for electrical general
use outlets as described on Exhibit A-1 attached hereto.
(i) Landlord shall provide twenty-four-hour-a-day, seven-day-a-week,
security at the Building, which the Tenant acknowledges is for the protection of
the Building only, and shall not be relied upon to protect Tenant, Tenant's
property, or employees or their property.
(j) Landlord reserves the right to stop, interrupt or reduce the level of
service required of Landlord under this Lease, whenever and for so long as may
be necessary, by reason of accidents, emergencies, introduction of foreign
substances, laws, regulations, controls, or guidelines, strikes, maintenance,
repairs or changes which Landlord is required by this Lease or by law to make or
in good faith deems necessary, or by reason of difficulty in securing proper
supplies of fuel, water, electricity, or labor, or by reason of any other cause
beyond Landlord's reasonable control. In each instance, Landlord shall exercise
reasonable diligence to eliminate the cause of stoppage and to effect
restoration of service and shall give Tenant reasonable notice, when
practicable, of the commencement and anticipated duration of such stoppage,
interruption or reduction in service. Tenant shall not be entitled to any
diminution or abatement of Rent or other compensation by reason of any such
stoppage, interruption or reduction unless resulting from Landlord's wrongful
acts or gross negligence. In any event, Tenant will be entitled to rental
abatement if electricity is not available to the Premises for more than twenty-
four (24) hours if such interruption is caused by the Landlord. Also, if such
interruption is not caused by the Landlord and such interruption shall continue
for a period longer than five (5) days, Tenant will be entitled to rental
abatement.
13. Alterations.
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(a) Tenant shall make no improvements, alterations, changes, or additions
to the Premises without the prior written consent of
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Landlord. Tenant shall reimburse Landlord for all reasonable expenses incurred
by Landlord in connection with approving and inspecting said improvements,
alterations, changes or additions.
(b) All improvements, alterations, changes, additions, and fixtures are the
property of Landlord upon termination and expiration of the Lease and shall be
surrendered with the Premises.
(c) Tenant shall cause no damage to the Premises and the Building from
removal of Tenant's personal property from the Building. Any such damage or
injury to the Premises and the Building shall be promptly repaired by Tenant at
its sole cost and expense. Any personal property of Tenant not removed by Tenant
prior to the Expiration Date or date of sooner termination of this Lease shall,
at Landlord's option, either become the property of Landlord or shall be
disposed of or stored by Landlord at Tenant's risk and expense.
(d) No approval of plans or specifications by Landlord or consent by
Landlord allowing Tenant to make improvements, alterations, changes or additions
to the Premises shall in any way be deemed to be an agreement by Landlord that
the contemplated work complies with any Legal Requirements or Insurance
Requirements or the certificate of compliance for the Building, or deemed to be
a waiver by Landlord of any of the provisions of this Lease. Tenant shall
construct all approved improvements, alterations, changes or additions in a good
and workmanlike manner, free of all defects and in compliance with all Legal
Requirements and Insurance Requirements. Neither Landlord, Landlord's agents,
nor the holder of any mortgage on the Land and Building shall be liable for any
labor or materials furnished or to be furnished to Tenant upon credit, and no
mechanic's or materialmen's or other liens for such labor or materials shall
attach to or affect any estate or interest of Landlord or any other such party
in and to the Premises, the Land and the Building. Tenant shall not permit any
mechanics' or materialmen's lien to attach, be placed or filed against the
Premises, the Building or the Land arising out of such work prosecuted under
Paragraph 4(j) or this Paragraph 13; and if such a lien if filed, Tenant shall
satisfy, bond off, or otherwise cause such lien to be canceled or discharged
within ten (10) days of Tenant's receipt from Landlord of written notice of any
such lien.
14. Insurance.
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(a) Tenant shall during the Term and during any period of rent abatement or
period of occupancy prior to the Commencement Date, at its sole cost and
expense, obtain, maintain and keep in full force and effect, with Tenant,
Landlord, and the holder of any mortgage if Tenant has been notified of the name
of such holder on the Land and Building named as insureds therein or as their
respective interests may appear, as appropriate, the following insurance:
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(i) hazard insurance, including extended coverage, vandalism and
malicious mischief, upon property of every description and kind owned by Tenant
or anyone claiming through or under Tenant and located in the Building or for
which Tenant is legally liable or which was installed by or on behalf of Tenant
or anyone claiming through or under Tenant, including, without limitation,
Tenant's personal property and all other improvements, alterations, changes and
additions (other than Landlord's Work) in an amount not less than the full
insurable value thereof;
(ii) comprehensive general public liability insurance coverage to
include personal injury, bodily injury, broad form property damage, operations
hazard, owner's protective coverage, contractual liability and products and
completed operations liability in limits not less than $1,000,000 inclusive;
(iii) worker's compensation in no less than statutory limits and
employer's liability insurance in limits reasonably acceptable to Landlord; and
(iv) Any other form or forms of insurance as Landlord may reasonably
require which is then customarily carried on first class office buildings in the
State of North Carolina; provided, however, such insurance shall not be in lieu
of insurance that Landlord is required to carry under this Lease.
(b) All policies shall be taken out with insurers reasonably acceptable to
Landlord and in form reasonably satisfactory from time to time to Landlord.
Tenant agrees that certificates of insurance will be delivered to Landlord as
soon as practicable after the placing of the required insurance. All policies
shall contain an undertaking by the insurers to notify Landlord in writing, not
less than 30 days prior to any material change or reduction in coverage or
cancellation or termination thereof.
(c) In the event of damage to or destruction of the Premises and the
termination of this Lease by Landlord pursuant to Paragraph 16 hereof, Tenant
shall pay to Landlord all of its insurance proceeds relating to any
improvements, alterations, changes and additions made by Tenant to the Premises,
except for any such proceeds paid on (i) items installed by Tenant and which
Landlord has agreed may be removed from the Premises upon the expiration of the
Term, and (ii) any personal property of Tenant.
(d) Landlord shall not carry insurance of any kind on any improvements,
alterations, changes or additions made by Tenant to the Premises, or on any of
Tenant's personal property, and Landlord shall not be obligated to repair any
damage thereto or replace the same.
(e) Any policy or policies of hazard, extended coverage, or similar
casualty insurance which either party obtains in connection
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with the Premises or Building shall include a clause or endorsement denying the
insurer any rights of subrogation against the other party to the extent rights
have been waived by the insured prior to the occurrence of injury or loss.
Tenant and Landlord hereby waive any rights of recovery against the other for
injury or loss due to hazards covered by insurance containing such a waiver of
subrogation clause or endorsement to the extent of the injury or loss covered
thereby even if resulting from the negligent acts or omissions of the other
party.
(f) Landlord shall carry hazard insurance covering the Building (including
the Public Areas, Landlord's Work and Tenant's Work but excluding movable
personal property of Tenant included in improvements to the Premises after
construction of Tenant's Work) in an amount not less than $63,000,000.00
(Landlord agreeing that this amount of coverage will be increased as reasonably
required to maintain an amount of coverage approximately equal to the full
replacement cost of the Building) and general liability insurance with limits
not less than $10,000,000.00 at all times.
15. Non-Liability and Indemnification.
---------------------------------
(a) Unless caused by Landlord's negligence, intentional misconduct, or that
of its employees, agents or contractors, Tenant shall indemnify and hold
harmless Landlord and its agents from and against any and all claims for damage
to the person or property of anyone or any entity to the extent arising from
Tenant's use of the Premises, or from the conduct of Tenant's business or from
any activity, work, or things done, permitted, or suffered by Tenant in or about
the Premises or elsewhere and shall further indemnify and hold harmless Landlord
from and against any and all claims, costs, and expenses arising to the extent
from any breach or default in the performance of any obligation on Tenant's part
to be performed under the terms of this Lease, or arising to the extent from any
act or omission of Tenant, or any of Tenant's agents, contractors, employees, or
invitees, and from and against all costs, reasonable attorney's fees, expenses
and liabilities incurred by Landlord as the result of any such use, conduct,
activity, work, things done, permitted, or suffered, breach, default, or
negligence, and in dealing reasonably therewith, including, but not limited to,
the defense or pursuit of any claim or any action or proceeding involved
therein; and in case any action or proceeding be brought against Landlord by
reason of any such matter, Tenant upon notice from Landlord shall defend the
same at Tenant's expense by counsel reasonably satisfactory to Landlord and
Landlord shall cooperate with Tenant in such defense. Landlord need not have
first paid any such claim in order to be so indemnified. This indemnity shall
expressly survive expiration or termination of this Lease. Tenant, as a material
part of the consideration to Landlord, hereby assumes all risk of damage to
property of Tenant or injury to its employees, contractors, agents, and invitees
in, upon, or about the
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Premises arising from any cause except negligence or intentional misconduct of
Landlord, its agents, employees and contractors, and Tenant hereby waives all
claims in respect thereof against Landlord.
(b) Unless caused by Tenant's negligence, intentional misconduct or that
of its agents, employees, or contractors, Landlord shall indemnify and hold
harmless Tenant and its agents from and against any and all claims for damage to
the person or property of anyone or any entity arising from Landlord's operation
of the Property containing Tenant's Premises, or from the conduct of Landlord's
business or from any activity, work, or things done, permitted, or suffered by
Landlord in or about the Building or elsewhere and shall further indemnify and
hold harmless Tenant from and against any and all claims costs, and expenses
arising from any breach or default in the performance of any obligation on
Landlord's part to be performed under the terms of this Lease, or arising from
any act or omission of Landlord, or any of Landlord's agents, contractors
employees, or invitees, and from and against all costs, reasonable attorney's
fees, expenses and liabilities incurred by Tenant as the result of any such use,
conduct, activity, work, things done, permitted, or suffered, breach, default,
or negligence, and in dealing reasonably therewith, including, but not limited
to, the defense or pursuit of any claim or any action or proceeding involved
therein; and in case any action or proceeding be brought against Tenant by
reason of any such matter, Landlord upon notice from Tenant shall defend the
same at Landlord's expense by counsel reasonably satisfactory to Tenant and
Tenant shall cooperate with Landlord in such defense. Tenant need not have first
paid any such claim in order to be so indemnified. This indemnity shall
expressly survive expiration or termination of this Lease.
16. Casualty Damage.
---------------
(a) Tenant shall give immediate notice (by telephone, confirmed in writing)
to Landlord of any damage caused to the Premises by fire or other casualty, and
if Landlord does not elect to terminate this Lease as provided in Paragraph 16
(b), Landlord shall proceed with reasonable diligence and at its sole cost and
expense to repair and restore the Premises (other than any improvements,
alterations, changes and additions to the Premises and any personal property of
Tenant) to substantially the same condition as immediately prior to said damage
or destruction.
(b) If (i) the Building or the Premises shall be destroyed or substantially
damaged by a casualty not covered by Landlord's insurance; or (ii) 25% or more
of the Premises is damaged or rendered untenantable by a casualty covered by
Landlord's insurance; or (iii) the Premises are not affected but 25% of the
Building or such portion of the Public Areas as shall render the Premises or the
Building untenantable is damaged or rendered
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untenantable, then in any such event Landlord may elect either to terminate this
Lease or to proceed to rebuild and repair the Premises or that portion of the
Building so damaged. Landlord shall give written notice to Tenant of such
election within 90 days after the occurrence of such casualty. If 25% or more of
the Premises is damaged or rendered untenantable by a casualty during the last
twelve (12) months of the lease term, the Tenant may also elect to terminate
this lease. If such notice of termination shall be given, this Lease shall
terminate as of the date provided in such notice of termination (whether or not
the Term shall have commenced) with the same effect as if that date were the
Expiration Date.
(c) If the Premises are damaged and the Lease is not terminated pursuant to
Paragraph 16(b), the Basic Rent and the Additional Rent payable pursuant to
Paragraph 5 and 6 hereof shall be abated in proportion to the degree in which
Tenant's use of the Premises is impaired during the period of any damage, repair
or restoration provided for in this Paragraph 16. Except for such abatement,
Tenant shall not be entitled to any compensation or damage for loss in the use
of the whole or any part of the Premises and/or any inconvenience or annoyance
occasioned by damage, destruction, repair or restoration.
17. Eminent Domain.
--------------
(a) If the whole or any portion of the Building or the Premises shall be
acquired or condemned by eminent domain for any public or quasi-public use or
purpose, this Lease shall terminate as of the date of the vesting or acquisition
of title in the condemning authority with the same effect as if said date were
the Expiration Date. If the whole or any portion of the Building other than the
Premises shall be acquired or condemned by eminent domain for any public or
quasi-public use or purpose, this Lease shall, at the option of Landlord,
terminate as of the date of the vesting or acquisition of title in such
condemning authority with the same effect as if such date were the Expiration
Date.
(b) The proceeds of any condemnation award shall be the property of
Landlord, whether such award is compensation for damages to Landlord's or
Tenant's interest in the Premises, and Tenant hereby assigns all of its interest
in any such award to Landlord; provided, however, that Landlord shall have no
interest in any award made to Tenant for loss of business, relocation expenses,
or for the taking of Tenant's personal property if a separate award for such
items is made to Tenant.
18. Events of Default. The occurrence of any one or more of the following
-----------------
events shall constitute a material default of this Lease by Tenant:
19
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(a) The failure by Tenant to make any payment of Basic Rent or
Additional Rent payable in monthly installments pursuant to Paragraphs 5 and 6
hereof, where such failure shall continue for a period of ten (10) days after
written notice thereof from Landlord to Tenant.
(b) The failure by Tenant to make any payment of Additional Rent
or any other payment required to be made by Tenant hereunder other than that
described in Paragraph 18(a), as and when due, where such failure shall continue
for a period of ten (10) days after written notice thereof from Landlord to
Tenant. If Landlord serves Tenant with a Notice to Pay Additional Rent or Quit,
such Notice to Pay Additional Rent or Quit shall also constitute the notice
required by this Paragraph 18 (b).
(c) The failure of Tenant to execute the documents contemplated
in Paragraphs 21(b) or 27(e) hereof, and such failure shall continue for a
period of ten (10) days after written notice thereof from Landlord to Tenant.
(d) The failure by Tenant to observe or perform any of the
agreements, covenants, conditions or provisions of this Lease to be observed or
performed by Tenant other than those referenced above, where such failure shall
continue for a period of thirty (30) days after written notice thereof from
Landlord to Tenant; provided, however, that if the nature of Tenant's
noncompliance is such that more than thirty (30) days are reasonably required
for its cure, then Tenant shall not be deemed to be in default if Tenant
commenced such cure within said thirty (30) day period and thereafter diligently
pursues such cure to completion. To the extent permitted by law, such thirty
(30) day notice shall constitute the sole and exclusive notice required to be
given to Tenant under applicable statutes.
(e) (i) The making by Tenant of any general arrangement or
general assignment for the benefit of creditors; (ii) Tenant becoming a "debtor"
as defined in 11 U.S.C. (S)101 or any successor statute thereto (unless, in the
case of a petition filed against Tenant, the same is dismissed within sixty (60)
days); (iii) the appointment of a trustee or receiver to take possession of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease; or (iv) the attachment, execution, or other judicial
seizure of substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease, where such seizure is not discharged within
thirty (30) days.
(f) The discovery by Landlord that any financial statement given
to Landlord by Tenant, by Tenant's successor in interest, or by any guarantor of
Tenant's obligation hereunder was materially false when presented to Landlord.
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19. Landlord's Remedies. In the event of any material default or breach of
-------------------
this Lease by Tenant as described in Paragraph 18 hereinabove, Landlord may at
any time thereafter, without further notice or demand and without limiting
Landlord in the exercise of any right or remedy which Landlord may have by
reason of such default:
(a) Terminate Tenant's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Tenant shall immediately surrender possession of the Premises to Landlord. In
such event Landlord shall be entitled to recover from Tenant all damages
incurred by Landlord by reason of Tenant's default including, but not limited
to, the cost of recovering possession of the Premises; expenses of reletting,
including necessary renovation and alteration of the Premises, reasonable
attorney's fees, and any real estate commission actually paid; Basic Rent and
Additional Rent that would have been paid through the end of the Term had the
Lease not been terminated due to Tenant's default less all sums received from
any substitute tenant; and that portion of the leasing commission paid by
Landlord applicable to the unexpired term of this Lease; and/or
(b) Maintain Tenant's right to possession, in which case this
Lease shall continue in effect whether or not Tenant shall have vacated or
abandoned the Premises. In such event Landlord shall be entitled to enforce all
of Landlord's rights and remedies under this Lease, including the right to
recover the rent as it becomes due hereunder; and/or
(c) Enter the Premises at any time to cure any default without
thereby incurring any liability to Tenant or anyone claiming through or under
Tenant. Any expenses incurred by Landlord in connection with any such
performance or involved in collecting or endeavoring to collect rent or
enforcing or endeavoring to enforce any rights against Tenant under or in
connection with this Lease or pursuant to law shall be paid by Tenant as
Additional Rent on demand; and/or
(d) Pursue in connection with any other remedies now or hereafter
available to Landlord under the laws or judicial decisions of the state of North
Carolina or this Lease.
The remedies provided under this Paragraph 19 are nonexclusive
and may be combined with other remedies hereunder available to Landlord for
Tenant's material default or breach hereunder.
20. Landlord's Defaults. Landlord agrees to use reasonable efforts to
-------------------
mitigate its damages in the event of any Tenant default. Landlord shall not be
in default under this Lease unless Landlord fails to perform obligations
required of Landlord within a reasonable time, but in no event later than thirty
(30) days after
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written notice by Tenant to Landlord and to the holder of any first mortgage or
deed of trust covering the Premises whose name and address shall have
theretofore been furnished to Tenant in writing, specifying wherein Landlord has
failed to perform such obligation; provided, however, that if the nature of
Landlord's obligation is such that more than thirty (30) days are required for
performance, then Landlord shall not be in default if Landlord commences
performance within such 30-day period and thereafter diligently pursues the same
to completion.
21. Subordination and Attornment
----------------------------
(a) Unless otherwise provided, and subject to Tenant's occupancy
not being disturbed, this Lease shall be automatically subordinate to any ground
lease, mortgage, deed of trust, or any other hypothecation or security now or
hereafter placed upon the Premises and to any and all advances made on the
security thereof and to all renewals, modifications, consolidations,
replacements and extensions thereof. If any mortgagee, trustee or ground lessor
shall elect to have this Lease prior to the lien of this mortgage, deed of
trust, or ground lease, and shall give written notice thereof to Tenant, this
Lease shall be deemed prior to such mortgage, deed of trust, or ground lease,
whether this Lease is dated prior or subsequent to the date of said mortgage,
deed of trust, or ground lease or the date of recording thereof.
(b) Tenant agrees to execute any documents required to effectuate
an attornment, a subordination, or to make this Lease prior to the lien of any
mortgage, deed of trust, or ground lease, as the case may be, provided such
mortgagee, beneficiary or lessee agrees, in writing, not to disturb Tenant in
its use and enjoyment of the Premises. Tenant's failure to execute such
documents within ten (10) days after written demand shall constitute a material
default by Tenant hereunder without further notice to Tenant.
22. Surrender. On the Expiration Date or upon the sooner termination of this
---------
Lease or upon re-entry by Landlord upon the Premises, Tenant shall surrender,
vacate, and deliver to Landlord the Premises, including all improvements,
additions, alterations, and replacements thereon, "broom clean" and in good
order, condition and repair except for ordinary wear, tear, and damage by fire
or other casualty or by Landlord, its employees, agents, invitees or
contractors. If the Premises are not surrendered upon the expiration or
termination of this Lease, Tenant hereby indemnifies Landlord against liability
resulting from delay by Tenant in so surrendering the Premises, including any
claims made by any succeeding Tenant or prospective Tenant founded upon such
delay. Tenant's obligations under this Paragraph 22 shall survive the
termination of this Lease.
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23. Holding Over. If Tenant shall hold over the expiration of the Term without
------------
Landlord's consent, then Tenant waives all notice to quit and agrees to pay
Landlord for the period that Tenant is in possession after the Expiration Date,
monthly rent which is one hundred and twenty-five percent (125%) of the Rent
applicable to the last month of this Lease. Tenant expressly agrees to hold
Landlord harmless from all loss and damages, direct and consequential, which
Landlord may suffer in defense of claims by the parties against Landlord arising
out of the holding over by Tenant, including, without limitation, reasonable
attorneys' fees which may be incurred by Landlord in defense of such claims.
Acceptance of Rent by Landlord subsequent to the Expiration Date shall not
constitute consent to any holding over. Landlord shall have the right to apply
all payments received after the Expiration Date toward payment for use and
occupancy of the Premises subsequent to the Expiration Date and toward any other
sums owed by Tenant to Landlord. Landlord, at its option, may forthwith reenter
and take possession of the Premises without process or by any legal process in
force.
24. Quiet Enjoyment. Tenant, if and so long as it pays the Rent and performs
---------------
and observes the other terms and covenants as provided in this Lease, shall have
the peaceable and quiet possession of the Premises during the Term free of the
claims of Landlord or anyone claiming by, through or under Landlord, subject to
the terms of this Lease and any lease or mortgage referred to in Paragraph 21
hereof. This covenant shall be construed as a covenant running with the land and
shall not be construed as a personal covenant or obligation of Landlord.
25. Security Deposit. Tenant shall deposit with Landlord
----------------
simultaneously with the execution of this Lease, the amount stipulated in
Paragraph 1(k) as a security deposit. Provided Tenant is not in default in the
payment of any Rent or any other charges due Landlord and further provided the
Premises are left in good condition, reasonable wear and tear accepted upon the
Expiration Date or earlier termination of this Lease, the Security Deposit
(which shall not bear interest to Tenant) shall be returned to Tenant within
forty-five (45) days after the Expiration Date or earlier termination of this
Lease. If the Tenant is in default under this Lease or the Premises are not left
in good condition, reasonable wear and tear accepted, then the Security Deposit
shall be applied to the extent available on account of sums due Landlord or to
the cost of repairing damages to the Premises. If all or any part of the
Security Deposit is applied to an obligation of the Tenant hereunder while
Tenant is in possession of the Premises, Tenant shall immediately upon request
of Landlord, restore the Security Deposit to its original amount. Tenant shall
not have the right to call upon Landlord to apply any or all of the Security
Deposit to cure any default or fulfill any obligation of Tenant, but such use
shall be solely in the discretion of Landlord. Upon
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any conveyance by Landlord of its fee simple interest in the Building, the
Security Deposit may be delivered by Landlord to Landlord's grantee or
transferee, and upon such delivery, Landlord shall thereupon be released of any
and all liability with respect to the Security Deposit, its application and
return, and the Tenant agrees to look solely to such grantee or transferee.
26. Rules and Regulations. Tenant and its employees, agents, invitees and
---------------------
licensees shall faithfully observe and strictly comply with, and shall not
permit violation of, the Rules and Regulations. In case of any conflict or
inconsistency between the provisions of this Lease and any Rules and
Regulations, the provisions of this Lease shall control. Landlord shall have no
duty or obligation to enforce any Rule or Regulation, or any term, covenant or
condition of any other lease, against any other tenant, and Landlord's failure
or refusal to enforce any Rule or Regulation or any term, covenant or condition
of any other lease against any other tenant shall be without liability of
Landlord to Tenant. Landlord will make reasonable efforts to uniformly apply the
rules and regulations consistently to all comparable size tenants.
27. Miscellaneous.
-------------
(a) No agreement to accept a surrender of this Lease or of possession of
the Premises shall be valid unless in writing signed by Landlord. The delivery
of keys or possession to Landlord or any agent or employee of Landlord shall not
operate as a termination of this Lease or a surrender of the Premises.
(b) No provision of this Lease shall be deemed to have been waived by
Landlord or Tenant unless such waiver be in writing signed by the party making
such waiver. The failure of Landlord or Tenant to seek redress for violation of,
or to insist upon the strict performance of, any covenant or condition of this
Lease, shall not be deemed a waiver thereof or prevent a subsequent act, which
would have originally constituted a violation, from having all the force and
effect of an original violation.
(c) The receipt by Landlord of Rent with knowledge of the breach of any
covenant, warranty, or obligation by Tenant contained in this Lease shall not be
deemed a waiver of such breach. No payment by Tenant or receipt by Landlord of
a lesser amount than the Basic Rent herein stipulated shall be deemed to be
other than on account of the earliest Basic Rent reserved hereby which is due
and owing at the time such payment is received by Landlord. No payment by
Tenant or receipt by Landlord of a lesser amount than the Additional Rent herein
stipulated shall be deemed to be other than on account of the earliest
Additional Rent reserved hereby which is due and owing at the time such payment
is received by Landlord. No endorsement or statement on any check or any letter
accompanying any check or payment of any such Rent shall be deemed
24
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an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to remedy provided in this Lease. If
Tenant is in arrears in payment of Rent, Tenant waives Tenant's right, if any,
to designate the items against which any payments made by Tenant are to be
credited, irrespective of and notwithstanding any designation or requests by
Tenant as to the items against which any such payments shall be credited.
(d) This Lease and all attachments and exhibits hereto contain the entire
agreement between the parties, and no agreement, representation or inducement
shall be effective to change, modify or terminate this Lease in whole or in part
unless such agreement, representation or inducement is in writing and signed by
both parties hereto.
(e) Either party under this Lease at any time or from time to time at the
request of the other non-requesting party or at the request of the holder of any
lease or mortgage referred to in Paragraph 21 hereof, shall execute, acknowledge
and deliver to the party so requesting, a certificate certifying (i) that this
Lease has not been modified, changed, altered or amended in any respect and is
in full force and effect (or, if there have been modifications, stating the
modifications and that the Lease is in full force and effect as modified); (ii)
that this Lease is the only Lease between Landlord and Tenant affecting the
Premises (or specifying any other leases); (iii) that as the case maybe, Tenant
has accepted the Premises (or a part thereof), is in occupancy of the Premises,
or a part thereof and is paying all Rent hereunder, for which it is then liable
on a current basis; (iv) that there are then existing no credits, offsets or
defenses against the enforcement of any provisions of this Lease (and, if so,
specifying the same); (v) the dates, if any, to which the Rent or other charges
due hereunder have been paid in advance and that there has been no prepayment of
Rent other than as provided for in this Lease; (vi) that there are no existing
defaults by Landlord or Tenant under this Lease (or, if so, specifying such
default); (vii) whether or not Tenant has exercised any renewal options or other
options which may be provided in this Lease; (viii) that there are no actions,
whether voluntary or otherwise, pending against Tenant under the bankruptcy laws
of the United States or any insolvency laws of any state thereof; and (ix) such
further information with respect to the Lease or the Premises as Landlord or
Tenant, or such lessor or mortgagee may reasonably request. Any such certificate
may be relied upon by any prospective purchaser of the Land and Building or of
the interest of Landlord in any part thereof, by any mortgagee or prospective
mortgagee thereof, by any lessor or prospective lessor thereof, by any lessee or
prospective lessee thereof, or by any prospective assignee of any mortgage
thereof. The failure of Tenant to execute, acknowledge and deliver to Landlord a
statement in accordance with the provisions of this Paragraph 27(e) within 10
days after request therefor shall constitute an acknowledgment by Tenant, which
may be relied on by
25
<PAGE>
any person who would be entitled to rely upon any such statement, that such
statement as submitted by Landlord is true and correct.
(f) If any provision of this Lease should be held to be invalid or
unenforceable, such invalid and unenforceable provisions shall be stricken and
the validity and enforceability of the remaining provisions of this Lease shall
not be affected thereby.
(g) The terms, provisions and covenants contained in this Lease shall apply
to, inure to the benefit of, and be binding upon the parties hereto and their
respective heirs, personal representatives, successors and permitted assigns.
(h) Except in the instances specifically referenced hereunder, in the event
of any default or breach by Landlord with respect to any of the terms, covenants
and conditions of this Lease to be observed and performed by Landlord, Tenant
shall look solely to the estate and property of Landlord in the Land and
Building and in the rents therefrom and in any applicable insurance proceeds
and/or condemnation award to the extent allowed by this Lease for the collection
of any sum of money on a judgment, or for the payment or expenditure of any
money under any decree of specific performance, injunctive relief or other
equitable relief (or other judicial process) requiring performance by Landlord
of any obligation under this Lease. No other property or assets of the Landlord,
Landlord's agents, partners, principals (disclosed or undisclosed) or affiliates
shall be subject to levy, execution or other enforcement procedure for the
satisfaction of Tenant's remedies.
(i) The term "Landlord" shall mean only the owner at the time in question
of the present Landlord's interest in the Building and in the event of a sale or
transfer of the Building (by operation of law or otherwise), the transferor
shall be and hereby is automatically and entirely released and discharged, from
and after the date of such sale or transfer, of all liability in respect of the
performance of any of the terms of this Lease on the part of Landlord thereafter
to be performed.
(j) Neither Landlord nor Tenant shall record this Lease, any amendment to
this Lease, any agreement to lease, or any other memorandum of this Lease
without the prior written consent of the other party, and in the event such
consent is given, the party requesting such consent shall pay all transfer
taxes, recording fees and other charges in connection with such recording
notwithstanding any provision of law imposing liability therefor upon the other
party.
(k) Except as otherwise expressly set forth herein all notices, requests,
demands, approvals or consents required hereunder or by law shall be in writing
and shall be given by personal delivery or by mailing the same, certified or
registered mail, return receipt requested, postage prepaid, addressed if to
26
<PAGE>
Landlord to Landlord's Notice Address, and if to Tenant, to Tenant's Notice
Address. Such notices, requests, demands, approvals or consents shall be deemed
given upon such personal delivery or, if mailed, 2 business days after mailing.
The persons designated for the receipt of such, and the addresses to which such
may be given or made by either party, may be changed or supplemented by notice
given by such party to the other and notwithstanding the preceding sentence,
such notice (and therefore such new notice address) shall be effective 10 days
after mailing or delivery.
(1) Tenant warrants that it has not employed nor had any dealings or
discussions with any broker or agent in connection with the negotiation or
execution of an agreement to lease, a letter of intent to lease, or this Lease
other than Goodman, Segar, Hogan, Hoffler. Tenant agrees to indemnify Landlord
and hold it harmless from and against any and all liability for commissions or
other compensation or charges and all costs and expenses incurred in defense of
the claim if this warranty is breached other than those commissions or other
compensations to be paid to Goodman, Segar, Hogan, Hoffler by Landlord. In the
event of a suit on any such claim, Landlord shall notify and implied Tenant, or
Tenant may intervene. This warranty shall survive termination or expiration of
this Lease.
(m) If Tenant is a Partnership Tenant or if Tenant's interest in this Lease
shall be assigned to a Partnership Tenant, the following provisions shall apply
to such Partnership Tenant: (i) the liability of each of the parties comprising
Partnership Tenant shall be joint and several, (ii) each of the parties
comprising Partnership Tenant hereby consents in advance to and agrees to be
bound by, any modifications, termination, discharge, or surrender of this Lease
which may hereafter be made and by any notices, demands, requests, or other
communications which may hereafter be given, by Partnership Tenant or by any of
the parties comprising Partnership Tenant, (iii) any bills, statements, notices,
demands, requests, or other communications given or rendered to Partnership
Tenant or to any of the parties comprising Partnership Tenant shall be deemed
given or rendered to Partnership Tenant or to any of the parties comprising
Partnership Tenant and shall be binding upon Partnership Tenant and all parties,
(iv) if Partnership Tenant shall admit new partners, all such new partners
shall, by their admission to Partnership Tenant, be deemed to have assumed
performance of all of the terms, covenants, and conditions of this Lease on
Tenant's part to be observed and performed, and (v) Partnership Tenant shall
give prompt notice to Landlord of the admission of any such new partners.
(n) This Lease shall be deemed to be made under and shall be construed in
accordance with and governed by the internal laws of
27
<PAGE>
the State of North Carolina, without regard to principles of conflicts of laws.
(o) Tenant expressly acknowledges that (i) neither Landlord nor Landlord's
agents has made or is making any warranties, representations, promises, or
statements, except to the extent that the same are expressly set forth in this
Lease, (ii) that Tenant, in executing and delivering this Lease, is not relying
upon any such warranties, representations, promises, or statements, and (iii)
that no rights, easements, or licenses are or shall be acquired by Tenant by
implication or otherwise unless expressly set forth in this Lease.
(p) Tenant hereby waives any claim against Landlord, and Landlord hereby
waives any claim against Tenant, which it may have based upon any assertion that
the other party has unreasonably withheld or unreasonably delayed any consent
provided for in this Lease, and both parties agree that its sole remedy shall be
an action or proceeding to enforce any such provision or for specific
performance, injunction, or declaratory judgment. In the event of such a
determination, the requested consent shall be deemed to have been granted. The
sole remedy for either party unreasonably withholding or delaying of consent
shall be as provided in this Paragraph 27 (p).
(q) The terms of this Lease shall bind and benefit the successors and
assigns of the parties with the same effect as if mentioned in such instance
where a party is named or referred to, except that no violation of the
provisions of this Lease shall operate to vest any right in any successors or
assignee of Tenant.
28. Exhibits. Except as noted on the Table of Contents on page I of this
--------
Lease, the following exhibits are attached hereto and are made a part of this
Lease as if fully set out herein: (a) description of the Premises as set forth
in Exhibit A, "Description of Premises"; Exhibit A-1 "Premises, Plans and
Specifications"; (b) rules and regulations governing Tenant's occupancy of the
Premises as set forth in Exhibit B, "Rules and Regulations"; (c) general
cle1XTerm as set forth in Exhibit E, "Renewal of Term"; (f) a schedule of Basic
Rent as set forth in Exhibit F, "Basic Rent"; (g) a guaranty of Tenant's
obligations under the Lease as set forth in Exhibit G, "Guaranty of Lease"; (h)
other terms as set forth in Exhibit H, "Other Terms"; and (i) a glossary of
terms as attached hereto, "Glossary of Terms."
The Rider attached hereto is incorporated herein by reference.
28
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease under seal
on the day and year first above written.
LANDLORD :
PHOENIX LIMITED PARTNERSHIP OF RALEIGH
By: AAC RALEIGH, INC., General Partner
By:
-----------------------------------------------
President
-------------
ATTEST:
--------------------------------------------------
Secretary
------------
(CORPORATE SEAL)
TENANT:
ON Technology Corporation, a Delaware Corporation
-------------------------------------------------
By: /s/ Christopher A. Risley
--------------------------------------------------
CHRISTOPHER A. RISLEY President
---------------------
ATTEST :
/s/ John M. Bogdan
-----------------------------------------------------
JOHN M. BOGDAN Secretary
--------------
(CORPORATE SEAL)
29
<PAGE>
(ix) cost of removal of trash, rubbish, garbage, and other refuse from the
Building as well as removal of ice and snow from the sidewalks on or adjacent to
the Land;
(x) all supplies, tools, equipment and materials used in the operation and
maintenance of the Building;
(xi) straight line depreciation of the cost of any capital improvements
made to the Building subsequent to the Commencement Date (including, without
limitation, legal, architectural and engineering fees incurred in connection
therewith) to the extent permitted by the definition of Operating Expenses in
the Glossary.
(xii) all charges for gas, water, sewerage service, and other utilities not
separately metered and furnished to the Building;
(xiii) all electricity furnished to the Building, including without
limitation, electricity furnished to individual tenants of the Building, to the
common areas and public areas of the Building, and to the machinery and
equipment including any heating, ventilation, and air-conditioning equipment
used in the operation and maintenance of the Building;
(xiv) janitorial service, including service to areas of the Building leased
to tenants;
(xv) every other expense which would be considered as an expense of
maintaining, operating, insuring, managing, or repairing the Building; and
(xvi) management fees payable to any managing agent of the Building, or, if
there is no managing agent, an allowance for management, overhead and
administration equal to 4% of the gross revenues of the Building (including,
without limitation, all Basic Rent and Additional Rent).
INITIALS JMB
--------------------
D - 2
<PAGE>
EXHIBIT E
RENEWAL OF TERM
If Tenant is not in default beyond the expiration of applicable grace,
notice and cure periods, in any of the terms, conditions, or covenants of this
Lease, and with the mere passage of time will not be in default beyond the
expiration of applicable grace, notice and cure periods of any term, condition
or covenant of this Lease, at the time Tenant gives notice to extend the Term as
contemplated below and at the end of the Term (without regard to the extension),
then the Tenant is hereby granted an option to extend the Term of this Lease for
two (2) additional terms of three (3) years each upon the same terms and
conditions contained in this Lease, except that the Basic Rent for each renewed
term shall be equal to the then negotiated market rate between Landlord and
Tenant negotiated by Landlord and Tenant in good faith but with respect to the
first extension period in no event to exceed $18.90 per Rentable Square Feet in
the Premises, and with respect to the second extension period not to exceed
$19.85 per Rentable Square Feet in the Premises. If Tenant desires to extend the
Term of this Lease, then Tenant shall notify the Landlord of its intention to
renew no later than six (6) months prior to the Expiration Date (without regard
to the extension), and upon such notice, the Term shall be deemed to include the
extension and the Expiration Date shall be adjusted accordingly.
E-1
<PAGE>
EXHIBIT F
BASIC RENT
The Basic Rent over the Term shall be as follows:
<TABLE>
<CAPTION>
Agreed upon
Month of Tenant Occupancy Rental Rate Monthly Installment of
From the Commencement Date Per RSF Basic Rent
- -------------------------- ------- ----------
<S> <C> <C>
Month 1 through 60 $18.00 $10,260.00
----- ----- -------- -----------
</TABLE>
The monthly installment of Basic Rent due for the first month of Tenant's
occupancy of the Premises shall be prorated in accordance with Paragraph 5(b) of
the Lease.
F-1
<PAGE>
EXHIBIT G
GUARANTY OF LEASE
None
G - 1
<PAGE>
EXHIBIT H
OTHER TERMS
1. Parking
During the Term of the Lease as the same may be extended as provided herein,
Landlord, at its sole cost, shall provide twenty four (24) parking stalls in
the Cabarrus Street Parking Garage and one (1) handicapped parking space on
the blue level of the Fayetteville Street Mall Parking Garage adjacent to
the Building. Landlord agrees to have completed, at its sole cost, by the
Commencement Date, adequate handicapped access from said Mall Garage to the
Building. If during the term of the Lease as the same may be extended as
provided herein, Landlord, despite its best efforts to maintain one (1)
handicapped parking space on the blue level of the Fayetteville Street Mall
Parking Garage, can no longer provide such handicapped parking space to
Tenant, Landlord agrees to provide, at its sole cost, a replacement
handicapped parking space reasonably acceptable to Tenant. Landlord agrees
that Tenant will have a parking preference over any subsequent tenants in
the Building for the Term of this Lease relating to parking stalls in the
Cabarrus Street Parking Garage in the event of any reallocation of parking
spaces within that parking garage by the owner thereof. If Tenant exercises
an Expansion Option or the Refusal Right as described in this Exhibit H,
Landlord, at its sole cost, shall provide Tenant with parking spaces in the
Cabarrus Street Parking Garage (or in such other relevant parking facility)
at a ratio of three (3) parking stalls per 1,000 rentable square feet of
leased expansion area. Tenant acknowledges that the Cabarrus Street Parking
Garage is owned by The City of Raleigh and Landlord cannot guaranty
continuing availability of spaces in that facility; provided, however,
Landlord agrees to use reasonable efforts to maintain its arrangements at
that facility throughout the Term and any extensions subject only to fire,
casualty or condemnation. If The City of Raleigh terminates its arrangement
with Landlord for parking in the Cabarrus Street Parking Garage, Landlord,
at its sole cost, shall provide Tenant with twenty-four (24) parking spaces
(or such other relevant number of spaces if the Premises has been expanded)
in the 411 South McDowell Street Parking Lot, which lot is owned by
Landlord. Tenant acknowledges that the McDowell Street Parking Lot is not a
covered parking deck and agrees that if Landlord is unable to provide the
required number of spaces in the Cabarrus Street Parking Garage, Landlord's
provision of the required number of spaces in the McDowell Street Parking
Lot is acceptable to Tenant, subject to the Rent Credit described
hereinbelow. If, during the Term of the Lease, Landlord is unable to provide
the required
H - 1
<PAGE>
number of parking spaces to Tenant in the Cabarrus Street Parking Garage or
in the McDowell Street Parking Lot, Landlord agrees to provide the required
number of parking spaces, at Landlord's sole cost, within reasonable
proximity to the Building, such parking facility to be reasonably acceptable
to Tenant. If Tenant notifies Landlord that the substitute parking spaces to
be provided by Landlord are not reasonably acceptable to Tenant, Landlord
and Tenant agree to submit the issues of such reasonableness to an
arbitrator in Wake County, North Carolina acceptable to Landlord and Tenant,
the agreement on such arbitrator to be made during a reasonable period of
time after Tenant's notice to Landlord; provided, however, the
reasonableness of any substitute handicapped parking space shall not be the
subject of arbitration. The sole issues to be decided by the arbitrator is
whether the substitute parking proposed to be provided to Tenant by Landlord
is reasonable given the proximity to the Building of the substitute parking,
other parking facilities available in reasonable proximity to the Building,
the cost and current availability of other substitute parking in the
downtown Raleigh area, and the parking facilities made available by owners
of other first class buildings in downtown Raleigh to their tenants.
Landlord agrees to bear the costs of this arbitration, not including
Tenant's attorneys' fees, expert fees, or travel expenses.
In the event Landlord cannot provide parking spaces in the Cabarrus Street
Parking Garage and does provide Tenant parking spaces in the McDowell Street
Parking Lot, Landlord agrees that from the date the Cabarrus Street Parking
Garage spaces become unavailable to Tenant, Landlord shall credit again Rent
------
an amount equal to the difference between the cost at market rate of the
spaces in the Cabarrus Street Parking Garage previously provided to Tenant
and the cost at market rates of the spaces in the McDowell Street Parking
Lot provided to Tenant in replacement thereof. Landlord and Tenant agree to
execute and deliver to the other a memorandum stating such credit and, if
desired by either party, an amendment to the Lease reflecting the reduction
in the Rent as a result of such credit.
If the arbitrator selected above determines that the parking proposed to be
provided to Tenant is not reasonable, Tenant shall have the option to
terminate the Lease within ninety (90) days after such determination. If
Tenant elects not to terminate the Lease, Tenant shall receive a credit
against Rent from the date that the McDowell Street Parking Lot spaces
became unavailable in an amount equal to the different between the cost at
market rates of the spaces in the McDowell Street Parking Lot and the cost
at market rates of the substitute parking spaces provided to Tenant by
Landlord. In the event Tenant exercises its option to terminate the Lease
pursuant to this paragraph, Tenant shall specify in its written notice to
H - 2
<PAGE>
exercise this Option, it must do so by written notice to Landlord by ninety
(90) days before the end of the fifteenth month after the month in which the
Commencement Date occurs, time being of the essence.
(C) Tenant shall have the option to lease 2,785 rentable square feet of
the Option One Space as shown on Exhibit A (the "Option Three Space").
If Tenant desires to exercise this Option, it must do so by written
notice to Landlord by ninety (90) days before the end of the
eighteenth month after the month in which the Commencement Date
occurs, time being of the essence.
(D) Any Expansion Option, if exercised, must result in the expansion space
being contiguous to the then existing Premises. Notwithstanding the
foregoing, if Tenant shall (I) not have exercised its option with
respect to any of the above referenced space, or (ii) have exercised
its option with respect to some of said space, Tenant shall have a
continuing right of first refusal on 100% of the remaining rentable
square footage on the sixteenth (16th) floor ("Refusal Space"),
provided Landlord received a bonafide offer from an unrelated third
party to lease any portion of the Refusal Space. Landlord shall give
Tenant written notice ("Landlord's Notice") thereof prior to Landlord
entering into a lease for the Refusal Space, which notice shall
specify (I) the portion of the Refusal Space that Landlord desires to
lease and (ii) the date upon which the Refusal Space shall be
available for occupancy .
After receipt of Landlord's Notice, Tenant shall thereupon have the right
(the "Refusal Right") to lease all, but not less than all, of the Refusal
Space described in Landlord's Notice for a term commencing on the available
occupancy date for such Refusal Space (as specified in Landlord's Notice)
and ending on the Expiration Date. Tenant's rights of first refusal shall
continue with respect to any of the Refusal Space not leased within 120 days
of Tenant's receipt of Landlord's Notice under the terms of such offer. The
Refusal Right is conditioned upon timely compliance with the following terms
and conditions:
(a) Tenant shall give Landlord written notice of its election to
exercise the Refusal Right within five (5) days after Tenant's receipt
of Landlord's Notice; and
(b) The Lease shall be in full force and effect and Tenant shall not
be in breach or default under this Lease beyond any applicable grace
or cure period on the date Tenant exercises the Refusal Right or,
unless waived in writing by Landlord, on the proposed commencement
date of this Lease as applicable to the Refusal Space.
