ý
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2011
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________TO
_____________
|
DELAWARE
|
02-0405716
|
|
(State or Other Jurisdiction of
Incorporation or Organization)
|
(I.R.S. Employer
Identification No.)
|
Common Stock $0.01 PAR VALUE
|
NASDAQ
|
(Title of Class)
|
(Name of Exchange on which Registered)
|
Part I
|
||
Item 1.
|
Business
|
3
|
Item 1A.
|
Risk Factors
|
8
|
Item 1B.
|
Unresolved Staff Comments
|
12
|
Item 2.
|
Properties
|
12
|
Item 3.
|
Legal Proceedings
|
13
|
Part II
|
||
Item 5.
|
Market for Registrant’s Common Equity and Related Shareholder Matters
|
14
|
Item 6.
|
Selected Consolidated Financial Data
|
14
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
15
|
Item 7A.
|
Quantitative and Qualitative Disclosures about Market Risk
|
25
|
Item 8.
|
Financial Statements and Supplementary Data
|
26
|
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
48
|
Item 9A.
|
Controls and Procedures
|
48
|
Item 9B.
|
Other Information
|
49
|
Part III
|
||
Item 10.
|
Directors and Executive Officers of the Registrant
|
50
|
Item 11.
|
Executive Compensation
|
51
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management
|
51
|
Item 13.
|
Certain Relationships and Related Transactions
|
51
|
Item 14.
|
Principal Accountant Fees and Services
|
51
|
Part IV
|
||
Item 15.
|
Exhibits and Financial Statement Schedules
|
52
|
Percentage of total revenue
|
||||||
for the fiscal year ended
|
||||||
September 30,
|
||||||
2011
|
2010
|
2009
|
||||
Ingram Micro, Inc.
|
13%
|
11%
|
17%
|
|||
Lifeboat Distribution
|
15%
|
12%
|
5%
|
For the Year Ended
|
Common Stock
|
||||
September 30, 2011
|
High ($)
|
Low ($)
|
|||
4th Quarter
|
5.96
|
4.90
|
|||
3rd Quarter
|
5.97
|
4.85
|
|||
2nd Quarter
|
5.59
|
3.08
|
|||
1st Quarter
|
3.59
|
2.71
|
For the Year Ended
|
Common Stock
|
||||
September 30, 2010
|
High ($)
|
Low ($)
|
|||
4th Quarter
|
2.90
|
2.25
|
|||
3rd Quarter
|
3.17
|
2.20
|
|||
2nd Quarter
|
2.68
|
2.25
|
|||
1st Quarter
|
2.68
|
2.10
|
Statements of Operations Data:
|
||||||||||||||||||||
Years Ended September 30,
|
2011
|
2010
|
2009
|
2008
|
2007
|
|||||||||||||||
(In thousands, except per share data)
|
||||||||||||||||||||
Revenue
|
$ | 17,885 | $ | 17,674 | $ | 19,618 | $ | 23,030 | $ | 25,259 | ||||||||||
Costs and Expenses
|
17,818 | 17,283 | 24,912 | 22,531 | 23,524 | |||||||||||||||
Income (Loss) from Operations
|
67 | 391 | (5,294 | ) | 499 | 1,735 | ||||||||||||||
Net Income (Loss) (1)
|
$ | 132 | $ | 380 | $ | (4,940 | ) | $ | 717 | $ | 1,669 | |||||||||
Earnings (Loss) per Common Share:
|
||||||||||||||||||||
Basic (1)
|
$ | 0.02 | $ | 0.06 | $ | (0.83 | ) | $ | 0.12 | $ | 0.30 | |||||||||
Diluted (1)
|
$ | 0.02 | $ | 0.06 | $ | (0.83 | ) | $ | 0.12 | $ | 0.29 | |||||||||
Balance Sheet Data:
|
||||||||||||||||||||
September 30,
|
2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||
(In thousands)
|
||||||||||||||||||||
Total Assets
|
$ | 13,134 | $ | 11,487 | $ | 12,043 | $ | 18,169 | $ | 18,337 | ||||||||||
Working Capital (Deficiency)
|
5,423 | 4,186 | 2,627 | 1,130 | (279 | ) | ||||||||||||||
Long-Term Obligations
|
288 | 302 | 482 | 627 | 448 | |||||||||||||||
Shareholders’ Equity
|
6,342 | 5,679 | 5,166 | 10,082 | 9,020 |
(1)
|
Net income (loss) and earnings (loss) per common share for 2009 include the impact of the full impairment of goodwill and
an indefinite lived trademark totaling $6,401,000. See Note 1.