H - 3
<PAGE>
(c) In the event the Premises are expanded pursuant to any properly
and timely exercised Expansion Option or Refusal Right, Tenant shall
occupy the Option One Space, the Option Two Space, the Option Three
Space, or Refusal Space, as the case may be, under the same terms and
conditions applicable to the Premises (except as specified to the
contrary in this paragraph), including, without limitation,
commencement of Rent on the earlier of the date that such expansion
area is Ready for Occupancy or the date of Tenant's use and occupancy
thereof for the conduct of its business; provided, however, the Upfit
Allowance applicable to the Expansion Option Space or Refusal Space
shall be proportionate to the time remaining in the initial Term of
the Lease running from the date of commencement of Rent as provided
earlier in this paragraph; provided further, however, if the
Expansion Area or the Refusal Space is not Ready for Occupancy within
ninety (90) days after the date Landlord and Tenant have agreed on
the plans and specifications for the build out of the Expansion Area
or the Refusal Space and such delay by Landlord is not excused by
forces beyond the reasonable control of Landlord and Landlord shall
have contemporaneously notified Tenant such delays, the time
remaining in the initial Term of the Lease shall be deemed to run
from the ninety-first (91st) day after Landlord's and Tenant's
agreement on such plans and specification. Notwithstanding the
foregoing, if the Expansion Area or the Refusal Space is not Ready
for Occupancy by the 150th day after Landlord and Tenant have agreed
on the plans and specifications for the build out of such space and
such delay is not substantially attributable to delays caused by
Tenant, Tenant shall have the option to rescind its exercise of its
Expansion Option or its Refusal Rights, as the case may be, without
liability to Landlord with respect to such space or such exercise. If
the space has been previously improved and, in Tenant's reasonable
opinion, the quality and extent of the build-out therein is
comparable to the Premises, then Landlord shall only be required to
pay for new carpeting, painting, and removal of the demising wall and
other demolition and rewiring Tenant may request to integrate the
Premises and such expansion space. Landlord and Tenant agree to
execute and deliver an amendment to this Lease to add any expansion
space to the Premises.
4. Capital City Club Membership - Landlord agrees to assist Tenant in obtaining
an initiation rate of $300 per member to join the Capital City Club. Tenant
to pay 100% of all membership costs, including the initiation rate. Landlord
does not have any control over increases in the initiation rate that the
Capital City Club may impose, and makes no
H - 4
<PAGE>
guarantee to Tenant that the initiation rate will remain at $300 over the
Lease term.
H - 5
<PAGE>
GLOSSARY OF TERMS
For purposes of this Lease:
(a) Building means the building improvements (not including the
parking garage underneath) commonly known as BB&T Two Hannover Square located
upon the Land.
(b) Building Standard means the materials and work which
Landlord purchases or obtains in quantity from its suppliers or contractors for
general use in finishing premises in the Building for individual tenants,
including but not limited to:
(i) 8'6" sheet rock, smooth-seamed walls, 2 coats of Duron
paint selected from Landlord's standard color boards;
(ii) 2'x 2' celotex ceiling tile with reveal edge;
(iii) 2'x 4' Lithonia fluorescent lights with parabolic
lenses;
(iv) 8' solid-core doors, stained mahogany, with metal
frames;
(v) Russwin polished chrome handled mortised locks;
(vi) Shaw Cypress Point III 30 oz. carpet with a 4" carpet
base, selected from Landlord's color boards;
(vii) one HVAC VAV box for every 600 square feet with
controls and diffusers;
(viii) Levelor mini-blinds in neutral gray;
(ix) one sprinkler system head per 150 square feet.
(C) Business Days means all days other than Saturdays, Sundays
and days proclaimed as legal holidays by the state of North Carolina, the city
of Raleigh or the Federal Government provided that upon such holidays,
professional businesses, such as law or accounting firms, are not generally open
for business.
(d) Business Hours means the hours from 8 a.m. to 6 p.m., on
Business Days and from 8:00 a.m. to 1:00 p.m. on Saturday, exclusive of (i) New
Year's Day, (ii) Memorial Day, (iii) Independence Day, (iv) Labor Day, (v)
Thanksgiving Day, and (vi) Christmas Day.
(e) Change Costs means the total of (i) all costs or expenses incurred by
Landlord as a result of any change in Tenant's Plans or in any of Tenant's other
plans or specifications, including, without limitation (whether or not the
change is to Landlord's Work), costs or expenses relating to (i) any additional
architectural or engineering services, (ii) any changes to
Glossary - 1
<PAGE>
materials in process of fabrication, (iii) cancellation or modification of
supply or fabric contracts, (iv) removal or alteration of work or plans
completed or in process, and (v) the cost of obtaining and maintaining any
additional governmental permits and authorizations which may be required in
connection with Tenant's Changes.
(f) Design Completion Date means the date no later than ten
Business days after completion of the design, construction and engineering plans
and specifications and the receipt of the bids by general contractors in
accordance with the procedures set forth in Paragraph 4 (b).
(g) Hazardous Substance means any substance which is toxic,
ignitable, reactive, or corrosive and which is regulated by any local
government, the state of North Carolina, or the United States Government, and
includes any and all material or substances which are defined as "hazardous
waste," "extremely hazardous waste," or a "hazardous substance" pursuant to
state, federal, or local governmental law, including but not limited to
asbestos, polychlorobiphenyls ("PCB's") and petroleum but shall not mean any
cleaning supplies, office supplies and product derived therefrom in the ordinary
course of Tenant's business.
(i) Insurance Requirements means all requirements of any
insurance policy covering or applicable to all or any part of the Land, the
Building or the Premises or the use thereof, all requirements of the issuer of
any such policy and all orders, rules, regulations, recommendations and other
requirements of the local board of fire underwriters or any other body
exercising the same or similar functions and having jurisdiction or cognizane
of all or any part of the Land, the Building or the Premises.
(j) Land means that certain subdivided parcel of land
constituting a separate tax parcel for ad valorem tax purposes described in a
deed recorded in Book 5504, Page 335, Wake County Registry.
(k) Landlord's Work means the engineering described in
Paragraph 4(d) of the Lease, Building Standard work, and all work designated on
Tenant's Plans. In no event shall kitchen, appliances, furniture, trade fixtures
or decorative effects (such as drapes and pictures), office equipment or
telephone installations be a part of Landlord's Work.
(1) Latent Defects means any defects in Landlord's Work that
were not known or reasonably discoverable by Tenant by observation or inspection
within 60 days after the Commencement Date.
(m) Legal Requirements means all laws, statutes and
ordinances (including building codes and zoning regulations and ordinances) and
the orders, rules, regulations, directives and requirements of all federal,
state, county and city departments, bureaus, boards, agencies, offices,
commissions and other subdivisions thereof, or of any official thereof, or of
any other governmental, public or quasi-public authority, whether now or
hereafter in force, which may be applicable to the Land, the Building or the
Premises, or any part thereof, and all requirements, obligations and conditions
of all instruments of record affecting the Land and the Building.
Glossary - 2
<PAGE>
(n) Operating Expenses means all expenses relating to the
Building, covered walkways, tunnels, or other means of access to the Building,
and all expenses and costs (but not specific costs which are allocated or
separately billed to and paid by specific tenants) of every kind and nature
which Landlord shall pay or become obligated to pay because of or in connection
with owning, operating, managing, painting, repairing, insuring, cleaning,
maintaining, decorating, securing, and replacing components or systems in the
Building in accordance with generally accepted accounting principles
consistently applied, including, but not limited to, Taxes and the items
enumerated in Exhibit D annexed hereto; provided, however, notwithstanding any
-----------------
thing herein to the contrary or in Exhibit D, Operating Expenses shall not
include amounts paid for capital expenditures other than those that result in a
net savings on Operating Expenses; leasing commissions; special tenant
inducements; accounting, tax or their services rendered for the benefit of
Landlord; management fees in excess of four percent (4%) or prevailing market
rates, whichever is lower; or administrative fees or overhead in excess of seven
percent (7%) of other Operating Expenses, Hazardous Substance abatement or
removal costs; any losses not covered by insurance; advertising, promotional or
other expenses related to tenant procurement; ground rent; indebtedness covering
the Building; lease enforcement costs; depreciation; penalties or fines.
(o) Partnership Tenant means a partnership of two (2) or more
persons or entities, individually, or as joint ventures or as copartners of a
partnership.
(p) Public Areas means the common areas, the sidewalks,
driveways, public entrances, passageways, doors, doorways, corridors, elevators,
stairs, toilets, and other public portions of the Building and the Land.
(q) Ready for Occupancy has the definition ascribed to it in
Paragraph 3(b) hereof.
(r) Rent means Basic Rent and Additional Rent.
(s) Rentable Square Feet means Tenant's prorata share of the
square footage of the entire Building floor, excluding major vertical
penetrations for stairs, elevator shafts, pipe shafts, vertical air ducts, etc.,
which serve more than one floor of the Building, as further defined by BOMA
National Standards.
(t) Rules and Regulations means those attached to this Lease as
Exhibit B and such reasonable changes therein as Landlord hereafter may make and
communicate to Tenant.
(u) Taxes means all taxes, assessments, and governmental
charges, whether or not directly p aid by Landlord, whether federal, state,
county, or municipal and whether by taxing district or authorities presently
taxing the Building and the Land or by others subsequently created or otherwise,
and any other taxes and assessments attributable to the Land and the Building or
its operation, excluding, however, federal and state taxes on income, death
taxes, franchise taxes, and any taxes imposed or measured on or by the income of
Landlord from the operation of the Building or imposed on Landlord's profit in
connection with any change of owners hip of the Building; provided, however,
that if at any time during the Term the present method of taxation or assessment
shall
Glossary - 3
<PAGE>
be so changed that the whole or any part of the taxes, assessments, levies,
impositions, or charges so levied, assessed, or imposed on real estate and the
improvements thereof shall be discontinued and as a substitute therefor, or in
lieu of an addition thereto, taxes, assessments, levies, impositions, or charges
shall be levied, assessed and/or imposed wholly or partially as a capital levy
or otherwise on the rents received from the Building or the substitute or
additional taxes, assessments, levies, impositions, or charges, to the extent so
levied, assessed, or imposed, shall be deemed to be included within Taxes to the
extent that such substitute or additional tax would be payable with respect to
the Land and the Building were they the only property of the Landlord subject to
such tax.
(v) Tenant's Operating Payment means an amount equal to Tenant's
Proportionate Share of the amount by which Operating Expenses for a calendar
year exceeds the Base Factor. In no event shall Tenant be liable for Tenant's
Operating Payment in excess of the previous year's Tenant Operating Payment
times 1.05.
(w) Tenant's Changes means changes to Tenant's Plans
requested by Tenant subsequent to final construction drawings and which are
consented to by Landlord, which consent shall not be unreasonably withheld,
delayed, or conditioned. If Landlord fails to respond to a request for such
consent within the period of seven (7) days after such request is made, such
consent shall be deemed given by Landlord.
(x) Tenant's Plans means the plans and specifications for the
build-out or upfit of the Premises as approved by Landlord and Tenant in
accordance with Paragraph 4 (b).
(y) Tenant's Work means any work not shown on or reasonably
inferrable from Tenant's Plans, or shown on Tenant's Plans but not designated as
Landlord's Work thereon.
(z) Unavoidable Delays means any delays caused by other tenants,
war, civil commotion, riot, acts of God, strikes or other labor disputes,
governmental restrictions, regulations or actions, fire or other casualty,
shortage or unavailability of labor or materials obtainable on reasonable terms
or any other factors beyond the control of Landlord, whether similar or not to
any of those listed above.
(aa) Useable Square Feet or Useable Square Foot means that
portion of the Premises leased by Tenant exclusive of common areas, bathrooms,
elevator shafts and hallways accessible by other tenants as further defined in
accordance with BOMA National Standards.
(bb) Work means Landlord's Work and that portion of Tenant's
Work to be performed by Landlord, through its employees, agents, and
contractors.
Glossary - 4
<PAGE>
RIDER TO LEASE BETWEEN
PHOENIX LIMITED PARTNERSHIP OF RALEIGH ("LANDLORD")
and
ON TECHNOLOGY CORPORATION ("TENANT")
concerning Suite 1600 on the sixteenth floor
at Two Hannover Square, Raleigh, North Carolina
--------------------
The terms and provisions of this Rider are hereby incorporated into and
made a part of that certain Lease, dated as of November 5, 1996, between
Landlord and Tenant for the above-described premises (such Lease and this Rider
are collectively referred to herein as the "Lease"); however, in the event any
provision of the Lease form is in conflict or inconsistent with any provision of
this Rider, the provision in this Rider shall govern and prevail.
All defined terms in the Lease form shall have the same meaning as set
forth in the Lease if such terms are used in this Rider, unless specifically
provided otherwise in this Rider.
4. Ready for Occupancy
(a) Notwithstanding anything in the Lease to the contrary, the following
items must be completed prior to the Premises being deemed "Ready for
Occupancy":
1. carpets shall have been laid;
2. all exterior and all other doors shall have been installed, with all
locks in working order;
3. all painting shall have been completed (except touch-up);
4. all electric facilities, plumbing and sprinklers shall have been
installed and working;
5. all HVAC, including, without limitation, any supplemental HVAC, having
been installed and initially balanced and in working order (with
further balancing and adjustments as seasonably required after
occupancy);
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<PAGE>
6. all of Tenant's signs and directory listings shall have been installed
by Landlord at Landlord's expense; and
7. Tenant's employees shall have been provided card access to the Building
security system and Tenant has received twenty-five access cards to the
Cabarrus Street parking garage.
(ii) Landlord shall deliver to Tenant a written notice of the
anticipated date that the Premises are "Ready for Occupancy" at least ten (10)
days prior to the actual date the Premises are Ready for Occupancy (the "10-Day
Notice"). In no event shall the Commencement Date occur before the date
contained in the 10-Day Notice. If, in Landlord's reasonable judgement, it
appears that the Landlord's Work will not be completed on or before the date
specified in the 10-Day Notice, Landlord shall deliver to Tenant additional
written notice(s) (the "Subsequent Notice(s)") of the anticipated date that the
Premises are Ready of Occupancy (the "Revised Date(s)"). If a Subsequent Notice
is required to be given hereunder, in no event will the Commencement Date occur
until the expiration of ten (10) business days after the Revised Date(s).
(iii) Notwithstanding anything in the Lease to the contrary, (i) all
references in the Lease to Upfit Allowance (except in Paragraph 4(c) and 4(f) of
the Lease with respect to Tenant's Changes and Change Costs only and Exhibit H
of the Lease) are hereby deleted; (ii) Landlord and Tenant acknowledge that the
plans and specifications attached hereto as Exhibit A-1, consisting of 1 (one)
page, dated October 25, 1996, constitute "Tenant's Plans" and describe
"Landlord's Work"; (iii) Landlord shall complete all of Landlord's Work and
provide all of the equipment depicted on Tenant's Plans at Landlord's sole cost
and expense, including, without limitation, any non-Building Standard work and
equipment described therein; (iv) the provisions of Paragraph 4(h)(i)(A) and
4(D) do not apply.
6. Taxes. Landlord shall pay all Taxes to the appropriate taxing authority
before the same become delinquent and any betterments assessed shall be paid on
an installment basis for the maximum period of time permitted by law.
8. Subletting and Assignment. Notwithstanding the provisions of the Lease
to the contrary, Tenant may, without Landlord's consent, assign this Lease to a
corporation or other business entity (herein called a "successor corporation")
into or with which, Tenant shall be merged or consolidated or to which all or
substantially all of Tenant's stock or assets may be transferred, provided such
successor corporation has a net worth (determined in accordance with generally
accepted accounting principles) at least equal to that of Tenant prior to such
merger, consolidation
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ii
<PAGE>
or transfer; sublet any part(s) of the Premises to a corporation or other
business entity (herein called a "related corporation") which shall control, be
controlled by, or be under common control or affiliated with, Tenant; and permit
any related corporation of Tenant to use the Premises, or any part thereof; and
assign this Lease to a related corporation of Tenant. In addition, the
acquisition by Tenant of all or substantially all of the stock or assets
together with the assumption of all or substantially all of the obligations and
liabilities of any corporation shall be deemed a merger for the purposes hereof;
and any sale, or public or private offering, of stock in Tenant shall not be
deemed to be an assignment hereof and shall not require Landlord's consent. As
used hereinabove, the term "Tenant" shall mean its corporate successors and
permitted assigns. If Landlord and an assignee of Tenant amend the Lease, Tenant
shall not be liable for the performance and observance of the obligations to be
performed by the assignee pursuant to the provisions of the amended portions of
the Lease to the extent such amendments constitute increased obligations. If any
of those transfers occur Tenant will send Landlord copy of documentation of the
transfer within a reasonable time of transfer thereof.
Nothing in this Rider modifies the provisions of the Lease pertaining to
Tenant's continuing liability notwithstanding any assignment of subletting.
12. Building Operations. Throughout the Term, Landlord agrees that the
Building will be managed, operated and maintained, and services provided in
accordance with the highest and best standards of quality generally followed in
class "A" office buildings in Raleigh, North Carolina. Landlord makes no
warranty or representation regarding compliance of the Building and the Public
Areas with the American Disabilities Act ("ADA"); compliance of the Building and
the Public Areas with the ADA, however, is the responsibility of Landlord.
Landlord agrees that it will respond promptly on a case-by-case basis to any
complaint that the Building or the Public Areas does not comply with ADA,
including taking all action required by governmental authorities to correct the
non-complying condition. Any costs incurred in connection therewith by Landlord
shall not be included in "Operating Expenses".
15. Limitation of Liability. The provisions of the Lease pertaining to
damage to persons or property (including, without limitation, the Premises)
shall not apply to the extent any such damage is covered by Landlord's insurance
or would have been so covered had Landlord carried said insurance.
16 and 17. Casualty Damage and Eminent Domain. If the Building or the
Public Areas are not repaired or restored by Landlord as aforesaid within one
hundred eighty (180) days after the occurrence of casualty destruction or
damages for any reason whatsoever, or if the Premises are damaged by fire or
other casualty during the last year of the term then Tenant may, at its option,
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<PAGE>
terminate this Lease by notice to Landlord at any time thereafter, but not prior
to the completion of such repair or restoration by Landlord as aforesaid.
Notwithstanding the foregoing to the contrary, if there is damage or destruction
in the Building or taking of a portion of the Building not affecting the
Premises and Landlord is entitled to terminate this Lease pursuant to the
foregoing provisions of the Lease, Landlord may terminate this Lease only if all
other leases then in effect for tenants in the Building are also terminated by
Landlord.
21. Non-Disturbance Agreement. Landlord hereby warrants and represents
that, as of the date hereof: (a) the only mortgage or deed of trust affecting
the Building or Land in existence is with Branch Bank and Trust Company; and (b)
there is no ground Lease affecting the Land or Building. Tenant's obligations
hereunder are expressly conditioned upon Landlord delivering a subordination and
non-disturbance agreement ("SNDA") from said holder by the Commencement Date,
failing which, Tenant may, at its option, terminate this Lease. With respect to
any future mortgage, deed of trust or ground lease, notwithstanding the
provisions of the Lease to the contrary, Tenant's obligations to subordinate and
attorn or to otherwise recognize the priority of such interests shall be
expressly conditioned upon each such mortgagee, trustee or ground lessor
executing and delivering to Tenant an SNDA. The SNDA shall contain provisions
that are reasonably acceptable to Tenant and such mortgagee, trustee, or ground
lessor, including, with respect to Tenant, provisions to the effect that so long
as Tenant performs the obligations imposed upon Tenant under the Lease within
the applicable notice, grace or cue period, its tenancy will not be disturbed,
nor its rights or benefits under this Lease affected by, any default under such
mortgage, deed of trust or ground lease, nor shall Tenant be named as a
defendant in any foreclosure proceeding.
(b) Minimizing Interferences. Landlord covenants and agrees that in
exercising any of its rights and performing its obligations set forth herein,
Landlord shall use reasonable efforts to minimize inconvenience and interference
with Tenant's business and operations and use and enjoyment of the Public Areas
and shall cause or permit no unreasonable obstruction or diminution of the
Premises or access or egress thereto or therefrom. In addition, Landlord shall,
at its own cost and expense, promptly repair and restore the Premises and
Building to the condition they were in immediately prior to said exercise of
rights or performance of obligations as is practicable.
(c) Access. Tenant and its employees shall be allowed 24-hour access to the
Building and Premises, 365 days per year, subject to such security and safety
measures which Landlord may from time to time reasonably implement.
(d) Environmental Matters. Landlord represents and warrants to Tenant that
as of the date hereof (i) to Landlord's best knowledge, there is no asbestos or
asbestos containing materials in the Building and (ii) Landlord has not received
notification of any kind from any regulatory agency stating, and has or
knowledge or belief, that the Building or Land are identified as containing, or
targeted for cleanup of, any Hazardous Substance.
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<PAGE>
EXHIBIT 10.2
SUBLEASE
--------
Parties
THIS SUBLEASE, dated as of the 7th day of November, 1996 (this "Sublease")
between Davinci Systems Corporation, a Delaware corporation having an address of
c/o ON Technology Corporation, One Cambridge Center, 6th Floor, Cambridge,
Massachusetts 02142 (the "Sublessor") and Northern Telecom Inc., a Delaware
corporation having an address of 2221 Lakeside Blvd., Richardson, Texas 75082
(the "Subtenant").
Recitals
A. Sublessor is tenant under a Lease Agreement dated as of August 9, 1994,
as amended by First Amendment to Lease Agreement dated January 31, 1996
(collectively, the "Main Lease") for certain premises (the "Leased Premises")
containing approximately 33,118 square feet of rentable area of the building
("Building") known as Enterprise One, 507 Airport Blvd., Morrisville, North
Carolina, owned by Perimeter Park West Associates Limited Partnership, a North
Carolina limited partnership having an address c/o Lichtin Properties, Inc.,
1800 Perimeter Park Drive, Suite 200, Morrisville, North Carolina (the "Main
Landlord").
B. Sublessor wishes to sublease to Subtenant, and Subtenant wishes to
sublease from Sublessor, the entire Leased Premises outlined in blue on
Exhibit A hereto (the "Subleased Premises") pursuant to the terms set forth
- ---------
below.
Terms
1. DEMISE AND TERM. Sublessor leases to Subtenant, and Subtenant hereby
---------------
leases from Sublessor, the Subleased Premises. The term of this Sublease (the
"Term") shall commence (the "Commencement Date") on November 1, 1996 and shall
----------------
end ("Expiration Date") on October 31, 1999 (unless sooner terminated as
----------------
provided in this Sublease). This Sublease shall terminate in the event the
Main Lease terminates. Sublessor shall have no liability to Subtenant in the
event the Main Lease is terminated for any reason whatsoever, except only in the
event Sublessor shall have breached the Main Lease and such breach is unrelated
to the failure of Subtenant to fully pay, perform and observe its obligations
hereunder.
2. RENT. (a) Subject to the November Rent Credit and the Use and
----
Occupancy Fee Credit described in Section 2(b) hereinbelow, Subtenant shall pay
to Sublessor (i) fixed rent ("Fixed Rent") in the amount of Twenty-Five Thousand
--------------------
Eight Hundred Four and 44/100 ($25,804.44) per month (based upon $9.35
- ----------------------------------------------------
1
<PAGE>
per square foot of rentable floor area in the Subleased Premises) commencing
December 1, 1996 (for the month of December, 1996) and continuing on the first
(1st) day of each month during the Term (for each subsequent calendar month
during the Term), and (ii) additional rent (including, without limitation,
monthly payments for Taxes, insurance, CAM Expense described in Paragraph 2 of
--------------
the Main Lease ["Pass-Through Costs"]) and all other monetary consideration set
- --------------
forth in the Main Lease in the same amount payable by Sublessor to Main Landlord
under the Main Lease with respect to the Subleased Premises (collectively, the
"Additional Rent"). The Fixed Rent and Additional Rent is hereinafter
collectively referred to as the "Rent". Rent shall be paid not later than the
due date thereof under the Main Lease, without notice or demand, and without
deduction, abatement, counterclaim or setoff of any amount or for any reason.
Rent shall be paid to Sublessor in lawful money of the United States at the
address of Sublessor set forth above or to such other person and/or at such
other address as Sublessor may from time to time designate by notice to
Subtenant. No payment by Subtenant or receipt by Sublessor of any less amount
than the amount stipulated to be paid hereunder shall be deemed other than on
account of the earliest stipulated Rent; nor shall any endorsement or statement
on any check or letter be deemed an accord and satisfaction, and Sublessor may
accept any check or payment without prejudice to Sublessor's right to recover
the balance due or to pursue any other remedy available to Sublessor.
(b) Notwithstanding the provisions of Section 2(a) hereinabove, Subtenant
shall (i) not be required to pay any Fixed Rent or Additional Rent for the month
of November, 1996 ("November Rent Credit") and (ii) be entitled to deduct from
Rent the "Use and Occupancy Fee Credit" which is defined in Section 11
hereinbelow. Subtenant shall pay Sublessor, within thirty (30) days of the date
the Main Landlord executes the Landlord Consent (described in Paragraph 31
hereinbelow), the sum of Twenty-Two Thousand Seven Hundred Fifty and 33/100
Dollars ($22,750.33), which represents the December, 1996 Rent payment net of
the Use and Occupancy Fee Credit for said month.
(c) Subtenant shall timely pay all bills and charges for electricity and
other utilities relating to the Subleased Premises, including, without
limitation, those bills and charges for the month of November 1996.
3. SUBORDINATION TO MAIN LEASE. This Sublease is and shall be subject and
---------------------------
subordinate to the Main Lease and to the matters to which the Main Lease is or
shall be subject and subordinate. A copy of the Main Lease has been delivered
to and examined by Subtenant. Subtenant shall, upon the request of Sublessor,
subordinate this Sublease to the lien of any present or future mortgage or deed
of trust upon the Leased Premises
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<PAGE>
irrespective of the time of execution or the recording of any such mortgage or
deed of trust.
4. MAIN LANDLORD'S RESERVED RIGHTS. Subtenant acknowledges any rights
-------------------------------
specifically reserved by Main Landlord under the Main Lease, and Subtenant
further acknowledges that its possession and use of the Subleased Premises shall
at all times be subject to such rights. Subtenant hereby releases Sublessor from
all liability in connection with Main Landlord's exercise of such rights.
5. INCORPORATION BY REFERENCE. All the terms and conditions of the Main
--------------------------
Lease, to the extent not inconsistent with this Sublease, are incorporated
herein by reference and Subtenant agrees to assume all obligations of Sublessor
under the Main Lease with respect to the Subleased Premises from and after the
date hereof. Without limitation of the foregoing, Subtenant agrees as follows:
(a) The term "Landlord, " as used in the Main Lease shall mean
Sublessor, and the term "Tenant," as used in the Main Lease shall mean
Subtenant.
(b) The time limits contained in the Main Lease (including, without
limitation, those set forth in Paragraph 15 thereof) for the giving of
------------
notice, making of demands or performing of any act, condition or
covenant on the part of the Lessee thereunder, or for the exercise by
the Lessee thereunder of any right, remedy or option, are changed for
the purposes of incorporation by reference by shortening the same in
each instance by three (3) days, so that in each instance Subtenant
shall have three (3) days less time to observe or perform hereunder
than Sublessor has as the Tenant under the Main Lease.
(c) Any non-liability provisions in the Main Lease for the benefit of
the Main Landlord shall be deemed to inure to the benefit of Sublessor
and any other person intended to be benefited by said provision. Any
right of the Main Landlord under the Main Lease of access or inspection
and any right of the Main Landlord under the Main Lease to do work in
the Subleased Premises or in the Building and any other rights of the
Main Landlord under the Main Lease and respective rules and regulations
shall be deemed to inure to the benefit of Sublessor and any other
person intended to be benefited by said provision, for the purpose of
incorporation by reference in this Sublease.
(d) Any rights of Sublessor to terminate the Main Lease provided
therein shall be exercised only by
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<PAGE>
Sublessor when, in its sole option, those conditions precedent required
for a termination by Sublessor under the terms and conditions of the
Main Lease have occurred.
(e) Subtenant shall not have any of Sublessor's rights in the Main
Lease to exercise any option to expand the Leased Premises or any
option to renew or extend the term of the Main Lease; nor shall the
following paragraphs of the Main Lease apply to this Sublease:
Paragraphs 2(a), 2(b), 2(d), 2(h), 21, and Rider Paragraphs 1, 2 [but
NOT excluding 2(e) and 2(g)] and 18.
---
(f) Subtenant may, at its sole cost and expense, install such
identifying signage as the Main Landlord may, in its discretion,
approve.
6. PERFORMANCE BY SUBLESSOR. In the event of any default by the Main
------------------------
Landlord under the terms of the Main Lease, Subtenant shall give Sublessor and
the Main Landlord written notice thereof. Sublessor shall have no obligations
whatsoever to Subtenant with respect to the Subleased Premises, including,
without limitation, with respect to alteration, repair, maintenance, or
warranties, representations, covenants or agreements of the Main Landlord. Upon
the request of Subtenant, Sublessor shall use its reasonable efforts to cause
the Main Landlord to observe and/or perform the obligations of the Main Landlord
under the Main Lease which relate to the Subleased Premises, and Sublessor shall
have a reasonable time to enforce its rights to cause such observance or
performance in accordance with the terms of the Main Lease after request for
such enforcement has been made by Sublessor; provided, however, that Sublessor
shall not be required to incur any expense or expend any sums to obtain such
enforcement, except to the extent of funds advanced by Subtenant to Sublessor
for such purpose. Subtenant shall not in any event have any rights with respect
to the Subleased Premises greater than Sublessor's rights under the Main Lease
and, notwithstanding any provision to the contrary, as to obligations that
pertain to the Subleased Premises and are contained in this Sublease by the
incorporation by reference of the provisions of the Main Lease, Sublessor shall
not be required to make any payment or perform any obligation, and Sublessor
shall have no liability to Subtenant for any such payment or performance, except
for Sublessor's obligation to use the aforesaid reasonable efforts. Sublessor
shall not be responsible for any failure or interruption, for any reason
whatsoever, of the services or facilities that may be appurtenant to or supplied
at the Building by the Main Landlord under the Main Lease or otherwise,
including, without limitation, heat, air conditioning, water, electricity,
elevator service and cleaning service, if any; and no failure to furnish, or
interruption of, any such
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<PAGE>
services or facilities shall give rise to any (a) abatement, diminution or
reduction of Subtenant's obligations under this Sublease, (b) constructive
eviction, whether in whole or in part or (c) liability on the part of Sublessor.
Sublessor shall promptly provide Subtenant with a copy of any written notice
received from the Main Landlord that states that (a) Sublessor is in default in
the payment, performance or observance of any provision of the Main Lease, and
(b) Main Landlord intends to terminate the Main Lease as a result thereof.
7. NO BREACH OF MAIN LEASE. Subtenant and Sublessor shall not do, omit to
-----------------------
do, or permit to be done any act or thing which may constitute a breach or
violation of any term, covenant or condition of the Main Lease by the Tenant
thereunder, whether or not such act or thing is permitted under the provisions
of this Sublease.
8. RELEASES. Subtenant and Sublessor hereby release the other and the
--------
Main Landlord or anyone claiming through or under such parties by way of
subrogation or otherwise to the extent that Sublessor and the Main Landlord
released such parties under the Main Lease and/or the Main Landlord and
Sublessor were relieved of liability or responsibility pursuant to the
provisions of the Main Lease, and Subtenant and Sublessor will cause its
insurance carriers to include any clauses or endorsements in favor of each other
and the Main Landlord which Sublessor is required to provide pursuant to the
provisions of the Main Lease.
9. LATE CHARGES. If payment of any Rent shall not have been paid by the
------------
fifteenth (15th) day after the date on which such amount was due and payable:
(a) a charge equal to the amount described in Paragraph 16 of the Main Lease
------------------------------
shall be due and payable by Subtenant, (b) in addition to the aforesaid charge,
a late payment service charge (to cover Sublessor's administrative and overhead
expenses of processing late payments and not as a penalty) equal to $250 shall
be due and payable by Subtenant, and (c) Subtenant shall be liable for
reasonable attorneys' fees incurred by Sublessor by reason of said default by
Subtenant. Said charges are hereinafter referred to as "Late Charges". The
Late Charges for any month shall be payable on the first day of the following
month, and in default of payment of any Late Charges, Sublessor shall have (in
addition to all other remedies) the same rights as provided in this Sublease
(including the provisions incorporated by reference) for nonpayment of Rent.
Nothing in this Section contained and no acceptance of Late Charges by Sublessor
shall be deemed to extend or change the time for payment of Rent.
10. USE. Subtenant shall use and occupy the Subleased Premises for the
---
use permitted under the Main Lease and for no
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<PAGE>
other purpose. Subtenant shall comply with the certificate of occupancy relating
to the Subleased Premises.
11. SUBLESSOR USE AND OCCUPANCY OF RETAINED AREAS. Sublessor hereby
---------------------------------------------
reserves the right to exclusively use and occupy the portions of the Subleased
Premises designated as "Retained Area A" and "Retained Area B" (collectively,
"Retained Areas") and "Telephone Room" on Exhibit A-1 attached hereto and
-----------
made a part hereof. Sublessor shall vacate: (i) Retained Area A by no later than
midnight, November 30, 1996 and (ii) Retained Area B and the Telephone Room by
-----------------
no later than midnight, March 31, 1997; provided, however, Sublessor shall have
--------------
the option to terminate the use and occupancy of Retained Area B at any time
prior thereto, at which time Sublessor's right to use the Telephone Room shall
also terminate. Retained Area B shall be deemed to constitute 26.57% of the
Subleased Premises. Since the Retained Areas shall not be physically separated
from the remainder of the Subleased Premises, Sublessor and Subtenant hereby
agree to cooperate reasonably with the other in sharing the use of corridors and
other areas and facilities in the Subleased Premises necessary and desirable to
be used in connection with each party's use of the portions of the Subleased
Premises which it occupies. Sublessor shall have the right of access through the
Subleased Premises to use the Retained Areas, including, without limitation, the
"Telephone Room" serving the Retained Areas. If any HVAC thermostats, electric
panels or other utility facilities serving either the Subleased Premises or the
Retained Areas are located in the other said spaces, then the party in whose
space same are located shall provide reasonable access to the other party for
use of same. If any utility or other facility serves or is designed to serve
both the Subleased Premises and the Retained Areas, the parties will cooperate
with each other reasonably to share such facility for the purpose intended and
shall permit access to the respective space in connection therewith. All of the
foregoing shared rights shall be subject to such reasonable security procedures
as Subtenant and Sublessor shall provide to each other. Sublessor may, at its
option, permit employees of its parent corporation, ON Technology Corporation
("ON"), to use and occupy the Retained Areas. For so long as Sublessor (and/or
ON) uses the Retained Areas, Sublessor (and/or ON) shall have the right to use
the common areas and facilities of the Building ("Common Areas"), including,
without limitation, the parking areas appurtenant thereto.
Sublessor shall pay Subtenant, within twenty (20) days of Sublessor's
receipt of an invoice from Subtenant, an equitable portion of the electric bills
for the Subleased Premises for each day Sublessor (or ON) occupies and uses the
Retained Areas. Sublessor's portion of such bills shall be based on the actual
square footage of the Retained Areas used and occupied by Sublessor (and/or ON)
during the applicable billing period. In consideration of the November Rent
Credit, Sublessor (and/or ON)
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<PAGE>
shall be entitled to use and occupy Retained Area A and the Common Areas without
any fee, rent or other compensation being payable to Subtenant. As full
consideration for Sublessor's (and/or ON's) use of Retained Area B and the
Common Areas, Subtenant shall be entitled to a credit ("Use and Occupancy Fee
Credit") equal to the following product for each day that Sublessor (or ON)
occupies and uses the Retained Areas:
Fixed Rent plus Pass-Through Costs X 26.57%
----------------------------------
Number of days in the applicable month
If Sublessor uses and occupies the Retained Areas for less than a full calendar
month, Subtenant shall pay Sublessor any excess amount of the Use and Occupancy
Fee Credit applied by Subtenant towards Rent.
Subtenant does not desire to pay for the services described in the HVAC PM
Inspection and Service Contract dated August 30, 1996 between the Main Landlord
and Sublessor ("HVAC Contract"). Therefore, Sublessor shall cancel the HVAC
Contract effective as of November 30, 1996; provided, however, Subtenant shall
be responsible for complying with Paragraph 4(c) of the Main Lease.
--------------------------------
12. CONDITION OF SUBLEASED PREMISES. Subtenant is subleasing the
-------------------------------
Subleased Premises from Sublessor "AS IS", without representation or warranty,
express or implied, of any kind, and Sublessor shall have no obligation to
furnish, render or supply any work, labor, services, material, fixtures,
equipment or decorations to make the Subleased Premises ready for Subtenant's
occupancy. Subtenant shall be conclusively presumed to have accepted the
Subleased Premises in the condition existing on the date Subtenant first takes
possession and to have waived all claims against Sublessor relating to such
condition.
13. NOTICES. All notices, consents, approvals, demands, requests and
-------
other communications made or required to be given pursuant hereto shall be in
writing and shall be delivered in hand, mailed by United States first class
mail, postage prepaid, sent by overnight courier (e.g., Federal Express or
similar courier), or sent by telegraph, telecopy, facsimile or telex and
confirmed by delivery via courier or postal service, addressed as follows:
If to Sublessor, to: Davinci Systems Corporation
c/o ON Technology Corporation
One Cambridge Center, 6th Floor
Cambridge, MA 02142
Attn: John Bogdan
Chief Financial Officer
- 7 -
<PAGE>
with a copy to: Andrew R. Stern, Esq.
Epstein Becker & Green, P.C.
75 State Street
Boston, MA 02109
If to Subtenant, to: Northern Telecom Inc.
2221 Lakeside Blvd., MSE E-700
Richardson, TX 75082
Attn: Real Estate Department
(972) 684-8632
with a copy to: Northern Telecom, Inc.
200 Athens Way
Nashville, TN 37228
Attn: Legal Dept.
or to such other address for notice as either party shall last have furnished in
writing to the party giving the notice. Any such notice or demand shall be
deemed to have been duly given or made and to have become effective (i) if
delivered by hand, overnight courier or facsimile to a responsible officer of
the party to which it is directed, at the time of the receipt thereof by such
officer or the sending of such facsimile and (ii) if sent by first-class mail,
postage prepaid, on the third business day following the mailing thereof.
14. ASSIGNMENT AND SUBLETTING. Subtenant shall not, by operation of law
-------------------------
or otherwise, assign, convey, mortgage, pledge, encumber or in any other manner
transfer (whether voluntary or otherwise) this Sublease or any interest therein,
or sublet the Subleased Premises or any part thereof or grant any concession or
license or otherwise permit the use or occupancy of all or part thereof
(collectively, "Transfer") without the written consent of Sublessor, which
consent may be withheld in Sublessor's sole and absolute discretion. If
Sublessor grants its consent, Subtenant shall not undertake a Transfer without
first also complying with the provisions of Paragraph 9 of the Main Lease.
-----------------------------
Obtaining the consent of the Main Landlord required under the Main Lease shall
be the obligation of the Subtenant and Subtenant shall hold Sublessor harmless
from any failure by the Main Landlord to grant its consent. Notwithstanding the
foregoing to the contrary, Subtenant shall have the same rights as Sublessor set
forth in Rider Paragraph 9 of the Main Lease; provided, notwithstanding any
-----------------------------------
Transfer described therein, Subtenant shall remain primarily liable hereunder.
15. INSURANCE AND INDEMNIFICATION. Subtenant and Sublessor shall maintain
-----------------------------
throughout the term of this Sublease broad form comprehensive general public
liability and property damage insurance in the form, manner and amounts required
by Paragraph
---------
- 8 -
<PAGE>
11 of the Main Lease, with Sublessor, Subtenant and Main Landlord named as
- --------------------
additional insureds on each policy. Such insurance may be part of a "blanket"
policy. Subtenant shall deliver to Sublessor a certificate of such coverage
prior to the Commencement Date. Subtenant shall procure and pay for renewals of
such insurance from time to time before the expiration thereof, and Subtenant
shall deliver to Sublessor such renewal certificate within fifteen (15) days of
Sublessor's request. All such policies shall be issued by companies of
recognized responsibility whose policies are valid in the State of North
-----
Carolina and all such policies shall contain a provision whereby the same
- --------
cannot be cancelled or modified unless Sublessor is given at least thirty (30)
days prior written notice of such cancellation or modification. Subtenant's
insurance shall be primary and Sublessor's insurance noncontributing. Without
regard to any insurance coverage, and to the fullest extent permitted by
applicable law, Subtenant hereby indemnifies and holds harmless Sublessor, ON,
their employees, agents and contractors from any breach of this Sublease,
violations of law and any loss, liability, claims, suits, costs, damages,
expenses (including, without limitation, reasonable attorneys' fees), both real
and alleged, arising out of any damage or injury to persons or tangible property
to the extent caused by the acts, omissions, or willful misconduct of Subtenant,
its employees, agents, contractors or invitees. Without regard to any insurance
coverage, and to the fullest extent permitted by applicable law, Sublessor
hereby indemnifies and holds harmless Subtenant, its employees, agents and
contractors from any loss, liability, claims, suits, costs, damages, expenses
(including, without limitation, reasonable attorneys' fees), both real and
alleged, arising out of any damage or injury to persons or tangible property to
the extent caused by the acts, omissions, or willful misconduct of Sublessor,
its employees, agents, contractors or invitees.
16. CASUALTY. If the Subleased Premises are damaged by fire or other
--------
casualty, and Main Landlord, pursuant to the terms of the Main Lease, shall
elect to terminate the Main Lease, this Sublease shall cease and terminate on
the date of notice of such election, and Rent shall be apportioned to the date
of such termination. In all other cases of casualty, if the damage has rendered
the Subleased Premises untenantable, in whole or in part, there shall be an
apportionment of the Rent in the same manner as provided in the Main Lease. In
no event shall Sublessor have any obligation to repair any portion of the
Subleased Premises.
17. CONDEMNATION. If the Subleased Premises, or a material part thereof,
------------
shall be condemned or taken in any manner for any public or quasi-public use, at
Sublessor's option this Sublease shall forthwith terminate on the date of such
taking. Subtenant shall have no right to share in any condemnation award, but
shall
- 9 -
<PAGE>
execute any and all documents that may be reasonably required to facilitate
collection by Sublessor and/or Main Landlord of any and all such awards;
provided, however, Subtenant may pursue a separate award for its relocation
expenses.
18. ESTOPPEL CERTIFICATES. Subtenant shall, within fifteen (15) days
---------------------
after each and every request by Sublessor, execute, acknowledge and deliver to
Sublessor, or any other party designated by Sublessor, a statement in writing
(a) certifying that this Sublease is unmodified and in full force and effect (or
if there have been modifications, that the same is in full force and effect as
modified, and stating the modifications), (b) specifying the dates to which the
Rent has been paid, (c) stating whether or not, to the best knowledge of
Subtenant, Sublessor is in default in performance or observance of its
obligations under this Sublease, and, if so, specifying each such default, and
(d) such other information as Sublessor may reasonably request. Any such
statement delivered pursuant to this Section may be relied upon by Main
Landlord, any prospective assignee or transferee of the leasehold estate under
the Main Lease, or any other person designated by Sublessor.
19. ALTERATIONS. Subtenant shall not make or cause, suffer or permit the
-----------
making of any alteration, addition, change, replacement, installation or
addition (collectively "Alterations") in or to the Subleased Premises without
first obtaining the prior written consent of Sublessor in each instance.
Sublessor shall not unreasonably withhold or delay its consent, but any such
consent shall be deemed to be conditioned upon Sublessor having no liability to
anyone for, and being indemnified from, the Alterations or their removal. If
Sublessor grants its consent, Subtenant shall then comply with the provisions of
Article 5 of the Main Lease. Subtenant understands and agrees that the Main
- ---------------------------
Landlord may withhold its consent to proposed Alterations. In the event that the
Main Landlord (or any designee of the Main Landlord) shall succeed to
Sublessor's interest under this Sublease (whether by reason of a termination of
the Main Lease or other exercise of the Main Landlord's rights under the Main
Lease), then the foregoing provisions of this Section 19 shall be of no force
and effect, and Subtenant's rights hereunder shall instead be governed by the
provisions of Article 5 of the Main Lease.
---------------------------
20. BROKERAGE. Sublessor and Subtenant each warrants and represents
---------
that it has dealt with no broker with respect to this Sublease other than
Fischer & Company, Anthony & Company, Goodman Segar Hogan Hoffler and McCall &
- ------------------ ------------------ --------------------------- --------
Almy (the "Brokers") and that there are no brokerage or similar fees or
- ----
commissions due in connection with this Sublease other than the Brokers.
Sublessor shall pay, within thirty (30) days of the date of the Main Landlord's
execution of the Landlord Consent, a total Brokers fee of $54,189.33, of which
$36,126.22, in the aggregate, shall be
- 10 -
<PAGE>
payable to Subtenant's brokers (Fischer & Company and Anthony & Company) and the
balance of $18,063.11, in the aggregate, shall be payable to Goodman Segar Hogan
Hoffler and McCall & Almy. Sublessor and Subtenant each agrees to indemnify and
hold harmless the other and the Main Landlord from and against all claims for
brokerage commissions on account of this Sublease by any person who establishes
by a court action a right to such brokerage commission arising out of dealings
with the party from whom indemnification is sought, and for all costs and
expenses, including reasonable attorneys' fees, incurred in connection with any
such claims. Both parties shall have the right to participate in the defense of
any such action.
21. SUBLEASE FEE. Subtenant shall pay Sublessor the sum of
------------
Twenty Thousand ($20,000) Dollars ("Sublease Fee") which shall be applied toward
the Brokers' fees and other costs and expenses incurred by Sublessor in
connection with this Sublease. The Sublease Fee shall be due and payable within
thirty (30) days of the date the Main Landlord executes the Landlord Consent
(described in Paragraph 31 hereinbelow). Subtenant acknowledges and agrees that
the Sublease Fee is not refundable in whole or in part for any reason
whatsoever.