Nature of Business and Summary of Significant Accounting Policies
,
of Notes to Consolidated Financial Statements in the Company's Form 10-K for the fiscal year ended September 30, 2010.
|
·
|
Monarch
, a desktop reporting and data analysis application that lets users extract and manipulate data from ASCII report files, PDF files or HTML files produced on any mainframe, midrange, client/server or PC system;
|
·
|
Monarch Data Pump
, a data replication and migration tool that offers a shortcut for populating and refreshing data marts and data warehouses, for migrating legacy data into new applications and for providing automated delivery of reports in a variety of formats, such as Excel, via email;
|
·
|
Monarch Enterprise Server
, an enterprise solution that provides web-enabled report storage, transformation and distribution including data analysis, visualization and MS Excel integration for easy to use and cost effective self-serve reporting and analytics;
|
·
|
Monarch RMS
, a web-based report analysis solution that integrates with any existing enterprise report management or content management archiving solution;
|
·
|
Datawatch Dashboards
, an interactive dashboard solution that provides a visual overview of operational performance as well as the ability to monitor specific business processes and events;
|
·
|
Monarch Report Manager on Demand
, a system for high-volume document capture, archiving, and online presentation;
|
·
|
iMergence
, an enterprise report mining system;
|
·
|
Visual QSM
, a fully internet-enabled IT service management solution that incorporates workflow and network management capabilities and provides web access to multiple databases via a standard browser; and
|
·
|
Visual Help Desk
or
Visual HD
, a web-based help desk and call center solution operating on the IBM Lotus Domino platform.
|
Year Ended September 30,
|
||||||||
2011 | 2010 | |||||||
REVENUE:
|
||||||||
Software licenses
|
55 | % | 54 | % | ||||
Maintenance
|
35 | 36 | ||||||
Professional Services
|
10 | 10 | ||||||
Total revenue
|
100 | 100 | ||||||
COSTS AND EXPENSES:
|
||||||||
Cost of software licenses
|
13 | 14 | ||||||
Cost of maintenance and services
|
14 | 16 | ||||||
Sales and marketing
|
35 | 33 | ||||||
Engineering and product development
|
14 | 15 | ||||||
General and administrative
|
24 | 20 | ||||||
Total costs and expenses
|
100 | 98 | ||||||
INCOME FROM OPERATIONS
|
— | 2 | ||||||
Other income (expense), net
|
1 | — | ||||||
INCOME BEFORE INCOME TAXES
|
1 | 2 | ||||||
(Provision) benefit for income taxes
|
—
|
— | ||||||
NET INCOME
|
1 | 2 |
Year Ended September 30,
|
Increase
|
Percentage
|
||||||||||||||
2011
|
2010
|
(Decrease)
|
Change
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Software licenses
|
$ | 9,858 | $ | 9,563 | $ | 295 | 3% | |||||||||
Maintenance
|
6,219 | 6,322 | (103 | ) | -2% | |||||||||||
Professional Services
|
1,808 | 1,789 | 19 | 1% | ||||||||||||
Total revenue
|
$ | 17,885 | $ | 17,674 | $ | 211 | 1% | |||||||||
Year Ended September 30,
|
Increase /
|
Percentage
|
||||||||||||||
2011
|
2010
|
(Decrease)
|
Change
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Cost of software licenses
|
$ | 2,237 | $ | 2,382 | $ | (145 | ) | -6% | ||||||||
Cost of maintenance and services