22. WAIVER OF JURY TRIAL AND RIGHT TO COUNTERCLAIM.
----------------------------------------------
Sublessor and Subtenant hereby waive all right to trial by jury in any summary
or other action, proceeding or counterclaim arising out of or in any way
connected with this Sublease, the relationship of Sublessor and Subtenant, the
Subleased Premises and the use and occupancy thereof, and any claim of injury or
damages. Subtenant also hereby waives all right to assert or interpose a
counterclaim (unless required by applicable law) in any summary proceeding or
other action or proceeding to recover or obtain possession of the Subleased
Premises.
23. NO WAIVER. The failure of either party to insist in any one
---------
or more cases upon the strict performance or observance of any obligation of the
other party hereunder or to exercise any right or option contained herein shall
not be construed as a waiver or relinquishment for the future of any such
obligation of the bound party or any right or option of the benefitted party.
Sublessor's receipt and acceptance of Rent, or Sublessor's acceptance of
performance of any other obligation by Subtenant, with knowledge of Subtenant's
breach of any provision of this Sublease, shall not be deemed a waiver of such
breach. No waiver by either party of any term, covenant or condition of this
Sublease shall be deemed to have been made unless expressed in writing and
signed by the party to be bound by such waiver.
24. COMPLETE AGREEMENT. There are no representations,
------------------
agreements, arrangements or understandings, oral or written, between the parties
relating to the subject matter of this Sublease which are not fully expressed in
this Sublease. This
- 11 -
<PAGE>
Sublease cannot be changed or terminated orally or in any manner other than by a
written agreement executed by both parties.
25. SUCCESSORS AND ASSIGNS. The provisions of this Sublease,
----------------------
except as herein otherwise specifically provided, shall extend to, bind and
inure to the benefit of the parties hereto and their respective personal
representatives, heirs, successors and permitted assigns.
26. INTERPRETATION. This Sublease shall be governed by and
--------------
construed in accordance with the laws of the State of North Carolina. If any
----- --------
provision of this Sublease or the application thereof to any person or
circumstance shall, for any reason and to any extent, be invalid or
unenforceable, the remainder of this Sublease and the application of that
provision to other persons or circumstances shall not be affected but rather
shall be enforced to the extent permitted by law. The captions, headings and
titles, if any, in this Sublease are solely for convenience of reference and
shall not affect its interpretation. This Sublease shall be construed without
regard to any presumption or other rule requiring construction against the party
causing this Sublease to be drafted. If any words or phrases in this Sublease
shall have been stricken out or otherwise eliminated whether or not any other
words or phrases have been added, this Sublease shall be construed as if the
words or phrases so stricken out or otherwise eliminated were never included in
this Sublease and no implication or inference shall be drawn from the fact that
said words or phrases were so stricken out or otherwise eliminated. Each
covenant, agreement, obligations or other provision of this Sublease shall be
deemed and construed as a separate and independent covenant of the party bound
by, undertaking or making same, not dependent on any other provision of this
Sublease unless otherwise expressly provided. All terms and words used in this
Sublease, regardless of the number or gender in which they are used, shall be
deemed to include any other number and any other gender as the context may
require. The word "person" as used in this Sublease shall mean a natural person
or persons, a partnership, a corporation, a limited liability company, or any
other form of business or legal association or entity.
27. EXCULPATION. Sublessor shall have no liability whatsoever
-----------
for any act or omission to act, by the Main Landlord or for the failure by Main
Landlord to perform any obligation under the Main Lease.
28. HOLDOVER. If Subtenant shall hold over possession of the
--------
Subleased Premises after the end of the Term hereof, Subtenant shall be deemed
to be occupying as a tenant-at-sufferance. In such event, Subtenant shall (i)
indemnify and hold harmless Sublessor from and against all direct and
consequential damages suffered or incurred by Sublessor pursuant to claims of
the Main Landlord and (ii) pay Sublessor 150% of the Rent during the
- 12 -
<PAGE>
period of such occupancy. The provisions of this Section 28 shall not constitute
a waiver by Sublessor of any re-entry rights of Sublessor available under this
Sublease or by law.
29. INDEMNITIES. All of Sublessor's and Subtenant's indemnities
-----------
described and/or incorporated herein shall survive the expiration or earlier
termination of this Sublease.
30. ATTORNEYS' FEES. In the event an action is commenced to
---------------
enforce or interpret this Sublease, the prevailing party shall recover
reasonable attorneys' fees and costs as provided in this Sublease, or as awarded
by the court in which the action is pending, or as awarded by any other court of
competent jurisdiction in an action commenced for such purpose.
31. MAIN LANDLORD'S CONSENT. This Sublease shall not be
-----------------------
effective unless and until Main Landlord executes and delivers a written consent
hereto ("Landlord Consent") . In the event such Landlord Consent shall not have
been received on or before November 6, 1996, this Sublease shall terminate, be
----------------
null and void and of no force or effect unless Sublessor and Subtenant otherwise
agree. Sublessor may, at its option, seek to have the Main Landlord enter into a
direct lease with Subtenant on the same material terms as are set forth herein
("Direct Lease") . If Sublessor exercises such option, Subtenant agrees to
negotiate the Direct Lease in good faith. Upon the execution of the Direct
Lease, this Sublease shall terminate, be null and void and of no force or
effect, provided, however, the provisions of Paragraph 15 hereinabove shall
survive such termination.
[END OF PAGE]
- 13 -
<PAGE>
IN WITNESS WHEREOF, Sublessor and Subtenant have hereunder
executed this Sublease as of the day and year first above written.
DAVINCI SYSTEMS CORPORATION
By: /s/ [SIGNATURE APPEARS HERE]
------------------------------------
NORTHERN TELECOM INC.
By: /s/ [SIGNATURE APPEARS HERE] 11/7/96
------------------------------------
- 14 -
<PAGE>
The undersigned hereby consents to the foregoing Sublease dated
as of November 7, 1996 by and between Davinci Systems Corporation and Northern
Telecom Inc.
PERIMETER PARK WEST ASSOCIATES
LIMITED PARTNERSHIP
By: /s/ Harold S. Lichtin
------------------------------
Harold S. Lichtin
General Partner
Dated: As of November 8, 1996
<PAGE>
[LICHTIN LETTERHEAD APPEARS HERE]
November 12, 1996
Via Facsimile
Mr. Andrew R. Stern
Epstein Becker & Green, P.C.
75 State Street
Boston, MA 02109
RE: Perimeter Park West Associates Limited Partnership ("Landlord") sublease
consent between DaVinci Systems Corporation ("DaVinci") and Northern
Telecom, Inc. ("Nortel"), 507 Airport Boulevard, Morrisville, North
Carolina
Dear Andy:
On behalf of Landlord, I have attached a single page consent statement signed by
Harold S. Lichtin, General Partner to Landlord, which acknowledges Landlord's
consent of the Sublease between DaVinci and Nortel at the above referenced
Premises.
If I can be of further assistance to you, please feel free to contact me at
(919) 469-1300.
Best regards
/s/ Dave Lindner
Dave Lindner
Vice President
Enclosure (as stated)
cc: Carol Wood (with copy of enclosure and Sublease) file
<PAGE>
EXHIBIT A
---------
Subleased Premises
<PAGE>
EXHIBIT "A"
[MAP OF ENTERPRISE CENTER APPEARS HERE]
<PAGE>
EXHIBIT A-1
-----------
Retained Areas
- 16 -
<PAGE>
EXHIBIT "A"-1
33,118 Sq. Ft.
Enterprise Center l
Morrisville, NC
[MAP APPEARS HERE]
<PAGE>
EXHIBIT 10.3
10/16/95
SUBLEASE
--------
Parties
-------
THIS SUBLEASE, dated as of the 13th day of October, 1995 ("Sublease")
between Camp Dresser & McKee Inc., a Massachusetts corporation, having an office
at One Cambridge Center, 12th floor, Cambridge, Massachusetts ("Sublandlord")
and ON Technology Corporation, a Delaware corporation, having an office at One
Cambridge Center, 6th floor, Cambridge, Massachusetts ("Subtenant").
Recitals
--------
A. Sublandlord entered into a Lease dated May 6, 1988 ("Main Lease") with
the Trustees of One Cambridge Center Trust ("Main Landlord") for the entire
tenth (10th), eleventh (11th) and twelfth (12th) floors ("Leased Premises") of
One Cambridge Center, Cambridge, Massachusetts ("Building"). The Main Lease is
attached hereto as Exhibit A;
B. Sublandlord wishes to sublease part of the Leased Premises on the
eleventh (11th) floor of the Building containing approximately 19,535 square
feet of rentable floor area ("Rentable Floor Area of Tenant's Premises") and
being all of said eleventh floor except the shaded areas ("Retained Areas")
depicted on the plan attached hereto as Exhibit B ("Subleased Premises");
C. The Retained Areas are as follows: (i) an interior staircase and
stairwell that provides Sublandlord with access to the Leased Premises on the
tenth and twelfth floors ("Stairway"); (ii) a darkroom ("Darkroom") and (iii) a
telephone/network room ("Telcom Room").
D. Sublandlord entered into a Sublease Agreement dated March 5, 1992 with
Open Software Foundation, Inc. ("OSF") for the Subleased Premises. Sublandlord
and OSF amended the OSF Sublease by letter dated June 17, 1993 and by another
letter dated June 23, 1993 (the "June 23 Letter") (the Sublease Agreement and
said two letters being collectively, the "OSF Sublease").
E. OSF and Gemini Consulting, Inc. ("Gemini") entered into a Sub-sublease
Agreement on December 16, 1994 for the Subleased Premises ("Gemini Sub-
sublease").
<PAGE>
Terms
-----
1. A. Demise. Sublandlord hereby subleases to Subtenant, and Subtenant
------
hereby leases from Sublandlord, on the terms and conditions set forth in this
Sublease, the Subleased Premises, together with, and in common with Sublandlord
and all others entitled thereto, the benefit of all rights and common areas
appurtenant to the Leased Premises granted to Sublandlord in the Main Lease;
B. Personal Property/Equipment. Subtenant shall have the right, at no
---------------------------
additional cost, during the term of this Sublease to use all the furniture,
fixtures and equipment ("FFE") owned and leased by CDM and presently being used
by Gemini in the Subleased Premises. Subtenant shall maintain the FFE in the
condition the FFE was delivered to Subtenant on the Commencement Date,
reasonable wear and tear excepted. The FFE will be left by Subtenant in the
Subleased Premises after the expiration of the Sublease Term.
C. Sublandlord and Subtenant shall use best efforts to promptly
develop a plan to provide access to the Darkroom and Telcom Room through the
Building common areas and Room 1149 shown on Exhibit B. In the event that a plan
that complies with all requirements of Main Landlord and applicable law cannot
be reasonably achieved, Sublandlord shall access the Darkroom and Telcom Room
with adequate notice to and supervision by Subtenant. Neither Sublandlord nor
its employees, agents, invitees, contractors, or anyone claiming by, through or
under Sublandlord shall enter the Subleased Premises at any time through the
Stairway.
D. Right of First Refusal. Subtenant shall have a right of first
----------------------
refusal to match any bona fide offer to lease all or any portions of the tenth
---- ----
and twelfth floor portions of the Leased Premises made by any offeror
unaffiliated with Sublandlord.
2. Sublandlord Warranties. Sublandlord hereby warrants and represents to
----------------------
Subtenant that (i) the Main Lease represents the entire agreement concerning the
Leased Premises and has not been amended or modified except as expressly set
forth herein; (ii) Sublandlord has received no notice of any claim by the Main
Landlord that Sublandlord is in default or breach of any of the provisions of
the Main Lease; (iii) this Sublease shall not result in Sublandlord having
subleased on an aggregate basis seventy percent (70%) or more of the Leased
Premises; (iv) Sublandlord shall give Gemini any notice necessary to terminate
Gemini's use and occupancy of the Subleased Premises effective as of March 1,
1996; and (v) the three year option to extend the OSF Sublease contained in the
June 23 Letter has not been exercised and is null and void.
2
<PAGE>
3. Term and Extension Option.
-------------------------
A. Subject to the terms of Paragraph 15 hereof, the term ("Term") of
this Sublease shall commence ("Commencement Date") on the earlier of: (i) May 1,
1996 or (ii) three (3) business days after the date on which Sublandlord
delivers to Subtenant possession of the Subleased Premises vacant, free of all
tenants and occupants, broom-clean and in the same condition the Subleased
Premises are in as of the date hereof, reasonable wear and tear excepted. Time
is of the essence hereof. The term shall end on September 30, 1999 at 11:59 p.m.
("Termination Date"), unless otherwise sooner terminated in accordance with the
provisions of this Sublease. Full possession of the Subleased Premises shall be
delivered to Subtenant on the Commencement Date. Sublandlord shall deliver to
Subtenant one or more written notices of the anticipated Commencement Date at
least thirty (30) days prior to the actual Commencement Date ("30 Day Notice").
Unless Subtenant elects otherwise, in no event shall the Commencement Date occur
prior to the date contained in the 30 Day Notice. Subtenant may, at its option,
terminate this Sublease in the event that the Commencement Date has not occurred
by May 1, 1996 for any reason whatsoever.
B. Subtenant shall have the option to extend the Term through March
31, 2000 at a mutually agreeable rental rate arrived at by good faith
negotiations between Sublandlord and Subtenant.
4.1 Rent. Subtenant shall pay to Sublandlord
----
(a) Fixed Rent. The sum of Thirty-Eight Thousand Two Hundred Fifty-Six
----------
and 04/100 Dollars ($38,256.04) per month, in advance, on the first day of each
month of the Term, as Fixed Rent.
(b) Real Estate Tax and Operating Expense Escalations. (i) Nine and
-------------------------------------------------
06/100 (9.06%) percent ("Proportionate Share") of the difference between the
"Landlord's Tax Expenses" (as defined in the Main Lease) for the "Tax Years" (as
defined in the Main Lease) during the Term and Landlord's Tax Expenses for the
1995 Tax Year; and (ii) the Proportionate Share of the difference between
"Operating Expenses for the Property" (as defined in the Main Lease) for each
calendar year during the Term and the Operating Expenses for the Property for
1995 calendar year. Such amounts (hereinafter referred to as "Escalation Costs")
shall be payable by Subtenant as and when the Tax Excess and Operating Cost
Excess are payable by Sublandlord to Main Landlord pursuant to the Main Lease.
If the Main Lease provides for the payment by Sublandlord of Tax Excess and
Operating Cost Excess on the basis of estimates thereof, then Subtenant's
Escalation Costs shall be payable as and when estimates are payable by
Sublandlord under
3
<PAGE>
the Main Lease. When adjustments between estimated and actual Tax Excess and
Operating Cost Excess are made under the Main Lease, the obligations of
Sublandlord and Subtenant hereunder shall be adjusted in a like manner; and if
any such adjustments shall occur after the expiration or earlier termination of
the Term, then the obligations of Sublandlord and Subtenant under this Paragraph
4(b) shall survive such expiration or termination. Sublandlord shall furnish
Subtenant, as a condition precedent to Subtenant's payment obligations under
this Paragraph 4(b), promptly with copies of all statements and supporting
documentation submitted by Main Landlord of actual or estimated Landlord's Tax
Expenses and Operating Expenses for the Property and calculations of the Tax
Excess and Operating Cost Excess during the Term.
(c) Electricity Charges. Ninety-Four and one-half percent (94.5%) of
-------------------
the electrical charges for the eleventh floor of the Building (as determined by
actual usage measured by the eleventh floor check meter) payable within thirty
(30) days of Subtenant's receipt of invoices and supporting documentation
therefor. The foregoing electricity charges are subject to adjustment in
accordance with Sections 5.1, 5.2 and 7.5 and Exhibit H of the Main Lease.
4.2 Proration. If the payment of the Fixed Rent, Escalation Costs and the
---------
electricity charges begins, or the Term ends, on a day other than the first or
last day of a month, as applicable, such rent and charges for the partial months
shall be pro rated on a per diem basis.
4.3 Abatement. All rent and charges described in Paragraph 4.1 hereinabove
---------
shall be equitably abated and pro rated to the extent Sublandlord's rent,
additional rent and other charges are abated or pro rated pursuant to the Main
Lease upon the occurrence of a fire or other casualty, governmental taking,
force majeure events, breach of the covenant of quiet enjoyment, constructive
eviction and the like.
4.4 Self-Help. If Sublandlord shall at any time fail to make any payment
---------
or perform any act which Sublandlord is obligated to make or perform under this
Sublease and (except in the case of emergency) if the same continues unpaid or
unperformed beyond applicable grace period in the Main Lease, then Subtenant
may, but shall not be obligated so to do, after ten (10) days' notice to and
demand upon Sublandlord, or without notice to or demand upon Sublandlord in the
case of any emergency, and without waiving, or releasing Sublandlord from, any
obligations of Sublandlord in this Sublease contained, make such payment or
perform such act which Sublandlord is obligated to perform under this Sublease
or the Main Lease in such manner and to such extent as may be reasonably
necessary, and, in exercising any such rights, pay any reasonably necessary and
4
<PAGE>
incidental costs and expenses, employ counsel and incur and pay reasonable
attorneys' fees. All sums so paid by Subtenant and all reasonable and necessary
costs and expenses of Subtenant incidental thereto, together with interest
thereon at the annual rate equal to the sum of (a) the Base Rate from time to
time announced by Bank of Boston as its Base Rate and (b) two percent (2%), from
the date of the making of such expenditures by Subtenant shall be payable to
Subtenant by Sublandlord on demand, and if not promptly paid shall be deducted
from any rent or other charges then due or thereafter becoming due under this
Sublease, and Sublandlord covenants to pay any such sum or sums with interest as
aforesaid.
5. Permitted Uses. Notwithstanding the Permitted Use described in the
--------------
Main Lease, the Subleased Premises may be used by Subtenant for general office
use and accessory thereto, production and light manufacturing of computer
software, computer disk duplication, shrink wrapping and collation of computer
disks, provided that in no event shall such accessory uses be conducted in more
than 4,884 square feet (rentable) of the Subleased Premises in the aggregate.
6. Other Provisions of Sublease. All applicable terms, conditions and
----------------------------
rights of the Main Lease are incorporated into and made a part of this Sublease
as if Sublandlord were the landlord thereunder, Subtenant, the tenant
thereunder, and the Subleased Premises, the eleventh (11th) floor portion of
the Leased Premises.
Notwithstanding the foregoing to the contrary, the following provisions
shall be deemed deleted from the Main Lease for the purposes of incorporation
herein:
From Section 1.2, the definitions of "Present Mailing Address of Tenant,"
"Tenant's Construction Representative", "Lease Term", "Extension Options,
"Commencement Date", "Commencement Date for Tenth Floor Space", "Initial
Premises," "Outside Completion Date", "Annual Fixed Rent", "Brokers", and
"Permitted Use";
From Section 1.3 and the exhibits attached to the Main Lease, Exhibit C;
Sections 2.1.1, 2.3 and 2.4, Article III, Article IV, Section 5.3, Article X,
Sections 13.1, 13.3, 17.9, 17.25 and 17.26.
Subtenant assumes and agrees to perform the tenant's obligations under the
Main Lease during the Term to the extent that such obligations are applicable to
the Subleased Premises only, and except that the obligation to pay rent,
additional rent and other charges to Main Landlord under the Main Lease shall be
considered performed by Subtenant to the extent and in the amount rent and other
charges is paid to Main Landlord in accordance with Paragraph 4 of this
Sublease. Notwithstanding the foregoing
5
<PAGE>
to the contrary, Subtenant does not hereby assume any obligations under the Main
Lease (i) that conflict with or are inconsistent with the terms of this Sublease
or the Consent (described in Paragraph 15 hereinbelow) ; (ii) arising out of any
act, omission or conduct of Sublandlord or any other subtenants of Sublandlord;
or (iii) that relate to parking spaces, it being understood that Subtenant shall
negotiate directly with Main Landlord with respect to parking rights.
If the Main Lease gives Sublandlord any right to terminate the Main Lease
in the event of the partial or total damage, destruction, condemnation of the
Leased Premises or the Building or otherwise, the exercise of such right by
Sublandlord shall not constitute a default or breach hereunder; provided,
however, if the Main Landlord gives Sublandlord notice that the scheduled
completion of the repair and restoration of casualty damage is more than 90 days
after the date of such damage, or if the casualty damage occurs during the last
12 months of the Term of the Sublease, Subtenant, may, at its option, by notice
to Sublandlord, terminate this Sublease.
7. Utilities and Services. Subtenant shall be entitled to all those
----------------------
services and utilities that Main Landlord is required to provide to the Leased
Premises pursuant to Sections 7.1, 7.2 and 7.3 of the Main Lease and Exhibit D
attached thereto. Subtenant shall look solely to Main Landlord for the provision
of such services and utilities and Sublandlord shall not be responsible for Main
Landlord's failure to provide the same; provided, however, upon request of
Subtenant, Sublandlord shall use best efforts to compel Main Landlord to cure
any such failure. All charges levied by Main Landlord pursuant to Sections 5.2,
7.3, 8.1 and 9.6 of the Main Lease, as well as the applicable provisions of
Exhibit D attached thereto shall either be (i) equitably apportioned between
Sublandlord and Subtenant to the extent such utilities and services are actually
shared by both parties or (ii) paid solely by the party requesting or causing
the delivery of such services or utilities to the extent not shared by Subtenant
and Sublandlord.
8. Notices. Whenever, by the terms of this Sublease, notice shall or may
-------
be given either to Sublandlord or to Subtenant, such notices shall be in writing
and shall be sent by hand, registered or certified mail, or overnight or other
commercial courier, postage or delivery charges, as the case may be, pre-paid as
follows:
if intended for Sublandlord, addressed to Sublandlord at the Twelfth (12th)
floor of the Building, Attention: Vice President -Facilities (or to such
other address or addresses as may from time to time hereafter be designated
by Sublandlord by like notice).
6
<PAGE>
if intended for Subtenant, addressed to Subtenant at the sixth (6th) floor
of the Building, Attention: John Bogdan, Chief Financial Officer (or to
such other address or addresses that may from time to time hereafter be
designated by Subtenant by like notice) with a copy sent to Andrew R.
Stern, Esq., Epstein Becker & Green, P.C., 75 State Street, Boston,
Massachusetts 02109.
Except as otherwise provided herein, all such notices shall be effective
when received; provided, that if receipt is refused, notice shall be effective
upon the first occasion that such receipt is refused. Failure to send notices to
the attorneys referenced above shall not constitute defective notice. Where
provision is made for the attention of an individual or department, the notice
shall be effective only if the wrapper in which such notice is sent is addressed
to the attention of such individual or department. Time is of the essence with
respect to any and all notices and periods for giving such notice or taking any
action thereto under this Sublease.
9. Performance by Sublandlord. Sublandlord agrees that it will pay all
--------------------------
rent, additional rent and other charges due and payable under the Main Lease as
and when the same shall become due and payable, and perform and observe all
other obligations required of Sublandlord under the Main Lease (other than as
required of Subtenant pursuant to this Sublease with respect to the Subleased
Premises). In addition, Sublandlord shall not do, or permit or suffer to be
done, any act or omission by Sublandlord, its agents, employees, contractors,
invitees, sublessees, licensees or representatives that is prohibited by the
Main Lease or that would in any way contravene or violate any term, obligation,
covenant, agreement or condition of the Main Lease, or would constitute or give
rise to a default under the Main Lease.
10. Enforcement of Rights. If Main Landlord defaults in any of its
---------------------
obligations under the Main Lease, Subtenant shall be entitled to participate
with Sublandlord in any action undertaken by Sublandlord in the enforcement of
Sublandlord's rights against Main Landlord. If Sublandlord, after having used
best efforts to cause Main Landlord to cure its defaults under the Main Lease,
elects not to take further action, whether legal or otherwise, for the
enforcement of Sublandlord's rights against Main Landlord, Subtenant shall have
the right to take such action in its own name and, for that purpose and only to
such extent, all the rights of Sublandlord under the Main Lease with respect to
the Subleased Premises shall be and are hereby conferred upon and assigned to
Subtenant, and Subtenant shall be subrogated to such rights to the extent they
apply to the Subleased Premises.
11. Insurance and Waiver Subrogation. Sublandlord shall comply with all
--------------------------------
of the insurance requirements and obligations
7
<PAGE>
required by the Main Lease and shall name Subtenant as an additional insured as
its interests may appear on its commercial or comprehensive general liability
insurance. Subtenant shall maintain commercial or comprehensive general
liability insurance with a broad form comprehensive liability endorsement under
which Subtenant is named as the insured and Main Landlord and Sublandlord are
named as additional insureds as their interests may appear, provided, however
such insurance shall have limits of $2,000,000 combined single limit per
occurrence and annual aggregate coverage. Sublandlord and Subtenant hereby
release the other from any and all liability or responsibilities to the other
(or anyone claiming through or under them by way of subrogation or otherwise)
for any loss or damage to property, loss of use or business interruption caused
by fire or any of the all-risk coverage casualties (whether either party has
such insurance in effect or not), even if such fire or other casualties shall
have been caused by default or negligence of the other party, or anyone for whom
such party may responsible. Sublandlord and Subtenant each hereby agree that its
respective policies on insurance will include such a clause or endorsement. Each
party shall be responsible, for its own deductibles and retentions.
12.A. Sublandlord's Indemnity. To the maximum extent that this agreement
-----------------------
may be made effective according to applicable law and without regard to any
insurance carried by Sublandlord, Sublandlord agrees to defend, indemnify and
save harmless Subtenant from and against all claims of whatever nature arising
from (i) any act, omission or negligence of Sublandlord, or Sublandlord's
contractors, licensees, invitees, agents, servants or employees, or (ii) any
accident, injury or damage whatsoever caused to any person, or to the property
of any person, occurring after the date that possession of the Subleased
Premises is first delivered to Subtenant and until the end of the Term and
thereafter, so long as Sublandlord is in occupancy of any part of the Leased
Premises, in or about the Leased Premises, or (iii) any accident, injury or
damage occurring outside the Leased Premises but within the Building, the Garage
(as defined in the Main Lease) or on the Site (as defined in the Main Lease),
where such accident, injury or damage referred to in (i), (ii) or (iii) above
results, or is claimed to have resulted, from an act or omission on the part of
Sublandlord or Sublandlord's agents or employees, licensees, invitees or
independent contractors. This indemnification and hold harmless agreement (which
shall survive the expiration or earlier termination of this Sublease) shall
include indemnity against all costs, 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).
12.B. Subtenant's Indemnity. To the maximum extent that this agreement
---------------------
may be made effective according to applicable law and without regard to any
insurance carried by Subtenant, Subtenant agrees to defend, indemnify and save
harmless Sublandlord from and against all claims of whatever nature arising from
(i) any act, omission or negligence of Subtenant, or Subtenant's contractors,
licensees, invitees, agents, servants or employees, or (ii) any accident, injury
or damage whatsoever caused to any person, or to the property of any person,
occurring after the date that possession of the Subleased Premises is first
delivered to Subtenant and until the end of the Term and thereafter, so long as
Subtenant is in occupancy of any part of the Subleased Premises, in or about the
Subleased Premises, or (iii) any accident, injury or damage occurring outside
the Subleased Premises but within the Building, the Garage (as defined in the
Main Lease) or on the Site (as defined in the Main Lease), where such accident,
injury or damage referred to in (i) , (ii) or (iii) above results, or is claimed
to have resulted, from an act or omission on the part of Subtenant or
Subtenant's agents or employees, licensees, invitees or independent contractors.
This indemnification and hold harmless agreement (which shall survive the
expiration or earlier termination of this Sublease) shall include indemnity
against all costs, 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).
8
<PAGE>
13. Consent or Approval of Main Landlord. If the consent or approval
------------------------------------
of Main Landlord is required under the Main Lease with respect to any matter
relating to the Subleased Premises or this Sublease, it shall also be required
of Sublandlord hereunder. Subtenant shall be required first to obtain the
consent or approval of Sublandlord with respect thereto and, if Sublandlord
grants such consent or approval, such consent may be conditioned upon receipt of
consent or approval from Main Landlord. Sublandlord shall be required to deliver
to Subtenant a copy of any request for consent or approval to be delivered to
Main Landlord and Main Landlord's response thereto within three (3) business
days of delivery or receipt, as the case may be. Sublandlord shall, if
requested, provide reasonable assistance to Subtenant in obtaining such consent
or approval from Main Landlord. Wherever in this Sublease Sublandlord's consent
or approval is required, such consent or approval shall not be unreasonably
withheld, delayed or conditioned. The representative of Sublandlord authorized
to provide approvals or consents on behalf of Sublandlord shall be Robert
Cabral, Vice President - Facilities, until Subtenant receives written notice
from Sublandlord designating a substitute representative.
14. Brokers. Sublandlord and Subtenant warrant and represent that they
-------
have had no dealings with any real estate broker or agent in connection with the
negotiation of this Sublease other than Meredith & Grew Incorporated and
Sinclair Properties (collectively, the "Brokers") and that they know of no real
estate broker or agent who is or might be entitled to a commission in connection
with this Sublease other than the Brokers. Sublandlord and Subtenant each agree
to indemnify, defend and hold the other party harmless from and against any and
all liabilities or expenses, including, without limitation, attorneys' fees and
costs, arising out of or in connection with the breach of the representation
contained in this paragraph; provided, however, notwithstanding Paragraph 15 of
the Consent, Sublandlord hereby covenants and agrees that it is solely
responsible for all fees, commissions and compensation due to the Brokers and
Sublandlord hereby agrees to indemnify and hold harmless Subtenant in connection
therewith, including, without limitation attorneys' fees and costs incurred by
Subtenant in connection with any claims made by either or both of the Brokers.
15. Consent by Main Landlord. This Sublease shall be of no force or
------------------------
effect unless consented to in writing by Main Landlord in the form set forth in
Exhibit C attached hereto ("Consent"). Sublandlord is solely responsible and
shall pay any and all of the fees and costs payable to Main Landlord under the
terms of the Main Lease in connection with the request for consent to this
Sublease. Subtenant may, at its option terminate the Sublease in the event the
Consent is not executed and delivered to Subtenant by October 31, 1995.
9
<PAGE>
16. Submission of Sublease to Subtenant. This Sublease shall have no
-----------------------------------
binding force or effect, shall not constitute an option for the subleasing of
the Subleased Premises, nor confer any rights or impose any obligations upon
either party until the execution thereof by both parties and the delivery of
executed original copies to both parties.
17. Drafting. The parties mutually agree that this Sublease has been
--------
negotiated at arm's length. The provisions of this Sublease shall be deemed to
have been drafted by both parties and this Sublease shall not be interpreted or
construed against any party solely by virtue of the fact that such party or its
counsel was responsible for its preparation.
18. Status Reports. The provisions of Section 17.16 of the Main Lease
--------------
shall apply as between Sublandlord and Subtenant.
19. Quiet Enjoyment. Sublandlord covenants that Subtenant, on paying the
---------------
rent under the Sublease and performing all of its obligations set forth or
referred to herein, shall peacefully and quietly have, hold and enjoy the
Subleased Premises throughout the Term, without ejection by Sublandlord or any
person lawfully claiming under or through Sublandlord, subject to the other
terms and provisions of this Sublease, and subject to the terms and provisions
of the Main Lease.
20. Conflicts. If any of the agreements between Sublandlord and
---------
Subtenant contained in the Consent of even date herewith among Sublandlord,
Subtenant and Main Landlord, conflict with the provisions of this Sublease, the
provisions of the Consent shall govern and control.
21. Attorneys' Fees. If either party hereto be made or becomes a party
---------------
to any litigation commenced by or against the other party involving the
enforcement of any of the rights and remedies of such party, or arising on
account of the default of the other party in the performance of such party's
obligations hereunder, then the prevailing party in any such litigation, or the
party becoming involved in such litigation because of a claim against such other
party, as the case may be, shall receive from the other party all costs and
reasonable attorneys' fees incurred by such party at trial and on appeal in
connection with such litigation.
22. Waiver of Jury Trial. Subtenant hereby waives all right to trial by
--------------------
jury in any summary or other action, proceeding or counterclaim arising out of
or in any way connected with this Sublease, the relationship of Sublessor and
Subtenant, the Subleased Premises and the use and occupancy thereof, and any
claim of injury or damages.
10
<PAGE>
23. No Waiver. The failure of either Sublessor or Subtenant to insist in
---------
any one or more cases upon the strict performance or observance of any
obligation of the other party hereunder or to exercise any right or option
contained herein shall not be construed as a waiver or relinquishment for the
future of any such obligation of such part or any right or option of the other
party. No waiver by either party of any term, covenant or condition of this
Sublease shall be deemed to have been made unless expressed in writing and
signed by the other party.
24. Complete Agreement. There are no representations, agreements,
------------------
arrangements or understandings, oral or written, between the parties relating to
the subject matter of this Sublease which are not fully expressed in this
Sublease. This Sublease cannot be changed or terminated orally or in any manner
other than by a written agreement executed by both parties.
25. Successors and Assigns. The provisions of this Sublease shall extend
----------------------
to, bind and inure to the benefit of the parties hereto and their respective
personal representatives, heirs, successors and assigns.
26. Interpretation. Irrespective of the place of execution or
--------------
performance, this Sublease shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts. If any provision of this Sublease
or the application thereof to any person or circumstance shall, for any reason
and to any extent, be invalid or unenforceable, the remainder of this Sublease
and the application of that provision to other persons or circumstances shall
not be affected but rather shall be enforced to the extent permitted by law. The
captions, headings and titles, if any, in this Sublease are solely for
convenience of reference and shall not affect its interpretation. If any words
or phrases in this Sublease shall have been stricken out or otherwise eliminated
whether or not any other words or phrases have been added, this Sublease shall
be construed as if the words or phrases so stricken out or otherwise eliminated
were never included in this Sublease and no implication or inference shall be
drawn from the fact that said words or phrases were so stricken out or otherwise
eliminated. All terms and words used in this Sublease, regardless of the number
or gender in which they are used, shall be deemed to include any other number
and any other gender as the context may require. The word "person" as used in
this Sublease shall mean a natural person or persons, a partnership, a
corporation or any other form of business or legal association or entity.
11
<PAGE>
IN WITNESS WHEREOF, Sublandlord and Subtenant have hereunder executed this
Sublease as of the day and year first above written.
CAMP DRESSER & MCKEE INC.
By: /s/ Paul G. Camell
----------------------------
Paul G. Camell
Its: Senior Vice President-Finance
duly authorized
ON TECHNOLOGY CORPORATION
By: /s/ John Bogdan
----------------------------
John Bogdan
Its: Chief Financial Officer
duly authorized
12
<PAGE>
EXHIBIT A
I N D E X T O L E A S E
- - - - - - - - - - - -
FROM
----
TRUSTEES OF ONE CAMBRIDGE CENTER TRUST
TO
CAMP DRESSER & McKEE INC.
================================================================================
<TABLE>
<CAPTION>
ARTICLE
NUMBER CAPTION PAGE
- ------ ------- ----
<S> <C> <C>
I BASIC LEASE PROVISIONS AND ENUMERATION OF EXHIBITS
II PREMISES
III LEASE TERM AND EXTENSION OPTIONS
IV CONSTRUCTION
V ANNUAL FIXED RENT
VI TAXES
VII LANDLORD'S REPAIRS AND SERVICES AND TENANT'S PAYMENTS
VIII TENANT'S REPAIRS
IX ALTERATIONS
X PARKING
XI CERTAIN TENANT COVENANTS
XII TRANSFER OF TENANT'S INTEREST, ASSIGNMENT AND SUBLETTING
XIII INDEMNITY AND COMPREHENSIVE GENERAL LIABILITY INSURANCE
XIV FIRE, CASUALTY AND TAKING
XV DEFAULT
XVI BANKRUPTCY OR INSOLVENCY
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
XVII MISCELLANEOUS PROVISIONS
<S> <C>
Section 17.1 Waiver
Section 17.2 Cumulative Remedies
Section 17.3 Quiet Enjoyment
Section 17.4 Surrender
Section 17.5 Brokerage
Section 17.6 Invalidity of Particular Provisions
Section 17.7 Provisions Binding, Etc.
Section 17.8 Recording
Section 17.9 Notices
Section 17.10 When Lease Becomes Binding
Section 17.11 Paragraph Headings
Section 17.12 Rights of Mortgagee
Section 17.13 Rights of Ground Lessor
Section 17.14 Notice to Mortgagee and Ground Lessor
Section 17.15 Assignment of Rents
Section 17.16 Status Report
Section 17.17 Self-Help
Section 17.18 Holding Over
Section 17.19 Entry by Landlord
Section 17.20 Tenant's Payments
Section 17.21 Counterparts
Section 17.22 Entire Agreement
Section 17.23 Landlord Liability
Section 17.24 No Partnership
Section 17.25 Certain Adjustments
Section 17.26 Corporate Signage
Section 17.27 Governing Law
Exhibit A -- Description of the Site.
Exhibit B -- Loading Dock Plan.
Exhibit C -- Tenant Plan Schedule and Requirements.
Exhibit D -- Landlord's Services.
Exhibit E -- Floor Plans.
Exhibit F -- Development Area Map.
Exhibit G -- Form of Commencement Date Agreement.
Exhibit H -- Memorandum Re: Procedure for Adjustment of
Electricity Costs.
Exhibit I -- Broker Determination of Prevailing Market Rent.
Exhibit J -- Measurement Method.
</TABLE>
<PAGE>
THIS INSTRUMENT IS AN INDENTURE OF LEASE in which the Landlord and the
Tenant are the parties hereinafter named, and which relates to space in the
building (the "Building") known as, and having an address at, One Cambridge
Center, Cambridge, Massachusetts.
The parties to this instrument hereby agree with each other as follows:
ARTICLE I
---------
BASIC LEASE PROVISIONS AND ENUMERATIONS OF EXHIBITS
---------------------------------------------------
1.1 INTRODUCTION. The following sets forth the basic data and identifying
------------
Exhibits elsewhere hereinafter referred to in this Lease, and, where
appropriate, constitute definitions of the terms hereinafter listed.
1.2 BASIC DATA.
----------
Date: May 6, 1988
Landlord: MORTIMER B. ZUCKERMAN, EDWARD H.
LINDE AND DAVID BARRETT, AS TRUSTEES
OF ONE CAMBRIDGE CENTER TRUST under
Declaration of Trust dated May 14,
1985, recorded with the Middlesex
South District Registry of Deeds in
Book 16221, Page 413, as amended by
instrument dated July 31, 1986 and
recorded with said Registry of Deeds
in Book 17438, Page 23, but not
individually.
Present Mailing Address c/o Boston Properties
of Landlord: 8 Arlington Street
Boston, Massachusetts 02116
Landlord's Construction David Barrett, John Camera and
Representatives: Stephen P. Baraldi
Tenant: Camp Dresser & McKee Inc.
a Massachusetts corporation
Present Mailing Address One Center Plaza
of Tenant: Boston, Massachusetts 02108
<PAGE>
Tenant's Construction Thomas D. Furman, Jr.
Representative:
Outside Completion Date: February 28, 1989
Lease Term (also sometimes The period commencing on the
called the "Term"): "Commencement Date" (hereinafter
referred to) and ending on March 31,
2000 unless extended or sooner
terminated as hereinafter provided.
Extension Options: Three (3) successive periods of five
years each, all as provided in and
on the terms set forth in Section
3.2.1 hereof.
Lease Year: A period of twelve (12) consecutive
calendar months, commencing on the
first day of January in each year,
except that the first Lease Year of
the Lease Term hereof shall be the
period commencing on the
Commencement Date and ending on the
succeeding December 31, and the last
Lease Year of the Lease Term hereof
shall be the period commencing on
January 1 of the calendar year in
which the Lease Term ends, and
ending with the date on which the
Lease Term ends.
Commencement Date: As defined in Section 3.1 hereof.
Commencement Date for Tenth As defined in Section 2.1.1 hereof.
Floor Space (also sometimes
called the "Tenth Floor Space
Commencement Date"):
Initial Premises: Floors 11 and 12 being the top two
(2) floors of the Building, plus
----
Floor 10 of the Building when the
same is added pursuant to the
provisions of Section 2.1.1 hereof,
in accordance with the floor plans
annexed hereto as Exhibit E and
incorporated herein by reference, as
further defined and limited in
Section 2.1 hereof.
Premises: That portion of the Building that
Tenant is leasing at any given time
pursuant to the provisions of this
Lease.
<PAGE>
Rentable Floor Area of the 20,671 square feet comprising Floor
Initial Premises: 11 and 20,694 square feet comprising
Floor 12, for a total of 41,365
square feet, plus 20,699 square feet
----
comprising Floor 10 (the "Tenth
Floor Space") when the same is added
pursuant to the provisions of
Section 2.1.1 hereof for a total of
62,064 square feet, included in each
case a proportionate share of common
areas of the Building outside of the
Premises.
Measurement Method: The rentable floor area for all
Premises (or portions thereof) are
determined pursuant to the
Measurement Method set forth in
Exhibit J.
Rentable Floor Area of The rentable floor area of all of
the Premises: the space at any given time under
lease to Tenant in the Building
under this Lease, including the
Rentable Floor Area of the Initial
Premises as defined above and any
other space added thereto by Tenant
pursuant to its rights under Section
2.3, Section 2.4 or otherwise.
Annual Fixed Rent: (i) For the Initial Premises during
the original Lease Term, at the
following annual rates per square
foot of Rentable Floor Area of the
Initial Premises:
(a) $30.79 for the period
beginning on the
Commencement Date (but
in the case of the
Tenth Floor Space
beginning on the
Commencement Date for
the Tenth Floor Space)
and in all cases ending
on the last day of the
sixtieth (60th) full
calendar month of the
original Lease Term;
and
(b) $35.29 for the period
beginning on the first
day of the sixty first
(61st) calendar month
of
<PAGE>
the Lease Term and
continuing through the
last to occur of March
31, 2000 or the last
day of the "Addition to
the One CC Original
Lease Term" (defined in
Section 3.2).
(ii) For the Expansion Space
referred to in Section 2.3 hereof,
as provided and determined in
accordance with Section 2.3 hereof.
(iii) For any space added to the
Premises pursuant to the provisions
of Section 2.4, as set forth in said
Section 2.4.
(iv) During the extension option
periods (if exercised) as provided
or determined in Section 2.3, 2.4
and/or Section 3.2.1 hereof, as the
case may be.
Tenant Electricity: Initially as provided in Section 5.1
hereof, subject to adjustment as
provided in Section 5.2 and Section
7.5 hereof.
Additional Rent: All charges and other sums payable
by Tenant as set forth in this
Lease, in addition to Annual Fixed
Rent.
Initial Minimum Limits of $2,000,000 combined single limit.
Tenant's Comprehensive
General Liability Insurance:
Total Rentable Floor Area 215,686 square feet.
of the Building:
Lot or Site: All, and also any part of, the
property described in Exhibit A,
plus any additions or reductions
thereto resulting from the change of
any abutting street line. The terms
Lot and Site are used
interchangeably in this instrument.
Property: The Building and Lot or Site.
Loading Dock: The service dock and related
driveways providing vehicular
service access for the Building as
shown on Exhibit B.
<PAGE>
Development Area: The area of the Cambridge Center
development owned, or to be owned,
by Landlord or affiliates of
Landlord, as shown on Exhibit F.
Permitted Use: General office use and for other
ancillary uses customarily
associated therewith as permitted by
applicable zoning.
Brokers: Leggat McCall/Grubb & Ellis, Inc.
53 State Street
Boston, Massachusetts 02109
And
Meredith & Grew Incorporated
160 Federal Street
Boston, Massachusetts 02110
1.3 ENUMERATION OF EXHIBITS. The following Exhibits attached hereto are a part
-----------------------
of this Lease, are incorporated herein by reference, and are to be treated
as a part of this Lease for all purposes. Undertakings contained in such
Exhibits are agreements on the part of Landlord and Tenant, as the case may
be, to perform the obligations stated therein to be performed by Landlord
and Tenant, as and where stipulated therein.
Exhibit A -- Description of the Site.
Exhibit B -- Loading Dock Plan.
Exhibit C -- Tenant Plan Schedule and
Requirements.
Exhibit D -- Landlord's Services.
Exhibit E -- Floor Plans.
Exhibit F -- Development Area Map.
Exhibit G -- Form of Commencement Date
Agreement.
Exhibit H -- Memorandum Re: Procedure for
Adjustment of Electricity Costs.
Exhibit I -- Broker Determination of Prevailing
Market Rent.
Exhibit J -- Measurement Method.
-5-
<PAGE>
ARTICLE II
----------
PREMISES
--------
2.1 DEMISE AND LEASE OF PREMISES. Landlord hereby demises and leases to
----------------------------
Tenant, and Tenant hereby hires and accepts from Landlord, the Premises
in the Building, excluding exterior faces of exterior walls, the common
stairways and stairwells, elevators and elevator walls, mechanical rooms,
electric and telephone closets, janitor closets, and pipes, ducts,
shafts, conduits, wires and appurtenant fixtures serving exclusively or
in common other parts of the Building, and if the Premises includes less
than the entire rentable area of any floor, excluding the common
corridors, elevator lobbies and toilets located on such floor.