|
2,537 | 2,893 | (356 | ) | -12% | |||||||||||
Sales and marketing
|
6,268 | 5,786 | 482 | 8% | ||||||||||||
Engineering and product development
|
2,502 | 2,658 | (156 | ) | -6% | |||||||||||
General and administrative
|
4,274 | 3,564 | 710 | 20% | ||||||||||||
Total costs and operating expenses
|
$ | 17,818 | $ | 17,283 | $ | 535 | 3% | |||||||||
Less than 1
|
More than
|
|||||||||||||||||||
Contractual Obligations:
|
Total
|
Year
|
1-3 Years
|
3-5 Years
|
5 Years
|
|||||||||||||||
Operating Lease Obligations
|
$ | 1,050 | $ | 360 | $ | 393 | $ | 297 | $ | — | ||||||||||
Other Liabilities
|
$ | 175 | $ | — | $ | — | $ | — | $ | 175 | ||||||||||
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
27
|
CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2011 AND 2010 AND FOR EACH OF THE TWO YEARS IN THE PERIOD ENDED SEPTEMBER 30, 2011:
|
|
Consolidated Balance Sheets
|
28
|
Consolidated Statements of Operations
|
29
|
Consolidated Statements of Shareholders’ Equity and Comprehensive Income
|
30
|
Consolidated Statements of Cash Flows
|
31
|
Notes to Consolidated Financial Statements
|
32
|
Year Ended September 30,
|
||||||||
2011
|
2010
|
|||||||
REVENUE:
|
||||||||
Software licenses
|
$ | 9,858 | $ | 9,563 | ||||
Maintenance
|
6,219 | 6,322 | ||||||
Professional services
|
1,808 | 1,789 | ||||||
Total revenue
|
17,885 | 17,674 | ||||||
COSTS AND EXPENSES:
|
||||||||
Cost of software licenses
|
2,237 | 2,382 | ||||||
Cost of maintenance and services
|
2,537 | 2,893 | ||||||
Sales and marketing
|
6,268 | 5,786 | ||||||
Engineering and product development
|
2,502 | 2,658 | ||||||
General and administrative
|
4,274 | 3,564 | ||||||
Total costs and expenses
|
17,818 | 17,283 | ||||||
INCOME FROM OPERATIONS
|
67 | 391 | ||||||
Interest income and other income (expense), net
|
11 | 2 | ||||||
Foreign currency transaction gains
|
89 | 24 | ||||||
INCOME FROM OPERATIONS BEFORE INCOME TAXES
|
167 | 417 | ||||||
Provision for income taxes
|
(35 | ) | (37 | ) | ||||
NET INCOME
|
$ | 132 | $ | 380 | ||||
Net income per share - Basic:
|
$ | 0.02 | $ | 0.06 | ||||
Net income per share - Diluted:
|
$ | 0.02 | $ | 0.06 | ||||
Weighted-average shares outstanding - basic
|
6,039 | 5,936 | ||||||
Weighted-average shares outstanding - diluted
|
6,235 | 6,061 | ||||||
Accumulated
|
||||||||||||||||||||||||||||||||||||
Additional
|
Other
|
|||||||||||||||||||||||||||||||||||
Common Stock
|
Paid-In
|
Accumulated
|
Comprehensive
|
Comprehensive
|
Treasury Stock
|
|||||||||||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Loss
|
Income
|
Shares
|
Amount
|
Total
|
||||||||||||||||||||||||||||
BALANCE,
|
||||||||||||||||||||||||||||||||||||
OCTOBER 1, 2009
|
5,940,085 | 59 | 23,634 | (17,370 | ) | (1,017 | ) | (14,246 | ) | (140 | ) | 5,166 | ||||||||||||||||||||||||
Stock options exercised/
|
||||||||||||||||||||||||||||||||||||
vesting of restricted
|
||||||||||||||||||||||||||||||||||||
stock units
|
18,152 | 1 | 1 | |||||||||||||||||||||||||||||||||
Share-based compensation
|
||||||||||||||||||||||||||||||||||||
expense
|
192 | 192 | ||||||||||||||||||||||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||||||||||
Translation adjustments
|
(60 | ) | (60 | ) | (60 | ) | ||||||||||||||||||||||||||||||