2.1.1 TENTH FLOOR SPACE. (A) The Tenth Floor Space shall become part of the
-----------------
Initial Premises on the later to occur of (a) January 1, 1990 or (b) the
date on which the Tenth Floor Space is substantially completed as defined
in Section 4.1 (B) hereof; provided, however, that if Tenant shall
request Landlord to prepare the Tenth Floor Space for earlier occupancy
as provided below in this section, then the Tenth Floor Space shall
become a part of the Initial Premises on the later of (x) said date for
which such earlier occupancy was requested or (y) the date on which the
Tenth Floor Space is substantially completed as defined in Section 4.1
(B), hereof. Notwithstanding any of the foregoing, if Tenant shall
commence beneficial occupancy (as defined in Section 3.1 (b), below) of
the Tenth Floor Space on any earlier date than provided for above, then
the Tenth Floor Space shall become part of the Initial Premises on such
earlier date. Landlord and Tenant agree that promptly after determination
of the date on which the Tenth Floor Space is added to and becomes part
of the Initial Premises (the "Tenth Floor Space Commencement Date") they
will execute an appropriate document setting forth such date.
(B) Until commencement of Landlord's improvement work in the Tenth Floor
Space pursuant to the Tenant Plans therefor, Landlord shall retain all
rights to use, lease, sublease and license the use of the Tenth Floor
Space to others and to retain all rental payments and other charges
received for such use during such interim period. This interim period
shall end on the commencement of the aforesaid improvement work.
(C) Tenant may at any time request Landlord to proceed with said
improvement work in the Tenth Floor Space on a schedule leading to an
earlier completion date than January 1, 1990, providing that Tenant shall
in such case pay Annual Fixed Rent and all other charges from such
earlier substantial completion date. (E.g., if Tenant should request
Landlord to proceed towards a target occupancy date of October 1, 1989,
then rent and other charges would commence on the later of October 1,
1989 or the date on which such work was substantially completed.)
Further, Landlord's obligation to proceed on such earlier schedule shall
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be subordinate to any other commitments it may have made for interim
occupancies under (B), above, which shall take precedence as may be
required.
2.2 APPURTENANT RIGHTS AND RESERVATIONS. Tenant shall have, as appurtenant to
-----------------------------------
the Premises, the non-exclusive right to use in common with others, but
not in a manner or extent that would interfere with the normal operation
and use of the Building as a multi-tenant office building and subject to
reasonable rules of general applicability to tenants of the Building from
time to time made by Landlord of which Tenant is given notice: (a) the
common lobbies, corridors, stairways, and elevators of the Building, and
the pipes, ducts, shafts, conduits, wires and appurtenant meters and
equipment serving the Premises in common with others, (b) the Loading
Dock and the common walkways and driveways necessary for access to the
Building, (c) if the Premises include less than the entire rentable floor
area of any floor, the common toilets, corridors and elevator lobby of
such floor and (d) common areas within Parcel 4 of the Development Area.
Landlord covenants and agrees that such rules and regulations shall not
prohibit Tenant using the Building's common stairways for access among
Floor 10, Floor 11 and Floor 12 of the Building. Tenant shall have the
right of access to the Premises on a twenty-four (24) hour per day basis
subject to (i) such reasonable rules and regulations as aforesaid so long
as same do not prohibit such access, (ii) security measures promulgated
by Landlord or the managing agent respecting the manner of such access
and (iii) Tenant paying for building operation services for periods not
within the normal operating hours of the Building.
Landlord reserves the right, initially at its cost and expense but
subject, however, to escalation payments as provided in Section 7.5
hereof, from time to time, without unreasonable interference with
Tenant's use: (a) to install, use, maintain, repair, replace and relocate
for service to the Premises and other parts of the Building, or either,
pipes, ducts, conduits, wires and appurtenant fixtures, wherever located
in the Premises or the Building, and (b) to alter or relocate any other
common facility, provided that substitutions are substantially equivalent
or better. Installations, replacements and relocations referred to in
clause (a) above shall be located so far as practicable in the central
core area of the Building, above ceiling surfaces, below floor surfaces
or within perimeter walls of the Premises. Except in the case of
emergencies, Landlord shall give Tenant reasonable advance notice of any
of the foregoing activities which require work in the Premises. In the
event that any such work shall result in a reduction of the Rentable
Floor Area of the Premises, Landlord and Tenant promptly shall execute an
amendment to this Lease setting forth such reduction in said Rentable
Floor Area of the Premises as defined in Section 1.2 hereof.
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2.3 TENANT'S EXPANSION SPACE OPTION. If Tenant exercises the option
-------------------------------
hereinbelow set forth in this Section, Landlord agrees to lease to Tenant
additional space in the Building upon and subject to the terms and
conditions set forth below.
(A) (1) Expansion Space. Tenant shall have the right to lease additional
---------------
space pursuant to this Section as follows: an initial increment as
described in paragraph (A) (2), below (the "First Expansion Space") and
additional increments at the end of the one hundred thirty-eighth (138th)
calendar month of the Lease Term (the "Second Expansion Space") and, if
the Lease Term has been extended, at the end of the one hundred ninety-
eighth (198th) calendar month of the Lease Term (the "Third Expansion
Space") and at the end of the two hundred fifty-eighth (258th) calendar
month of the Lease Term (the "Fourth Expansion Space"), in each case
subject, however, (i) to the "leeway period" for which provision is
hereinafter made in this Section and (ii) to the modification provided in
Section 3.2(B) if applicable. The First Expansion Space, the Second
Expansion Space, the Third Expansion Space and the Fourth Expansion Space
may be sometimes hereinafter referred to separately or collectively as
the context admits or requires, as the "Expansion Space". Each Expansion
Space shall consist of between approximately 8,000 square feet of
rentable floor area and approximately 12,000 square feet of rentable
floor area (except in regard to the First Expansion Space as provided in
paragraph (A) (2), below) and shall be contiguous to the Premises then
under lease to Tenant, unless Landlord cannot provide such contiguous
space because of then-existing leases in the Building, in which case it
shall be space within the Building as proximate as such space is
available to the Initial Premises (as the same may have been previously
contiguously expanded).
(A) (2) First Expansion Space. The "First Expansion Space" shall be one
---------------------
of the following:
(i) On the ninth floor of the Building, on the expiration
of the initial lease terms of one of the tenants on
that floor. The current tenants and their lease terms
are as follows: Kapor Enterprises, Inc., September 30,
1992, and Applied Medical Systems, October 31, 1992,
each with one (1) extension option of five (5) years.
If Landlord can offer space under this alternative,
then (and only in such case) the First Expansion Space
may be satisfied by a minimum of 5,000 rentable square
feet.
(ii) If either (a) the tenants on the ninth floor of the
Building have exercised their extension options, or (b)
one or both current ninth floor leases is terminated
early and Landlord has leased said space to another
tenant (Tenant having declined to exercise its right of
first refusal under Section 2.4) , and as a result of
either (a)
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or (b) Landlord therefore cannot offer said space for
the First Expansion Space as described in (i) above,
Landlord will endeavor to locate other space in
Cambridge Center to which it can relocate one of the
ninth floor tenants. If Landlord can structure such a
relocation, then Tenant will have the right (but not
the obligation) to have its First Expansion Space on
such vacated space on the ninth floor on the same terms
and conditions as previously agreed, subject, however,
to Tenant also paying for any relocation costs for the
tenant so relocated. Landlord will provide Tenant with
a statement describing the estimated timing of the
relocation and resulting availability of the space for
Tenant, and setting forth budgeted relocation costs
(which may include moving expenses, space preparation
expenses and the like), prior to the time Tenant must
make its decision in regard to this alternative.
(iii) If Landlord cannot offer either alternative (i) or (ii)
(or if Landlord cannot offer alternative (i) and Tenant
elects not to accept alternative (ii)), then the First
Expansion Space shall be on another floor in the
Building, as proximate to the Initial Premises as
available, unless Landlord cannot provide such space in
the Building because of then-existing leases in the
Building. For these purposes the First Expansion Space
shall be provided at the end of the sixtieth (60th)
calendar month of the Lease Term, subject to a "Leeway
Period" for the addition of the First Expansion Space
to the Premises as the same is defined in Section 2.3
(C), except that for these purposes the Leeway Period
shall be 12 months rather than 6 months.
(iv) If Landlord cannot offer any of alternatives (i), (ii)
or (iii) above (or if Landlord cannot offer either
alternative (i) or (iii) and Tenant elects not to
accept alternative (ii)), then the First Expansion
Space shall be located in a multi-tenant office
building within the Development Area owned by Landlord
or affiliates of Landlord that is the closest such
building to the Building in which such space can be
provided, and shall be provided on the schedule as is
described in the last sentence of (iii) above.
(B) Prerequisites. Tenant shall have the right to cause the applicable
-------------
Expansion Space to be included within, and as a part of, the Premises
under this Lease, provided that:
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(i) Tenant gives Landlord timely written notice of its election to
include the applicable Expansion Space within the Premises as
provided below; and
(ii) Tenant is not in default beyond applicable notice and cure
periods in the performance of any obligations to be performed by
Tenant under this Lease; and
(iii) In regard to the Second Expansion Space, the Third Expansion
Space and the Fourth Expansion Space, that prior to or
concurrently with the giving of the aforesaid notice as to the
applicable Expansion Space, Tenant has given or gives Landlord
written notice of its election to extend the Lease Term of this
Lease for the then applicable extension option period provided in
Section 3.2.1 hereof.
(C) Leeway Period. If Tenant elects to cause the applicable Expansion
-------------
Space to be included within the Premises as aforesaid, then:
(i) Landlord shall have the flexibility of delivering possession of
the applicable Expansion Space, or portions thereof, to the
Tenant at any time within a "leeway period" which occurs in the
case of the First Expansion Space as defined in paragraphs (A)
(2) (iii) and (iv), above, and in the case of other Expansion
Space within a period beginning six (6) months prior to and
ending six (6) months subsequent to the expiration of the
sixtieth (60th), one hundred thirty-eighth (138th), one hundred
ninety-eighth (198th), and two hundred fifty-eighth (258th)
calendar month of the Lease Term, as may be applicable and as
modified by the provisions of Section 3.2(B) if applicable; and
(ii) Effective as of the date when Landlord delivers possession of the
applicable Expansion Space, or portions thereof, to the Tenant,
the applicable Expansion Space, or such portions thereof, shall
become a part of the Premises demised under this Lease for the
balance of the Term of this Lease, as it may be extended; and
(iii) The Annual Fixed Rent attributable to the applicable Expansion
Space and payments on account of real estate taxes, operating
costs and electricity for any remaining portion of the original
Lease Term and any Extended Term (as defined in Section 3.2.1
hereof) respecting the Expansion Space shall be as determined in
accordance with the provisions of this Section 2.3.
(D) Tenant's Request. If Tenant desires to exercise its then available
----------------
option to add Expansion Space, then it shall give notice to Landlord, not
earlier than January 1, 1992, nor later
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<PAGE>
than March 31, 1992 in the case of the First Expansion Space and not
earlier than eighteen (18) months nor later than fourteen (14) months
prior to, respectively, the last day of the one hundred thirty-eighth
(138th) calendar month of the Lease Term in the case of the Second
Expansion Space, the last day of the one hundred ninety-eighth (198th)
calendar month of the Lease Term in the case of the Third Expansion
Space, and the last day of the two hundred fifty-eighth (258th) calendar
month of the Lease Term in the case of the Fourth Expansion Space, of
Tenant's request for Landlord's proposal to Tenant of a proposed annual
rent and a proposed location for the Expansion Space. Said dates for the
giving of said notice shall be as modified by the provisions of Section
3.2(B) if applicable. Such request shall specify that it is made pursuant
to this Section 2.3 (D) provided, however, that Tenant's failure to
specify that such request is made pursuant to Section 2.3 (D) shall not
constitute or result in a waiver or forfeiture of Tenant's rights under
this Section 2.3.
(E) Landlord's Response. Within thirty (30) days after receipt by
-------------------
Landlord of Tenant's request as aforesaid, Landlord shall notify Tenant
of its proposed Annual Fixed Rent for the applicable Expansion Space in
"as-is" condition, which shall be expressed in relation to the tax and
operating cost bases and provisions for payment of tenant electricity as
contained in this Lease, shall specify the rentable square foot area of
the applicable Expansion Space and shall include a floor plan showing the
location of the applicable Expansion Space (collectively "Landlord's
Expansion Proposal").
(F) Tenant's Right to Broker Determination. If at the expiration of
--------------------------------------
thirty (30) days after the date when Tenant receives Landlord's Expansion
Proposal (the "Negotiation Period"), Landlord and Tenant have not reached
agreement on a determination of an annual rental and all other relevant
terms for the Expansion Space and executed a written instrument pursuant
to such agreement adding the applicable Expansion Space to the Premises,
then Tenant shall have the right, by notice given to Landlord within
thirty (30) days following the expiration of the Negotiation Period, to
request a broker determination (the "Broker Determination") of the
Prevailing Market Rent (as defined in Exhibit I attached to this Lease
and made a part hereof) for the applicable Expansion Space, which Broker
Determination shall be made in the manner set forth in Exhibit I.
(G) Exercise of Expansion Option. If Tenant timely shall have requested
----------------------------
the Broker Determination, then in order to exercise its right to add the
applicable Expansion Space to the Premises, Tenant, within fifteen (15)
days after receipt of the Broker Determination, shall give written notice
to Landlord of Tenant's exercise of its right to add the applicable
Expansion Space pursuant to this subsection, in which case the Annual
Fixed Rent for the Expansion Space shall be the lesser of (i) the
Prevailing Market Rent as determined by the Broker Determination or (ii)
the
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<PAGE>
applicable "Maximum Expansion Rent". The "Maximum Expansion Rent" shall
be the sum of (x) the "Reference Rent Per Square Foot, and (y) the
applicable "Expansion Premium". The "Reference Rent Per Square Foot"
shall be (i) during the initial Lease Term (but not any extension
thereof) the Annual Fixed Rent per square foot applicable to the Initial
Premises as set forth in Section 1.2 less $2.29 per rentable square foot,
----
and (ii) during any extension period of the Lease Term, whether under
Section 3.2 or under Section 3.2.1 or otherwise, the Annual Fixed Rent
per square foot applicable to the Initial Premises during such extension
period. The "Expansion Premium" shall be as follows: $1.25 per square
foot for the First Expansion Space; $2.50 per square foot for the Second
Expansion Space; $3.75 per square foot for the Third Expansion Space and
$5.00 per square foot for the Fourth Expansion Space.
(H) Confirmation in Writing. Upon the giving of notice by Tenant to
-----------------------
Landlord exercising Tenant's option to add the applicable Expansion Space
to the Premises in accordance with the provisions of subsection (G)
above, then Landlord and Tenant agree to enter into (1) an amendment of
this Lease confirming the location of the applicable Expansion Space in
the Building and the rentable floor area of same and the Annual Fixed
Rent and all other terms related to same, including the extent of any
additional parking provided for below, and (2) an amended notice of lease
to appropriately reflect the terms of such amendment to this Lease.
(I) Parking. If Tenant shall exercise its right to add applicable
-------
Expansion Space hereunder, then Tenant shall also have the right to add
additional parking rights for such space, to be subject to the provisions
of Article X, up to a maximum of parking for two (2) passenger
automobiles for each 1,000 square feet of rentable floor area of such
applicable Expansion Space, by giving written notice to Landlord of the
number of spaces so elected at any time on or before the commencement
date respecting the applicable Expansion Space provided, however, that
Landlord shall have until the last to occur of (i) thirty (30) days after
its receipt of Tenant's notice hereunder and (ii) the commencement date
for the applicable Expansion Space to provide the parking spaces so
elected hereunder by Tenant.
(J) Certain Provisions Inapplicable. Tenant acknowledges that inasmuch as
-------------------------------
the Prevailing Market Rent to be established by the Broker Determination
is to reflect the Expansion Space in "as-is" condition, the obligations
of Landlord under Article IV (in regard to construction of tenant
improvements) and Section 5.3 (in regard to certain special allowances)
shall not apply to any of the Expansion Space.
2.4 TENANT'S FIRST REFUSAL RIGHTS. (A) Landlord shall have the right upon
-----------------------------
terms and conditions determined by Landlord initially to lease the entire
space in the Building to tenants, without first offering to Tenant such
space or giving to Tenant an
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opportunity to lease such space, subject, however, to Tenant's expansion
rights as set forth and on the terms and conditions provided in Section
2.3. Landlord and Tenant acknowledge that with respect to the ninth (9th)
floor of the Building the space has been leased by Landlord as described
in Section 2.3 (A) (2) (i) above, and that the eighth (8th) floor of the
Building has been leased by Landlord to Lotus Development Corporation for
an initial term ending December 31, 1992 with one (1), five (5) year
extension option of five (5) years and certain early termination rights.
Such leases on the ninth (9th) and eighth (8th) floors of the Building
and the terms thereof, including, but not limited to, the original term
thereof, options to extend the term thereof and expansion rights are
hereinafter called the "Initial Leases" and the tenants under the Initial
Leases are hereinafter called the "Initial Tenants". Once an Initial
Lease shall have been executed, then for purposes of this Section 2.4,
the original lease term, extension options and expansion rights shall be
as set forth in such Initial Lease as of the execution thereof. By way of
example, if Landlord shall have executed an Initial Lease with an Initial
Tenant providing for (i) an original term of five (5) years and (ii) one,
five (5) year extension option and if the Initial Tenant shall exercise
said extension option then at the expiration of the term as extended by
the five (5) year extension option period, Tenant's right of first
refusal under, and upon the terms and conditions, of this Section 2.4
shall be applicable. Subject to the Initial Leases and the rights of the
Initial Tenants thereunder, which rights are hereby made prior to the
rights of Tenant under this Section 2.4, Landlord agrees not to enter
into a lease or leases to rent space on the ninth (9th) and eighth (8th)
floors in the Building without first giving to Tenant an opportunity to
lease such space on business terms at least as favorable as those which
Landlord is willing to offer to some other prospective tenant for such
space. When Landlord determines that any such space becomes available for
reletting, Landlord shall notify Tenant of the availability of such space
and shall advise Tenant of the annual market fixed rent and all other
business terms upon which Landlord is willing so to lease such space. If
Tenant wishes to exercise Tenant's right of first refusal, Tenant shall
do so, if at all, by giving Landlord notice of Tenant's desire to enter
into a lease of such space on such terms within fifteen (15) days after
Landlord's notice to Tenant of the availability of such space and of such
terms. If Tenant shall give such notice, the same shall constitute an
agreement to enter into a lease of such space within fifteen (15) days
thereafter, at an annual fixed rent equal to ninety-five percent (95%) of
the annual market fixed rent set forth in Landlord's notice to Tenant
provided for above and on the other terms and conditions set forth in
Landlord's notice to Tenant. Such leasing shall be effected by an
appropriate amendment to this Lease. If Tenant shall not so exercise such
right within such period, time being of the essence in respect of such
exercise, Landlord shall be free to enter into a lease of such space with
another prospective tenant upon terms and conditions no more favorable to
such other tenant than those offered to Tenant, which terms may include
rights or options to extend the term or
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<PAGE>
to expand the size of the premises under such lease. No failure or
refusal by Tenant to exercise any right of first refusal under this
Section 2.4 shall vitiate, terminate or otherwise affect Tenant's
expansion rights under Section 2.3.
(B) If Tenant shall exercise any right of first refusal under this
Section 2.4 respecting space on the ninth (9th) or eighth (8th) floor of
the Building, such space shall be credited against Landlord's obligations
under Section 2.3 to provide Expansion Space next due.
(C) If Tenant shall exercise any right of first refusal under this
Section 2.4 and if, thereafter, the then tenant or occupant of the
premises with respect to which Tenant shall have so exercised such right
wrongfully fails to deliver possession of such premises at the time when
its tenancy or occupancy is scheduled to expire, Landlord shall use all
reasonable efforts and due diligence (which shall be limited to the
commencement and prosecution thereafter of eviction proceedings and to
the payment of legal fees and other expenses reasonably associated with
such proceedings) to evict such tenant occupant from the premises and to
deliver possession of such premises to Tenant as soon as may be
practicable. If Landlord shall fail so to evict such tenant or occupant
and deliver possession after having been requested to do so by Tenant,
Tenant may, in the name of Landlord and/or its own name, commence and
prosecute such eviction proceedings for Landlord's account and at
Landlord's expense, and Landlord shall execute and deliver any and all
documents reasonably required by Tenant for the purpose and shall give
Tenant such cooperation as may be required reasonably by Tenant.
Commencement of the term of Tenant's occupancy and lease of such
additional space shall, in the event of such holding over by such tenant
or occupant, be deferred until possession of the additional space is
delivered to Tenant or the expiration of thirty (30) days after Landlord
notifies Tenant of the date upon which it is reasonably anticipated such
possession will be delivered to Tenant, whichever is later.
Notwithstanding anything herein to the contrary contained, in the event
of any such holding over by such tenant or occupant continuing for more
than sixty (60) days, Tenant may thereafter at any time until possession
of such additional space shall have been delivered to Tenant, have the
right to terminate Tenant's-obligations in respect thereof without any
liability to Landlord and, in the event of any such termination by
Tenant, any lease of such additional space between Landlord and Tenant
shall be null and void and without further force or effect. Further, the
failure of the then tenant or occupant of such premises to so vacate
shall not give Tenant any right to terminate this Lease or to deduct
from, offset against or withhold Annual Fixed Rent or additional rent (or
any portions thereof) and shall not constitute a default of Landlord
irrespective of whether or not Tenant exercises the termination right set
forth in the immediately preceding sentence.
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(D) The rights of first refusal provided in this Section 2.4 shall apply
only to the ninth (9th) and eighth (8th) floors of the Building and to no
other space in the Building.
ARTICLE III
-----------
LEASE TERM, ADDITION TO ORIGINAL LEASE TERM AND EXTENSION OPTIONS
-----------------------------------------------------------------
3.1 TERM. The Term of this Lease shall be the period specified in Section 1.2
----
hereof as the "Lease Term", unless sooner terminated or extended as herein
provided. The Lease Term hereof shall commence on, and the Commencement Date
shall be, the first to occur of:
(a) The date (but in no event earlier than October 1, 1988) on which
the Initial Premises exclusive of the Tenth Floor Space are
substantially complete, as defined in Section 4.1 hereof; or
(b) The date upon which Tenant commences beneficial use of any part
of the Initial Premises.
Tenant shall, in all events, be treated as having commenced
beneficial use of the Initial Premises when it begins to move
into the Initial Premises furniture and equipment for its regular
business operations; provided, however, that construction work
involved in the installation of computers and the performance of
electrical work and general fit up for Tenant's business
operations shall not constitute commencement of beneficial use of
the Premises.
As soon as may be convenient after the Commencement Date has been
determined, Landlord and Tenant agree to join with each other in the
execution, in the form of Exhibit G hereto, of a written Declaration in
which the Commencement Date and specified Lease Term of this Lease shall be
stated.
3.2 ADDITION TO ORIGINAL LEASE TERM. (A) Reference is made to that certain lease
-------------------------------
of even date herewith between the Trustees of Ten Cambridge Center Trust, as
landlord, and Tenant, as tenant, of the leased premises known as Ten
Cambridge Center (the "Ten CC Lease"). Promptly after the Commencement Date
of the Ten CC Lease, the parties shall determine in writing the Expiration
Date of the initial Term of the Ten CC Lease ("Ten CC Lease Initial
Expiration Date"), being the date one hundred and twenty (120) calendar
months, plus any partial month, after the Commencement Date of the Ten CC
Lease. If the Ten CC Lease Initial Expiration Date shall be later than March
31, 2000 then the original Lease Term hereof shall automatically be extended
by a period equal to the number of calendar months from March 31, 2000 until
said Ten CC Lease Expiration Date (the "Addition to the One CC Original
Lease Term"). The Addition to the One CC Original Lease Term shall be added
to the end of the original Lease Term of this Lease as set forth in Section
1.2 hereof under the definition of
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"Lease Term" (also sometimes called the "Term"). The Addition to the One
CC Original Lease Term shall only occur as provided in this Section 3.2
and shall be upon all of the same terms and conditions contained in this
Lease and at the then prevailing Annual Fixed Rent per square foot of
Rentable Floor Area of the Initial Premises less $2.29 per square foot of
----
Rentable Floor Area of the Initial Premises. If the Addition to the One
CC Original Lease Term shall occur as provided in this Section 3.2, the
Addition to the One CC Original Lease Term shall become part of the
original Lease Term for all purposes under this Lease and the expiration
date of the original Lease Term shall be deemed extended by the Addition
to the One CC Original Lease Term.
(B) In the case of an extension of the original Lease Term hereof
pursuant to the terms of Section 3.2. (A) above, then the dates for the
Second, Third and Fourth Expansion Spaces set forth in Section 2.3 above
shall be extended in the case of all references to such dates in said
Section 2.3 by the same number of months as the Addition to the One CC
Lease Term. For example, in the case of the Addition to the One CC
Original Lease Term being one month, then the date for the Second
Expansion Space shall be extended from the one hundred thirty-eighth
(138th) calendar month of the Lease Term to the one hundred thirty-ninth
(139th) calendar month thereof, with like extensions respecting the dates
of the Third and Fourth Expansion Spaces.
3.2.1 EXTENSION OPTIONS. (A) Provided that at the respective times of exercise
-----------------
of each of the herein described options to extend (i) there exists no
Event of Default beyond applicable notice and cure periods provided in
Section 15.1 and (ii) this Lease is still in full force and effect,
Tenant shall have the right to extend the Term hereof upon all of the
same terms, conditions, covenants and agreements herein contained (except
for the Annual Fixed Rent which shall be adjusted during the extension
periods as hereinafter set forth) for three (3) successive periods of
five (5) years as hereinafter set forth. Each of said three (3) extension
periods is sometimes herein referred to as an "Extended Term".
(B) (i) If Tenant desires to exercise the then available option to extend
the Term, then Tenant shall give notice to Landlord, not earlier than
------------------------------------
eighteen(18) months nor later than fourteen (14) months prior to the
------------------------------------------------
expiration of the Term of this Lease (as it may previously have been
------------------------------------
extended hereunder) of Tenant's request for Landlord's quotation to
Tenant of a proposed annual rent for the applicable Extended Term. Within
thirty (30) days after receipt by Landlord of Tenant's request as
aforesaid, Landlord shall notify Tenant of Landlord's quotation of the
proposed Annual Fixed Rent for the applicable Extended Term. If at the
expiration of thirty (30) days (i) after the date when Tenant receives
Landlord's quotation of the proposed Annual Fixed Rent for the applicable
Extended Term or (ii) after the date when Landlord is required to notify
Tenant of such quotation with none being given by Landlord to Tenant
(herein called the "Negotiation Period"), Landlord and Tenant have not
reached agreement on a
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<PAGE>
determination of an annual rental for the applicable Extended Term and
executed a written instrument extending the term of this Lease pursuant
to such agreement, then Tenant shall have the right, for thirty (30) days
following the expiration of the Negotiation Period, to make a request by
written notice to Landlord for a broker determination (the "Broker
Determination") of the Prevailing Market Rent (as defined in Exhibit I)
for the applicable Extended Term, which Broker Determination shall be
made in the manner set forth in Exhibit I.
(B) (ii) If Tenant timely shall have requested the Broker Determination,
then in order to exercise its right to extend the Term of this Lease for
the applicable Extended Term, Tenant, within fifteen (15) days after
receipt of the Broker Determination, shall give written notice to
Landlord of Tenant's exercise of its right to extend the Lease Term for
the applicable Extended Term pursuant to this subsection 3.2.1 (B) (ii).
If Tenant timely shall have thus exercised its right to extend the Lease
Term for the first Extended Term, the Annual Fixed Rent for the first
Extended Term shall be the greater of (a) ninety-five percent (95%) of
the Prevailing Market Rent as determined by the Broker Determination or
(b) the Annual Fixed Rent in effect during the last twelve (12) month
period of the Lease Term immediately prior to such first Extended Term
less $2.29 per rentable square foot; provided, however, that if any
portion of the Premises then under lease shall have been added to the
Premises pursuant to Section 2.3 or Section 2.4, then the Annual Fixed
Rent for such portion or portions of the Premises shall be increased by
the Expansion Premiums set forth in Section 2.3(G). Further, if Tenant
timely shall have thus exercised its right to extend the Lease Term (as
previously extended by the First Extended Term) for the second Extended
Term, the Annual Fixed Rent for the second Extended Term shall be the
greater of (a) ninety-five percent (95%) of the Prevailing Market Rent as
determined by the Broker Determination or (b) the Annual Fixed Rent in
effect for the last twelve (12) months of the first Extended Term as
above determined; provided, however, that if any portion of the Premises
then under lease shall have been added to the Premises pursuant to
Section 2.3 or Section 2.4, then the Annual Fixed Rent for such portion
or portions of the Premises shall be increased by the Expansion Premiums
set forth in Section 2.3(G). In addition, if Tenant timely shall have
exercised its right to extend the Lease Term (as previously extended by
the first Extended Term and the second Extended Term) for the third
Extended Term, the Annual Fixed Rent for the third Extended Term shall be
the greater of (a) the Prevailing Market Rent as determined by the Broker
Determination for the third Extended Term and (b) the Annual Fixed Rent
in effect for the last twelve (12) months of the second Extended Term.
Upon the giving of notice by Tenant within said fifteen (15) day period
as provided in this subsection (B) (ii) then this Lease and Lease Term
hereof-shall be extended for an additional term of five (5) years upon
all of the same terms, conditions, covenants and agreements contained in
this Lease except that the Annual Fixed Rent for the applicable Extended
Term shall be the rent determined as
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described in this subparagraph and except, further, that after the
exercise by Tenant of its third option to extend there shall be no
further option to extend the Term.
(C) Upon the giving of notice by Tenant to Landlord exercising Tenant's
option to extend the Lease Term in accordance with the provisions of
subsection (B) (ii) above, then this Lease and the Lease Term hereof
shall be extended, for the applicable Extended Term, without the
necessity for the execution of any additional documents, except that
Landlord and Tenant agree to enter into an instrument in writing setting
forth the Annual Fixed Rent for the applicable Extended Term as
determined in the relevant manner and forth in this Section 3.2.1; and in
such event all references herein to the Lease Term or the term of this
Lease shall be construed as referring to the Lease Term as so extended,
unless the context clearly otherwise requires. Notwithstanding anything
in this Lease to the contrary, in no event shall Tenant have any rights
under this Section 3.2.1 or any other Section of this Lease to extend the
Lease Term hereof for more than fifteen (15) years after the expiration
of the original Lease Term hereof, nor shall Tenant have the right to
exercise its second, five (5) year extension option unless it has duly
and timely exercised the first, five (5) year extension option, nor shall
Tenant have the right to exercise its third, five (5) year extension
option unless it has duly and timely exercised both the first and second,
five (5) year extension options, nor shall Tenant have the right to
exercise more than one (1) extension option at a time. Landlord and
Tenant hereby covenant and agree that time is of the essence with respect
to the provisions of this Section 3.2.1.
ARTICLE IV
----------
CONSTRUCTION
------------
4.1 SUBSTANTIAL COMPLETION. (A) Subject to delays due to governmental
----------------------
regulation, unusual scarcity of or inability to obtain labor or
materials, labor difficulties, casualty or other causes reasonably beyond
Landlord's control (collectively "Landlord's Force Majeure") or
attributable to Tenant's action or inaction, Landlord shall use
reasonable speed and diligence in the construction of the work to be
undertaken by Landlord in the Premises as described in Tenant's Plans
(hereinafter defined), but Tenant shall have no claim against Landlord
for failure to complete construction of the work in the Premises, except
for the right to terminate this Lease, without further liability to
either party, in accordance with the provisions hereinafter specified in
Section 4.3.
The Premises shall be treated as having been substantially completed and
be deemed ready for Tenant's occupancy on the latest of:
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(i) The date on which the work described in Tenant's Plans for
the Initial Premises exclusive of the Tenth Floor Space has
been completed except for (a) items of work and adjustment
of equipment and fixtures which can be completed after
occupancy has been taken without causing substantial
interference with Tenant's use of the Premises (i.e. so-
called "punch list" items) and (b) special finish items
requiring long lead times for procurement, and
(ii) The date a certificate of occupancy, temporary or
permanent, shall have been issued by applicable
Governmental authority, to the extent required by law,
permitting occupancy by Tenant of the Initial Premises
exclusive of the Tenth Floor Space for the Permitted Uses.
Landlord shall complete as soon as conditions practically permit all
items and work excepted by paragraph 4.1 (A) (i) above, and Tenant shall
cooperate with Landlord in providing access as may be required to
complete such work in a normal manner. Landlord shall permit Tenant
access for installing Tenant's trade fixtures in portions of the Premises
prior to substantial completion when it can be done without material
interference with remaining work and with the maintenance of harmonious
labor relations. In the event of any dispute as to the date on which work
has been completed as described in subsection 4.1 (A) (i) , above, the
determination of Landlord's architect (after consultation with Tenant's
architect) as to such date shall be deemed conclusive and binding on both
Landlord and Tenant.
(B) The Tenth Floor Space shall be treated as having been substantially
completed and be deemed ready for Tenant's occupancy as of the date that
the same standards for substantial completion are met in regard to the
Tenth Floor Space and Tenant's Plans therefor as are set forth in
paragraph (A) , above, in regard to the Initial Premises exclusive of the
Tenth Floor Space and Tenant's Plans therefor.
4.2 TENANT'S PLANS AND TENANT PLAN COSTS. (A) Tenant agrees to deliver to
------------------------------------
Landlord "Tenant's Schematic Plans", "Tenant's Design Development Plans"
and "Tenant's Final Plans", on the schedules set forth in Exhibit C
hereto, as such plans and materials are defined in Exhibit C. Time is of
the essence in connection with the delivery of said plans and materials
and in connection with the giving by Tenant of the approvals called for
by Exhibit C. Should Tenant fail to meet the date originally scheduled
for providing Landlord with Tenant's Design Development Plans or the
dates for providing Landlord with Tenant's Final Plans or with
authorization to proceed with initial or revised construction in
accordance with Tenant's Final Plans (as such dates may be extended as a
result of any failure by Landlord to provide the cost budgets pursuant to
Exhibit C) and should the Commencement Date for the Initial Premises
---
exclusive of the Tenth Floor Space be delayed to a date beyond October 1,
1988 as a
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result of the delays or failure to meet the aforesaid schedule by Tenant,
Tenant shall pay to Landlord, as Additional Rent, one (1) day's rent for
the Premises for each day of such failure to meet each such scheduled
date. If the Commencement Date is delayed beyond October 1, 1988, then
any failure by Tenant (not attributable to or resulting from delays of
Landlord) to authorize commencement of construction by the schedule
called for in Exhibit C shall be conclusively deemed to have caused such
a delay in the Commencement Date beyond October 1, 1988 on the basis of
one day for each day the Commencement Date is so delayed beyond October
1, 1988 due to such failure to meet such authorization date; provided
however, that Tenant shall also have the right to authorize Landlord to
perform overtime work at Tenant's expense in order to expedite the
completion of the work. Tenant's liabilities in case of delays shall
apply in like manner to any delay in the Commencement Date for the Tenth
Floor Space beyond January 1, 1990 as a result of such delays.
Any Additional Rent due under this section shall be paid by Tenant to
Landlord within thirty (30) days after receipt by Tenant of Landlord's
invoice therefor. Nothing contained herein shall limit or qualify or
prejudice any other covenants, agreements, terms, provisions and
conditions contained in this Lease, including, but not limited to, those
set forth in Section 4.1 hereof.
(B) "Tenant Final Plan Costs" for the work in the Initial Premises shall
be determined as defined and provided for in Exhibit C. To the extent, if
any, that the total Tenant Final Plan Costs for the Initial Premises
exceed Tenant's special allowance as provided for in Section 5.3, below
(which determination shall be made separately for the Initial Premises
exclusive of the Tenth Floor Space, and for the Tenth Floor Space),
Tenant shall reimburse Landlord, as Additional Rent, for such excess of
the Tenant Final Plan Costs as follows: during construction Landlord may,
at its option on or about the first day of each month, deliver to Tenant
a statement showing the proportion of Tenant Final Plan Costs allocable
to the previous month's work and Tenant shall pay to Landlord as
Additional Rent the full amount specified in such statement within ten
(10) days of receipt of such statement. Final payment by Tenant to
Landlord shall be made within ten (10) days after the work is completed
and Tenant has received a final bill therefor from Landlord.
(C) All plans required to be submitted by Tenant under this Section 4.2
and Exhibit C hereto shall be prepared by The Architect's Collaborative
or such other firm as Tenant may select ("Tenant's Space Planner"),
prepared under Tenant's direction at Tenant's expense. All related
required engineering services (including mechanical, electrical,
plumbing, structural and fire safety engineering) shall be performed by
engineers retained by Tenant or Tenant's Space Planner, at Tenant's
expense; provided that, to the extent requested by Tenant, and subject to
Tenant's agreement to pay the costs thereof, Landlord will exert its best
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efforts to cause the engineers responsible for such design work in regard
to the construction of the Building to perform such work.
4.3 OUTSIDE COMPLETION DATE. If Landlord shall have failed substantially to
-----------------------
complete the work in the Premises described in Tenant's Plans for the
Initial Premises exclusive of the Tenth Floor Space on or before the
Outside Completion Date as defined in Section 1.2 hereof (which date shall
be extended automatically for such periods of time as Landlord is prevented
from proceeding with or completing the same by reason of Landlord's Force
Majeure as defined in Section 4.1 or any act or failure to act of Tenant
which interferes with Landlord's construction of the Premises, without
limiting Landlord's other rights on account thereof), Tenant shall have the
right to terminate this Lease by giving notice to Landlord of Tenant's
desire so to do within thirty (30) days after such date; and, upon the
giving of such notice, the term of this Lease shall cease and come to an
end without further liability or obligation on the part of either party
unless, within thirty (30) days after receipt of such notice, Landlord
substantially completes the work to be performed by Landlord under Tenant's
Plans; and such right of termination shall be Tenant's sole and exclusive
remedy for Landlord's failure so to complete such work within such time.
Each day of delay in delivery of Tenant's Plans beyond the date specified
in Section 1.2 or in Tenant's authorization to Landlord to proceed with
construction beyond the date for the giving of same specified in Section
1.2 shall be deemed conclusively to cause an equivalent day of delay by
Landlord in substantially completing the work to be done by Landlord
pursuant to this Section 4.1, and thereby extend for each equivalent day of
delay the date of the Outside Completion Date.
4.4 QUALITY AND PERFORMANCE OF WORK. All construction work required or
-------------------------------
permitted by this Lease shall be done in a good and workmanlike manner and
in compliance with all applicable laws, ordinances, regulations and orders
and requirements of all public authorities and insurers of the Building.
All of Tenant's work shall be coordinated with any work being performed by
or for Landlord and in such manner as to maintain harmonious labor
relations. Each party may inspect the work of the other at reasonable times
and shall promptly give notice of observed defects. Each party authorizes
the other to rely in connection with design and construction upon approval
and other actions on the party's behalf by any Construction Representative
of the party named in Section 1.2 or any person hereafter designated in
substitution or addition by notice to the party relying. Except to the
extent to which Tenant shall have given Landlord notice of respects in
which Landlord has not performed Landlord's construction obligations under
this Article IV (i) not later than the end of the nine (9) full calendar
month next beginning after the Commencement Date with respect to the
heating, ventilating and air conditioning Systems servicing the Premises,
and (ii) not later than the six (6) full calendar month next beginning
after
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<PAGE>
the Commencement Date with respect to Landlord's construction obligations
under this Article IV not referenced in (i) above, Tenant shall be deemed
conclusively to have approved Landlord's construction and shall have no
claim that Landlord has failed to perform any of Landlord's obligations
under this Article IV. Landlord agrees to correct or repair at its expense
items which are then incomplete or do not conform to the work contemplated
under Tenant's Plans and as to which, in either case, Tenant shall have
given notice to Landlord, as aforesaid and the cost to so correct, repair
or complete shall not be added to "Operating Expenses Allocable to the
Premises" (defined in Section 7.4 hereof) and shall not be the subject of
the "Operating Cost Excess" (defined in Section 7.5 hereof).
ARTICLE V
---------
ANNUAL FIXED RENT AND ELECTRICITY AND SPECIAL ALLOWANCES
--------------------------------------------------------
5.1 FIXED RENT AND ELECTRICITY CHARGES. Tenant agrees to pay to Landlord, or
----------------------------------
as directed by Landlord, at Landlord's Present Mailing Address specified in
Section 1.2 hereof, or at such other place as Landlord shall from time to
time designate by notice, (1) (a) on the Commencement Date, and thereafter
monthly, in advance, on the first day of each and every calendar month
during the original Lease Term, a sum equal to one-twelfth (1/12) of the
Annual Fixed Rent specified in Section 1.2 hereof and (1) (b) on the
Commencement Date and thereafter monthly, in advance, on the first day of
each and every calendar month during the original Lease Term, a sum equal
to one-twelfth (1/12) of $1.00 per annum for each square foot of Rentable
Floor Area of the Premises for Tenant Electricity subject to adjustment as
provided in Section 5.2 and Section 7.5 hereof, and (2) on the first day of
each and every calendar month during each extension option period (if
exercised), a sum equal to (a) one-twelfth of the Annual Fixed Rent as
determined in Section 3.2 for the applicable extension option period plus
(b) then applicable monthly electricity charges (subject to adjustment as
provided in Section 5.2 and Section 7.5 hereof). Until notice of some other
designation is given, Annual Fixed Rent and all other charges for which
provision is herein made shall be paid by remittance to or to the order of
BOSTON PROPERTIES, Agents at 8 Arlington Street, Boston, Massachusetts
02116, and all remittances received by BOSTON PROPERTIES, as Agents as
aforesaid, or by any subsequently designated recipient, shall be treated as
a payment to Landlord.
Annual Fixed Rent for any partial month shall be paid by Tenant to Landlord
at such rate on a pro rata basis, and, if the Commencement Date shall be
other than the first day of a calendar month, the first payment which
Tenant shall make to Landlord shall be a payment equal to a proportionate
part of such monthly Annual Fixed Rent for the partial month from the
Commencement Date to the first day of the succeeding calendar month.
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<PAGE>
Other charges payable by Tenant on a monthly basis, as elsewhere provided
in this Lease, likewise shall be prorated, and the first payment on account
thereof shall be determined in similar fashion and shall commence on the
Commencement Date and other provisions of this Lease calling for monthly
payments shall be read as incorporating this undertaking by Tenant.
The Annual Fixed Rent and all other charges for which provision is made in
this Lease shall be paid by Tenant to Landlord without setoff, deduction or
abatement.
5.2 REALLOCATION OF ELECTRICITY CHARGES. Notwithstanding the provisions of
-----------------------------------
Section 5.1 relating to the payment by Tenant for the cost of electricity,
if and to the extent that Landlord is permitted from time to time by then
applicable law, ordinance, rule, regulation and utility company policy,
Landlord shall reallocate the cost of electricity to tenants of the
Building (including, but not limited to, Tenant herein) in accordance with
the procedure contained in Exhibit H, and Tenant shall pay for electricity
as provided in said Exhibit H. If Landlord does not so reallocate the cost
of electricity as aforesaid, Tenant shall pay the charge for electricity as
specified in Section 5.1 hereof and additional adjustment payments shall be
made in the manner specified in Section 7.5 hereof.
5.3 SPECIAL ALLOWANCE. Landlord shall provide to Tenant an allowance of
-----------------
$1,240,950.00 to be used and applied by Tenant on account of any Tenant
Plan Costs relating to the Initial Premises exclusive of the Tenth Floor
Space (the "Eleventh and Twelfth Floors Allowance") and an additional
$620,970.00 to be used and applied by Tenant on account of any Tenant Plan
Costs relating to the Tenth Floor Space (the "Tenth Floor Allowance"). Any
unused portion of the Eleventh and Twelfth Floors Allowance shall be
credited against Annual Fixed Rent due from Tenant after the Commencement
Date and any unused portion of the Tenth Floor Allowance shall be credited
against Annual Fixed Rent due from Tenant after the Commencement Date for
the Tenth Floor Space. Tenant acknowledges that except for this special
allowance, Tenant is taking the Initial Premises in "as-is" condition and
shall be responsible for all costs related to the reconstruction of the
Initial Premises to meet Tenant's requirements as shown on Tenant's Plans.
ARTICLE VI
----------
TAXES
-----
6.1 DEFINITIONS. With reference to the real estate taxes referred to in
-----------
this Article VI, it is agreed that terms used herein are defined as
follows:
(a) "Tax Year" means the 12-month period beginning July 1 each
year during the Lease Term or if the appropriate
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<PAGE>
3BBB
Governmental tax fiscal period shall begin on any date other than
July 1, such other date.
(b) "Landlord's Tax Expenses Allocable to the Premises" means the
same proportion of Landlord's Tax Expenses as Rentable Floor Area
of Tenant's Premises bears to the Total Rentable Floor Area of
the Building.
(c) "Landlord's Tax Expenses" with respect to any Tax Year means the
aggregate "real estate taxes" (hereinafter defined) with respect
to that Tax Year, reduced by any net abatement receipts with
respect to that Tax Year; provided, however, that if in any Tax
Year an abatement has been obtained on account of vacancies in
the Building, or if the real estate taxes had initially been
assessed in an amount to reflect such vacancies then Landlord's
Tax Expenses shall be determined to be an amount equal to the
taxes which would normally be expected to have been assessed had
occupancy been ninety-five percent (95%) as of the reference date
or period on which or in relation to which such assessment was
made. For this purpose, taxes on properties comparable to the
Property may be used as a reference (specifically including the
buildings known as Four and Five Cambridge Center) if such
properties were occupied at ninety-five percent (95%) more or
less during the relevant period.
(d) "Real estate taxes" means all taxes and special assessments of
every kind and nature assessed by any Governmental authority on
the Site or the Building or the Property which the Landlord shall
be obligated to pay because of or in connection with the
ownership, leasing and operation of the Site and the Building and
reasonable expenses of any proceedings for abatement of taxes.
The amount of special taxes or special assessments to be included
shall be limited to the amount of the installment (plus any
interest other than penalty interest payable thereon) of such
special tax or special assessment required to be paid during the
year in respect of which such taxes are being determined. There
shall be excluded from such taxes all income, estate, succession,
inheritance and transfer taxes; provided, however, that if at any
time during the Lease Term the present system of ad valorem
taxation of real property shall be changed so that in lieu of the
whole or any part of the ad valorem tax on real property, there
shall be assessed on Landlord a capital levy or other tax on the
gross rents received with respect to the Site or Building, or a
Federal, State, County, Municipal, or other local income,
franchise, excise or similar tax, assessment, levy or charge
(distinct from any now in effect in the jurisdiction in which the
Property is located) measured by or based, in whole or in part,
upon any such gross
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<PAGE>
rents, then any and all of such taxes, assessments, levies or
charges, to the extent so measured or based, shall be deemed to
be included within the term "real estate taxes" but only to the
extent that the same would be payable if the Site or Building
were the only property of Landlord.
6.2 TENANT'S SHARE OF REAL ESTATE TAXES. If with respect to any full Tax Year
-----------------------------------
or fraction of a Tax Year falling within the Lease Term Landlord's Tax
Expenses Allocable to the Premises for a full Tax Year exceed $3.00 per
square foot of Rentable Floor Area of the Premises, or for any such
fraction of a Tax Year exceed the corresponding fraction of $3.00 per
square foot of Rentable Floor Area of the Premises (such amount being
hereinafter referred to as the "Tax Excess"), then Tenant shall pay to
Landlord, as additional rent, the amount of such Tax Excess. Payments by
Tenant on account of the Tax Excess shall be made monthly at the time and
in the fashion herein provided for the payment of Annual Fixed Rent. The
amount so to be paid to Landlord shall be an amount from time to time
reasonably estimated by Landlord to be sufficient to provide Landlord, in
the aggregate, a sum equal to the Tax Excess, ten (10) days at least before
the day on which tax payments by Landlord would become delinquent.
Not later than ninety (90) days after Landlord's Tax Expenses Allocable to
the Premises are determinable for the first such Tax Year or fraction
thereof and for each succeeding Tax Year or fraction thereof during the
Lease Term, Landlord shall render Tenant a statement in reasonable detail
certified by a representative of Landlord showing for the preceding year or
fraction thereof, as the case may be, real estate taxes on the Building and
Lot, abatements and refunds, if any, of any such taxes and assessments,
expenditures incurred in obtaining such abatement or refund, the amount of
the Tax Excess, the amount thereof already paid by Tenant and the amount
thereof overpaid by, or remaining due from Tenant for the period covered by
such statement. Within thirty (30) days after the receipt of such
statement, Tenant shall pay any sum remaining due. Any balance shown as due
to Tenant shall be credited against Annual Fixed Rent next due, or refunded
to Tenant forthwith if the Lease Term has then expired and Tenant has no
further obligation to Landlord. Expenditures for legal fees and for other
expenses incurred in obtaining an abatement or refund may be charged
against the abatement or refund before the adjustments are made for the Tax
Year.
To the extent that real estate taxes shall be payable to the taxing
authority in installments with respect to periods less than a Tax Year, the
statement to be furnished by Landlord shall be rendered and payments made
on account of such installments.
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<PAGE>
ARTICLE VII
-----------
LANDLORD'S REPAIRS AND SERVICES AND TENANT'S ESCALATION PAYMENTS
----------------------------------------------------------------
7.1 STRUCTURAL REPAIRS. Except for (a) normal and reasonable wear and use and
------------------
(b) damage caused by fire or other casualty and by eminent domain (which
shall be governed by the provisions of Article XIV of this Lease), Landlord
shall, throughout the Lease Term, at Landlord's sole cost and expense, keep
and maintain in good order, condition and repair the following portions of
the Building: the structural portions of the roof, the exterior and load
bearing walls, the foundation, the structural columns and floor slabs and
other structural elements of the Building; provided however, that Tenant
shall pay to Landlord, as Additional Rent, the cost of any and all such
repairs which may be required as a result of repairs, alterations, or
installations made by Tenant or any subtenant, assignee, licensee or
concessionaire of Tenant or any agent, servant, employee or contractor of
any of them or to the extent of any loss, destruction or damage caused by
the omission or negligence of Tenant, any assignee or subtenant or any
agent, servant, employee, customer, visitor or contractor of any of them.
7.2 OTHER REPAIRS TO BE MADE BY LANDLORD. (A) Except as otherwise provided in
------------------------------------
this Lease, Landlord agrees to keep and maintain in good order, condition
and repair the common areas and facilities of the Building, including,
without limitation, heating, ventilating, air conditioning, plumbing, the
Building elevators and other Building systems equipment servicing the
Premises, except that Landlord shall in no event be responsible to Tenant
for (a) the condition of glass in and about the Premises (other than for
glass in exterior walls for which Landlord shall be responsible unless the
damage thereto is attributable to Tenant's negligence or misuse, in which
event the responsibility therefor shall be Tenant's), or (b) for any
condition in the Premises or the Building caused by any act or neglect of
Tenant or any agent, employee, contractor, assignee, subtenant or invitee
of Tenant. In no event shall Landlord be obligated under this Lease to make
any repairs in or to any premises in the Building leased to any other
tenant. Notwithstanding anything in this Lease to the contrary, "Operating
Expenses Allocable to the Premises" (defined in Section 7.4) and "Operating
Cost Excess" (defined in Section 7.5) shall not include the cost to replace
any item which is the subject of the warranty provided in Section 4.4
hereof.
(B) Notwithstanding Landlord's obligation to perform certain repairs and
services as set forth in Section 7.2 (A) and in Section 7.3 below, Tenant
shall be obligated to make the payments required by Section 5.1, Section
5.2 and Section 7.5 which may include payment for repairs and services
provided or performed by Landlord pursuant to Section 7.2 (A) and Section
7.3 hereof.
7.3 SERVICES TO BE PROVIDED BY LANDLORD. In addition, except as otherwise
-----------------------------------
provided in this Lease, Landlord agrees to furnish
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<PAGE>
services, utilities, facilities and supplies set forth in Exhibit D hereto
equal in quality comparable to those customarily provided by landlords in
high quality buildings in Cambridge. In addition, Landlord agrees to
furnish, at Tenant's expense, reasonable additional Building operation
services which are usual and customary in similar buildings in Cambridge,
and such additional special services as may be mutually agreed upon by
Landlord and Tenant, upon reasonable and equitable rates from time to time
established by Landlord.
7.4 OPERATING COSTS DEFINED. "Operating Expenses Allocable to the Premises"
-----------------------
means the same proportion of the Operating Expenses for the Property as
Rentable Floor Area of the Premises bears to the Total Rentable Floor Area
of the Building. "Operating Expenses for the Property" means the cost of
operation of the Property incurred by Landlord, including those incurred in
discharging Landlord's obligations under Sections 7.2 and 7.3.
Notwithstanding anything in this Lease to the contrary, "Operating Expenses
Allocable to the Premises" (defined in Section 7.4) and "Operating Cost
Excess" (defined in Section 7.5) shall not include the cost to replace any
item which is the subject of the warranty provided in Section 4.4 hereof.
Such costs shall exclude payments of debt service and any other mortgage
charges, brokerage commissions, legal fees attributable to (i) individual
lease and tenant matters, (ii) financings of the Property and (iii)
refinancings of the Property, salaries of executives and owners not
directly employed in the management or operation of the Building, the
general overhead and administrative expenses of the home office of Landlord
or Landlord's managing agent, and costs of special services rendered to
tenants (including Tenant) for which a separate charge is made, but shall
include, without limitation:
(a) compensation, wages and all fringe benefits, workmen's
compensation insurance premiums and payroll taxes paid to, for or
with respect to all persons for their services in the operating,
maintaining or cleaning of the Building or the Site;
(b) payments under service contracts with independent contractors for
operating, maintaining or cleaning of the Building or the Site;
(c) steam, water, sewer, gas, oil, electricity and telephone charges
(excluding such utility charges separately chargeable to tenants
for additional or separate services and electricity charges paid
by Tenant in the manner set forth in Section 5.2) and costs of
maintaining letters of credit or other security as may be
required by utility companies as a condition of providing such
services;
(d) cost of maintenance, cleaning and repairs (other than repairs not
properly chargeable against income or reimbursed from contractors
under guarantees);
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<PAGE>
(e) cost of snow removal and care of landscaping;
(f) cost of building and cleaning supplies and equipment;
(g) premiums for insurance carried with respect to the Property
(including, without limitation, liability insurance, insurance
against loss in case of fire or casualty and of monthly
installments of Annual Fixed Rent and any Additional Rent which
may be due under this Lease and other leases of space in the
Building for not more than twelve months in the case of both
Annual Fixed Rent and Additional Rent and, if there be any first
mortgage on the Property, including such insurance as may be
required by the holder of such first mortgage);
(h) management fees at reasonable rates consistent with the type of
occupancy and the services rendered not to exceed prevailing
market rates for management services (exclusive of brokerage
services) for building of similar size, quality and age in the
Kendall Square area;
(i) the Building's share of operating expenses (as herein defined in
this Section 7.4) related to the maintenance and repair of the
Loading Dock and of other common areas and facilities within
Parcel 4 of the Development Area for use of tenants of the
Building in common with tenants of other buildings in the
Development Area;
(j) amortization (including an interest factor) for capital
expenditures made by Landlord to reduce operating expenses if
Landlord reasonably shall have determined that the annual
reduction in operating expenses shall exceed depreciation
therefor (plus an interest factor reasonably determined by
Landlord, as being the interest rate then charged for long term
mortgages by institutional lenders on like properties within the
general locality in which the Building is located), in which
case depreciation shall be determined by dividing the original
cost of such capital expenditure (plus interest at such factor)
by the number of years of useful life of the capital item
acquired, which useful life shall be determined reasonably by
Landlord in accordance with generally accepted accounting
principles and practices in effect at the time of acquisition of
the capital item; and
(k) all other reasonable and necessary expenses paid in connection
with the operating, cleaning and maintenance of the Building, the
Site and said common areas and facilities and properly chargeable
against income.
Notwithstanding the foregoing, in determining the amount of Operating
Expenses for the Property for any calendar year or
- 28 -
<PAGE>
portion thereof falling within the Lease Term, no decrease in Operating
Expenses Allocable to the Property shall result in a reduction in the
amount otherwise payable by Tenant if and to the extend said decrease is
attributable to vacancy in the Building rather than to any other causes. By
way of example (but not in limitation), if the cost of cleaning the total
of approximately 216,000 rentable square feet of tenantable area in the
Building during a given calendar year would be $129,600.00 (being $.60 per
square foot of total rentable floor area) if there were no vacancy in the
Building, but during such calendar year fifty percent (50%) of the space in
the Building were occupied for the entire year and the other fifty percent
(50%) vacant, and the cost of cleaning the occupied space for the calendar
year were $74,800.00 (being $.60 per square foot of occupied space), with
no cleaning cost incurred for the vacant space, then the amount of cleaning
expenses charged to Tenant for such calendar year as part of Operating
Expenses Allocable to the Premises would be $.60 per square foot of the
Rentable Area of the Premises, notwithstanding that a mechanical
application of the allocation formula set forth in the first sentence of
this Section 7.4 would result in the inclusion of only $.30 per square
foot, since the $.60 would represent the actual cost of providing the
service to Tenant and to other occupied tenantable areas of the Building,
and the $.30 would represent only a mathematical average of the total
cleaning cost for the Building divided by the total rentable area of the
Building including both areas occupied during that calendar year (to which
all of the services were provided and for which all of the costs were
incurred) and areas vacant during that calendar year (to which none of the
services were provided and for which none of the costs were incurred).
7.5 TENANT'S ESCALATION PAYMENTS. (A) If with respect to any calendar year
----------------------------
falling within the Lease Term, or fraction of a calendar year falling
within the Lease Term at the beginning or end thereof, the Operating
Expenses Allocable to the Premises (as defined in Section 7.4) for a full
calendar year exceed $3.50 per square foot of Rentable Floor Area of the
Premises, or for any such fraction of a calendar year exceed the
corresponding fraction of $3.50 per square foot of Rentable Floor Area of
the Premises (such amount being hereinafter referred to as the "Operating
Cost Excess"), then Tenant shall pay to Landlord, as Additional Rent, on
or before the thirtieth (30th) day following receipt by Tenant of the
statement referred to below in this Section 7.5, the amount of such excess.
(The $3.50 base figure referred to above does not include the $1.00 for
--------
tenant electricity to be paid by Tenant as part of the Annual Fixed Rent.
However, if and so long as Landlord is not allocating the cost of
---
electricity among tenants of the Building in accordance with Exhibit H,
then the $3.50 base figure referred to above shall be increased by $1.00
to $4.50.)
(B) Payments by Tenant on account of the Operating Cost Excess shall be
made monthly at the time and in the fashion herein provided for the payment
of Annual Fixed Rent. The amount so to
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<PAGE>
be paid to Landlord shall be an amount from time to time reasonably
estimated by Landlord to be sufficient to cover, in the aggregate, a sum
equal to the Operating Cost Excess for each calendar year during the Lease
Term.
(C) No later than ninety (90) days after the end of the first calendar
year or fraction thereof ending December 31 and of each succeeding calendar
year during the Lease Term or fraction thereof at the end of the Lease
Term, Landlord shall render Tenant a statement in reasonable detail and
according to usual accounting practices certified by a representative of
Landlord, showing for the preceding calendar year or fraction thereof, as
the case may be, the Operating Expenses for the Property and the Operating
Expenses Allocable to the Premises. Said statement to be rendered to Tenant
also shall show for the preceding year or fraction thereof, as the case may
be, the amounts already paid by Tenant on account of Operating Cost Excess
and the amount of Operating Cost Excess remaining due from, or overpaid by,
Tenant for the year or other period covered by the statement.
If such statement shows a balance remaining due to Landlord, Tenant shall
pay same to Landlord on or before the thirtieth (30th) day following
receipt by Tenant of said statement. Any balance shown as due to Tenant
shall be credited against Annual Fixed Rent next due, or refunded to Tenant
if the Lease Term has then expired and Tenant has no further obligation to
Landlord.
Notwithstanding the provisions of the immediately preceding paragraph, if
Tenant desires to contest such statement, Tenant shall give written notice
to Landlord thereof within ten (10) days after Tenant's receipt of such
statement, time being of the essence. If the statement rendered by Landlord
to Tenant shows a balance remaining due to Landlord, then as a condition
precedent to Tenant contesting such statement and in addition to giving
such a notice of contest, Tenant shall pay such balance under protest (with
a written statement to Landlord of such payment under protest) within said
ten (10) day period. If Tenant shall fail to (i) give notice of such
contest or (ii) to pay any such balance (with a notice of protest) within
said ten (10) day period, Tenant shall be deemed to have accepted such
statement as rendered by Landlord. Within ten (10) days after such notice
of contest (together with payment under protest of any balance shown on
Landlord's statement and a written statement thereof) to Landlord, time
being of the essence, Tenant shall have the right during normal business
hours and at Landlord's place of business to examine Landlord's books and
records with respect to such statement on not less than three (3) days'
prior written notice to Landlord. If such examination reveals that such
statement is incorrect, the appropriate adjustment in the amount due from
Tenant to Landlord promptly shall be made and Tenant may make a demand on
Landlord for payment of any refund claimed by Tenant as a result of such
examination and if Landlord shall not pay such demand, Tenant shall have
the right to bring and prosecute suit to collect such demand for payment
but Landlord's failure to pay such demand for payment shall not entitle
Tenant to offset
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<PAGE>
against, withhold or otherwise deduct from Annual Fixed Rent or any
Additional Rent nor shall Landlord's failure to pay Tenant's demand for
payment be a default of Landlord or give Tenant the right to terminate this
Lease, Tenant's sole right being to bring and prosecute such suit as
aforesaid.
7.6 NO DAMAGE. Landlord shall not be liable to Tenant for any compensation or
---------
reduction of rent by reason of inconvenience or annoyance or for loss of
business arising from the necessity of Landlord or its agents entering the
Premises for any purposes in this Lease authorized, or for repairing the
Premises or any portion of the Building however the necessity may occur. In
case Landlord is prevented or delayed from making any repairs, alterations
or improvements, or furnishing any services or performing any other
covenant or duty to be performed on Landlord's part, by reason of any cause
reasonably beyond Landlord's control, including, without limitation,
strike, lockout, breakdown, accident, order or regulation of or by any
Governmental authority, or failure of supply, or inability by the exercise
of reasonable diligence to obtain supplies, parts or employees necessary to
furnish such services, or because of war or other emergency, or for any
cause due to any act or neglect of Tenant or Tenant's servants, agents,
employees, licenses or any person claiming by, through or under Tenant,
Landlord shall not be liable to Tenant therefor, nor, except as expressly
otherwise provided in this Lease, shall Tenant be entitled to any abatement
or reduction of rent by reason thereof, nor shall the same give rise to a
claim in Tenant's favor that such failure constitutes actual or
constructive, total or partial, eviction from the Premises.
Landlord reserves the right to stop any service or utility system, when
necessary by reason of accident or emergency, or until necessary repairs
have been completed; provided, however, that in each instance of stoppage,
Landlord shall exercise reasonable diligence to eliminate the cause
thereof. Except in case of emergency repairs, Landlord will give Tenant
reasonable advance notice of any contemplated stoppage and will use
reasonable efforts to avoid unnecessary inconvenience to Tenant by reason
thereof. Landlord shall use best efforts to restore the service or utility
system so stopped as soon as is reasonably practicable under the
circumstances with due regard given to the reason for such stoppage.
ARTICLE VIII
------------
TENANT'S REPAIRS
----------------
8.1 TENANT'S REPAIRS AND MAINTENANCE. Tenant covenants and agree that, from
--------------------------------
and after the date that possession of the Premises is delivered to Tenant
and until the end of the Lease Term, Tenant will keep neat and clean and
maintain in good order, condition and repair the Premises and every part
thereof, excepting only normal wear and use and excepting further those
repairs for which
- 31 -
<PAGE>
Landlord is responsible under the terms of Article VII of this Lease and
damage by fire or other casualty and as a consequence of the exercise of
the power of eminent domain. Tenant shall not permit or commit any waste,
and Tenant shall be responsible for the cost of repairs which may be made
necessary by reason of damages to common areas in the Building by Tenant,
Tenant's agents, employees, contractors, or invitees.
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, Landlord may (but shall not be
required to do so) make or cause such repairs to be made and shall not be
responsible to Tenant for any loss or damage that may accrue to Tenant's
stock or business by reason thereof. If Landlord makes or causes such
repairs to be made, Tenant agrees that Tenant will forthwith on demand, pay
to Landlord as Additional Rent the cost thereof, and if Tenant shall
default in such payment, Landlord shall have the remedies provided for non-
payment of rent or other charges payable hereunder.
ARTICLE IX
----------
ALTERATIONS
-----------
9.1 LANDLORD'S APPROVAL. Tenant covenants and agrees not to make alterations,
-------------------
additions or improvements to the Premises, whether before or during the
Lease Term, except in accordance with plans and specifications therefor
first approved by Landlord, which approval shall not be unreasonably
withheld or delayed. Landlord shall not be deemed unreasonable:
(a) for withholding approval of any alterations, additions or
improvements which (i) in Landlord's opinion might adversely
affect any structural or exterior element of the Building, any
area or element outside of the Premises or any facility serving
any area of the Building outside of the Premises or (ii) involve
or affect the exterior design, size, height or other exterior
dimensions of the Building, or (iii) enlarge the Rentable Floor
Area of the Premises; or
(b) for making its approval conditional on Tenant's agreement to
restore the Premises to its condition prior to such alteration,
addition, or improvement at the expiration or earlier termination
of the Lease Term; provided, however, that as to any given
alteration, addition or improvement so approved by Landlord if
Landlord's approval does not specify that Tenant shall so restore
the Premises, then at the expiration or earlier termination of the
Lease Term, Tenant shall not be required to so restore the
Premises.
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<PAGE>
9.2 CONFORMITY OF WORK. Tenant covenants and agrees that any alterations,
------------------
additions, improvements or installations made by it to or upon the Premises
shall be done in a good and workmanlike manner and in compliance with all
applicable laws, ordinances and regulations and orders and requirements of
all public authorities and insurers of the Building, that materials of
first and otherwise good quality shall be employed therein, that the
structure of the Building shall not be endangered or impaired thereby and
that the Premises shall not be diminished in value thereby.
9.3 PERFORMANCE OF WORK, GOVERNMENTAL PERMITS AND INSURANCE. All of Tenant's
-------------------------------------------------------
alterations and additions and installation of furnishings shall be
coordinated with any work being performed by or for Landlord and in such
manner as to maintain harmonious labor relations and not to damage the
Building or Site or interfere with Building construction or operation and,
except for installation of furnishings, shall be performed by Landlord's
general contractor or by contractors or workmen first approved by Landlord.
Except for work by Landlord's general contractor, Tenant shall procure all
necessary governmental permits before making any repairs, alterations,
other improvements or installations. Tenant agrees to save harmless and
indemnify Landlord from any and all injury, loss, claims or damage to any
person or property occasioned by or arising out of the doing of any such
work whether the same be performed prior to or during the Term of this
Lease. In addition, Tenant shall cause each contractor to carry workmen's
compensation insurance in statutory amounts covering the employees of all
contractors and subcontractors, and comprehensive general liability
insurance with such limits as Landlord may require reasonably from time to
time during the Term of this Lease, but in no event less than the minimum
amount of comprehensive general liability insurance Tenant is required to
maintain as set forth in Section 1.2 hereof and as the same may be modified
as provided in Section 13.2 hereof (all such insurance to be written in
companies approved reasonably by Landlord and insuring Landlord and Tenant
as well as contractors) and to deliver to Landlord certificates of all such
insurance.
9.4 LIENS. Tenant covenants and agrees to pay promptly when due the entire cost
-----
of any work done on the Premises by Tenant, its agents, employees or
contractors, and not to cause or permit any liens for labor or materials
performed or furnished in connection therewith to attach to the Premises or
the Building or the Site and within thirty (30) days after the recordation
of any such liens to discharge or to bond off of record any such liens
which may so attach.
9.5 NATURE OF ALTERATIONS. All work, construction, repairs, alterations,
---------------------
other improvements or installations made to or upon the Premises
(including, but not limited to, the construction performed by Landlord
under Article IV), shall become part of the Premises and shall become the
property of Landlord and remain
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<PAGE>
upon and be surrendered with the Premises as a part thereof upon the
expiration or earlier termination of the Lease Term, except as follows:
(a) All trade fixtures, movable partitions and room dividers whether
by law deemed to be a part of the realty or not, installed at any
time or times by Tenant or any person claiming under Tenant shall
remain the property of Tenant or persons claiming under Tenant and
may be removed by Tenant or any person claiming under Tenant at
any time or times during the Lease Term or any occupancy by Tenant
thereafter and shall be removed by Tenant at the expiration or
earlier termination of the Lease Term if so requested by Landlord.
Tenant shall repair any damage to the Premises occasioned by the
removal by Tenant or any person claiming under Tenant of any such
property from the Premises.
(b) At the expiration or earlier termination of the Lease Term, unless
otherwise agreed in writing by Landlord, Tenant shall remove any
alterations, additions and improvements made after the
Commencement Date with Landlord's consent for which such removal
was made a condition of such consent under Section 9.1 (b). Upon
such removal Tenant shall restore the Premises to their condition
prior to such alterations, additions and improvements and repair
any damage occasioned by such removal and restoration.
(c) If Tenant shall make any alterations, additions or improvements to
the Premises for which Landlord's approval is required under
Section 9.1 without obtaining such approval, then at Landlord's
request at any time during the Lease Term, and at any event at the
expiration or earlier termination of the Lease Term, Tenant shall
remove such alterations, additions and improvements and restore
the Premises to their condition prior to same and repair any
damage occasioned by such removal and restoration. Nothing herein
shall be deemed to be a consent to Tenant to make any such
alterations, additions or improvements, the provisions of Section
9.l being applicable to any such work.
9.6 INCREASES IN TAXES. Tenant shall pay, as additional rent, one hundred
------------------
percent (100%) of any increase in real estate taxes on the Property which
shall, at any time after the Commencement Date, result from alterations,
additions or improvements to the Premises made by Tenant after the
Commencement Date if the taxing authority specifically determines such
increase results from such alterations, additions or improvements made by
Tenant.
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<PAGE>
ARTICLE X
---------
PARKING
-------
10.1 PARKING PRIVILEGES. (A) Reference is made to the fact that affiliates of
------------------
Landlord have constructed a parking garage and propose to construct one or
more additional parking garages (hereinafter the "Garage", or the
"Garages" if there be more than one) within the Development Area shown on
Exhibit F to serve the Building and other buildings constructed or to be
constructed by Landlord or affiliates of Landlord within the Development
Area. The existing Garage, with vehicular entrances from the south side of
Broadway and the east side of Ames Street, is also sometimes hereinafter
referred to as the "East Garage." Landlord shall provide to Tenant monthly
parking privileges in one or more of the Garages in number not to exceed
parking for two (2) passenger automobiles for each 1,000 square feet of
Rentable Floor Area of the Initial Premises for the parking of motor
vehicles in unreserved stalls in one or more of the Garages by Tenant's
employees commencing on the Commencement Date of the Lease Term. Such
parking privileges may be shifted from time to time among the Garages by
notice from Landlord; provided however that parking shall be provided in
the East Garage for no less than one-half (1/2) of the total number of
automobiles for which Tenant elects to have parking privileges pursuant to
this Section 10.1; and provided further, that Tenant shall have the right,
as part of such parking rights, to ten (10) reserved parking spaces,
designated by Landlord, four (4) to be in the East Garage and six (6) to
be in the underground parking area under the Building (herein sometimes
called the "Reserved Spaces"). Landlord shall not grant to anyone other
than Tenant the right to use any of such Reserved Spaces and will use
reasonable efforts, by the use of signs and markings, to designate such
spaces as spaces to be used exclusively by Tenant. However, Landlord shall
not be obligated otherwise to police the use of the Reserved Spaces which
Tenant recognizes are to be contained in an area to be operated on a self
parking basis.
(B) On or before September 1, 1988, Tenant shall give notice to Landlord
("Tenant's Parking Notice") of the total number of parking spaces which
Tenant desires be made available in the Garage(s) for the use in
accordance with the provisions of this Section 10.1 and at any time and
from time to time (but not more often than once per month) prior to April
1, 1990 Tenant may, by notice to Landlord increase or decrease the number
of parking spaces initially elected as aforesaid but any such increase
shall not result in Tenant electing more than the total number of parking
spaces provided for in the preceding paragraph and provided further that
Landlord shall have until the last to occur of (i) thirty (30) days after
its receipt of Tenant's notice increasing the number of parking spaces and
(ii) the Commencement Date to provide such increased number of parking
spaces. Further, if Tenant shall elect to expand its space under lease
pursuant to its rights under Section 2.3, Tenant shall have the
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<PAGE>
rights to elect additional parking as provided in Section 2.3 subject to
the notice requirements of Section 2.3.
(C) Notwithstanding the foregoing, from time to time Tenant may at any
time after April 1, 1990 decrease its total number of parking spaces by
notice to Landlord. Any such reduction shall take effect thirty (30) days
after Landlord's receipt of such notice.
10.2 PARKING CHARGES. Tenant shall pay for parking privileges in Garages at
---------------
prevailing monthly rates from time to time charged by the operator or
operators of Garages, whether or not such operator is an affiliate of
Landlord. Such monthly parking charges for parking privileges in the
Garage or Garages shall constitute Additional Rent and shall be payable
monthly as directed by Landlord upon billing therefor by Landlord. Tenant
acknowledges that said monthly charges to be paid under this Section are
for the use by the Tenant of the parking privileges referred to herein,
and not for any other service.
Notwithstanding the provisions of the first sentence of the immediately
preceding paragraph of this Section 10.2 but subject to the provisions of
the next paragraph of this Section 10.2, the monthly rate per car charged
to Tenant hereunder shall not exceed the following amounts for the
following specified periods only:
<TABLE>
<CAPTION>
Period Maximum Monthly Rate Per Car
------ ----------------------------
<S> <C>
From the Commencement Date
through December 31, 1989 $125.00/month
From January 1, 1990
through December 31, 1990 $132.50/month
From January 1, 1991
through December 31, 1991 $140.00/month
From January 1, 1992
through December 31, 1992 $147.50/month
From January 1, 1993
through December 31, 1993 $155.00/month
From January 1, 1994
through December 31, 1994 $162.50/month
From January 1, 1995
through December 31, 1995 $170.00/month
For each calendar year (or
portion thereof) from
January 1, 1996 through
December 31, 2000 $170.00/month plus
$10.00/month for each
such calendar year
(i.e., $180.00/month in
1996, $190.00/month in
1997, etc.)
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
For each calendar year thereafter At the prevailing rates
referred to and
described in the first
sentence of the first
paragraph of this
Section 10.2.
</TABLE>
Notwithstanding the provisions of (i) the first sentence of this Section
10.2 and (ii) the immediately preceding paragraph, the monthly parking
charges for each of the Reserved Spaces shall be at the monthly rate equal
to one hundred fifteen percent (115%) of the applicable monthly parking
rate or charge from time to time in effect as established pursuant to the
provisions of this Section 10.2.
10.3 GARAGE OPERATION. Unless otherwise determined by Landlord, each Garage is
----------------
to be operated on a self-parking basis, and Tenant shall be obligated to
park and remove its own automobiles. Tenant's parking shall be on an
unreserved basis, Tenant having the right to park in any available stalls.
Tenant's access and use privileges with respect to the Garage shall be in
accordance with regulations of uniform applicability to the users of the
Garage from time to time established by the operator of the Garage. Tenant
shall receive one (1) identification sticker or pass and one (1) magnetic
card so-called, or other suitable device providing access to the Garage,
for each vehicle paid for by Tenant. Tenant shall supply Landlord with an
identification roster listing, for each identification sticker or pass,
the name of the employee and the make, color and registration number of
the vehicle to which it has been assigned, and shall provide a revised
roster to Landlord monthly indicating changes thereto. Any automobile
found parked in the Garage during normal business hours without
appropriate identification will be subject to being towed at said
automobile owner's expense. The parking privileges granted herein are non-
transferable (other than to a permitted assignee or subtenant pursuant to
the applicable provisions of Article XII hereof). The door of the Garage
will be open during normal business hours except during periods of severe
inclement or cold weather. For periods during which an attendant is not on
duty at the Garage entrance or when the door to the Garage is closed, or
at any other periods as may from time to time be stipulated by the Garage
Operator in accordance with its Regulations, including normal business
hours, the magnetic cards furnished to Tenant shall be used by Tenant to
gain access to and egress from the Garage for motor vehicles.
10.4 LIMITATIONS. Tenant agrees that it and all persons claiming by, through
-----------
and under it, shall at all times abide by all reasonable rules and
regulations promulgated by Landlord or the operator of the parking
facilities with respect to the use of the Garage or such on-grade parking
facilities as may be provided by Landlord within the Development Area and
Tenant's parking shall be on an unreserved basis, Tenant having the right
to park in any available stalls in the Garage or in any available spaces
in the
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<PAGE>
on-grade parking facilities. Except to the extent of gross negligence or
willful acts, neither the Landlord nor the operator of such parking
facilities assumes any responsibility whatsoever for loss or damage due to
fire or theft or otherwise to any automobile or to any personal property
therein, however caused, and Tenant agrees, upon request from the
Landlord, from time to time, to notify its officers, employees and agents
then using any of the parking privileges provided for herein, of such
limitation of liability. Tenant further acknowledges and agrees that no
bailment is intended or shall be created.
10.5 INTERIM ON-GRADE PARKING. Notwithstanding the references to Garages in
------------------------
this Article X, Tenant acknowledges that, from time to time, Landlord may
satisfy the requirements of providing Tenant with parking hereunder
(except for parking called for as to be provided in the East Garage and
except for the Reserved Spaces) by providing such parking in on-grade
parking lots within the Development Area, in which case such parking shall
be paid for in accordance with the prevailing monthly rate from time to
time charged by the operator or operators of such lots, whether or not
such operator is an affiliate of Landlord (but in no event greater than
seventy five percent (75%) of the then prevailing garage rate per month
provided for in Section 10.2) and in all other respects in accordance with
the terms and conditions of this Article X. When another Garage is
constructed and opened for business, such parking as is provided in on-
grade parking lots shall be shifted to such other Garage and the
provisions of Sections 10.2, 10.3 and 10.4 shall apply thereto.
ARTICLE XI
----------
CERTAIN TENANT COVENANTS
------------------------
Tenant covenants during the Lease Term and for such further time as Tenant
occupies any part of the Premises:
11.1 To pay when due all Annual Fixed Rent and Additional Rent and all charges
for utility services rendered to the Premises and service inspections
therefor (except as is otherwise provided in Exhibit D) and, as further
Additional Rent, all charges for additional and special services rendered
pursuant to Section 7.3.
11.2 To use and occupy the Premises for the Permitted Uses only, and not to
injure or deface the Premises or the Property, not to permit in the
Premises any auction sale, vending machine (other than vending machines
which dispense food, candy and non-alcoholic beverages) or flammable
fluids or chemicals, or nuisance, or the emission from the Premises of any
objectionable noise or odor, nor to use or devote the Premises or any part
thereof for any purpose other than the Permitted Uses, nor any use thereof
which is inconsistent with the maintenance of the Building as an office
building of the first-class in the quality of its maintenance, use and
occupancy, or which is improper,
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<PAGE>
offensive, contrary to law or ordinance or liable to invalidate or
increase the premiums for any insurance on the Building or its contents or
liable to render necessary any alteration or addition to the Building.
Landlord acknowledges and agrees that the Permitted Uses (defined in
Section 1.2 hereof) will not result in such an increase in insurance
premiums. Further, Tenant shall not nor shall Tenant permit its employees,
invitees or contractors to engage in any activity which may produce a
hazardous material, waste or substance, or keep or maintain any substance
which is or may hereafter be classified as a hazardous material, waste or
substance, under Massachusetts General Laws, Chapter 21E and said rules
and regulations may be amended from time to time or under any other
applicable governmental laws, ordinances, rules or regulations and,
further, Tenant shall comply and shall cause its employees, invitees,
agents and contractors to comply with each of the foregoing. The hanging
or affixing within the Premises of pictures, paintings, other art work or
normal business furnishings shall not constitute injuring or defacing the
Premises. At the expiration or earlier termination of the Lease Term,
Tenant shall repair and restore any damage done in so hanging or affixing
any of the foregoing and in removing any of the foregoing.
11.3 Not to obstruct in any manner any portion of the Building not hereby
leased or any portion thereof or of the Site used by Tenant in common with
others; not without prior consent of Landlord to permit the painting or
placing of any signs, curtains, blinds, shades, awnings, aerials or
flagpoles, or the like, visible from outside the Premises; and to comply
with all reasonable rules and regulations now or hereafter made by
Landlord, of which Tenant has been given notice, for the care and use of
the Building and the Site and their facilities and approaches, but
Landlord shall not be liable to Tenant for the failure of other occupants
of the Building to conform to such rules and regulations. Landlord shall
use reasonable efforts to enforce such rules and regulations uniformly for
each occupant of the Building but the failure by other occupants of the
Building to comply with such rules and regulations shall not be a default
of Landlord under this Lease. This Lease shall control in the event that
any term hereof conflicts with any such rules and regulations.
11.4 Landlord shall be obligated to construct the Premises (subject to the
provisions of Article IV) in accordance with the requirements of
applicable laws, ordinances, codes, rules and regulations. Thereafter,
Tenant shall keep the Premises equipped with all safety appliances
required by law or ordinance or any other regulation of any public
authority because of the particular manner of Tenant's use of the Premises
other than normal office use, and to procure all licenses and permits so
required because of the particular manner of Tenant's use of the Premises
other than normal office use, and, if requested by Landlord, to do any
work so required because of such use, it being understood that the
foregoing provisions shall not be construed to broaden in any way Tenant's
Permitted Uses.
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<PAGE>
11.5 Not to place a load upon any floor in the Premises exceeding an average
rate of 70 pounds of live load (including partitions) per square foot of
floor area; and not to move any safe, vault or other heavy equipment in,
about or out of the Premises except in such manner and at such time as
Landlord shall in each instance authorize. Tenant's business machines and
mechanical equipment shall be placed and maintained by Tenant at Tenant's
expense in settings sufficient to absorb and prevent vibration or noise
that may be transmitted to the Building structure or to any other space in
the Building.
11.6 To pay promptly when due to the applicable taxing authority all taxes
which may be imposed upon personal property (including, without
limitation, fixtures and equipment) in the Premises irrespective of
whether such taxes are assessed to Landlord or Tenant. Landlord agrees to
timely provide Tenant with a copy of any such tax assessment Landlord
shall receive.
11.7 Not to 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
insurance on the Premises or on the Building above the standard rate
applicable to premises being occupied for the use to which Tenant has
agreed to devote the Premises; and Tenant further agrees that, in the
event that Tenant shall do any of the foregoing, Tenant will promptly pay
to Landlord, on demand, any such increase resulting therefrom, which shall
be due and payable as Additional Rent hereunder. Landlord acknowledges and
agrees that the Permitted Uses (defined in Section 1.2 hereof) will not
result in such an increase in insurance premiums.
11.8 To comply with all present and future laws, ordinances, rules and
regulations of any duly constituted governmental authority relating to the
use or occupancy of the Premises for the permitted Use (as defined in
Section 1.2 hereof); provided that Tenant shall not be required to make
any alterations or additions to the structure, roof, exterior and load
bearing walls, foundation, insulation or insulation materials in exterior
walls, structural floor slabs and other structural elements of the
Building unless the same are required by applicable governmental authority
solely as a result of the particular manner or level of Tenant's use or
occupancy of the Premises for the Permitted Use beyond normal use of space
of this kind. Tenant shall promptly pay all fines, penalties and damages
that may arise out of or be imposed because of its failure to comply with
the provisions of this Section 11.9.
ARTICLE XXI
-----------
TRANSFER OF TENANT'S INTEREST, ASSIGNMENT AND SUBLETTING
--------------------------------------------------------
12.1 RESTRICTION ON TRANSFER. Except as otherwise expressly provided herein,
-----------------------
Tenant covenants and agrees that it shall not assign,
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mortgage, pledge, hypothecate or otherwise transfer this Lease and/or
Tenant's interest in this Lease or sublet (which term, without limitation,
shall include granting of concessions, licenses or the like) the whole or
any part of the Premises. Any assignment, mortgage, pledge, hypothecation,
transfer or subletting not expressly permitted in this Article XII shall
be void, ab initio; shall be of no force and effect; and shall confer no
rights on or in favor of third parties; and, at Landlord's sole option,
any breach of this covenant shall constitute a default of Tenant entitling
Landlord to exercise its remedies in the event of default hereunder by
Tenant. In addition, Landlord shall be entitled to seek specific
performance of or other equitable relief with respect to the provisions of
this Article XII. Landlord hereby acknowledges and agrees that portions of
the Premises may be occupied by CDM Development Corp. and/or CDM
International Inc.
12.2 EXCEPTION FOR PARENT OR SUBSIDIARY OR AFFILIATE. Notwithstanding the
-----------------------------------------------
foregoing provisions of Section 12.1 above and the provisions of Sections
12.3, 12.4 and 12.6 below, but subject to the provisions of Sections 12.5
---
and 12.7 below, Tenant shall have the right to assign this Lease or to
sublet the Premises (in whole or in part) to any parent or subsidiary
corporation of Tenant or to any corporation resulting from a merger with
Tenant.
12.3 SUBLEASE OF A PORTION OF SPACE. Notwithstanding the provisions of Section
------------------------------
12.1 above but subject to the provisions of this Section 12.3 and the
---
provisions of Sections 12.5, 12.6 and 12.7 below, Tenant (and for purposes
of this Section 12.3, any permitted assignee then in possession under
Section 12.2, above) may sublease less than seventy percent (70%) of the
Rentable Floor Area of the Premises in the aggregate provided Tenant first
obtains the express prior written consent of Landlord, which consent shall
not be unreasonably withheld or delayed. Landlord shall not be deemed to
be unreasonably withholding its consent to such a proposed subleasing if:
(a) the proposed subtenant is not of a character consistent with the
operation of a first class office building (by way of example and
not in limitation, Landlord shall not be deemed to be unreasonably
withholding its consent to a proposed subleasing to any
governmental agency), or
(b) the proposed subtenant is not of good character and reputation, or
(c) the proposed subtenant proposes to use such portion of the
Premises to be sublet (or part thereof) for a purpose other than
the purpose for which the Premises may be used as stated in
Section 1.2 hereof, or
(d) there shall then be existing an "Event of Default" (defined in
Section 15.1).
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12.4 SUBSTANTIAL SUBLEASING OR ASSIGNMENT. Notwithstanding the provisions of
------------------------------------
Section 12.1 above, but subject to the provisions of this Section 12.4 and
---
the provisions of Sections 12.5, 12.6 and 12.7 below, Tenant covenants and
agrees not to assign this Lease or to sublet seventy percent (70%) or more
of the Rentable Floor Area of the Premises (which shall be deemed to
include, without limitation, any proposed subleasing which together with
prior subleasings would result in an area equal to or greater than seventy
percent (70%) of the Rentable Floor Area of the Premises in the aggregate
being the subject of one or more subleases) without, in each instance,
having first obtained the express prior written consent of Landlord, which
consent shall not be unreasonably withheld or delayed. Landlord shall not
be deemed to be unreasonably withholding its consent to such a proposed
assignment or subleasing if:
(a) the proposed assignee or subtenant does not possess adequate
financial capability to meet the tenant obligations under such
sublease, or
(b) the proposed assignee or subtenant is not of a character
consistent with the operation of a first class office building (by
way of example and not in limitation, Landlord shall not be deemed
to be unreasonably withholding its consent to a proposed
assignment or subleasing to any governmental agency), or
(c) the proposed assignee or subtenant is not of good character and
reputation, or
(d) the assignee or subtenant proposes to use the Premises (or part
thereof) for a purpose other than the purpose for which the
Demised Premises may be used as stated in Section 1.2 hereof, or
(e) there shall be existing an "Event of Default" (defined in Section
15.1), or
(f) in the case of a proposed assignment, Landlord elects, at its
option, by notice given within thirty (30) days after receipt of
Tenant's notice given pursuant to Section 12.5 below, to terminate
this Lease as of a date which shall be not earlier than thirty
(30) days nor later than ninety (90) days after Landlord's notice
to Tenant; provided, however, that upon the termination date as
set forth in Landlord's notice, all of Landlord's and Tenant's
obligations relating to the period after such termination date
(but not those relating to the period before such termination
date) shall cease. Notwithstanding the foregoing, Tenant may, by
written notice to Landlord given within fifteen (15) days after
Tenant's receipt of Landlord's notice of termination, avoid such
termination by giving notice
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that it has validly canceled any agreement to enter into such
assignment and agreeing to remain as Tenant in the Premises
pursuant to this Lease, provided that Tenant includes with its
notice evidence reasonably satisfactory to Landlord evidencing
such valid cancellation of such agreement to enter into such
assignment. In the event Tenant avoids Landlord's termination,
this Lease shall remain in full force and effect in accordance
with its terms, or
(g) in the case of a proposed subleasing which together with prior
subleasings would result in an area equal to seventy percent (70%)
or more of the Rentable Floor Area of the Premises being the
subject of one or more subleases, Landlord elects, at its option,
by notice given within thirty (30) days after receipt of Tenant's
notice given pursuant to section 12.5 below, (i) to terminate this
Lease as to such portions of the Premises proposed to be sublet
which would, if made, result in an area greater than seventy
percent (70%) of the Rentable Floor Area of the Premises being
sublet (herein called the "Terminated Portion of the Premises")
and/or (ii) to effect an assignment from Tenant to Landlord of
this Lease as to such portions of the Premises as had been
previously sublet (herein called the "Assigned Portion of the
Premises") as of a date which shall be not earlier than thirty
(30) days nor later than ninety (90) days after Landlord's notice
to Tenant; provided, however, that upon the date as set forth in
Landlord's notice for such termination and/or assignment, all of
Landlord's and Tenant's obligations as to the Terminated Portion
of the Premises relating to the period after such termination date
(but not those relating to the period before such termination
date) and as to the Assigned Portion of the Premises relating to
the period after such assignment date (but not those relating to
the period before such assignment date) shall cease and provided,
further, that this Lease shall remain in full force and effect as
to the remainder of the Premises, except that from and after the
termination and/or assignment date the Rentable Floor Area of the
Premises shall be reduced to the rentable floor area of the
remainder of the Premises and the definition of Rentable Floor
Area of the Premises shall be so amended and after such
termination and/or assignment all references in this Lease to the
"Premises" or the "Rentable Floor Area of the Premises" shall be
deemed to be references to the remainder of the Premises, and
provided further that Landlord shall have the right to make such
alterations and improvements as may be required to separately
demise the Terminated Portion of the Premises and/or the Assigned
Portion of the Premises. Notwithstanding the foregoing, Tenant
may, by written notice to Landlord
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<PAGE>
given within fifteen (15) days after Tenant's receipt of
Landlord's notice of termination as aforesaid, avoid said
termination and/or assignment by giving notice that it has validly
cancelled any agreement to enter into such subletting and agreeing
to remain as Tenant in the Premises pursuant to this Lease,
provided that Tenant includes with its notice evidence reasonably
satisfactory to Landlord evidencing such valid cancellation of
such agreement to enter into such subletting. In the event Tenant
avoids Landlord's termination and/or assignment, this Lease shall
remain in full force and effect in accordance with its terms.