Net income
|
380 | 380 | 380 | |||||||||||||||||||||||||||||||||
Total comprehensive income
|
$ | 320 | ||||||||||||||||||||||||||||||||||
BALANCE,
|
||||||||||||||||||||||||||||||||||||
SEPTEMBER 30, 2010
|
5,958,237 | 60 | 23,826 | (16,990 | ) | (1,077 | ) | (14,246 | ) | (140 | ) | 5,679 | ||||||||||||||||||||||||
Stock options exercised/
|
||||||||||||||||||||||||||||||||||||
vesting of restricted
|
||||||||||||||||||||||||||||||||||||
stock units
|
217,741 | 2 | 386 | 388 | ||||||||||||||||||||||||||||||||
Share-based compensation
|
||||||||||||||||||||||||||||||||||||
expense
|
264 | 264 | ||||||||||||||||||||||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||||||||||
Translation adjustments
|
(121 | ) | (121 | ) | (121 | ) | ||||||||||||||||||||||||||||||
Net income
|
132 | 132 | 132 | |||||||||||||||||||||||||||||||||
Total comprehensive income
|
$ | 11 | ||||||||||||||||||||||||||||||||||
BALANCE,
|
||||||||||||||||||||||||||||||||||||
SEPTEMBER 30, 2011
|
6,175,978 | $ | 62 | $ | 24,476 | $ | (16,858 | ) | $ | (1,198 | ) | (14,246 | ) | $ | (140 | ) | $ | 6,342 | ||||||||||||||||||
Year Ended September 30,
|
||||||||
2011
|
2010
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net income
|
$ | 132 | $ | 380 | ||||
Adjustments to reconcile net income to cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
753 | 1,234 | ||||||
Provision for doubtful accounts and sales returns
|
(17 | ) | (50 | ) | ||||
Share-based compensation
|
264 | 192 | ||||||
Changes in current assets and liabilities
|
||||||||
Accounts receivable
|
(727 | ) | 782 | |||||
Inventories
|
(10 | ) | 26 | |||||
Prepaid expenses and other assets
|
(247 | ) | 56 | |||||
Accounts payable, accrued expenses and other liabilities
|
632 | (621 | ) | |||||
Deferred revenue
|
367 | (430 | ) | |||||
Cash provided by operating activities
|
1,147 | 1,569 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchases of equipment and fixtures
|
(128 | ) | (110 | ) | ||||
Capitalized software development costs
|
— | (3 | ) | |||||
Decrease in restricted cash
|
89 | 18 | ||||||
Increase in other assets
|
(37 | ) | (3 | ) | ||||
Cash used in investing activities
|
(76 | ) | (98 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds from exercise of stock options
|
388 | — | ||||||
Cash provided by financing activities
|
388 | — | ||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
|
||||||||
EQUIVALENTS
|
(128 | ) | (67 | ) | ||||
INCREASE IN CASH AND EQUIVALENTS
|
1,331 | 1,404 | ||||||
CASH AND EQUIVALENTS, BEGINNING OF YEAR
|
7,053 | 5,649 | ||||||
CASH AND EQUIVALENTS, END OF YEAR
|
$ | 8,384 | $ | 7,053 | ||||
SUPPLEMENTAL CASH FLOW INFORMATION:
|
||||||||
Income taxes paid
|
$ | 32 | $ | 35 | ||||
2011
|
2010
|
|||||||
(in thousands)
|
||||||||
Allowance for doubtful accounts balance - beginning of year
|
$ | 129 | $ | 160 | ||||
Additions to the allowance for doubtful accounts
|
92 | 99 | ||||||
Deductions against the allowance for doubtful accounts
|
(143 | ) | (130 | ) | ||||
Allowance for doubtful accounts balance - end of year
|
$ | 78 | $ | 129 | ||||
2011
|
2010
|
|||||||
(in thousands)
|
||||||||
Sales returns reserve balance - beginning of year
|
$ | 35 | $ | 55 | ||||
Additions to the sales returns reserve
|