12.5 TENANT'S NOTICE. Tenant shall give Landlord notice of any proposed
---------------
sublease or assignment, specifying the provisions of the proposed
assignment or subletting, including (a) the name and address of the
proposed assignee or subtenant, (b) reasonably adequate information as to
its net worth and financial capability and standing (provided, however,
that Landlord shall hold such information confidentially having the right
to release same only to its officers, accountants, attorneys and mortgage
lenders on a confidential basis), (c) all of the terms and provisions upon
which the proposed assignment or subletting is to be made, and (d) all
other information reasonably requested by Landlord as being necessary to
make the determination referred to in Sections 12.3 or 12.4 above.
Notwithstanding the provisions of item (b) above, Tenant shall not be
required to provide such reasonably adequate information as to net worth
and financial capability as to any proposed subtenant who proposes to
sublease less than five thousand (5,000) square feet of rentable floor
area. In making the determination of whether a proposed subtenant proposes
to sublease less than 5,000 square feet of rentable floor area, there
shall be aggregated the rentable floor areas of the initial proposed
subleased space and all space covered by expansion rights and rights of
first refusal.
If Landlord shall consent to the proposed assignment or subletting, as the
case may be, then, in such event, Tenant may thereafter sublease or assign
pursuant to Tenant's notice, as given hereunder and Landlord's consent
thereto; provided, however, that if the assignment or subletting, as the
case may be, consistent with Tenant's notice and Landlord's consent
thereto is not consummated within one hundred twenty (120) days after
Tenant's receipt of Landlord's consent hereunder, then such consent shall
terminate and the provisions and requirements of this Article XII shall
apply as if said consent had never been given. Tenant covenants and agrees
to promptly deliver to Landlord a true copy of the assignment or
subletting consummated by Tenant and in accordance with Tenant's notice
and Landlord's consent thereto but the failure of Tenant to so deliver
same shall not constitute a default of Tenant under this Lease unless
Tenant fails to deliver same to Landlord within ten (10) days after
receipt of notice from Landlord requesting same.
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<PAGE>
12.6 PROFIT ON SUBLEASING OR ASSIGNMENT. If (i) if there shall be any
----------------------------------
assignment or subleasing as to which Landlord may consent under this
Article XII (other than an assignment or subletting permitted under
Section 12.2 hereof) and (ii) such assignment or subletting shall occur,
---
or be continuing after the fifth (5th) annual anniversary of the
--
Commencement Date (the "Fifth Anniversary"), such consent shall be upon
the express and further condition, covenant and agreement, and Tenant
hereby covenants and agrees that, in addition to the Annual Fixed Rent,
Additional Rent and other charges to be paid pursuant to this Lease, from
and after the Fifth Anniversary fifty percent (50%) of the "Sublease or
Assignment Profits" (hereinafter defined), if any, shall be paid to
Landlord.
The "Sublease or Assignment Profits" shall be the excess, if any, of (a)
the "Sublease or Assignment Net Revenues" as hereinafter defined over (b)
the Annual Fixed Rent and Additional Rent and other charges provided in
this Lease; provided, however, that for purposes of calculating the
Sublease or Assignment Profits under this Section during the initial Lease
Term (not including any extensions, whether pursuant to Section 3.2, 3.2.1
or otherwise) there shall be subtraction from the Annual Fixed Rent the
amount of $2.29 per square foot of Rentable Floor Area respecting the
Premises or portion thereof being assigned or sublet; and provided further
that for the purpose of calculating the Sublease or Assignment Profits in
the case of a sublease, appropriate prorations in the applicable Annual
Fixed Rent, Additional Rent and other charges under this Lease shall be
made based on the percentage of the Premises subleased and on the terms of
the sublease). The "Sublease or Assignment Net Revenues" shall be the
fixed rent, additional rent and all other charges and sums paid either
initially or over the term of the sublease or assignment actually received
by Tenant from the subtenant or assignee, plus all other profits and
----
increases derived by Tenant as a result of such subletting or assignment,
less the reasonable out of pocket costs of Tenant actually incurred by
----
Tenant in such subleasing or assignment amortized over the term of the
sublease or assignment.
All payments of the Sublease or Assignment Profits due Landlord shall be
made at the time and in the manner provided for the payment of Annual
Fixed Rent unless any sums paid by the sublessee or assignee constituting
or forming a portion (or all) of the Sublease or Assignment Profits are
paid at a time or times and/or in a manner other than the time and in the
manner for the payment of Annual Fixed Rent, in which case such sums
comprising a portion (or all) of the Sublease or Assignment Profits due
Landlord shall be payable to Landlord at the time paid by the sublessee or
assignee.
12.7 ADDITIONAL CONDITIONS. (a) It shall be a condition of the validity of any
---------------------
assignment or subletting of right under Section 12.2 above, or consented
to under Sections 12.3 or 12.4 above, that the assignee or sublessee
agrees directly with Landlord, in
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<PAGE>
form reasonably satisfactory to Landlord, to be bound by all the
obligations of the Tenant hereunder, including, without limitation, the
obligation to pay the rent and other amounts provided for under this Lease
(but in the case of a partial subletting, such subtenant shall agree on a
pro rata basis to be so bound) and the covenant against further assignment
and subletting, but neither such assignment or subletting nor the
agreement of said assignee or subtenant shall relieve the Tenant named
herein of any of the obligations of the tenant hereunder, and Tenant shall
remain fully and primarily liable therefor.
(b) As Additional Rent, Tenant shall reimburse Landlord promptly for
reasonable out of pocket legal and other costs and expenses incurred by
Landlord in connection with any request by Tenant for consent to
assignment or subletting. Any amount paid by Tenant may be credited by
Tenant against Landlord's share of the Sublease or Assignment Profits.
(c) If this Lease be assigned, or if the Premises or any part thereof be
sublet or occupied by anyone other than Tenant, Landlord may upon prior
notice to Tenant, at any time and from time to time after a default of
Tenant, collect rent and other charges from the assignee, sublessee or
occupant and apply the net amount collected to the rent and other charges
herein reserved, including the Landlord's share of the Sublease or
Assignment Profits, but no such assignment, subletting, occupancy or
collection shall be deemed a waiver of this covenant, or the acceptance of
the assignee, sublessee or occupant as a tenant or a release of Tenant
from the further performance by Tenant of covenants on the part of Tenant
herein contained.
(d) The consent by Landlord to an assignment or subletting shall in no
wise be construed to relieve Tenant from obtaining the express consent in
writing of Landlord to any further assignment or subletting.
(e) No assignment, subletting or use of the Premises by any third party
shall affect the purpose for which the Premises may be used as stated in
this Lease.
ARTICLE XIII
------------
INDEMNITY AND COMPREHENSIVE GENERAL LIABILITY INSURANCE
-------------------------------------------------------
13.1 TENANT'S INDEMNITY. To the maximum extent this agreement may be made
------------------
effective according to law, Tenant agrees to indemnify and save harmless
Landlord from and against all claims of whatever nature arising from any
act, omission or negligence of Tenant, or Tenant's contractors, licensees,
invitees, agents, servants or employees, or arising from any accident,
injury or damage whatsoever caused to any person, or to the property of
any person, occurring after the date that possession of the Premises is
first delivered to Tenant and until the end of the Lease Term
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<PAGE>
and thereafter, so long as Tenant is in occupancy of any part of the
Premises, in or about the Premises or arising from any accident, injury or
damage occurring outside the Premises but within the Building, the Garage
or on the Site, where such accident, injury or damage results, or is
claimed to have resulted, from an act or omission on the part of Tenant or
Tenant's agents or employees, licensees, invitees or independent
contractors.
This indemnity and hold harmless agreement shall include indemnity against
all costs, expenses and liabilities incurred in or in connection with any
such claim or proceeding brought thereon, and the defense thereof.
13.2 COMPREHENSIVE GENERAL LIABILITY INSURANCE. Tenant agrees to maintain in
-----------------------------------------
full force from the date upon which Tenant first enters the Premises for
any reason, throughout the Lease Term of this Lease, and thereafter, so
long as Tenant is in occupancy of any part of the Premises, a policy of
broad form comprehensive general liability and property damage insurance
under which Landlord (and such other persons as are in privity of estate
with Landlord as may be set out in notice from time to time) and Tenant
are named as insureds, and under which the insurer agrees to indemnify and
hold Landlord, 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 mentioned in
Section 13.1 of this Article XIII. Each such policy shall be non-
cancelable and non-amendable with respect to Landlord and Landlord's said
designees without thirty (30) days' prior notice to Landlord, and a
duplicate original or certificate thereof shall be delivered to Landlord.
As of the Commencement Date hereof, the minimum limits of liability of
such insurance shall be as specified in Section 1.2 and from time to time
during the Lease Term for such higher limits, if any, as are carried
customarily in the Greater Boston Area with respect to similar properties.
13.3 LANDLORD'S INDEMNITY. Landlord agrees to indemnify and save Tenant
--------------------
harmless from and against injuries arising from or claimed to have arisen
from the negligence of Landlord, its agents or employees occuring after
the date that possession of the Premises is first delivered to Tenant and
until the expiration or earlier termination of the Lease Term, provided,
however that in no event shall the aforesaid indemnity render Landlord
responsible or liable for any loss or damage to fixtures or personal
property of Tenant and Landlord shall in no event be liable for any
indirect or consequential damages; and provided, further, that the
provisions of this Section shall not be applicable (i) to the holder of
any mortgage now or hereafter on the Site or the Building (whether or not
such holder shall be a mortgagee in possession of or shall have exercised
any rights under a conditional, collateral or other assignment of leases
and/or rents respecting, the Site and/or Building or (ii) any person
acquiring title as a result of, or subsequent to, a foreclosure of any
such mortgage or a deed in lieu of foreclosure.
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13.4 NON-SUBROGATION. Any insurance carried by either party with respect to
---------------
the Premises or property therein or occurrences thereon shall, if it can
be so written without additional premium or with an additional premium
which the other party agrees to pay, include a clause or endorsement
denying to the insurer rights of subrogation against the other party to
the extent rights have been waived by the insured prior to occurrence of
injury or loss. Each party, notwithstanding any provisions of this Lease
to the contrary, hereby waives any rights of recovery against the other
for injury or loss due to hazards covered by such insurance to the extent
of the indemnification received thereunder.
13.5 TENANT'S RISK. To the maximum extent that this agreement may be made
-------------
effective according to law, Tenant agrees to use and occupy the Premises
and to use such other portions of the Building, the Garage or Garages,
the Site and such portions of the Development Area as Tenant is herein
given the right to use at Tenant's own risk; and Landlord shall have no
responsibility or liability for any loss of or damage to fixtures or
other personal property of Tenant.
ARTICLE XIV
-----------
FIRE, CASUALTY AND TAKING
-------------------------
14.0 CASUALTY INSURANCE. Landlord shall carry at all times during the Term of
------------------
this Lease with respect to the Building insurance against loss or damage
covered by the so-called "all risk" type insurance coverage. Such
insurance shall be in an amount equal to at least the replacement value
of the Building, as reasonably estimated by Landlord from time to time,
and such insurance may be written with a deductible as determined by
Landlord. Notwithstanding the foregoing provisions of this Section 14.0,
if at any time or from time to time during the Term of this Lease (as it
may be extended) "all risk" type insurance coverage shall not be
available and/or if replacement value coverage shall not be available,
then the type of fire and casualty insurance and the amount of such
coverage shall be as determined by Landlord. Landlord may also maintain
such other insurance as may from time to time be required by any
mortgagee holding a first mortgage lien on the Building. Further,
Landlord may also maintain such insurance against loss of Annual Fixed
Rent and Additional Rent and such other risks and perils as Landlord
deems proper. Any and all such insurance together with the liability
insurance required or permitted to be carried under this Lease may be
maintained under a blanket policy affecting other premises of Landlord
and/or its affiliated business organizations.
14.1 DAMAGE RESULTING FROM CASUALTY. (A) LANDLORD'S TERMINATION RIGHT. In case
------------------------------ --------------------------------
during the Lease Term (as it may have been extended) the Building or the
Site are damaged by fire or other casualty, and such fire or casualty
damage cannot, in the
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ordinary course, reasonably be expected to be repaired within one hundred eighty
(180) days from "The Date Repair Work Would Commence" (hereinafter defined),
Landlord may, at its election, terminate this Lease by notice given to Tenant
within sixty (60) days after the date of such fire or other casualty, specifying
the effective date of termination. The effective date of termination specified
by Landlord shall not be less than thirty (30) days nor more than forty-five
(45) days after the date of notice of such termination.
(B) TENANT'S TERMINATION RIGHT. In case during the Lease Term (as it may have
- ------------------------------
been extended), the Building shall be damaged by fire or casualty and such fire
or casualty damage to the Premises cannot reasonably be expected to be repaired
or restored within one (1) year from The Date Repair Work Would Commence, then
Tenant shall have the right, by giving notice to Landlord not later than thirty
(30) days after such damage, to terminate this Lease, whereupon this Lease shall
terminate on the fifteenth (15th) day after Landlord's receipt of such notice
with the same force and effect as if such date were the date originally
established as the expiration date hereof.
(C) INSURANCE PROCEEDS. In the event that this Lease is terminated in
- -----------------------
accordance with the provisions of this Section 14.1, the insurance proceeds
from the insurance carried by Landlord shall be payable to and belong to
Landlord.
(D) LEASE IN EFFECT. Unless terminated pursuant to the provisions of this
- --------------------
Section 14.1, this Lease shall remain in full force and effect following any
such damage subject, however, to the following provisions. For purposes of this
Section 14.1 and Section 14.2, the phrase "The Date Repair Work Would Commence"
shall mean the date on which the contractor engaged by Landlord to reconstruct
the Building enters the Property for the purpose of commencing such
reconstruction as distinguished from the date the fire or other casualty occurs.
(E) RESTORATION. If the Building or the Site or any part thereof are damaged by
- ---------------
fire or other casualty and this Lease is not so terminated, or Landlord or
Tenant have no right to terminate this Lease, Landlord, promptly after such
damage and the determination of the net amount of insurance proceeds Available
shall use due diligence to restore the Premises in the event of damage thereto
(excluding any furniture, fixtures or equipment of Tenant, or any other items
installed, or paid for, by Tenant) into proper condition for use and occupation.
Whether or not insurance proceeds may be available, a just proportion of the
Annual Fixed Rent, the Operating Cost Excess and the Tax Excess according to the
nature and extent of the injury to the Premises (measured in terms of rentable
square feet) shall be abated from the date of casualty until the Premises shall
have been put by Landlord substantially into such condition.
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<PAGE>
(F) TERMINATION IF RESTORATION NOT TIMELY COMPLETED. Subject to the
----------------------------------------------------
provisions of the following paragraph, where Landlord is obligated or
otherwise elects to effect restoration of the Premises, unless such
restoration is substantially completed within one (1) year from the date
of the casualty or taking, such period to be subject, however, to
extension where the delay in completion of such work is due to Landlord's
Force Majeure (but in no event beyond twenty (20) months from the date of
the casualty or taking), Tenant shall have the right to terminate this
Lease at any time after the expiration of such one-year (as extended)
period until the restoration is substantially completed, such
termination to take effect as of the thirtieth (30th) day after the date
of receipt by Landlord of Tenant's notice, with the same force and effect
as if such date was the date originally established as the expiration
date hereof unless, within such thirty (30) day period such restoration
is substantially completed, in which case Tenant's notice of termination
shall be of no force and effect and this Lease and the Lease Term shall
continue in full force and effect.
Notwithstanding the provisions of the immediately preceding paragraph, if
the fire or casualty damage to the Premises shall be determined to be
such that it cannot be repaired within one (1) year from the Date Repair
Work Would Commence and if Tenant or Landlord shall not elect to
---
terminate this Lease as provided in this Section 14.1, then unless such
restoration is substantially completed within one (1) year from the date
that such repair or restoration work commences, Landlord being required
to use due diligence as provided in the paragraph (E) of this Section
14.1), such period to be subject, however, to extension where the delay
in substantial completion of such work is due to Landlord's Force
Majeure, Tenant shall have the right to terminate this Lease at any time
after the expiration of such one year (as extended) period until the
restoration is substantially completed, such termination to take effect
as of the thirtieth (30th) day after the date of receipt by Landlord of
Tenant's notice, with the same force and effect as if such date was the
date originally established as the expiration date hereof unless, within
such thirty (30) day period such restoration is substantially completed,
in which case Tenant's notice of termination shall be of no force and
effect and this Lease and the Lease Term shall continue in full force and
effect.
14.2 UNINSURED CASUALTY. Notwithstanding anything to the contrary
------------------
contained in this Lease, if the Building or the Premises shall be
substantially damaged by fire or casualty as the result of a risk not
covered by the forms of casualty insurance at the time required to be
maintained by Landlord and such fire or casualty damage cannot, in the
ordinary course, reasonably be expected to be repaired within ninety (90)
days from The Date Repair Work Would Commence, Landlord may, at its
election, terminate the Term of this Lease by notice to Tenant given
within thirty (30) days after such loss. If Landlord shall give such
notice, then this Lease shall terminate as of the date of such notice
with the same
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<PAGE>
force and effect as if such date were the date originally established as
the expiration date hereof.
14.3 RIGHTS OF TERMINATION FOR TAKING. If the Building, or such portion
--------------------------------
thereof as to render the balance (if reconstructed to the maximum extent
practicable in the circumstances) unsuitable for Tenant's purposes, shall
be taken by condemnation or right of eminent domain, Landlord or Tenant
shall have the right to terminate this Lease by notice to the other of
its desire to do so, provided that such notice is given not later than
thirty (30) days after Tenant has been deprived of possession. If either
party shall give such notice, then this Lease shall terminate as of the
date of such notice with the same force and effect as if such date were
the date originally established as the expiration date hereof.
Further, if so much of the Building shall be so taken that continued
operation of the Building would be uneconomic, Landlord shall have the
right to terminate this Lease by giving notice to Tenant of Landlord's
desire to do so not later than thirty (30) days after Tenant has been
derived of possession of the Premises (or such portion thereof as may be
taken). If Landlord shall give such notice, then this Lease shall
terminate as of the date of such notice with the same force and effect as
if such date were the date originally established as the expiration date
hereof. Notwithstanding the foregoing, Landlord agrees not to terminate
this Lease as a result of such a taking unless Landlord terminates
substantially all of the other tenants in the Building.
Should any part of the Premises be so taken or condemned during the Lease
Term hereof, and should this Lease not be terminated in accordance with
the foregoing provisions, and the holder of any mortgage which includes
the Premises as part of the mortgaged premises or any ground lessor of
any ground lease which includes the Site as part of the demised premises
allows the net condemnation proceeds to be applied to the restoration of
the Building, Landlord agrees that after the determination of the net
amount of condemnation proceeds available to Landlord, Landlord shall use
due diligence to put what may remain of the Premises into proper
condition for use and occupation as nearly like the condition of the
Premises prior to such taking as shall be practicable (excluding any
furniture, fixtures or equipment of Tenant, or any other items installed
or paid for by Tenant). Notwithstanding the foregoing, Landlord shall not
be obligated to expend for such repair and restoration any amount in
excess of the net condemnation proceeds.
If the Premises shall be affected by any exercise of the power of eminent
domain, then the Annual Fixed Rent, the Operating Cost Excess and
Tenant's share of real estate taxes shall be justly and equitably abated
and reduced according to the nature and extent of the loss of use thereof
suffered by Tenant (measured in terms of rentable square feet); and in
case of a taking which
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<PAGE>
permanently reduces the Rentable Floor Area of the Premises, a just
proportion of the Annual Fixed Rent, the Operating Cost Excess and the
Tax Excess shall be abated for the remainder of the Lease Term (measured
in terms of rentable square feet).
14.4 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 Building, the Site and the Garage or Garages and the leasehold
interest hereby created, and compensation accrued or hereafter to accrue
by reason of such taking, damage or destruction, as aforesaid, and by way
of confirming the foregoing, Tenant hereby grants and assigns, and
covenants with Landlord to grant and assign to Landlord, all rights to
such damages or compensation.
However, nothing contained herein shall be construed to prevent Tenant
from prosecuting in any such proceedings a claim for its trade fixtures
so taken or relocation, moving and other dislocation expenses, provided
that such action shall not affect the amount of compensation otherwise
recoverable by Landlord from the taking authority.
ARTICLE XV
----------
DEFAULT
-------
15.1 TENANT'S DEFAULT. This Lease and the term of this Lease are subject to
----------------
the limitation that Tenant shall be in default if, at any time during the
Lease Term, any one or more of the following events (herein called an
"Event of Default" a "default of Tenant" or similar reference) shall
occur and not be cured prior to the expiration of the grace period (if
any) herein provided, as follows:
(a) Tenant shall fail to pay any installment of the Annual Fixed
Rent, or any Additional Rent or any other monetary amount due
under this Lease on or before the date on which the same becomes
due and payable, and such failure continues for ten (10) days
after notice from Landlord thereof, or
(b) Landlord having rightfully given the notice specified in (a)
above to Tenant twice in any twelve (12) month period, Tenant
shall fail, to pay, on any occasion within the twelve months
following the giving of such second notice by Landlord, the
Annual Fixed Rent, Additional Rent or any other monetary amount
due under this Lease on or before the date on which the same
becomes due and payable, or
(c) Tenant shall fail to perform or observe some term or condition
of this Lease which, because of its character, would immediately
jeopardize Landlord's
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<PAGE>
interest (such as, but without limitation, failure to maintain general
liability insurance, or the employment of labor and contractors within the
Premises which interfere with Landlord's work, in violation of Section 4.4
or Section 9.3), and such failure continues for three (3) days after notice
from Landlord to Tenant thereof, or
(d) Tenant shall fail to perform or observe any other requirement, term,
covenant or condition of this Lease (not hereinabove in this Section 15.1
specifically referred to) on the part of Tenant to be performed or observed
and such failure shall continue for thirty (30) days after notice thereof
from Landlord to Tenant, or if said default shall reasonably require longer
than thirty (30) days to cure, if Tenant shall fail to commence to cure
said default within thirty (30) days after receipt of notice thereof and/or
fail to continuously prosecute the curing of the same to completion with
due diligence; or
(e) The estate hereby created shall be taken on execution or by other process
of law, or
(f) Tenant shall make an assignment or trust mortgage arrangement, so-called,
for the benefit of its creditors, or
(g) Tenant shall judicially be declared bankrupt or insolvent according to
law, or
(h) A receiver, guardian, conservator, trustee in involuntary bankruptcy or
other similar officer is appointed to take charge of all or any substantial
part of Tenant's property by a court of competent jurisdiction, or
(i) Any petition shall be filed against Tenant in any court, whether or not
pursuant to any statute of the United States or of any State, in any
bankruptcy, reorganization, composition, extension, arrangement or
insolvency proceeding, and such proceedings shall not be fully and finally
dismissed within sixty (60) days after the institution of the same; or
(j) Tenant shall file any petition in any court, whether or not pursuant to any
statute of the United States or any State, in any bankruptcy,
reorganization, composition, extension, arrangement or insolvency
proceeding; or
(k) At Landlord's sole option if elected by written notice to Tenant, if Tenant
otherwise abandons or vacates the Premises for more than sixty (60) days.
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<PAGE>
15.2 TERMINATION; RE-ENTRY. Upon the happening of any one or more of the
---------------------
aforementioned Events of Default (notwithstanding any license of a former
breach of covenant or waiver of the benefit hereof or consent in a former
instance), Landlord or Landlord's agents or servants may give to Tenant a
notice (hereinafter called "notice of termination") terminating this
Lease on a date specified in such notice of termination (which shall be
not less than five (5) days after the date of the mailing of such notice
of termination), and this Lease and the Lease Term, as well as any and
all of the right, title and interest of the Tenant hereunder, shall
wholly cease and expire on the date set forth in such notice of
termination in the same manner and with the same force and effect as if
such date were the date originally specified herein for the expiration of
the Lease Term, and Tenant shall then quit and surrender the Premises to
Landlord. Notwithstanding the foregoing, if there shall occur an Event of
Default not cured within any applicable notice and/or cure period
provided for in Section 15.1 and if Tenant shall fully cure such Event of
Default prior to the date Landlord sends to Tenant a notice of
termination under this Section 15.2, Landlord shall be deemed to have
accepted such cure; provided, however, that Tenant shall have no right to
require Landlord to accept a cure after the date Landlord gives Tenant
such a termination notice hereunder.
In addition or as an alternative to the giving of such notice of
termination, Landlord or Landlord's agents or servants may, by any
suitable action or proceeding at law, immediately or at any time
thereafter re-enter the Premises and remove therefrom Tenant, its agents,
employees, servants, licensees, and any subtenants and other persons, and
all or any of its or their property therefrom, and repossess and enjoy
the Premises, together with all additions, alterations and improvements
thereto; but, in any event under this Section 15.2, Tenant shall remain
liable as hereinafter provided.
The words "re-enter" and "re-entry" as used throughout this Article XV
are not restricted to their technical legal meanings.
15.3 CONTINUED LIABILITY; RE-LETTING. If this Lease is terminated or if
-------------------------------
Landlord shall re-enter the Premises as aforesaid, or in the event of the
termination of this Lease, or of re-entry, by or under any proceeding or
action or any provision of law by reason of an Event of Default hereunder
on the part of Tenant, Tenant covenants and agrees forthwith to pay and
be liable for, on the days originally fixed herein for the payment
thereof, amounts equal to the several installments of Annual Fixed Rent,
all Additional Rent and other charges reserved as they would, under the
terms of this Lease, become due if this Lease had not been terminated or
if Landlord had not entered or re-entered, as aforesaid, and whether the
Premises be relet or remain vacant, in whole or in part, or for a period
less than the remainder of the Lease Term, or for the whole thereof, but,
in the event the Premises be relet by Landlord, Tenant shall be entitled
to a credit in the net amount of rent and other charges received by
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<PAGE>
Landlord in reletting, after deduction of all reasonable expenses
incurred in reletting the Premises (including, without limitation,
remodeling costs, brokerage fees and the like), and in collecting the
rent in connection therewith, in the following manner:
Amounts received by Landlord after reletting shall first be applied
against such Landlord's expenses, until the same are recovered, and until
such recovery, Tenant shall pay, as of each day when a payment would fall
due under this Lease, the amount which Tenant is obligated to pay under
the terms of this Lease (Tenant's liability prior to any such reletting
and such recovery not in any way to be diminished as a result of the fact
that such reletting might be for a rent higher than the rent provided for
in this Lease); when and if such expenses have been completely recovered,
the amounts received from reletting by Landlord as have not previously
been applied shall be credited against Tenant's obligations as of each
day when a payment would fall due under this Lease, and only the net
amount thereof shall be payable by Tenant. Further, Tenant shall not be
entitled to any credit of any kind for any period after the date when the
term of this Lease is scheduled to expire according to its terms.
15.4 LIQUIDATED DAMAGES. Landlord may elect, as an alternative, to have Tenant
------------------
pay liquidated damages, which election may be made by notice given to
Tenant at any time after the termination of this Lease under Section
15.2, above, and whether or not Landlord shall have collected any damages
as hereinbefore provided in this Article XV, and in lieu of all other
such damages beyond the date of such notice. Upon such notice, Tenant
shall promptly pay to Landlord, as liquidated damages, in addition to any
damages collected or due from Tenant from any period prior to such
notice, such a sum as at the time of such notice represents the amount of
the excess, if any, of (a) the discounted present 1/2 value, at a
discount rate of 7%, of the Annual Fixed Rent, Additional Rent and other
charges which would have been payable by Tenant under this Lease for the
remainder of the Lease Term if the Lease terms had been fully complied
with by Tenant, over and above (b) the discounted present value, at a
discount rate of 7%, of the Annual Fixed Rent, Additional Rent and other
charges that would be received by Landlord if the Premises were re-leased
at the time of such notice for the remainder of the Lease Term at the
fair market value (including provisions regarding periodic increases in
Annual Fixed Rent if such are applicable) prevailing at the time of such
notice.
For the purposes of this Article, if Landlord elects to require Tenant to
pay liquidated damages in accordance with this Section 15.4, the total
rent shall be computed by assuming the Tenant's share of real estate
taxes under Section 6.1 and the Operating Cost Excess under Section 7.4
to be the same as were payable for the twelve (12) calendar months (or if
less than twelve calendar months have been elapsed since the date hereof,
the partial year) immediately preceding such termination of re-entry.
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<PAGE>
Nothing contained in this Lease shall limit or prejudice the right of
Landlord to prove for and obtain in proceedings for bankruptcy or
insolvency by reason of the termination of this Lease, an amount equal to
the maximum allowed by any statute or rule of law in effect at the time
when, and governing the proceeds in which, the damages are to be proved,
whether or not the amount be greater, equal to, or less than the amount
of the loss or damages referred to above.
15.5 WAIVER OF REDEMPTION. Tenant, for itself and any and all persons claiming
--------------------
by, through or under Tenant, including its creditors, upon the
termination of this Lease and of the term of this Lease in accordance
with the terms of this Lease, or in the event of entry of judgment for
the recovery of the possession of the Premises in any action or
proceeding, or if Landlord shall enter the Premises by process of law or
otherwise, hereby waives any right of redemption provided or permitted by
any statute, law or decision and does hereby waive, surrender and give up
all rights or privileges which it or they may or might have under and by
reason of any law or decision, to redeem the Premises or for a
continuation of this Lease for the term of this Lease hereby demised
after having been dispossessed or ejected therefrom by process of law, or
otherwise.
15.6 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 such additional time as is reasonably required to correct any
such default, after notice by Tenant to Landlord properly specifying
wherein Landlord has failed to perform any such obligation, Landlord
agreeing to diligently pursue the cure and correction of such default.
ARTICLE XVI
-----------
BANKRUPTCY OR INSOLVENCY
------------------------
16.1 CHAPTER 7 PROCEEDINGS. If the Tenant shall become a debtor under Chapter
---------------------
7 of the Bankruptcy Code and Tenant's trustee or Tenant shall elect to
assume this Lease for the purpose of assigning the same or otherwise,
such election and assignment may be made only if all of the provisions of
Sections 16.2 and 16.4 of this Article XVI are satisfied. If Tenant or
Tenant's trustee shall fail to elect to assume this Lease within sixty
(60) days after the filing of a petition, or such additional time as
provided by the court within such 60-day period (or such different period
as is permitted by applicable bankruptcy law), this Lease shall be deemed
to have been rejected. Immediately thereupon, Landlord shall be entitled
to possession of the Premises without further obligation to Tenant or
Tenant's trustee and this Lease shall terminate, but Landlord's right to
be compensated for damages (including, without limitation, damages
pursuant to Article XV), in any such proceeding shall survive.
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<PAGE>
16.2 CHAPTER 11 PROCEEDINGS. If a petition for reorganization or adjustment of
----------------------
debts is filed concerning Tenant under Chapter 11 of the Bankruptcy Code,
or a proceeding is filed under Chapter 7 of the Bankruptcy Code and is
transferred to Chapter 11, Tenant's trustee or Tenant, as debtor-in-
possession, must elect to assume this Lease within the earlier of (i)
confirmation of the plan and (ii) one hundred twenty (120) days from the
date of the filing of the petition under Chapter 11 or such transfer
thereto or Tenant's trustee or Tenant, as debtor-in-possession, shall be
deemed to have rejected this Lease. If Tenant's trustee or Tenant, as
debtor-in-possession, has failed to perform all of Tenant's obligations
under this Lease within the time periods (excluding grace periods)
required for such performance, no election by Tenant's trustee or by
Tenant, as debtor-in-possession, to assume this Lease, whether under
Chapter 7 or Chapter 11, shall be effective unless each of the following
conditions has been satisfied:
(a) Tenant's trustee or Tenant, as debtor-in-possession, has cured,
or has provided Landlord with Assurance (hereinafter defined)
that it will cure (i) all monetary defaults under this lease
within ten (10) days from the date of such assumption, and (ii)
all nonmonetary defaults under this lease within thirty (30)
days from the date of such assumption; and
(b) Tenant's trustee or Tenant, as debtor-in-possession, has
provided Landlord with Assurance of the future performance of
each of the obligations under this Lease of Tenant, Tenant's
trustee or Tenant, as debtor-in-possession, and has (i)
deposited with Landlord, as security for the timely payment of
rent hereunder, an amount equal to one annual installment of
Annual Fixed Rent which Tenant was obligated to pay to Landlord
under this Lease during the Lease Year in which such default
occurred, and (ii) paid in advance to Landlord Tenant's annual
obligations for Additional Rent and all other monetary charges
payable by Tenant under this Lease. The obligations imposed upon
Tenant's trustee or Tenant, as debtor-in-possession, shall
continue with respect to Tenant or any assignee of Tenant's
interests in this Lease after the completion of bankruptcy
proceedings.
For purposes of this Section 16.2, Landlord and Tenant acknowledge that
"Assurance" shall mean no less than: (i) Tenant's trustee or Tenant, as
debtor-in-possession, has and will continue to have sufficient
unencumbered assets after the payment of all secured obligations and
administration expenses to assure Landlord that sufficient funds will be
available to fulfill the obligations of Tenant under this Lease, and (ii)
the Bankruptcy Court shall have entered an order segregating sufficient
cash payment to Landlord, or Tenant's trustee or Tenant, as debtor-in-
possession, or shall have granted a valid
<PAGE>
and perfected first lien and security interest and mortgage in property
of Tenant, acceptable as to value and kind to Landlord, to secure to
Landlord the obligation of Tenant's trustee or Tenant, as debtor-in-
possession, to cure defaults under this Lease, both monetary and
nonmonetary, within the time period set forth above.
16.3 BANKRUPTCY EVENT FOLLOWING LEASE ASSUMPTION. If this Lease is assumed in
-------------------------------------------
accordance with the provisions of Section 16.2 and thereafter Tenant is
liquidated or files or has filed against it a subsequent petition for
reorganization or adjustment of debts under Chapter 11 of the Bankruptcy
Code, Landlord may, at its option, terminate this Lease and all rights of
Tenant hereunder, by giving Tenant notice of its election to so terminate
within thirty (30) days after the occurrence of either of such events.
16.4 LEASE ASSIGNMENT FOLLOWING LEASE ASSUMPTION. If Tenant's trustee or
-------------------------------------------
Tenant, as debtor-in-possession, has assumed this Lease pursuant to the
terms and provisions of Sections 16.1 and 16.2 of this Article for the
purpose of assigning (or elects to assign) this Lease, this Lease may be
so assigned only if the proposed assignee has provided adequate assurance
of future performance of all of the terms, covenants and conditions of
this Lease to be performed by Tenant. As used herein, "adequate
assurance of future performance" shall mean that all of the following
conditions have been satisfied:
(a) the proposed assignee has furnished Landlord with either (i) a
current financial statement audited by a certified public
accountant indicating a net worth and working capital in amounts
which Landlord reasonably determines to be sufficient to assure
the future performance by such assignee of Tenant's obligations
under this Lease, or (ii) a guaranty or guaranties in form and
substance satisfactory to Landlord from one or more persons or
entities with aggregate net worth which Landlord reasonably
determines to be sufficient to assure the future performance by
such assignee of Tenant's obligations under this Lease; and
(b) Landlord has obtained all consents or waivers from others
required under any lease, mortgage, financing agreement or other
agreement by which Landlord is bound to permit Landlord to
consent to such assignment.
16.5 USE AND OCCUPANCY CHARGES. When, pursuant to the Bankruptcy Code,
-------------------------
Tenant's trustee or Tenant, as debtor-in-possession, shall be obliged to
pay reasonable use and occupancy charges for the use of the Premises,
such charges shall not be less than the Annual Fixed Rent which Tenant is
obligated to pay to Landlord under this Lease, plus all Additional Rent
and all other monetary charges payable by Tenant under this Lease.
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<PAGE>
16.6 FURTHER PROVISIONS. Neither the whole nor any portion of Tenant's
------------------
interest in this Lease or its estate in the Premises shall pass to any
United States trustee, receiver, assignee for the benefit of creditors,
or any other person or entity, or otherwise by operation of law under the
laws of any state having jurisdiction of the person of property of
Tenant, unless Landlord shall have consented to such transfer in writing.
No acceptance by Landlord of rent or any other payments from any United
States trustee, receiver, assignee, person or other entity shall be
deemed to constitute such consent by Landlord, nor shall it be deemed a
waiver of Landlord's right to terminate this Lease for any transfer of
Tenant's interest under this Lease without such consent.
ARTICLE XVII
------------
MISCELLANEOUS PROVISIONS
------------------------
17.1 WAIVER. Failure on the part of Landlord or Tenant to complain of any
------
action or non-action on the part of the other, no matter how long the
same may continue, shall never be a waiver by Tenant or Landlord,
respectively, of any of its rights hereunder.
Further, no waiver at any time of any of the provisions hereof by
Landlord or Tenant shall be construed as a waiver of any of the other
provisions hereof, and a waiver at any time of any of the provisions
hereof shall not be construed as a waiver at any subsequent time of the
same provisions. The consent or approval of Landlord or Tenant to or of
any action by the other requiring such consent or approval shall not be
construed to waive or render unnecessary Landlord's or Tenant's consent
or approval to or of any subsequent similar act by the other.
No payment by Tenant, or acceptance by Landlord, of a lesser amount than
shall be due from Tenant to Landlord shall be treated otherwise than as a
payment on account. The acceptance by Landlord of a check for a lesser
amount with an endorsement or statement thereon, or upon any letter
accompanying such check, that such lesser amount is payment in full,
shall be given no effect, and Landlord may accept such check without
prejudice to any other rights or remedies which Landlord may have against
Tenant. Further, the acceptance by Landlord of Annual Fixed Rent,
Additional Rent or any other charges paid by Tenant under this Lease
shall not be or be deemed to be a waiver by Landlord of any default by
Tenant, whether or not Landlord knows of such default, except for such
defaults as to which such payment relates.
17.2 CUMULATIVE REMEDIES. The specific remedies to which Landlord and Tenant
-------------------
may resort under the terms of this Lease are cumulative and are not
intended to be exclusive of any other remedies or means of redress which
they may be lawfully entitled to seek in case of any breach or threatened
breach of any provisions of this
<PAGE>
Lease. In addition to the other remedies provided in this Lease, Landlord
shall be entitled to the restraint by injunction of the violation or
attempted or threatened violation of any of the covenants, conditions or
provisions of this Lease or to seek specific performance of any such
covenants, conditions or provisions, provided, however, that the
foregoing shall not be construed as a confession of judgment by Tenant.
17.3 QUIET ENJOYMENT. Landlord agrees that, upon Tenant's paying the Annual
---------------
Fixed Rent, Additional Rent and other charges herein reserved, and
performing and observing the covenants, conditions and agreements hereof
upon the part of Tenant to be performed and observed, Tenant shall and
may peaceably hold and enjoy the Premises during the term of this Lease
(as it may be extended), without interruption or disturbance from
Landlord or persons claiming through or under Landlord, subject, however,
to the terms of this Lease. This covenant shall be construed as running
with the land to and against subsequent owners and successors in
interest, and is not, nor shall it operate or be construed as, a personal
covenant of Landlord, except to the extent of the Landlord's interest in
the Premises, and this covenant and any and all other covenants of
Landlord contained in this Lease shall be binding upon Landlord and upon
such subsequent owners and successors in interest of Landlord's interest
under this Lease, to the extent of their respective interests, as and
when they shall acquire same and then only for so long as they shall
retain such interest.
17.4 SURRENDER. (A) No act or thing done by Landlord during the Lease Term
---------
shall be deemed an acceptance of a surrender of the Premises, and no
agreement to accept such surrender shall be valid, unless in writing
signed by Landlord. No employee of Landlord or of Landlord's agents shall
have any power to accept the keys of the Premises as an acceptance of a
surrender of the Premises prior to the termination of this Lease. The
foregoing shall in no way preclude the delivery of keys to Landlord or
its agents in its (or their) capacity as managing agent or for purpose of
emergency access.
However, in no event shall the delivery of keys to any employee of
Landlord or of Landlord's agents operate as a termination of the Lease or
a surrender of the Premises.
(B) Upon the expiration or earlier termination of the Lease Term, Tenant
shall surrender the Demised Premises to Landlord, in the condition as
required by Sections 8.1 and 9.5, first removing all goods and effects of
Tenant and completing such other removals as may be permitted or required
pursuant to Section 9.5.
17.5 BROKERAGE. (A) Tenant warrants and represents that Tenant has not dealt
---------
with any broker in connection with the consummation of this Lease other
than the Brokers designated in Section 1.2 hereof; and in the event any
claim is made against the Landlord relative to dealings with parties
other than the Brokers
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<PAGE>
designated in Section 1.2 hereof, Tenant shall defend the claim against
Landlord with counsel of Landlord's selection and save harmless and
indemnify Landlord on account of loss, cost or damage which may arise by
reason of such claim.
(B) Landlord warrants and represents that Landlord has not dealt with any
broker in connection with the consummation of this Lease other than the
Brokers designated in Section 1.2 hereof; and in the event any claim is
made against the Tenant relative to dealings by Landlord with parties
other than the Brokers designated in Section 1.2 hereof, Landlord shall
defend the claim against Tenant with counsel of Landlord's selection,
subject to approval by Tenant which shall not be unreasonably withheld,
and save harmless and indemnify Tenant on account of loss, cost or damage
which may arise by reason of such claim. Landlord agrees that it shall be
solely responsible for the payment of brokerage commissions to the
Brokers designated in Section 1.2 hereof.
17.6 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.
17.7 PROVISIONS BINDING, ETC. The obligations of this Lease shall run with the
-----------------------
land, and except as herein otherwise provided, the terms hereof shall be
binding upon and shall inure to the benefit of the successors and
assigns, respectively, of Landlord and Tenant and, if Tenant shall be an
individual, upon and to his heirs, executors, administrators, successors
and assigns. Each term and each provision of this Lease to be performed
by Tenant shall be construed to be both a covenant and a condition. The
reference contained to successors and assigns of Tenant is not intended
to constitute a consent to assignment by Tenant, but has reference only
to those instances in which Landlord may have later given consent to a
particular assignment as required by the provisions of Article XII
hereof.
17.8 RECORDING. Each of Landlord and Tenant agree not to record the within
---------
Lease, but each party hereto agrees, on the request of the other, to
execute a so-called Notice of Lease or short form lease in form
recordable and complying with applicable law and reasonably satisfactory
to Landlord's and Tenant'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.
17.9 (A) NOTICES AND TIME FOR ACTION. Whenever, by the terms of this Lease,
---------------------------
notice shall or may be given either to Landlord or to
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<PAGE>
Tenant, such notices shall be in writing and shall be sent by hand,
registered or certified mail, or by United States Postal Service Express
Mail, Federal Express or other similar overnight commercial courier or by
same day commercial courier, postage or delivery charges, as the case may
be, prepaid as follows:
If intended for Landlord, addressed to Landlord at the address set
forth on the first page of this Lease (or to such other address or
addresses as may from time to time hereafter be designated by
Landlord by like notice).
If intended for Tenant, addressed to Tenant at the "Present Mailing
Address of Tenant" (set forth in Section 1.2 hereof) until Tenant
shall first occupy the Initial Premises and thereafter at the address
of the Building Attention: President with a copy to the Chief
Financial Officer of Tenant and with a copy to Jeffrey M. Freedman,
Esquire, Brown, Rudnick, Freed & Gesmer, One Financial Center,
Boston, Massachusetts 02111 (or to such other address or addresses as
may from time to time hereafter be designated by Tenant by like
notice).
Except as otherwise provided herein, all such notices shall be effective
when received; provided, that if receipt is refused, notice shall be
effective upon the first occasion that such receipt is refused.
Where provision is made for the attention of an individual or department,
the notice shall be effective only if the wrapper in which such notice is
sent is addressed to the attention of such individual or department.
Time is of the essence with respect to any and all notices and periods
for giving of notice or taking any action thereto under this Lease.
(B) RELIANCE BY TENANT. Tenant shall have the right to rely on any
------------------
notice, document, instrument or other writing executed (i) by any Trustee
of Landlord, (ii) by any officer of Boston Properties on behalf of
Landlord and (iii) after a transfer of the Landlord's interest in this
Lease by any trustee, partner, officer or principal of such successor
landlord.
17.10 WHEN LEASE BECOMES BINDING. Employees or agents of Landlord have no
--------------------------
authority to make or agree to make a lease or any other agreement or
undertaking in connection herewith. The submission of this document for
examination and negotiation does not constitute an offer to lease, or a
reservation of, or option for, the Premises, and this document shall
become effective and binding only upon the execution and delivery hereof
by both Landlord and Tenant. All negotiations, considerations,
representations and understandings between Landlord and Tenant are
incorporated herein and may be modified or altered only by written
agreement between Landlord and Tenant, and no act or
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<PAGE>
omission of any employee or agent of Landlord shall alter, change or
modify any of the provisions hereof.