101 | 12 | ||||||
Deductions against the sales returns reserve
|
(66 | ) | (32 | ) | ||||
Sales returns reserve balance - end of year
|
$ | 70 | $ | 35 | ||||
2011
|
2010
|
|||||||
(in thousands)
|
||||||||
Capitalized and purchased software balance - beginning of year
|
$ | 396 | $ | 1,106 | ||||
Capitalized software development costs
|
— | 3 | ||||||
Amortization of capitalized software development costs and
|
||||||||
purchased software
|
(382 | ) | (713 | ) | ||||
Capitalized and purchased software balance - end of year
|
$ | 14 | $ | 396 | ||||
·
|
Level 1 – Observable inputs such as quoted prices in active markets;
|
·
|
Level 2 – Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
|
·
|
Level 3 – Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.
|
Quoted Prices
|
||||||||||||||||
in Active
|
Significant
|
|||||||||||||||
Markets for
|
Other
|
Significant
|
||||||||||||||
Identical
|
Observable
|
Unobservable
|
||||||||||||||
Assets
|
Inputs
|
Inputs
|
||||||||||||||
Total
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
|||||||||||||
Balance at September 30, 2011
|
||||||||||||||||
Money market funds
|
$ | 2,233 | $ | 2,233 | $ | — | $ | — | ||||||||
Balance at September 30, 2010
|
||||||||||||||||
Money market funds
|
$ | 2,233 | $ | 2,233 | $ | — | $ | — | ||||||||
Percentage of total revenue
|
Percentage of total
|
|||||||
for the year ended
|
accounts receivable at | |||||||
September 30,
|
September 30,
|
|||||||
2011
|
2010
|
2011
|
2010
|
|||||
Ingram Micro, Inc.
|
13%
|
11%
|
14%
|
11%
|
||||
Lifeboat Distribution
|
15%
|
12%
|
18%
|
21%
|
||||
2011
|
2010
|
|||||||
(in thousands)
|
||||||||
Maintenance
|
$ | 3,794 | $ | 3,350 | ||||
Other
|
142 | 229 | ||||||
Total
|
3,936 | 3,579 | ||||||
Less: Long-term portion of deferred maintenance
|
(113 | ) | (152 | ) | ||||
Current portion of deferred revenue
|
$ | 3,823 | $ | 3,427 | ||||
Weighted
|
September 30, 2011
|
September 30, 2010
|
||||||||||||||||||||||||||
Average
|
Gross
|
Net |
Gross
|
Net | ||||||||||||||||||||||||
Identified Intangible
|
Useful Life
|
Carrying
|
Accumulated
|
Carrying
|
Carrying
|
Accumulated
|
Carrying
|
|||||||||||||||||||||
Asset
|
in Years
|
Amount
|
Amortization
|
Amount
|
Amount
|
Amortization
|
Amount
|
|||||||||||||||||||||
(in thousands)
|
||||||||||||||||||||||||||||
Capitalized software
|
2 | $ | 2,662 | $ | 2,648 | $ | 14 | $ | 2,662 | $ | 2,287 | $ | 375 | |||||||||||||||
Purchased software
|
5 | 700 | 700 | — | 700 | 679 | 21 | |||||||||||||||||||||
Patents
|
20 | 160 | 57 | 103 | 160 | 49 | 111 | |||||||||||||||||||||
Customer lists
|
10 | 1,790 | 1,029 | 761 | 1,790 | 863 | 927 | |||||||||||||||||||||
Non-compete agreements
|
4 | 640 | 640 | — | 640 | 640 | — | |||||||||||||||||||||
Trademark
|
2 | 21 | 21 | — | 21 | 21 | — | |||||||||||||||||||||
Total
|
$ | 5,973 | $ | 5,095 | $ | 878 | $ | 5,973 | $ | 4,539 | $ | 1,434 | ||||||||||||||||
Fiscal Years Ending September 30,
|
||||
2012
|
$ | 188 | ||
2013
|
174 | |||
2014
|
174 | |||
2015
|
174 | |||
2016
|
105 | |||
Thereafter
|
63 | |||
Total estimated future amortization expense
|
$ | 878 | ||
2011
|
2010
|
|||||||
Quantity of option shares not included
|
105,819 | 270,916 | ||||||
Weighted-average exercise price
|
$ | 5.18 | $ | 4.46 |
2.