17.11 PARAGRAPH HEADINGS. 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.
17.12 RIGHTS OF MORTGAGEE. This Lease shall be subject and subordinate to any
-------------------
mortgage now or hereafter on the Site or the Building, or both, and to
all renewals, modifications, consolidations, replacements and extensions
thereof and all substitutions therefor, provided that the holder of such
mortgage agrees to recognize the rights of Tenant under this Lease upon
the payment of Annual Fixed Rent, Additional Rent and all other charges
payable by Tenant under this Lease and the performance by Tenant of
Tenant's obligations hereunder in which event Tenant shall agree to
attorn to such mortgage holder and its successors and assigns as its
Landlord and to perform and observe all of the tenant obligations
hereunder in the event such mortgagee (or its successors or assigns)
succeeds to the interest of the Landlord under this Lease. In
confirmation of such subordination and recognition, Tenant shall execute
and deliver promptly such instruments of subordination as such mortgagee
may reasonably request, subject to receipt of such instruments of
recognition from such mortgagee as Tenant may reasonably request. In the
event that any mortgagee or its respective successor in title shall
succeed to the interest of Landlord, then this Lease shall nevertheless
continue in full force and effect and Tenant shall and does hereby agree
to attorn to such mortgagee or successor and to recognize such mortgagee
or successor as its landlord. If any holder of a mortgage which includes
the Premises, executed and recorded prior to the Date of this Lease,
shall so elect, this Lease, and the rights of Tenant hereunder, shall be
superior in right to the rights of such holder, with the same force and
effect as if this Lease had been executed, delivered and recorded, or a
statutory notice hereof recorded, prior to the execution, delivery and
recording of any such mortgage. The election of any such holder shall
become effective upon either notice from such holder to Tenant in the
same fashion as notices from Landlord to Tenant are to be given hereunder
or by the recording in the appropriate registry or recorder's office of
an instrument in which such holder subordinates its rights under such
mortgage to this Lease.
17.13 RIGHTS OF GROUND LESSOR. If Landlord's interest in property (whether land
-----------------------
only or land and buildings) which includes the Premises is acquired by
another party and simultaneously leased back to Landlord herein, the
holder of the ground lessor's interest in such lease shall enter into a
recognition agreement with Tenant simultaneously with the sale and
leaseback, wherein the ground lessor will agree to recognize the rights
of Tenant under this Lease upon the payment of Annual Fixed Rent,
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<PAGE>
Additional Rent and all other charges payable by Tenant under this Lease
and the performance by Tenant of Tenant's obligations hereunder, and
wherein Tenant shall agree to attorn to such ground lessor and its
successors and assigns as its Landlord and to perform and observe all of
the tenant obligations hereunder in the event such ground lessor succeeds
to the interest of Landlord hereunder under such ground lease. Landlord
hereby represents that as of the date of this Lease Landlord has not
entered into any such ground lease transaction.
17.14 NOTICE TO MORTGAGEE AND GROUND LESSOR. After receiving notice from any
-------------------------------------
person, firm or other entity that it holds a mortgage which includes the
Premises as part of the mortgaged premises, or that it is the ground
lessor under a lease with Landlord as ground lessee which includes the
Premises as a part of the Premises, no notice from Tenant to Landlord
shall be effective unless and until a copy of the same is given to such
holder or ground lessor at the address as specified in said notice (as it
may from time to time be changed), and the curing of any of Landlord's
defaults by such holder or ground lessor within a reasonable time after
such notice shall be treated as performance by Landlord. For the purposes
of this Section 17.14, the term "mortgage" includes a mortgage on a
leasehold interest of Landlord (but not one on Tenant's leasehold
interest).
17.15 ASSIGNMENT OF RENTS. With reference to any assignment by Landlord of
-------------------
Landlord's interest in this Lease, or the rents payable hereunder,
conditional in nature or otherwise, which assignment is made to the
holder of a mortgage or ground lease on property which includes the
Premises, Tenant agrees:
(a) That the execution thereof by Landlord, and the acceptance
thereof by the holder of such mortgage, or the ground lessor,
shall never be treated as an assumption by such holder or ground
lessor of any of the obligations of Landlord hereunder, unless
such holder, or ground lessor, shall, by notice sent to Tenant,
specifically otherwise elect; and
(b) That, except as aforesaid, such holder or ground lessor shall be
treated as having assumed Landlord's obligations hereunder only
upon foreclosure of such holder's mortgage and the taking of
possession of the Premises, or, in the case of a ground lessor,
the assumption of Landlord's position hereunder by such ground
lessor. In no event shall the acquisition of title to the
Building and the land on which the same is located by a
purchaser which, simultaneously therewith, leases the entire
Building or such land back to the Seller thereof be treated as
an assumption, by 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
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<PAGE>
obligations hereunder. In any such event, this Lease shall be
subject and subordinate to the lease to such purchaser provided
that such purchaser-lessor agrees to recognize the right of
Tenant to use and occupy the Demised Premises upon the payment
of Annual Fixed Rent, Additional Rent and all other charges
payable by Tenant under this Lease and the performance by Tenant
of Tenant's obligations under this Lease. 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.
17.16 STATUS REPORT. Recognizing that both parties may find it necessary to
-------------
establish to third parties, such as accountants, banks,. mortgagees 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 mortgagee 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. Any such statement delivered
by Tenant or Landlord pursuant to this Section 17.16 may be relied upon
by any prospective purchaser or mortgagee of the Premises or any
prospective assignee of any mortgagee of the Premises or by any other
party for whom Landlord or Tenant may require such statement.
17.17 (A) LANDLORD'S SELF-HELP. If Tenant shall at any time fail to make any
--------------------
payment or perform any act which Tenant is obligated to make or perform
under this Lease and (except in the case of emergency) if the same
continues unpaid or unperformed beyond applicable grace periods, then
Landlord may, but shall not be obligated so to do, after ten (10) days'
notice to and demand upon Tenant, or without notice to or demand upon
Tenant in the case of any emergency, and without waiving, or releasing
Tenant from, any obligations of Tenant in this Lease contained, make such
payment or perform such act which Tenant is obligated to perform under
this Lease in such manner and to such extent as may be reasonably
necessary, and, in exercising any such rights, pay any reasonably
necessary and incidental costs and expenses, employ counsel and incur and
pay reasonable attorneys' fees. All sums so paid by Landlord and all
reasonable and necessary costs and expenses of Landlord incidental
thereto, together with interest thereon at the annual rate equal to the
sum of (a) the Base Rate from time to time announced by Bank of Boston as
its Base Rate and (b) two percent (2%), from the date of the making of
such expenditures by Landlord, shall be deemed to be Additional Rent and,
except as otherwise in this Lease expressly provided, shall be payable to
the Landlord on demand, and if not promptly paid shall be added to any
rent then due or thereafter becoming due under this Lease, and Tenant
covenants to pay any such sum or sums with interest as aforesaid, and
Landlord shall
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<PAGE>
have (in addition to any other right or remedy of Landlord) the same
rights and remedies in the event of the non-payment thereof by Tenant as
in the case of default by Tenant in the payment of Annual Fixed Rent.
17.17 (B) TENANT'S SELF HELP. In the event Landlord fails to make such repairs
as are required of Landlord under Sections 7.1 or 7.2 within thirty (30)
days after written notice from Tenant to Landlord and to the holder of
any mortgage on the Property specifying the nature of such repairs or if
such repairs are of the type which cannot be made within such thirty (30)
days, then if Landlord or the holder of any such mortgage (at the option
of such mortgagee) fails to (i) commence making such repairs within
thirty (30) days after such written notice from Tenant and (ii)
thereafter prosecute such repairs to completion with due diligence given
the nature of such repairs, then thereafter at any time prior to
Landlord's commencing such repairs, Tenant may, but need not, make such
repairs and may make a demand on Landlord for payment of the reasonable
cost thereof. If within thirty (30) days receipt of such demand, Landlord
shall not have paid same, then Tenant shall have the right to bring suit
in a court of competent jurisdiction in the Commonwealth of Massachusetts
seeking payment of the sum so claimed in Tenant's demand. However, in no
event shall Tenant have the right to offset against, withhold or deduct
from Annual Fixed Rent, or any Additional Rent or other charge payable
under this Lease nor shall Landlord's failure to pay Tenant's demand be a
default of Landlord or give Tenant the right to terminate this Lease,
Tenant's right being to bring suit as aforesaid.
Notwithstanding the provisions of the immediately proceeding paragraph,
if the fire or casualty damage to the Premises shall be determined to be
such that it cannot be repaired within one (1) year from the Date Repair
Work Would Commence and if Tenant or Landlord shall not elect to
---
terminate this Lease as provided in this Section 14.1, then unless such
restoration is substantially completed within one (1) year from the date
that such repair or restoration work commences, Landlord being required
to use due diligence as provided in the fourth paragraph of this Section
14.1), such period to be subject, however, to extension where the delay
in substantial completion of such work is due to Landlord's Force
Majeure, Tenant shall have the right to terminate this Lease at any time
after the expiration of such one year (as extended) period until the
restoration is substantially completed, such termination to take effect
as of the thirtieth (30th) day after the date of receipt by Landlord of
Tenant's notice, with the same force and effect as if such date was the
date originally established as the expiration date hereof unless, within
such thirty (30) day period such restoration is substantially completed,
in which case Tenant's notice of termination shall be of no force and
effect and this Lease and the Lease Term shall continue in full force and
effect.
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<PAGE>
17.18 HOLDING OVER. Any holding over by Tenant after the expiration of the term
------------
of this Lease shall be treated as a tenancy at sufferance at one and one
half (1.50) times the rents and other charges herein (prorated on a daily
basis) and shall otherwise be on the terms and conditions set forth in
this Lease, as far as applicable; provided, however, that there shall be
no options to extend the Lease Term.
17.19 ENTRY BY LANDLORD. Landlord, and its duly authorized representatives,
-----------------
shall, upon reasonable prior notice (except in the case of emergency),
have the right to enter the Premises at all reasonable times (except at
any time in the case of emergency) for the purposes of inspecting the
condition of same and making such repairs, alterations, additions or
improvements thereto as may be necessary if Tenant fails to do so as
required hereunder (but the Landlord shall have no duty whatsoever to
make any such inspections, repairs, alterations, additions or
improvements except as otherwise provided in Sections 4.2, 4.3, 7.1 and
7.2), and to show the Premises to prospective tenants during the twelve
(12) months preceding expiration of the term of this Lease as it may have
been extended and at any reasonable time during the Lease Term to show
the Premises to prospective purchasers and mortgagees.
17.20 TENANT'S PAYMENTS. Each and every payment and expenditure due from Tenant
-----------------
under this Lease, other than Annual Fixed Rent, shall be deemed to be
Additional Rent hereunder, whether or not the provisions requiring
payment of such amounts specifically so state, and shall be payable,
unless otherwise provided in this Lease, within ten (10) days after
written demand by Landlord, and in the case of the nonpayment of any such
amount, Landlord shall have, in addition to all of its other rights and
remedies, all the rights and remedies available to Landlord hereunder or
by law in the case of non-payment of Annual Fixed Rent. Unless expressly
otherwise provided in this Lease, the performance and observance by
Tenant of all the terms, covenants and conditions of this Lease to be
performed and observed by Tenant shall be at Tenant's sole cost and
expense.
17.21 COUNTERPARTS. This Lease may be executed in several counterparts, each of
------------
which shall be deemed an original, and such counterparts shall constitute
but one and the same instrument.
17.22 ENTIRE AGREEMENT. This Lease constitutes the entire agreement between the
----------------
parties hereto and affiliates of Landlord with respect to the subject
matter hereof and thereof and supersedes all prior dealings between them
with respect to such subject matter, and there are no verbal or
collateral understandings, agreements, representations or warranties not
expressly set forth in this Lease and such Agreement to Lease. No
subsequent alteration, amendment, change or addition to this Lease shall
be binding upon Landlord or Tenant, unless reduced to writing and signed
by the party or parties to be charged therewith.
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<PAGE>
17.23 LANDLORD LIABILITY. Tenant shall neither assert nor seek to enforce any
------------------
claim for breach of this Lease against any of Landlord's assets other
than Landlord's interest in the Building, and Tenant agrees to look
solely to such interest for the satisfaction of any liability of Landlord
under this Lease, it being specifically agreed that neither Landlord, nor
any successor holder of Landlord's interest hereunder, nor any
beneficiary of any Trust of which any person from time to time holding
Landlord's interest is Trustee, nor any such Trustee, shall ever be
personally liable for any such liability. This paragraph shall not limit
any right that Tenant might otherwise have to obtain injunctive relief
against Landlord or Landlord's successors-in-interest, or to take any
other action which shall not involve the personal liability of Landlord,
or of any successor holder of Landlord's interest hereunder, or of any
beneficiary of any trust of which any person from time to time holding
Landlord's interest is Trustee, or of any such Trustee, to respond in
monetary damages from Landlord's assets other than Landlord's interest in
said Demised Premises, as aforesaid. In no event shall Landlord ever be
liable for any indirect or consequential damages.
17.24 NO PARTNERSHIP. The relationship of the parties hereto is that of
--------------
landlord and tenant and no partnership, joint venture or participation is
hereby created.
17.25 CERTAIN ADJUSTMENTS. (A) Notwithstanding the provisions of Section 6.2
-------------------
and Section 7.5 of this Lease, unless and until the sum total of (i) the
proportionate share of Landlord's Tax Expenses Allocable to the Premises
(defined in Section 6.1) with respect to any Lease Year of the Lease Term
and (ii) Operating Expenses Allocable to the Premises (as defined in
Section 7.5 and assuming tenant electricity charges are being reallocated
and paid for pursuant to the first sentence of Section 5.2), with respect
to any Lease Year of the Lease Term exceed on a calendar year basis
(adjusted proportionately for any Lease Year less than a full calendar
year) the total of $6.50 per square foot of Rentable Floor Area of the
Initial Premises (the "Combined Base per Square Foot"), Landlord shall
provide Tenant with a special credit such that Tenant shall not be
obligated or liable for any payment of Tax Excess (defined in Section
6.2) or of Operating Cost Excess (defined in Section 7.5) during any such
Lease Year. Further, Tenant's obligation to pay Tax Excess and Operating
Excess in regard to the Initial Premises in any Lease Year shall be to
the extent, and only to the extent, that the total of Landlord's Tax
Expenses Allocable to the Premises and the Operating Cost Expenses
Allocable to the Premises exceed the Combined Base per Square Foot as
aforesaid.
By way of example (but not limitation), if in a given calendar year
Landlord's Tax Expense Allocable to the Premises were $1.00 per square
foot of the Rentable Floor Area of the Initial Premises and Operating
Expenses Allocable to the Premises (assuming reallocation of electricity
charges pursuant to Section
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<PAGE>
5.2) were $5.50 per square foot of Rentable Floor Area of the Initial
Premises, then the total of such tax and operating charges for such
period would be $6.50 per square foot and there would be no payment due
from Tenant under Section 7.5 since said total did not exceed the
Combined Base per Square Foot, notwithstanding that the Operating Expense
Allocable to the Premises of $5.50 per square foot exceeded the base
figure of $3.50 per square foot set forth in the first sentence of
Section 7.5 (A) and notwithstanding that there would be an Operating Cost
Excess of $2.00 per square foot otherwise due and payable pursuant to the
provisions of said Section 7.5 (A). In similar fashion, if during such
period Operating Expenses Allocable to the Premises were $6.00 per square
foot of Rentable Floor Area of the Initial Premises, and the total of
such tax and operating charges were therefor $7.00 per square foot for
such period, then the total amount payable by Tenant would be $.50 per
square foot of Rentable Floor Area of the Initial Premises -- i.e., the
excess of the $7.00 per square foot over the Combined Base per Square
Foot of $6.50 per square foot --notwithstanding that the Operating
Expense Allocable to the Premises of $6.00 per square foot exceeded the
base figure of $3.50 per square foot set forth in Section 7.5 (A) by
$2.50 and notwithstanding that there would therefor be an Operating Cost
Excess of $2.50 per square foot otherwise due and payable pursuant to the
provisions of said Section 7.5 (A).
If and so long as Landlord is not allocating the cost of tenant
---
electricity among tenants of the Building in accordance with Exhibit H,
then for and during any such period the $6.50 figure set forth above
shall be increased by $1.00, so that the "Combined Base per Square Foot"
as defined above shall be $7.50 per square foot for such period and for
any calculations made pursuant to this Section in regard to determining
the limitation on Tenant's payment obligations during such period.
(B) During any Lease Year in which the provisions of this Section 17.25
would result in Tenant's having either (a) no obligation for any payments
on account of either Tax Excess or Operating Cost Excess or (b) a payment
obligation less than the total of Tax Excess and Operating Cost Excess
calculated separately, Landlord shall provide Tenant a written summary of
Landlord's calculation related thereto, and if any payment is estimated
to be due from Tenant for such Lease Year, of the amount to be paid
monthly on account thereof as reasonably estimated by Landlord; and in
such case Landlord shall also at the end of such Lease Year provide
Tenant with a statement showing final calculations of actual Tax Excess
and Operating Excess in the manner, and on the schedule, as set forth in
subsection 7.5 (C) in regard to providing statements of actual operating
expenses, and a suitable adjustment shall be made in the case of
overpayment or underpayment in like manner as provided in said subsection
7.5 (C).
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(C) If for any Lease Year Landlord reasonably estimates that Tenant will
be obligated to make payment in full of both Tax Excess and Operating
Cost Excess, then the provisions of Section 6.2 and of Section 7.5 shall
be applied separately in regard to Tenant's obligations in regard to
payments for Tax Excess and Operating Cost Excess; provided, however,
that if, at the end of any Lease Year, a review of actual expenses
determines that total payments made by Tenant for Tax Excess and
Operating Cost Excess for such Lease Year exceed Tenant's obligations
therefor under this Section, then any balance due Tenant as a result of
such overpayment shall be credited against Annual Fixed Rent next due, or
refunded to Tenant if the Lease Term has then expired and Tenant has no
further obligations to Landlord.
17.26 CORPORATE SIGNAGE. Landlord shall, at its own expense, provide (i) an
-----------------
exterior signage pylon identifying the Building as containing the
corporate headquarters of Camp Dresser & McKee Inc. and in addition, (ii)
reasonable space on the Building's lobby directory consistent with the
extent of space provided to other tenants in the Building. Landlord shall
have the right to have such pylon sign also bear corporate signage for
one (1) other tenant in the Building but Camp Dresser & McKee Inc.'s
signage shall be located above that of such one (1) other tenant. The
size, type and specific location of such sign shall be consistent with
the standards for corporate pylon signage for other multi-tenant office
buildings at Cambridge Center (as exemplified by the signage provided at
Four Cambridge Center) and otherwise reasonably acceptable to both
Landlord and Tenant. The right to corporate signage provided under this
Section is specifically for Camp Dresser & McKee Inc. and shall not pass
to any assignee or sublessee of this Lease, except for an assignee under
Section 12.2 hereof. Further, at the expiration or earlier termination of
the Term of this Lease as it may be extended, and also in the case of an
assignment of this Lease (except for an assignment under Section 12.2
hereof) or in the event Tenant (or any assignee permitted under Section
12.2) occupies less than two (2) full floors and the Building (except in
the case of a subletting permitted under Section 12.2), Landlord shall
have the right to remove the signage provided to Tenant hereunder.
17.27 GOVERNING LAW. This Lease shall be governed exclusively by the provisions
-------------
hereof and by the law of The Commonwealth of Massachusetts, as the same
may from time to time exist.
EXECUTED as a sealed instrument in two or more counterparts by persons or
officers hereunto duly authorized on the Date set forth in Section 1.2 above.
[SIGNATURES APPEAR ON NEXT PAGE]
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WITNESS: LANDLORD:
/s/ Frederick DeAngelis /s/ David Barrett
- ---------------------------------- -------------------------------------
DAVID BARRETT, AS TRUSTEE OF ONE
CAMBRIDGE CENTER TRUST FOR HIMSELF
AND CO-TRUSTEES, BUT NOT
INDIVIDUALLY
ATTEST: TENANT:
CAMP DRESSER & McKEE INC. CAMP DRESSER & McKEE INC.
/s/ Paul G. Camell By /s/ Joseph H. Heney
- ---------------------------------- -----------------------------------
Name PAUL G. CAMELL Name Joseph H. Heney
------------------------------ ---------------------------------
Title ASSISTANT CLERK Title CHAIRMAN OF THE BOARD
----------------------------- --------------------------------
HEREUNTO DULY AUTHORIZED
(CORPORATE SEAL)
<PAGE>
EXHIBIT A
---------
A certain tract of land situated on the southerly side of Broadway in the City
of Cambridge, in the County of Middlesex, Commonwealth of Massachusetts, bounded
and described as follows:
Beginning at a Point in the southerly line of Broadway at the northwesterly
corner of the Premises S 60(degrees)-30'-18"E a distance of Six Hundred Sixty-
Six and Eighty-One Hundredths feet (666.81') from the Point of curvature of the
southerly sideline of Broadway and the easterly line of Sixth Street; thence
S 60(degrees)-30'18" E a distance of Two Hundred Six and Eighty-Three
Hundredths feet (206.83') bounding on the southerly
line of Broadway to a Point; thence
Along the arc of a curve, curving to the right with a radius of Five Hundred
Eighty-One and Eighty-Eight Hundredths feet (581.88'), a distance of Fifty-Five
and Fifty Hundredths (55.50') to a point; thence
S 49(degrees)-20'-28" E a distance of Seventy and No Hundredths feet (70.00')
along a certain parcel of land, now or formerly owned
by the Cambridge Redevelopment Authority for the next
four (4) courses to a point; thence
S 34(degrees)-35'-57" W a distance of Thirty-Four and Fifty-Five Hundredths
feet (34.55') to a point; thence
N 81(degrees)-44'-36" W a distance of One Hundred Ten and No Hundredths feet
(110.00') to a point; thence
N 05(degrees)-30'-53" E a distance of Forty-Four and Fifty-Nine Hundredths
feet (44.59') to a point; thence
N 84(degrees)-29"-07" W a distance of One Hundred Seventy-Six and Forty-One
Hundredths feet (176.41') to a point; thence
N 05(degrees)-34'-07" E a distance of Twenty-Four and Five Hundredths feet
(24.05') along the outside face of a brick building
for the next four (4) courses to a point; thence
N 84(degrees)-15'-14" W a distance of Nine and Ninety-Five Hundredths feet
(9.95') to a point; thence
N 05(degrees)-29'-37" E a distance of Fifty-Six and Ninety-Two Hundredths
feet (56.92') to a point; thence
<PAGE>
S 84(degrees)-25'-46" E a distance of Twenty and Two Hundredths feet (20.02')
to a point; thence
N 05(degrees)-27'-58" E a distance of Fifty-Three and Forty-Four Hundredths
feet (53.44') to the point of beginning.
The above-described tract of land contains 26,325 square feet, more or less, as
shown on a plan entitled "Kendall Sq. Urban Renewal Area, Cambridge, Mass.";
Dated November 19, 1985, Revised June 1986; Prepared by Allen & Demurjian, Inc.,
Scale 1"=40'. (Sheet 1 of 4)
The Premises have appurtenant thereto and are subject to all rights, easements
and restrictions of record, whether currently existing or to be hereafter
created.
<PAGE>
EXHIBIT B
LOADING DOCK PLAN
[FLOOR PLAN OF MARRIOTT HOTEL APPEARS HERE]
<PAGE>
EXHIBIT C
TENANT PLAN REQUIREMENTS, COST APPROVAL
AND WORK RELEASE SCHEDULE
LEASE WITH CAMP, DRESSER & McKEE, INC.
AT ONE CAMBRIDGE CENTER
1. Landlord acknowledges receipt from Tenant of the following "Tenant's
Schematic Plans" for Floors 11 and 12 of the Initial Premises:
(A) Floor plans showing the partition and door layout for the
reconstruction including specification of partition and door types and
any additional information necessary to clarify the scope of demolition
required to Floors 11 and 12 of the Initial Premises as currently
constructed.
(B) Location and heat load in BTU/hour of all special air conditioning and
ventilation requirements.
(C) Location of standard electrical convenience outlets and telephone
outlets and location and details of special electrical outlets (e.g.,
copy machines), including voltage, amperage, phase and NEMA
configuration of such outlets.
(D) An outline specification indicating the scope and nature of
architectural finishes and any other special requirements.
2. Tenant acknowledges receipt from Landlord of a budget estimate for the work
shown on Tenant's Schematic Plans received from Tenant as acknowledged in
paragraph 1, above. The parties acknowledge that this is a general scope
estimate only, subject to the further development of the construction
documents and the receipt of firm pricing information.
3. By May 20, 1988, Tenant shall deliver to Landlord Tenant's Design
Development Plans for Floors 11 and 12 prepared in accordance with generally
accepted architectural practices and standards.
4. By May 27, 1988, Landlord shall provide Tenant with a budget estimating the
cost of the work as shown on Tenant's Design Development Plans, including
guaranteed unit prices wherever possible for appropriate portions of the
work and Landlord's good faith estimates for all other portions of the work.
The budget will include general conditions at 7 1/2% of the cost of the work
and overhead and fee at 15%.
Exhibit C - Page 1 of 5
<PAGE>
As Tenant proceeds with further detailed design work, Tenant will endeavor
to cause Tenant's Space Planner to provide additional information and
progress drawings to Landlord. To the extent practicable Landlord will,
based on such information, provide Tenant with one or more revisions to the
budget previously provided to Tenant under paragraph 4, above.
5. By June 20, 1988, Tenant shall deliver to Landlord final construction
documents for Floor 11 of the Initial Premises, and no later than July 8,
1988, final construction documents for Floor 12 of the Initial Premises
("Tenant's Final Plans") and an authorization to proceed with work in
accordance with such plans ("Tenant's Work Release").
Tenant's Final Plans shall include at least all of the following:
A. Floor plan indicating location of partitions and doors (details
required of partition and door C types).
B. Location of standard electrical convenience outlets and telephone
outlets.
C. Location and details of special electrical outlets (e.g., Xerox),
including voltage, amperage, phase and NEMA configuration of outlets
and all necessary electrical engineering drawings.
D. Reflected ceiling plan showing layout of standard ceiling and light
fixtures. Partitions to be shown lightly with switches located
indicating fixtures to be controlled.
E. Locations and details of special ceiling conditions, lighting
fixtures, speakers, etc.
F. Location and heat load in BTU/Hr. of all special air conditioning
and ventilating requirements and all necessary HVAC mechanical
drawings.
G. Location and details of special structural requirements, e.g., slab
penetrations and areas with floor loadings exceeding a live load of
70 lbs./s.f.
Exhibit C - Page 2 of 5
<PAGE>
H. Locations and details of all plumbing fixtures, sinks, drinking
fountains, etc. and all necessary plumbing engineering drawings and
fire protection engineering drawings.
I. Location and specifications of floor coverings, e.g., vinyl tile,
carpet, ceramic tile, etc.
J. Finish schedule plan indicating wall covering, paint or paneling
with paint colors referenced to standard color system.
K. Details and specifications of special millwork, partitions, rolling
doors and grilles, blackboards, shelves, etc.
L. Hardware schedule indicating door number keyed to plan, size,
hardware required including butts, latchsets or locksets, closures,
stops, and any special items such as thresholds, soundproofing, etc.
Keying schedule is required.
M. Verified dimensions of all built-in equipment (file cabinets,
lockers, plan files, etc.).
N. Location of any special soundproofing requirements.
O. All drawings to be uniform size (30" X 42") and shall incorporate
the standard project electrical and plumbing symbols and be at a
scale of 1/8" = 1' or larger.
P. Drawing submittal shall include one sepia and one blue line print of
each drawing.
Q. Specifications for all of the work shall be provided in accordance
with generally accepted architectural and engineering standards and
practices.
Tenant's Work Release shall authorize Landlord to proceed with work in
accordance with Tenant's Final Plans and shall acknowledge Tenant s obligation
to pay the cost thereof, including (i) the cost of items included in such work
as to which Landlord and Tenant have agreed as to the cost thereof, and (ii)
Tenant's agreement to pay the actual cost, as reasonably determined by Landlord,
of the other items included in such work.
Exhibit C - Page 3 of 5
<PAGE>
6. As soon as practicable after the receipt of Tenant's Final Plan for each
floor, respectively (and in any event by July 8, 1988, in regard to Floor
11, and by July 29, 1988, in regard to Floor 12, provided Tenant has met its
plan delivery dates under paragraph 5, above), Landlord shall furnish to
Tenant a written statement of all costs of construction work and materials
necessary to complete the work described in Tenant's Final Plan for each
such floor (hereinafter referred to as "Tenant Final Plan Costs"), including
general conditions costs at 7 1/2% of the cost of the work and overhead and
fee at 15%.
7. By July 29, 1988, in regard to Floor 11, and by August 19, 1988, in regard
to Floor 12, Tenant shall notify Landlord in writing of its approval thereof
and its authorization to Landlord to continue with construction in
accordance with Tenant's Final Plan, and also stipulating any changes
required by Tenant in Tenant's Final Plan. In the event of any such latter
modifications, Landlord shall, as soon as practicable after Landlord obtains
price quotations for any changes in Tenant's Final Plan, quote to Tenant all
changes in Tenant Final Plan Costs resulting from said plan modifications.
Tenant shall within one (1) week following the date of receipt from Landlord
of such revised statement of Tenant Final Plan Costs give authorization to
Landlord to continue with construction in accordance with Tenant's Final
Plan as modified and said revised Tenant Plan Final Costs.
8. By March 1, 1989, Tenant shall deliver to Landlord "Tenant's Schematic
Plans for the Tenth Floor Space," which shall be plans and specifications
for the Tenth Floor Space meeting the same requirements as set forth in
subparagraphs 1(A) through 1(D), above, for the Initial Premises exclusive
of the Tenth Floor Space.
9. By May 1, 1989, Tenant shall deliver to Landlord "Tenant's Final Plans for
the Tenth Floor Space," which shall be plans and specifications for the
Tenth Floor Space meeting the same requirements as set forth in paragraph 5,
above, for the Initial Premises exclusive of the Tenth Floor Space.
10. As soon as practicable after the receipt of Tenant's Final Plan for the
Tenth Floor Space, Landlord shall furnish to Tenant a written statement of
all costs of construction work and materials necessary to complete the work
described in such plans ("Tenant Final Plan Costs for the Tenth Floor
Space"), including general conditions costs at 7 1/2% of the costs of the
work and overhead and fee at 15%.
Exhibit C - Page 4 of 5
<PAGE>
11. Within twenty-one (21) days of receipt by Tenant of Landlord's statement of
Tenant Final Plan Costs for the Tenth Floor Space, Tenant shall notify
Landlord of either its approval thereof and its authorization to Landlord to
proceed with construction, or of any changes required by Tenant in said
plans. In the event of the latter modification, Landlord shall, as soon as
practicable after Landlord obtains price quotations for any such changes,
quote to Tenant all changes in Tenant Final Plan Costs for the Tenth Floor
Space resulting from said modifications. Tenant shall within one (1) week
following receipt from Landlord of such revised statement of costs give
authorization to Landlord to proceed with construction in accordance with
Tenant's Final Plans for the Tenth Floor Space as modified and said revised
Tenant Final Plan Costs.
12. If either Landlord or Tenant shall fail to meet any of dates scheduled for
submission of plans, budgets or approvals to the other under this Exhibit C,
then the respective subsequent dates set for the action of the other party
hereunder shall be extended for one (1) day for each day of such failure.
Said extension shall be addition to any other obligations imposed for such a
failure or delay under the Lease to which this Exhibit C is attached.
Exhibit C - Page 5 of 5
<PAGE>
EXHIBIT D
---------
ONE CAMBRIDGE CENTER
--------------------
LANDLORD'S SERVICES
-------------------
I CLEANING
--------
A. Office Area
Daily: (Monday through Friday, inclusive, holidays excepted.)
l. Empty all waste receptacles and ash trays and remove waste material
from the Premises; clean ash trays daily and waste receptacles as
necessary.
2. Sweep and dust mop all uncarpeted areas using a dust-treated mop.
3. Vacuum all rugs and carpeted areas.
4. Hand dust and wipe clean with treated cloths all horizontal
surfaces including furniture, office equipment, window sills, door
ledges, chair rails, a: convector tops, within normal reach.
5. Wash clean all water fountains.
6. Remove and dust under all telephones and other furnishings (but not
computer terminals or other specialized equipment) and replace same
7. Wipe clean all brass and other bright work.
8. Hand dust all grill work within normal reach.
9. Upon completion of cleaning, turn off all lights, lock main entry
doors and any other doors found locked, and leave the Premises in
an orderly condition.
Weekly:
l. Dust coat racks, and the like.
2. Remove all finger marks from private entrance doors, light switches
and doorways.
Exhibit D - Page 1 of 5
<PAGE>
Quarterly:
Render high dusting not reached in daily cleaning to include:
l. Dusting all pictures, frames, charts, graphs, and similar wall
hangings.
2. Dusting all vertical surfaces, such as walls, partitions, doors and
ducts.
3. Dusting of all pipes, ducts, and high moldings.
4. Dusting of all vertical blinds.
B. Lavatories
Daily: (Monday through Friday, inclusive, holidays excepted.)
l. Sweep and damp mop floors.
2. Clean all mirrors, powder shelves, dispensers and receptacles,
bright work, flushometers, piping, and toilet set hinges.
3. Wash both sides of all toilet seats
4. Wash all basins, bowls and urinals.
5. Dust and clean all powder room fixtures.
6. Empty and clean paper towel and sanitary disposal receptacles.
7. Remove waste paper and refuse.
8. Refill tissue holders, soap dispensers, towel dispensers and vending
sanitary dispensers as require materials to be furnished by
Landlord.
9. A sanitizing solution will be used in all lavatory cleaning.
Monthly:
l. Machine scrub lavatory floors.
2. Wash all partitions and tile wails in lavatories.
Exhibit D - Page 2 of 5
<PAGE>
C. Main Lobby Elevators, Building Exterior and Corridors:
Daily: (Monday through Friday, inclusive, holidays excepted.)
l. Sweep and wash all floors
2. Wash all rubber mats.
3. Clean elevators, wash or vacuum floors, wipe down windows and
doors.
4. Spot clean any metal work inside lobby.
5. Spot clean any metal work surrounding Building Entrance doors.
Monthly:
All resilient tile floors in public areas to be treated equivalent to
spray buffing.
D. Window Cleaning
Windows of exterior walls will be washed on the inside an the outside no
less than three times per year.
E. Tenant requiring services in excess of those described and( shall
request same through Landlord, and any such excess services provided
shall be at Tenant's expense.
II HEATING, VENTILATING, AIR CONDITIONING
--------------------------------------
A. Landlord shall furnish space heating and cooling as normal seasonal
changes may require to provide reasonably comfortable space temperature
and ventilation for occupant of the Premises under normal business
operation, daily from 8:00 A.M. to 6:00 P.M. Saturdays from 8:00 A.M. to
1:00 P.M., Sundays and holidays excepted; provided, however that
Landlord shall provide air conditioning on a twenty-four (24) hour
basis, seven (7) days a week, if requested by Tenant.
If Tenant shall require heating or ventilation Outside the hours and
days above specified, Landlord shall furnish such service at Tenant's
expense.
B. The air conditioning system is based upon an occupancy of not more than
one person per 150 square feet of useable floor area, and upon a
combined lighting and standard electrical loan not to exceed 3.0 watts
per square foot of
Exhibit D - Page 3 of 5
<PAGE>
condition or introduces onto the Premises equipment which overloads the
system, and/or in any other way causes the system not adequately to
perform their proper functions, supplementary systems may at Landlord's
option be provide by Landlord at Tenant's expense.
III WATER
-----
A. Cold water at temperatures supplied by the City of Cambridge water mains
for drinking, lavatory, toilet and (if the s. have been approved by
Landlord for installation in the Premises, kitchen and restaurant
purposes, and hot water lavatory purposes only from regular building
supply at prevailing temperatures; provided, however, that Landlord may
require Tenant at Tenant's expense, to install a meter or meters to
measure the water supplied to any kitchen (including dishwashing) and
restaurant areas in the Premises, in which case Tenant shall upon
Landlord's require reimburse Landlord for the cost of the water
(including heating thereof) consumed in such areas and the sewer use
charges resulting therefrom.
IV ELEVATORS
---------
A. The passenger elevator system shall be in automatic operation and
available to Tenant at all times except when necessary repairs or
inspections are being rendered. The use of the service elevator will
have to be scheduled with the Landlord and coordinated with the needs of
the other tenants.
V ELECTRICAL SERVICE
------------------
A. Landlord shall provide electric power for up to 2.0 watts per square
foot of useable floor area for lighting plus l. watts per square foot of
useable floor area for office machines through standard receptacles for
the typical office space.
B. Landlord, at its Option, may require separate metering and direct
billing to Tenant for the electric power required for any special
equipment (such as computers and reproduction equipment) that requires
either 3-phase electric power or any voltage other than 120. Landlord
will furnish and install at Tenant's expense all replacement lighting
tubes lamps, and ballasts required by Tenant. Landlord will do lighting
fixtures on a regularly scheduled basis at Tenant expense.
Exhibit D - Page 4 of 5
<PAGE>
Useable floor area as used herein means the area between central
building core and the interior face of the exterior walls, unless
Tenant's space includes less than the entire rentable floor area of any
floor, in which case the used floor area shall mean the area within the
demising walls shall exclude any common area on the floor.
Exhibit D - Page 5 of 5
<PAGE>
EXHIBIT E
---------
(MAP OF ONE CAMBRIDGE CENTER APPEARS HERE)
PLAN OF ELEVENTH FLOOR
Page 1 of 2
<PAGE>
EXHIBIT E
---------
(MAP OF ONE CAMBRIDGE CENTER APPEARS HERE)
PLAN OF TWELFTH FLOOR
Page 2 of 2
<PAGE>
EXHIBIT F
---------
DEVELOPMENT AREA MAP
--------------------
[MAP OF DEVELOPMENT AREA APPEARS HERE]
[ ] Development Area Parcel 2
[ ] Development Area Parcel 2
[ ] Development Area Parcel 2
<PAGE>
EXHIBIT G
---------
DECLARATION FIXING THE COMMENCEMENT DATE OF LEASE
-------------------------------------------------
THIS AGREEMENT made this ______ day of ____________, 198 , by and between
DAVID BARRETT, EDWARD H. LINDE and MORTIMER B. ZUCKERMAN, as TRUSTEES OF ONE
CAMBRIDGE CENTER TRUST u/d/t dated June 13, 1985, recorded with the Middlesex
South District Registry of Deeds in Book 16221, Page 413, but not individually
(hereinafter "Landlord") and ________________, a ________ corporation
(hereinafter "Tenant").
W I T N E S S E T H T H A T:
- - - - - - - - - - - - - -
l. This Agreement is made pursuant to Section 3.1 of that certain
Lease dated _________________, 198 , between Landlord and Tenant.
-
2. It is hereby stipulated that the Lease Term commenced on
_______________ , 198 , (being the "Commencement Date" under the Lease), and
shall end and expire on ______________ , 198 , unless sooner terminated or
extended, as provided for in the Lease.
WITNESS the execution hereof under seal by persons hereunto duly
authorized, the date first above written.
LANDLORD:
----------------------------------
AS TRUSTEE OF ONE CAMBRIDGE CENTER
TRUST, FOR HIMSELF AND CO-TRUSTEES
PURSUANT TO APPROPRIATE WRITTEN
DELEGATION FROM THE CO-TRUSTEES,
BUT NOT INDIVIDUALLY
TENANT:
----------------------------------
ATTEST:
By:
-------------------------------
- ----------------------------- Name:
Name: -----------------------------
------------------------ Office:
Office: ---------------------------
---------------------- HEREUNTO DULY AUTHORIZED
(Clerk-Assistant Clerk)
(CORPORATE SEAL)
<PAGE>
EXHIBIT H
---------
ONE CAMBRIDGE CENTER
PROCEDURE FOR ADJUSTMENT OF COSTS OF
ELECTRIC POWER USAGE BY TENANTS
This memo outlines the procedure for adjusting charges of electric power to
tenants at the office building to be known a One Cambridge Center.
1. Main electric service to this building will be provide by the local
utility company (currently Cambridge Electric Lights Company) to a single main
meter. All charges by the utility will be read from this meter and billed to and
paid by Landlord at rates established by the utility company.
2. All office tenants shall pay for electricity as part their rental
payments, including electricity for both common areas of the building and for
tenant occupied areas. Each lease shall also contain a provision making such
tenant responsible its proportionate share of any increases in the cost of
electricity used in the building over the base year amounts established in the
lease.
3. In order to assure that charges for electric service are apportioned
fairly among tenants in relation to the relative amounts of electricity used by
each tenant, additional meters (known as "check meters") will be installed by
Landlord to perform periodic evaluations of electric usage to be made. On each
office floor (floors 2 through 12) there will be one check meter serving all of
the floor. Check meters shall be used solely for the purpose of allocating
electric usage among the tenants and other occupants of the building.
4. Each check meter shall be installed so that it will measure all of the
electricity provided to the floor governed by that meter, including all lights
and power in both tenant and common core areas (restrooms, corridors, HVAC
equipment room etc.). This shall not, however, include the following, which
shall be wired from the main building service and not through the check meters:
stairwell and emergency lights; elevators; lighting and HVAC in the building
lobby and main service areas; exterior lighting; and all main building
mechanical systems. (Common areas on each floor, including the elevator lobby,
corridors, and bathrooms, will have service through and check meters on each
floor.) In addition, further modification to the number and location of check
meters may be made by Landlord if required to improve the quality of information
obtained thereby
Exhibit H - Page 1 of 3
<PAGE>
5. The Landlord will cause the check meters to be read periodically by its
employees and will perform an analysis of information for the purpose of
determining whether any adjustments are required to achieve an equitable
allocation of the costs of electric service among the tenants in the building in
relation to the respective amounts of usage of electricity those tenants. For
this purpose, the Landlord shall, as far possible in each case, read the meters
to determine usage for periods that include one or more entire periods used by
the utility company for the reading of the main building meter (so that the
Landlord may, in its discretion, choose periods that longer than those used by
the utility company--for example, quarterly, semi-annual or annual periods).
6. A rent adjustment shall be made by Landlord on the following basis:
a. The total kilowatt hour usage for the period under evaluation shall be
established for each check meter and for each floor and also for the
building as a where by a reading of the main building meter for that
period.
b. The cost of the total amount of electricity supplied for usage by
tenants during the period (herein called "Tenant Electricity") shall be
determined by multiplying the total cost of electricity as invoiced by
the utility company for the same period by a fraction, the numerator of
which is the total amount kilowatt hour usage as measured by all of the
check meters in the building (Tenant Electricity) and the denominator
of which is the total amount of kilowatt hour usage for the entire
building as measured by the main building electric meter.
c. Where one or more floors is occupied entirely by one tenant, its
allocable share of Tenant Electricity cost for the period shall be
determined by multiplying the total costs of Tenant Electricity by a
fraction, the numerator of which is the kilowatt hour usage of tenant
electricity by said tenant (calculated as the sum of kilowatt hour
usage during the period measured by all check meters serving its
premises) and the denominator of which is the total kilowatt hour usage
of Tenant Electricity for the same period.
d. Where a floor is occupied by more than one tenant, the cost of Tenant
Electricity for that floor shall first be determined by the same
procedure as set forth in
Exhibit H - Page 2 of 3
<PAGE>
paragraph (c) above, and then the allocable share of each tenant on
that floor shall be determined by multiplying the cost of Tenant
Electricity for that floor by a fraction, the numerator of which is the
rentable area leased to each tenant (respectively for each
tenant) and the denominator of which is the total rentable area under
lease to tenants on said floor.
e. Where part or all of the rentable area on a floor had been occupied for
less than all of the period for which adjustments are being made,
appropriate and equitable modifications shall be made to the allocation
formula so that each tenant's allocable share of costs equitably
reflects its period of occupancy, provided that in no event shall the
total of all costs as allocated to tenants be less or greater than the
total cost of Tenant Electricity for said period.
7. The results of the cost adjustment analysis made by Landlord under
paragraph (6) above shall be compared to the schedule of amounts due from
tenants in regard to Tenant Electricity in accordance with the leases in effect
during the period in question. Where the payment due pursuant to the lease is
less than the cost as determined by the cost adjustment analysis, each tenant
shall be billed for the difference by Landlord. Where the payment due pursuant
to the lease is greater than the cost as determined by the cost adjustment
analysis, the tenant shall be provided with a credit in the amount of such
difference applicable to the rental payment next due (or, in the case of tenants
no longer in occupancy, Landlord shall refund such amount to such tenants).
In addition, where the leases call for tenants to make periodic
payments to Landlord based on estimates by Landlord of their allocable share of
Tenant Electricity, such estimates by Landlord shall, so far as possible, be
based on the effective distribution of costs among tenants during prior periods
resulting from the application of the cost adjustment procedure established
herein.
8. All costs of electricity billed to Landlord through the main electric
meter for use in and around the building other than the costs of Tenant
Electricity allocated pursuant to the procedures established herein, shall be
treated as part of the Operating Expenses for the Property for purposes of
determining the allocation of those costs.
Exhibit H - Page 3 of 3
<PAGE>
EXHIBIT I
---------
BROKER DETERMINATION OF PREVAILING MARKET RENT
----------------------------------------------
Where in the Lease to which this Exhibit is attached provision is made for
a Broker Determination of Prevailing Market Rent, the following procedures and
requirements shall apply:
1. Tenant's Request. Tenant shall send a notice to Landlord by the time set
----------------
for such notice in the applicable section of the Lease, requesting a Broker
Determination of the Prevailing Market Rent, which notice to be effective
must (i) make explicit reference to the Lease and to the specific section
of the Lease pursuant to which said request is being made, (ii) include the
name of a broker selected by Tenant to act for Tenant, which broker shall
be affiliated with a major Boston commercial real estate brokerage firm
selected by Tenant and which broker shall have at least ten (10) years
experience dealing in properties of a nature and type generally similar to
the Building located in the Cambridge-Downtown Boston area, and (iii)
explicitly state that Landlord is required to notify Tenant within thirty
(30) days of an additional broker selected by Landlord.
2. Landlord's Response. Within thirty (30) days after Landlord's receipt of
-------------------
Tenant's notice requesting the Broker Determination and stating the name of
the broker selected by Tenant, Landlord shall give written notice to Tenant
of Landlord's selection of a broker having at least the affiliation and
experience referred to above.
3. Selection of Third Broker. Within ten (10) days thereafter the two (2)
-------------------------
brokers so selected shall select a third such broker also having at least
the affiliation and experience referred to above.
4. Rental Value Determination. Within thirty (30) days after the selection of
--------------------------
the third broker, the three (3) brokers so selected, by majority, shall make
a determination of the annual fair market rental value in as-is condition
excluding any identifiable major improvement for which Tenant has paid after
depleting the special allowance set forth in Section 5.3 of the Lease (a) in
the case of an extension option under Section 3.2.1 of the Lease, of the
Premises for the Extended Term, or (b) in the case of an expansion option
under Section 2.3 of the Lease, of the Expansion Space for the relevant
period applicable to such Expansion Space. Such annual fair market rental
value determination (x) may include provision for annual increases in rent
during said term if
Exhibit I - Page 1 of 3
<PAGE>
so determined, (y) shall take into account the as-is condition of the
Premises or the Expansion Space, whichever is applicable, and (z) shall
take account of, and be expressed in relation to, the tax and operating
cost bases and provisions for paying for so-called tenant electricity as
contained in the Lease. The brokers shall advise Landlord and Tenant in
writing by the expiration of said thirty (30) day period of the annual
market rental value as so determined, and the annual fair market rental
value as so determined shall be referred to as the Prevailing Market Rent.
5. Resolution of Broker Deadlock. If the brokers are unable to agree at least
-----------------------------
by majority on a determination of annual fair market rental value, then the
brokers shall send a notice to Landlord and Tenant by the end of the thirty
day period for making said determination setting forth their individual
determinations of annual fair market rental value, and the highest such
determination and the lowest such determination shall be disregarded and
the remaining determination shall be deemed to be the determination of
annual fair market rental value and shall be referred to as the Prevailing
Market Rent.
6. Costs. Each party shall pay the costs and expenses of the broker selected
-----
by it and each shall pay one half (1/2) of the costs and expenses of the
third broker.
7. Failure to Select Broker or Failure of Broker to Serve. If Tenant shall
------------------------------------------------------
have requested a Broker Determination and Landlord shall not have
designated a broker within the time period provided therefor above, then
the broker selected by Tenant shall alone make the determination of
Prevailing Market Rent in writing to Landlord and Tenant within thirty (30)
days after the expiration of Landlord's right to designate a broker
hereunder. If Tenant and Landlord have both designated brokers but the two
brokers so designated do not, within a period of fifteen (15) days after
the appointment of the second broker, agree upon and designate an
additional broker willing so to act, the Tenant, the Landlord or either
broker previously designated may request the Greater Boston Real Estate
Board, Inc. to designate a third broker willing so to act and a broker so
appointed shall, for all purposes, have the same standing and powers as
though he had been seasonably appointed by the brokers first appointed. In
case of the inability or refusal to serve of any person designated as a
broker, or in case any broker for any reason ceases to be such, a broker to
fill such vacancy shall be appointed by the Tenant, the Landlord, the
Brokers first appointed or the said Greater Boston Real Estate Board, Inc.,
as the case may be, whichever made the original appointment, or if the
person who made the
Exhibit I - Page 2 of 3
<PAGE>
original appointment fails to fill such vacancy, upon application of any broker
who continues to act or by the Landlord or Tenant such vacancy may be filled by
the said Greater Boston Real Estate Board, Inc., and any broker so appointed to
fill such vacancy shall have the same standing and powers as though originally
appointed.
Exhibit I - Page 3 of 3
<PAGE>
EXHIBIT J
---------
MEASUREMENT METHOD
------------------
Usable Area shall be calculated on a full-floor basis by measuring each
floor from the inside face of exterior glass to the face of the building core,
excluding all portions of the core (elevator lobby, restrooms, stairs,
elevators, mechanical rooms and related vertical shafts). The Rentable Area of
each floor shall be calculated as one hundred and sixteen percent (116%) of the
Usable Area of the floor. The Total Rentable Area of the Building shall be
calculated as the sum of the Rentable Areas of all of the floors of the
Building.
Where floors are subdivided and require additional corridors, the total
Rentable Area of the floor will remain constant and be pro-rated among the
premises on the floor. Usable Area of each tenant's premises on a multi-tenant
floor shall be measured from interior face of exterior glass to the face of the
building core (if it abuts the premises) and the mid-line of abutting corridor
and demising walls.
<PAGE>
NOTICE OF LEASE
---------------
In accordance with the provisions of Massachusetts General Laws, Chapter
183, Section 4, as amended, notice is hereby given of the following lease
("Lease"):
LANDLORD: Mortimer B. Zuckerman, Edward H. Linde
- -------- and David Barrett, as Trustees of One
Cambridge Center Trust under Declaration
of Trust dated May 14, 1985, recorded
with the Middlesex South District
Registry of Deeds in Book 16221, Page
413, as amended by instrument dated July
31, 1986 and recorded with said Registry
of Deeds in Book 17438, Page 23, but not
individually. Landlord's mailing address
is C/O Boston Properties, 8 Arlington
Street, Boston, Massachusetts 02116.
TENANT: Camp Dresser & McKee Inc., a
- ------ Massachusetts corporation, whose mailing
address is One Center Plaza, Boston,
Massachusetts 02108.
DATE OF EXECUTION: May 6, 1988
- -----------------
DESCRIPTION 20,671 square feet comprising Floor 11
- ----------- of the Building known as and numbered
OF PREMISES: One Cambridge Center, Cambridge,
- ----------- Massachusetts (the "Building") and
20,694 square feet comprising Floor 12
of the Building, for a total of 41,365
square feet, plus 20,699 square feet
comprising Floor 10 of the Building (the
"Tenth Floor Space") when the same is
added pursuant to the provisions of
Section 2.1.1 of the Lease for a total
of 62,064 square feet, together with the
appurtenant, non-exclusive rights as
provided in Section 2.2 of the Lease.
TERM OF LEASE AND The period commencing on the
- ----------------- "Commencement Date" (as defined in
COMMENCEMENT DATE: Section 3.1 of the Lease) but in no
- ----------------- event earlier than October 1, 1988 and
ending on March 31,
<PAGE>
2000 but said date shall automatically
be extended by a period equal to the
number of calendar months from March 31,
2000 until the "Ten CC Lease Expiration
Date" as defined in Section 3.2 of the
Lease; provided, however, that with
respect to the Tenth Floor Space, the
term of the lease commences on the
"Commencement Date for Tenth Floor
Space" (also in the Lease called the
"Tenth Floor Space Commencement Date")
as defined in Section 2.1.1 of the Lease
and ending on March 31, 2000 but said
date shall automatically be extended by
a period equal to the number of calendar
months from March 31, 2000 until the
"Ten CC Lease Expiration Date" as
defined in Section 3.2 of the Lease.
OPTIONS TO EXTEND: Tenant has the option to extend the term
- ----------------- for three (3) successive periods of five
(5) years each, all as provided and on
the terms set forth in Section 3.2.1 of
the Lease.
TENANT'S EXPANSION Tenant has the right and option to lease
- ------------------ additional space in the Building on the
SPACE OPTION: terms and conditions set forth in
- ------------ Section 2.3 of the Lease.
TENANT'S FIRST Tenant has rights' of first refusal to
- -------------- lease space on the ninth (9th) floor and
REFUSAL RIGHTS: the eighth (8th) floor of the Building
- -------------- on the terms and conditions set forth in
Section 2.4 of the Lease.
PARKING RIGHTS: Tenant has the right to parking spaces
- -------------- on the terms and conditions set forth in
Article X of the Lease.
This document is executed pursuant to Section 17.8 of the Lease and is not
intended to vary any of the terms and conditions of the Lease.
<PAGE>
EXECUTED as a sealed instrument is 11th day of JULY, 1988.
WITNESS: LANDLORD:
[SIGNATURE ILLEGIBLE] /s/ David Barrett
- ------------------------------ --------------------------------
DAVID BARRETT, AS TRUSTEE OF ONE
CAMBRIDGE CENTER TRUST FOR
HIMSELF AND CO-TRUSTEES, BUT NOT
INDIVIDUALLY
ATTEST: TENANT:
CAMP DRESSER & McKEE INC. CAMP DRESSER & McKEE INC.
By /s/ Joseph E. Heney
------------------------------
By /s/ Paul G. Camell Name JOSEPH E. HENEY
---------------------------- ----------------------------
Name PAUL G. CAMELL Title CHAIRMAN OF THE BOARD
-------------------------- ---------------------------
Title ASSISTANT CLERK HEREUNTO DULY AUTHORIZED
-------------------------
(CORPORATE SEAL)
-3-
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF SUFFOLK
July 15, 1988
Then personally appeared before me the above-named DAVID BARRETT, as
TRUSTEE of ONE CAMBRIDGE CENTER TRUST, and acknowledged the foregoing instrument
to be his free act and deed as TRUSTEE as aforesaid.
/s/ GRACE E. DARRIGO
--------------------------------
GRACE E. DARRIGO
NOTARY PUBLIC
My Commission Expires:
--------------------------------
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF SUFFOLK
July 11, 1988
Then personally appeared before me the above-named JOSEPH E. HENEY,
CHAIRMAN OF THE BOARD of CAMP DRESSER & McKEE INC., and acknowledged the
foregoing instrument to be the free act and deed of said corporation.
/s/ Margaret A. Walsh
--------------------------------
NOTARY PUBLIC
My Commission Expires:
June 30, 1989
--------------------------------
<PAGE>
SUBORDINATION, NON-DISTURBANCE
------------------------------
AND ATTORNMENT AGREEMENT
------------------------
This SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT, made as of
the 6th day of June, 1988 (this "Agreement") by and among THE FIRST NATIONAL
BANK OF BOSTON, having an address at 100 Federal Street, Boston, Massachusetts
02106 (Attention: John A. DeCamp III, Vice President Construction Lending)
("Holder"), CAMP DRESSER & McKEE INC., a Massachusetts corporation, having an
office at One Center Plaza, Cambridge, Massachusetts 02108 (hereinafter called
the "Tenant") and Mortimer B. Zuckerman, Edward H. Linde and David Barrett,
TRUSTEES OF ONE CAMBRIDGE CENTER TRUST under Declaration of Trust dated May 14,
1985 recorded with the Middlesex South District Registry of Deeds (the
"Registry") in Book 16221 Page 413 as amended by instrument dated July 31, 1986
recorded with the Registry in Book 17438 Page 23 having an address c/o Boston
Properties, 8 Arlington Street, Boston, Massachusetts 02116 (hereinafter called
the "Trust" or the "Landlord").
W I T N E S S E T H
-------------------
WHEREAS, Holder has extended credit arrangements to the Trust;
WHEREAS, the Trust is the owner of the building (the "Building") located on
the parcel of land known as One Cambridge Center, Cambridge, Massachusetts (the
Building and said land being referred to herein collectively as the "Property");
WHEREAS, Tenant has entered into that certain Indenture of Lease of even
date herewith covering the tenth (10th), eleventh (11th) and twelfth (12th)
floors in the Building (the "Demised Premises"). Said lease as it may hereafter
be amended, modified or supplemented from time to time, is herein called the
"Lease";
WHEREAS, the credit arrangements are secured by a first mortgage and first
assignment of rents (the "Assignment") encumbering the Property. Said mortgage
is dated December 23, 1987 and is recorded with the Middlesex South District
Registry of Deeds in Book 18780, Page 88. The Assignment is dated December 23,
1987 and is recorded with said Registry of Deeds following the recording of the
Mortgage. Said mortgage as it may be amended, increased, renewed, modified,
consolidated, replaced, combined, substituted, severed, split, spread or
extended, is herein referred to as the "Mortgage".
NOW, THEREFORE, in consideration of the mutual agreements herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
<PAGE>
1. Tenant Covenants and agrees that the Lease now is and shall at all times
continue to be subject and subordinate in each and every respect to the
Mortgage and to all renewals, modifications, consolidations, replacements
and extensions thereof, to the full extent of the principal, interest and
other sums secured thereby. Tenant, upon request, shall execute and deliver
any certificate or other instrument whether or not in recordable form which
Holder may reasonably request to confirm said subordination provided such
certificate or other instrument is consistent with the terms hereof.
2. Tenant certifies that the Lease is presently in full force and effect and
unmodified and no rent payable thereunder has been paid more than one (1)
month in advance of its due date, and that no default by Tenant exists
under the Lease which has continued beyond the expiration of any applicable
grace period.
3A. Notwithstanding the provisions of Paragraph 1 above, so long as Tenant is
not in default in the performance of its obligations under the Lease beyond
any applicable notice and/or grace period, Holder shall not name Tenant as
a party defendant to any action for foreclosure or other enforcement of the
Mortgage (unless required by law, but then only for the purpose of notice
and in no event for possession), nor shall the Lease be terminated by
Holder in connection with, or by reason of, foreclosure or other
proceedings for the enforcement of the Mortgage, or by reason of a transfer
of the Landlord's interest under the Lease pursuant to the taking of a deed
or assignment in lieu of foreclosure (or similar device), nor shall
Tenant's use or possession of the Demised Premises be disturbed or
interfered with by Holder, except that the person acquiring, or succeeding
to, the interests of the Landlord as a result of any such action or
proceeding and such person's successors and assigns (any of the foregoing
being hereinafter referred to as, the "Successor"), shall not be:
(a) subject to any credits, offsets, defenses or claims which Tenant
might have against any prior Landlord during any periods ending on
the "Cut Off Date" (hereinafter defined); or
(b) bound by any prepayment of more than one month's rent made prior to
the "Cut Off Date" except additional rent for operating costs, real
estate taxes and electricity escalation payments or other pass
through payments and except as Holder may consent to or may have
received; or
-2-
<PAGE>
(C) liable for any act or omission of any prior Landlord which occurred
prior to the "Cut Off Date" except for then existing defaults of
which Holder has been given notice and opportunity to cure as
provided in the Lease; or
(d) bound by any amendment or modification of the Lease made without
Holder's consent; or
(e) be required to account for any security deposit other than any
security deposit actually delivered to the Successor.
The "Cut Off Date" shall be the date on which the first person acquires or
succeeds to the interests of Landlord in the Property by virtue of a
foreclosure or other similar action or device or by deed in lieu of
foreclosure.
3B. Notwithstanding the foregoing, the limitations set forth in Section 3A
above (with respect to the Successor not assuming certain actions or
obligations of the Landlord prior to the Cut Off Date) shall not apply to
Landlord's obligations upon and as provided in Article IV and Section 5.3
of the Lease, which such obligations pursuant to Article IV and Section 5.3
of the Lease shall be binding upon such Successor in accordance with the
terms thereof.
4. If the interest of the Landlord under the Lease shall be transferred by
reason of foreclosure or other proceedings for enforcement of the Mortgage
or the obligations which it secures or pursuant to a taking of a deed or
assignment in lieu of foreclosure (or similar device), Tenant shall be
bound to the Successor and, except as provided in this Agreement, the
Successor shall be bound to Tenant under all of the terms, covenants and
conditions of the Lease for the unexpired balance of the term thereof
remaining (and any extensions, if exercised), with the same force and
effect as if the Successor were the Landlord, and Tenant does hereby (i)
agree to attorn to the Successor, including Holder if it be the Successor,
as its Landlord, (ii) affirm its obligations under the Lease, and (iii)
agree to make payments of all sums due under the Lease to the Successor,
said attornment, affirmation and agreement to be effective and self-
operative without the execution of any further instruments, upon the
Successor succeeding to the interest of the Landlord under the Lease. To
the extent permitted by applicable law, Tenant waives the provisions of any
statute or rule of law now or hereafter in effect that may give or purport
to give it any right or election to terminate or otherwise adversely affect
the Lease or the obligations of Tenant thereunder by reason of any
foreclosure or other proceedings for enforcement of the Mortgage or the
taking of a deed or assignment in lieu of foreclosure (or similar device).
-3-
<PAGE>
5. Tenant shall not change the terms, covenants, conditions and agreements of
the Lease without the express written consent of Holder in each instance.
6. In addition to the requirements of Section 17.14 of the Lease, Tenant will
provide Holder with a copy of any notice of default served upon the
Landlord under the Lease, which notice shall be delivered in accordance
with the provisions of paragraph 13 hereof, and agrees that notwithstanding
any provisions of the Lease, no notice of cancellation or abatement shall
be effective unless (i) in the case of a monetary default of Landlord under
the Lease Holder has received notice as aforesaid, and has failed within 30
days of its receipt of such notice to cure the default or (ii) in the case
of any other default (except for such a monetary default) under the Lease,
Holder has received notice thereof as provided in Section 17.14 of the
Lease (as confirmed by the provisions of Paragraph 9 hereof) and has not
cured such non-monetary default within the time period after receipt of
such notice, as is provided in the Lease.
7. Anything herein or in the Lease to the contrary notwithstanding, in the
event that a Successor shall succeed to the interests of the Landlord under
the Lease, the Successor shall have no obligation, nor incur any liability,
beyond its then interest, if any, in the Property and Tenant shall look
exclusively to such interest of the Successor, if any, in the Property for
the payment and discharge of any obligations imposed upon the Successor
hereunder or under the Lease and the Successor is hereby released or
relieved of any other liability hereunder and under the Lease. Tenant
agrees that with respect to any judgment which may be obtained or secured
by Tenant against the Successor, Tenant shall look solely to the estate or
interest owned by the Successor in the Property and Tenant will not collect
or attempt to collect any such judgment out of any other assets of the
Successor.
8. Tenant acknowledges that it has notice that pursuant to the Assignment, the
Landlord's interest under the Lease and the rent and all other sums due
thereunder have been assigned to Holder as part of the security for the
indebtedness secured by the Mortgage. In the event that Holder notifies
Tenant of an event of default under the Mortgage and demands that Tenant
pay rent and all other sums due under the Lease to Holder, Tenant agrees
that irrespective of the provisions of Paragraph 4 hereof it shall pay rent
and all other sums due under the Lease directly to Holder, and Landlord
consents thereto.
9. Pursuant to the provisions of Section 17.14 of the Lease, Holder hereby
gives Tenant notice that Holder holds the Mortgage and the Assignment
covering the Property. Further, Tenant agrees (i) to give Holder such
notices as are
-4-
<PAGE>
required to be given or specified in Section 17.14 of the Lease and (ii)
that the provisions of Section 17.14 shall apply to Holder. Holder further
gives Tenant notice that the name and address of Holder is The First
National Bank of Boston, 100 Federal Street, Boston, Massachusetts 02106
(Attention: John A. DeCamp III, Vice President, Construction Lending).
Landlord hereby confirms that Holder is the holder of the Mortgage and
Assignment covering the Property.
10. This Agreement may not be modified except by an agreement in writing signed
by the parties or their respective successors in interest. This Agreement
shall inure to the benefit of and be binding upon the parties hereto, their
respective successors and assigns.
11. Nothing contained in this Agreement shall in any way impair or affect the
lien created by the Mortgage except as specifically set forth herein.
12. Tenant agrees that this Agreement satisfies any condition or requirement in
the Lease relating to the granting of a nondisturbance agreement with
respect to the Mortgage. Tenant further agrees that in the event there is
any inconsistency between the terms and provisions hereof and the terms and
provisions of the Lease dealing with nondisturbance, the terms and
provisions hereof shall be controlling.
13. All notices, demands or requests made pursuant to, under, or by virtue
of this Agreement (i) if intended for Landlord or Tenant shall be given in
writing in the manner provided in Section 17.9 of the Lease and (ii) if
intended for Holder shall be given to the Holder, 100 Federal Street,
Boston, Massachusetts 02106 (Attention: John A. DeCamp III, Vice President
Construction Lending) with a copy to Goulston & Storrs, 400 Atlantic
Avenue, Boston, Massachusetts 02210, Attention: Alan W. Rottenberg, Esquire
and such notice to Holder must be in writing and delivered by hand, or sent
by registered or certified mail, return receipt requested, or by United
States Postal Service Express Mail, Federal Express or other similar
overnight commercial courier or by same day commercial courier, postage or
delivery charges, as the case may be, prepaid. Any person may change the
place that notices and demands are to be sent by written notice delivered
in accordance with the foregoing.
14. This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts. If any of the terms of this Agreement or the application
thereof to any person or circumstances shall to any extent be invalid or
unenforceable, the remainder of this Agreement or the application of any
such terms to any person or circumstances other than those as to which it
is invalid or unenforceable shall not be affected thereby, and each term of
this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto caused this Agreement
to be duly executed as of the day and year first above written.
WITNESSES: THE FIRST NATIONAL BANK OF BOSTON
/s/[SIGNATURE APPEARS HERE] By: /s/[SIGNATURE APPEARS HERE]
- --------------------------- -------------------------------
Title: Vice President and
Authorized Officer
----------------------------
CAMP DRESSER & MCKEE INC.
/s/ Paul G. Camell By: /s/[SIGNATURE APPEARS HERE]
- --------------------------- -------------------------------
Paul G. Camell, Assistant Clerk Title: Chairman of the Board
----------------------------
/s/[SIGNATURE APPEARS HERE] /s/ David Barrett
- --------------------------- ----------------------------------
DAVID BARRETT, TRUSTEE OF ONE
CAMBRIDGE CENTER TRUST ON BEHALF
OF HIMSELF AND HIS CO-TRUSTEES
COMMONWEALTH OF MASSACHUSETTS)
) ss.
COUNTY OF SUFFOLK )
On the 22nd day of June, 1988, before me, Constance J. Winslow, a Notary
Public in and for the aforesaid jurisdiction, personally appeared John A.
DeCamp, III, who acknowledged himself to be the Vice President and Authorized
Officer of The First National Bank of Boston and that he, as such officer being
authorized to so do, executed the foregoing instrument bearing date of the 6th
day of June, 1988, on behalf of the corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
/s/ Constance J. Winslow
-------------------------
Notary Public
Constance J. Winslow
NOTARY PUBLIC
My Commission Expires:
My Commission Expires May 15, 1992
-6-
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
) ss.
COUNTY OF SUFFOLK )
On this 7th day of June, 1988, before me, Altoon Markarian , a Notary
Public in and for the aforesaid jurisdiction, personally appeared JOSEPH E.
HENEY, who acknowledged himself to be the CHAIRMAN OF THE BOARD of CAMP DRESSER
& MCKEE, INC., and that he, as such officer being authorized to so do, executed
the foregoing instrument bearing date of the 6th day of June, 1988, on behalf of
the corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal.
/s/ Altoon Markarian
-------------------------------
Notary Public
My Commission Expires: 10/17/91
---------
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF SUFFOLK
June __ , 1988
Then Personally appeared before me the above named David Barrett, Trustee
as aforesaid and acknowledged the foregoing instrument to be his free act and
deed.
/s/ Frederick J. DeAngelis
-------------------------------
Frederick J. DeAngelis,
Notary Public
My Commission Expires: December 9, 1994
-7-
<PAGE>
[MAP OF ONE CAMBRIDGE CENTER 11TH FLOOR APPEARS HERE]
EXHIBIT B
<PAGE>
[MAP OF ONE CAMBRIDGE CENTER 11TH FLOOR APPEARS HERE]
EXHIBIT B
<PAGE>
EXHIBIT C
---------
CONSENT AGREEMENT
-----------------
CONSENT AGREEMENT (the "Consent") dated as of the ____ day of
October __, 1995 by and between the TRUSTEES OF ONE CAMBRIDGE CENTER TRUST, and
not individually ("Landlord"), CAMP DRESSER & MCKEE INC., a Massachusetts
corporation ("Tenant"), and ON TECHNOLOGY CORPORATION, a Delaware corporation
("Subtenant") with an address of One Cambridge Center, Cambridge, MA.,
Attention: Chief Financial Officer.
RECITALS
--------
By Lease dated May 6, 1988 (the "Lease"), Landlord did lease to Tenant
and Tenant did lease from Landlord the tenth (10th), eleventh (11th) and twelfth
(12th) floors of the building (the "Building") known as and numbered One
Cambridge Center, Cambridge, Massachusetts, which premises are more particularly
described in the Lease (the "Premises").
Tenant desires to sublease to Subtenant 19,535 square feet of rentable
floor area on the eleventh (11th) floor of the Premises (the "Subleased
Premises") upon the terms and conditions contained in a Sublease between Tenant
and Subtenant dated October __, 1995 (the "Sublease").
Article 12 of the Lease provides that the Premises may not be sublet
without the written consent of Landlord.
Subject to, and in reliance upon, the representations, warranties,
covenants, terms and conditions contained in this Consent, Landlord desires to
consent to the Sublease.
NOW, THEREFORE, in consideration of One Dollar ($1.00) and other good
and valuable consideration, paid by each of the parties hereto to the other, the
receipt and sufficiency of which is hereby acknowledged, and in further
consideration of the provisions herein, Landlord, Tenant and Subtenant hereby
agree as follows:
1. Consent. Landlord hereby consents to the Sublease subject to and in
-------
reliance upon, the representations, warranties, covenants, terms and conditions,
contained in this Consent.
2. Acceptance of Sublease by Subtenant. Subtenant hereby accepts the
-----------------------------------
Sublease of the Subleased Premises and agrees that during the term of the
Sublease, Subtenant shall be directly bound and fully liable to Landlord for,
and shall duly observe and comply with, all of the terms, covenants, agreements,
provisions, obligations and conditions on the part of the Tenant and the
Subtenant to be performed or observed under the Lease and the Sublease relating
to the Subleased Premises, provided, however, the obligations to pay Annual
Fixed Rent,
<PAGE>
Final rent and all other charges shall be limited to the full amount of
such rent and charges set forth in Paragraph 4 of the Sublease and shall be
payable in the manner and at the times provided under the Sublease and provided
further that Subtenant does not assume any obligations under the lease (i)
unrelated to the Subleased Premises, (ii) arising out of any act, omission or
conduct of Tenant or any other Subtenants of Tenant or (iii) that are otherwise
described in Section 6 of the Sublease. Subject to the foregoing limitation with
respect to Subtenant, Tenant and Subtenant shall be jointly and severally
liable to Landlord for compliance with and performance of all of the terms,
covenants, agreements, provisions, obligations and conditions to be performed
or observed by the Tenant under the Lease.
3. Sublease Subordinate to Lease. The Sublease shall be subject and
-----------------------------
subordinate at all times to the Lease and to all of the terms, covenants,
agreements, provisions and conditions of the Lease and this Consent, and
Subtenant shall not do or permit anything to be done which would violate any of
said terms, covenants, agreements, provisions and conditions. Any breach or
violation of any provision of the Lease or of this Consent by Subtenant shall be
deemed to be and shall constitute a default by Tenant in fulfilling such
provision.
4. Representations and Warranties. Tenant and Subtenant represent and
------------------------------
warrant that no rent or other consideration has been or will be paid to Tenant
by Subtenant for the right to use or occupy the Subleased Premises or for the
use, sale or rental of Tenant's fixtures, leasehold improvements, equipment,
furniture or other personal property other than as set forth in the Sublease.
Tenant and Subtenant further represent and warrant that attached hereto as
Exhibit A is a true, correct and complete copy of the Sublease which embodies
- ---------
the complete and entire agreement between Tenant and Subtenant.
5. Amendment to Sublease. Tenant and Subtenant agree that they shall
---------------------
not change, modify, or amend (in any natural respect) or cancel or terminate
the Sublease except in accordance with its terms or enter into any additional
agreements relating to or affecting the use or occupancy of the Subleased
Premises or any other portion of the Premises or the use, sale or rental of
Tenant's fixtures, leasehold improvements, equipment, furniture or other
personal property, without first obtaining Landlord's prior written consent
thereto, which consent shall not be unreasonably delayed or withheld.
6. No Waiver or Release. Neither this Consent, the Sublease, nor any
--------------------
acceptance of rent or other consideration from Subtenant by Landlord (whether
before or after the occurrence of any default or Event of Default by Tenant
under the Lease) shall operate to waive, modify, impair, release or in any
manner affect any of the covenants, agreements, terms, provisions, obligations
or conditions contained in the Lease, or to waive any breach thereof, or any
rights of Landlord against any person, firm, association or corporation liable
or responsible for the performance thereof, or to increase the obligations or
diminish the rights of Landlord under the Lease, or to increase the rights or
diminish the obligations of Tenant thereunder, or to, in any way, be construed
as giving Subtenant any greater rights than those to which the original tenant
named in the Lease would be entitled. Tenant hereby agrees that the obligations
of Tenant under the Lease and this Consent shall not be discharged or otherwise
affected by reason of the giving or withholding of any consent or approval for
which provision is made in the
-2-
<PAGE>
Lease. All terms, covenants, agreements, provisions and conditions of the Lease
are hereby ratified and declared by Tenant to be full force and effect, and
Tenant hereby unconditionally reaffirms its primary, direct and ongoing
liability to Landlord for the performance of all obligations to be performed by
the tenant under the Lease, including without limitation, the obligations to pay
Annual Fixed Rent, additional rent and all other charges in the full amount, in
the manner and at the times provided for in the Lease.
7. Further Assignment or Subletting. Tenant and Subtenant hereby agree
--------------------------------
that the terms, conditions, restrictions and prohibitions set forth in the Lease
regarding subletting and assignment, including, without limitation, Article 12
of the Lease, shall, notwithstanding this Consent, (i) apply to the Sublease and
the Subleased Premises, (ii) continue to be binding upon Tenant and Subtenant
with respect to all future assignments and transfers of the Lease or the
Sublease, and all future sublettings of the Premises or the Subleased Premises,
and (iii) apply to Subtenant with the same effect as if Subtenant had been the
original tenant named in the Lease. The giving of this Consent shall not be
construed either as a consent by Landlord to, or as permitting, any other or
further assignment or transfer of the Lease or Sublease, whether in whole or in
part, or any subletting of the Premises, the Subleased Premises or any part
thereof, or as a waiver of the restrictions and prohibitions set forth in the
Lease regarding subletting and assignment.
8. No Ratification of Sublease. Tenant and Subtenant acknowledge that
---------------------------
Landlord is not a party to the Sublease and is not bound by the provisions
thereof, and recognize that, accordingly, Landlord has not, and will not, review
or pass upon any of the provisions of the Sublease. Nothing contained herein
shall be construed as an approval of, or ratification by Landlord of, any of the
particular provisions of the Sublease (except as may be expressly provided
herein) or as a representation or warranty by Landlord. Further, the provisions
of this Consent and the execution and delivery of the Sublease shall not
constitute a recognition of the Sublease or the Subtenant thereunder, it being
agreed that in the event of termination or expiration of the Lease, at
Landlord's option, the Sublease shall be terminated and Subtenant shall have no
further rights with respect to the Subleased Premises; provided, however, that
if the Sublease is terminated as aforesaid (except for a termination due to a
casualty or taking by eminent domain) Subtenant may remain in the Subleased
Premises for a period of thirty (30) days subsequent to the effective
termination of the Lease upon all of the same terms contained in the Sublease at
the time of termination of the Lease.
9. Remedies for Default. In the event (a) of any default by Tenant or
--------------------
Subtenant in the full performance and observance of any of their respective
obligations hereunder or (b) any representation or warranty of Tenant and
Subtenant made herein shall prove to be false or misleading in any material
respect: (i) such event may, at Landlord's option, be deemed an Event of Default
under the Lease, and Landlord shall have the right to and may pursue all of the
rights, powers and remedies provided for in the Lease or at law or in equity or
by statute or otherwise with respect to defaults, provided however, that in the
case of (a) above, if and to the extent the Lease provides for notice of and/or
an opportunity to cure the failure to perform any such obligation, such event
shall only be deemed to be an Event of Default under the Lease if it is not
cured after the giving of any such notice to the party who failed to perform
(with a copy of such notice to the other party) and the expiration of any such
cure period (provided, further, that such notice and/or cure period shall not be
cumulative with the notice and cure requirements of the
-3-
<PAGE>
Lease, and, accordingly, such notice and cure period requirements under this
Section shall not apply if the notice and cure period requirements of the Lease
are complied with for such event under the Lease) and (ii) Landlord may give
written notice of such default to the party in violation (with a copy of such
notice to the other party), and if such violation shall not be discontinued or
corrected within thirty (30) days after the giving of such notice, Landlord may,
in addition to Landlord's other remedies, revoke this Consent.
10. Conflict. If there shall be any conflict or inconsistency between
--------
the terms, covenants and conditions of this Consent or the Lease and the terms,
covenants and conditions of the Sublease, then the terms, covenants and
conditions of this Consent and the Lease shall prevail. In the event that there
shall be any conflict or inconsistency between this Consent and the Lease, such
conflict or inconsistency shall be determined for the benefit of Landlord. With
respect to Subtenant only, if there shall be any conflict or inconsistency
between the terms, covenants and conditions of the Lease and those of the
Sublease, then the terms, covenants and conditions of the Sublease shall
prevail.
11. Notices. Any notices or other communications given or required to be
-------
given under this Consent shall be effective only if in writing and delivered by
hand or sent by mail (certified, return receipt requested) or by overnight or
other commercial courier, postage or delivery charges prepaid, addressed to the
respective party at the address set forth in the Lease with respect to Landlord
and Tenant and the address hereinabove set forth with respect to Subtenant (with
a copy to: Andrew R. Stern, Esq, Epstein Becher & Green P.C. 75 State Street,
Boston, MA 02109) or at such other address for such purpose designated by notice
in accordance with the provisions hereof.
Except as otherwise provided herein, all such notices shall be
effective when received; provided, that (i) if receipt is refused, notice shall
be effective upon the first occasion that such receipt is refused of (ii) if the
notice is unable to be delivered due to a change of address of which no notice
was given, notice shall be effective upon the date such delivery was attempted.
Time is of the essence with respect to any and all notices and
periods for giving of notice or taking any action thereto under this Consent.
-4-
<PAGE>
<PAGE>
13. Entire Agreement. This Consent contains the entire agreement of the
----------------
parties with respect to the matters contained herein and may not be modified,
amended or otherwise changed except by written instrument signed by the parties
sought to be bound.
14. Governing Law. This Consent shall for all purposes be construed in
-------------
accordance with, and governed by, the laws of Massachusetts.
15. Brokerage. (A) Tenant represents and warrants to Landlord that
---------
Tenant has dealt with no broker in connection with the Sublease other than
Meredith & Grew Incorporated and Sinclair Properties. In the event any claim is
made against Landlord relative to dealings by Tenant with any broker in
connection with the Sublease, Tenant shall defend the claim against Landlord
with counsel of Tenant's selection first approved by Landlord and save harmless
and indemnify Landlord on account of loss, cost or damage which may arise by
reason of such claim. Tenant agrees that it shall be solely responsible for the
payment of brokerage commissions to Meredith & Grew Incorporated and Sinclair
Properties.
(B) Subtenant represents and warrants that Subtenant has dealt with
no broker in connection with the Sublease other than Meredith & Grew
Incorporated and Sinclair Properties. In the event any claim is made against
Landlord relative to dealings by Subtenant with any broker in connection with
the Sublease, Subtenant shall defend the claim against Landlord with counsel of
Subtenant's selection first approved by Landlord and save harmless and indemnify
Landlord on account of loss, cost or damage which may arise by reason of such
claim.
16. Miscellaneous.
-------------
(a) Remedies Cumulative. Each right and remedy of Landlord provided
-------------------
for in this Consent or in the Lease shall be cumulative and shall be in addition
to every other right and remedy provided for herein and therein or now or
hereafter existing at law or in equity or by statute or otherwise, and the
exercise by Landlord of any one or more of the rights or remedies so provided
for or existing shall not preclude the simultaneous or subsequent exercise by
Landlord of any or all other rights or remedies so provided for or so existing.
-6-
<PAGE>
(b) Landlord's Liability. The obligations of Landlord under this Consent
--------------------
shall not be binding upon Landlord named herein after the sale, conveyance,
assignment or transfer by such Landlord (or upon any subsequent landlord after
the sale, conveyance, assignment or transfer by such subsequent landlord) of its
interest in the Building or the Premises, as the case may be, and in the event
of any such sale, conveyance, assignment or transfer, such Landlord (and any
such subsequent landlord) shall be and hereby is entirely freed and relieved of
all covenants and obligations of Landlord hereunder from and after the date of
such sale, conveyance, assignment or transfer. Neither the trustees,
beneficiaries, partners, directors, officers or employees of Landlord
(collectively, the "Parties") shall be liable for the performance of
Landlord's obligations under this Consent, nor shall the Parties be liable for
the performance of Landlord's obligations under the Sublease pursuant to any
attornment by Subtenant to Landlord. Tenant and Subtenant, as the case may be,
shall look solely to Landlord to enforce Landlord's obligations hereunder and
thereunder and shall not seek any damages against any of the Parties. The
liability of Landlord for Landlord's obligations under this Consent and the
Sublease shall be limited to Landlord's interest in the Building and Tenant and
Subtenant shall not look to any other property or assets of Landlord or the
property or assets of any of the Parties in seeking either to enforce Landlord's
obligations under this Consent or under the Sublease pursuant to any such
attornment or to satisfy a judgement for Landlord's failure to perform such
obligations. In no event shall Landlord ever be liable for indirect or
consequential damages.
(c) Successors and Assigns. The terms and provisions of this Consent
----------------------
shall bind and inure to the benefit of the parties hereto and their respective
successors and assigns except that no violation of the provisions of Sections
5, 6, or 7 of this Consent shall operate to vest any rights in any successor or
assignee of Tenant or Subtenant.
(d) Severability. If any one or more of the provisions contained in this
------------
Consent shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
(e) Captions. The captions contained in this Consent are for convenience
--------
only and shall in no way define, limit or extend the scope or intent of this
Consent, nor shall such captions affect the construction hereof.
(f) Counterparts. This Consent may be executed in several counterparts,
------------
each of which shall be deemed an original but all of which shall constitute one
and the same agreement.
(g) Authority. Tenant, Subtenant and Landlord each represent and warrant
---------
that each has full right, power and authority to enter into this Consent and
that the person or persons executing this Consent on behalf of Tenant, Subtenant
or Landlord, as the case may be, are duly authorized to do so.
-7-
<PAGE>
(h) No Privity of Estate. It is expressly understood and agreed that,
---------------------
except as otherwise provided herein, this Consent shall not create or
constitute, nor shall it be deemed to create or constitute, privity of estate,
any landlord-tenant relationship, or occupancy or license agreement between
Landlord and Subtenant.
(i) Binding Effect. This Consent is offered to Tenant and Subtenant
---------------
for signature and it is understood that this Consent shall be of no force and
effect and shall not be binding upon Landlord unless and until Landlord shall
have executed and delivered a copy of this Consent to both Tenant and Subtenant.
(j) Landlord's Costs. To the extent required by the terms of the
-----------------
Lease, Tenant shall reimburse Landlord on demand for any costs incurred by
Landlord in connection with the Sublease, including, without limitation, the
costs of making investigations as to the acceptability of the proposed subtenant
and reasonable legal costs incurred in connection with the granting of this
Consent.
(k) Notices Concerning Sublease. Tenant and Subtenant agree promptly to
----------------------------
deliver to Landlord a copy of any default or termination notice sent or received
by either party with respect to the Sublease.
(l) Consent Limited. This Consent shall be deemed limited solely to
----------------
the Sublease, and Landlord reserves the right to consent or withhold consent and
all other rights as set forth in the Lease with respect to any other matters.
(m) Capitalized Terms. All capitalized terms and words used in this
------------------
instrument shall have the same meaning as set forth in the Lease unless a
contrary meaning is expressly set forth herein.
Landlord covenants and agrees to use reasonable efforts to send Subtenant
promptly a copy of all written notices given to Tenant affecting the Subleased
Premises, including, without limitation, notices of default pursuant to the
Lease and notices of non-payment of Annual Fixed Rent, Additional Rent or
other charges.
EXECUTED under seal as of the date and year first above written.
WITNESS: LANDLORD:
- ----------------------------- ------------------------------
, TRUSTEE
OF ONE CAMBRIDGE CENTER TRUST,
BUT NOT INDIVIDUALLY
(Signatures continued on next page)
EXHIBIT A-attach Sublease
---------
-8-
<PAGE>
TENANT:
ATTEST: CAMP DRESSER & MCKEE INC.
By: By:
--------------------------------- ------------------------------------
Name: Name:
------------------------------- ----------------------------------
Title: SECRETARY (OR Title: PRESIDENT (OR VICE PRESIDENT)
------------------------------ ---------------------------------
ASSISTANT SECRETARY) HERETO DULY AUTHORIZED
- ------------------------------------
By:
------------------------------------
Name:
----------------------------------
Title: TREASURER (OR ASSISTANT
---------------------------------
TREASURER)
---------------------------------
HERETO DULY AUTHORIZED
(CORPORATE SEAL)
SUBTENANT:
ATTEST: ON TECHNOLOGY CORPORATION
By: By:
---------------------------------- ------------------------------------
Name: Name:
-------------------------------- ----------------------------------
Title: SECRETARY (OR Title: PRESIDENT (OR VICE PRESIDENT)
------------------------------- ---------------------------------
ASSISTANT SECRETARY) HERETO DULY AUTHORIZED
-------------------------------
By:
-------------------------------------
Name:
-----------------------------------
Title: TREASURER (OR ASSISTANT
----------------------------------
TREASURER)
----------------------------------
HERETO DULY AUTHORIZED
(CORPORATE SEAL)
-9-
<PAGE>
Landlord and Tenant represent to Subtenant as follows: (a) that the Lease
is in full force and effect as originally executed and as amended as
aforesaid, (b) that, to the best of their actual knowledge Tenant has
paid all Annual Fixed Rent and Additional Rent which has been billed to
Tenant as of the date hereof and that neither Landlord nor Tenant is in
default in any of its respective obligations under the Lease, (c) that
the initial term of the Lease expires on March 31, 2000, (d) that the
Lease represents the entire understanding between the Landlord and Tenant
in respect to the leasing of the Premises, and (e) that the Landlord is
not aware of any assignment of Tenant's interest in the Lease or any
subletting (except for the Sublease) with respect to the Subleased
Premises and has not consented to any such assignment or subletting.
7. Tenant covenants and agrees that upon receiving from Landlord any notice
affecting the Subleased Premises, including, without limitation, any
notice of default pursuant to the provisions of the Lease, Tenant shall
also serve a copy of such notice promptly upon Subtenant. Landlord
covenants and agrees to use reasonable efforts to send Subtenant promptly
a copy of all written notices given to Tenant affecting the Subleased
Premises, including, without limitation, notices of default pursuant to
the Lease and notices of non-payment of Annual Fixed Rent, Additional
Rent or other charges. In case Tenant shall be in default under the
Lease, Subtenant shall have the right (but not the obligation) to remedy
such default, or cause the same to be remedied, within applicable grace
and cure periods, and Landlord shall accept such performance by or at the
instance of Subtenant as if the same had been made by Tenant.
-3-
<PAGE>
Exhibit 11.0
ON TECHNOLOGY CORPORATION AND SUBSIDIARIES
Computation of Net Income (Loss) Per Share (1)
FORM 10-Q, June 30, 1997
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
---------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Income (Loss) $ (767) $ 1,440 $ (16,659) $ (11,675)
Weighted Average Common Shares
Outstanding During Period................... 12,092,504 10,977,038 12,005,940 10,823,913
Weighted Average Common Equivalent
Shares Outstanding During Period........... --- 307,723 --- ---
------------ ------------ ------------ ------------
12,092,504 11,284,761 12,005,940 10,823,913
============ ============ ============ ============
Net Income (Loss) Per Share................ $ (0.06) $ 0.13 $ (1.39) $ (1.08)
============ ============ ============ ============
</TABLE>
- --------------------
(1) Primary and fully diluted net income (loss) per share has not been
separately presented, as the amounts would not be meaningful.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 11,063
<SECURITIES> 0
<RECEIVABLES> 12,554
<ALLOWANCES> 1,320
<INVENTORY> 2,557
<CURRENT-ASSETS> 27,976
<PP&E> 12,071
<DEPRECIATION> 6,210
<TOTAL-ASSETS> 37,995
<CURRENT-LIABILITIES> 12,457
<BONDS> 0
0
0
<COMMON> 123
<OTHER-SE> 25,221
<TOTAL-LIABILITY-AND-EQUITY> 37,955
<SALES> 24,597
<TOTAL-REVENUES> 26,708
<CGS> 4,385
<TOTAL-COSTS> 22,484
<OTHER-EXPENSES> 15,898
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 175
<INCOME-PRETAX> (15,884)
<INCOME-TAX> (775)
<INCOME-CONTINUING> (15,884)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,659)
<EPS-PRIMARY> (1.39)
<EPS-DILUTED> (1.39)
</TABLE>