|
INVENTORIES
|
2011
|
2010
|
|||||||
(in thousands)
|
||||||||
Raw materials
|
$ | 36 | $ | 22 | ||||
Finished goods
|
13 | 17 | ||||||
Total
|
$ | 49 | $ | 39 | ||||
3.
|
ACCRUED EXPENSES
|
2011
|
2010
|
|||||||
(in thousands)
|
||||||||
Accrued salaries and benefits
|
$ | 178 | $ | 171 | ||||
Accrued royalties and commissions
|
937 | 897 | ||||||
Accrued severance
|
114 | — | ||||||
Accrued professional fees
|
244 | 207 | ||||||
Other
|
329 | 331 | ||||||
Total
|
$ | 1,802 | $ | 1,606 | ||||
4.
|
COMMITMENTS AND CONTINGENCIES
|
Years Ending September 30,
|
||||
2012
|
$ | 360 | ||
2013
|
215 | |||
2014
|
178 | |||
2015
|
172 | |||
2016
|
125 | |||
Total future minimum lease payments
|
$ | 1,050 | ||
5.
|
INCOME TAXES
|
2011
|
2010
|
|||||||
(in thousands)
|
||||||||
Domestic
|
$ | 257 | $ | 399 | ||||
Foreign
|
(90 | ) | 18 | |||||
Total
|
$ | 167 | $ | 417 | ||||
2011
|
2010
|
|||||||
(in thousands)
|
||||||||
Current:
|
||||||||
Federal
|
$ | — | $ | — | ||||
State
|
11 | 17 | ||||||
Foreign
|
25 | 26 | ||||||
36 | 43 | |||||||
Deferred:
|
||||||||
Federal
|
(185 | ) | 390 | |||||
State
|
(1 | ) | (168 | ) | ||||
Change in valuation allowance
|
185 | (228 | ) | |||||
(1 | ) | (6 | ) | |||||
Total provision
|
$ | 35 | $ | 37 | ||||
2011
|
2010
|
|||||||
(in thousands)
|
||||||||
Deferred tax liabilities:
|
||||||||
Prepaid expenses
|
(91 | ) | (37 | ) | ||||
Acquired intangibles
|
(40 | ) | (43 | ) | ||||
(131 | ) | (80 | ) | |||||
Deferred tax assets:
|
||||||||
Net operating loss carryforwards
|
5,146 | 4,793 | ||||||
Research and development credits
|
624 | 571 | ||||||
Accounts and notes receivable reserves
|
27 | 48 | ||||||
Alternative minimum tax credits
|
164 | 164 | ||||||
Depreciation and amortization
|
1,241 | 1,412 | ||||||
Deferred rent
|
— | 21 | ||||||
Other
|
165 | 122 | ||||||
7,367 | 7,131 | |||||||
Total
|
7,236 | 7,051 | ||||||
Valuation allowance
|
(7,236 | ) | (7,051 | ) | ||||
Deferred tax liability, net
|
$ | — | $ | — | ||||
2011
|
2010
|
|||||||
Provision at federal statutory rate
|
$ | 57 | $ | 142 | ||||
State, net of federal impact
|
7 | (99 | ) | |||||
Foreign income taxes
|
25 | 26 | ||||||
Valuation allowance increase (decrease)
|
185 | (228 | ) | |||||
Return to provision adjustments
|
(181 | ) | 147 | |||||
Other
|
(58 | ) | 49 | |||||
Provision for income taxes
|
$ | 35 | $ | 37 |
Balance at October 1, 2009
|
$
|
793
|
||
Additions for prior year tax positions
|
33
|
|||
Balance at September 30, 2010
|
826
|
|||
Additions for prior year tax positions
|
24
|
|||
Balance at September 30, 2011
|
$
|
850
|
6.
|
SHAREHOLDERS’ EQUITY
|
Years Ended September 30,
|
||||||||
2011
|
2010
|
|||||||
(in thousands)
|
||||||||
Sales and marketing
|
$ | 100 | $ | 43 | ||||
Engineering and product development
|
8 | 14 | ||||||
General and administrative
|
156 | 135 | ||||||
Total
|
$ | 264 | $ | 192 | ||||
2011 | 2010 | |
Expected life
|
5 years
|
5 years
|
Expected volatility
|
66.26 – 67.32%
|
75.33%
|
Weighted-average volatility
|
66.56%
|
75.33%
|
Risk-free interest rate
|
1.49 – 2.38%
|
1.28%
|
Dividend yield
|
0.0%
|
0.0%
|
Weighted-
|
Weighted - Average
|
|||||||||||||||
Number of
|
Average
|
Remaining
|
Aggregate
|
|||||||||||||
Options
|
Exercise
|
Contractual
|
Intrinsic
|
|||||||||||||
Outstanding
|
Price
|
Term
|
Value $(000)
|
|||||||||||||
Outstanding, October 1, 2009
|
548,800 | 3.05 | ||||||||||||||
Granted
|
30,500 | 2.35 | ||||||||||||||
Canceled
|
(34,290 | ) | 5.08 | |||||||||||||
Exercised
|
— | — | ||||||||||||||
Outstanding, September 30, 2010
|
545,010 | 2.89 | ||||||||||||||
Granted
|
241,500 | 3.80 | ||||||||||||||
Canceled
|
(129,600 | ) | 3.95 | |||||||||||||
Exercised
|
(197,248 | ) | 1.97 | |||||||||||||
Outstanding, September 30, 2011
|
459,662 | $ | 3.46 | 4.55 | $ | 872 | ||||||||||
Vested or expected to vest, September 30, 2011
|
439,850 | $ | 3.44 | 4.47 | $ | 842 | ||||||||||
Exercisable, September 30, 2011
|
261,546 | $ | 3.16 | 3.40 | $ | 573 | ||||||||||
Exercisable, September 30, 2010
|
499,119 | $ | 2.90 |
Outstanding
|
Exercisable
|
|||||||||||||
Weighted-Average
|
Weighted-
|
Weighted-
|
||||||||||||
Remaining
|
Average
|
Average
|
||||||||||||
Exercise
|
Number of
|
Contractual
|
Exercise
|
Exercise
|
||||||||||
Prices
|
|
Shares
|
Life (Years)
|
Price
|
Shares
|
Price
|
||||||||
$ 0.74 – $2.98 |
136,163
|
2.61
|
$
|
1.89
|
120,343
|
$
|
1.81
|
|||||||
$ 3.22 – $4.55 |
212,999
|
5.61
|
3.63
|
87,996
|
3.88
|
|||||||||
$ 4.88 – $5.62 |
110,500
|
4.92
|
5.06
|
53,207
|
5.02
|
|||||||||
459,662
|
4.55
|
$
|
3.46
|
261,546
|
$
|
3.16
|
Number of
|
|||||
RSUs
|
|||||
Outstanding
|
|||||
Outstanding, October 1, 2009
|
39,494 | ||||
Granted
|
27,000 | ||||
Canceled
|
(2,501 | ) | |||
Vested
|
(18,152 | ) | |||
Outstanding, September 30, 2010
|
45,841 | ||||
Granted
|
282,500 | ||||
Canceled
|
(13,504 | ) | |||
Vested
|
(20,493 | ) | |||
Outstanding, September 30, 2011
|
294,344 |
7.
|
RETIREMENT SAVINGS PLAN
|
8.
|
SEGMENT INFORMATION
|
2011
|
2010
|
|||
Report Analytics Solutions
(including Monarch, Monarch Data Pump, Monarch Enterprise Server, Monarch RMS, Datawatch Dashboards, Monarch Report Manager on Demand and iMergence)
|
91%
|
90%
|
||
Business Service Management Solutions
(including Visual QSM and Visual HD)
|
9%
|
10%
|
||
Total
|
100%
|
100%
|
||
International
|
||||||||||||||||
(Principally
|
Intercompany
|
|||||||||||||||
Domestic
|
U.K.)
|
Eliminations
|
Total
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Year Ended September 30, 2011
|
||||||||||||||||
Total revenue
|
$ | 14,671 | $ | 4,042 | $ | (828 | ) | $ | 17,885 | |||||||
Operating income (loss)
|
257 | (190 | ) | — | 67 | |||||||||||
Long-lived assets
|
1,139 | 68 | — | 1,207 | ||||||||||||
Year Ended September 30, 2010
|
||||||||||||||||
Total revenue
|
$ | 14,229 | $ | 4,326 | $ | (881 | ) | $ | 17,674 | |||||||
Operating income (loss)
|
404 | (13 | ) | — | 391 | |||||||||||
Long-lived assets
|
1,741 | 54 | — | 1,795 | ||||||||||||
9.
|
QUARTERLY RESULTS (UNAUDITED)
|
First
|
Second
|
Third
|
Fourth
|
|||||||||||||
(in thousands, except per share amounts)
|
||||||||||||||||
Year Ended September 30, 2011:
|
||||||||||||||||
Software license revenue
|
$ | 2,110 | $ | 2,552 | $ | 2,400 | $ | 2,796 | ||||||||
Maintenance revenue
|
1,538 | 1,505 | 1,527 | 1,649 | ||||||||||||
Professional services revenue
|
532 | 397 | 486 | 393 | ||||||||||||
Cost of software licenses
|
545 | 587 | 530 | 575 | ||||||||||||
Cost of maintenance and services
|
680 | 606 | 655 | 596 | ||||||||||||
Expenses
|
2,738 | 3,765 | 3,034 | 3,507 | ||||||||||||
Income (loss) from operations
|
217 | (504 | ) | 194 | 160 | |||||||||||
Net income (loss)
|
229 | (511 | ) | 213 | 201 | |||||||||||
Net income (loss) per share - basic
|
$ | 0.04 | $ | (0.09 | ) | $ | 0.04 | $ | 0.03 | |||||||
Net income (loss) per share - diluted
|
$ | 0.04 | $ | (0.09 | ) | $ | 0.03 | $ | 0.03 | |||||||
Year Ended September 30, 2010:
|
||||||||||||||||
Software license revenue
|
$ | 2,166 | $ | 2,593 | $ | 2,458 | $ | 2,346 | ||||||||
Maintenance revenue
|
1,612 | 1,548 | 1,614 | 1,548 | ||||||||||||
Professional services revenue
|
456 | 430 | 521 | 382 | ||||||||||||
Cost of software licenses
|
573 | 648 | 597 | 564 | ||||||||||||
Cost of maintenance and services
|
759 | 747 | 731 | 656 | ||||||||||||
Expenses
|
3,091 | 3,268 | 2,978 | 2,671 | ||||||||||||
Income (loss) from operations
|
(189 | ) | (92 | ) | 287 | 385 | ||||||||||
Net income (loss)
|
(199 | ) | (97 | ) | 222 | 454 | ||||||||||
Net income (loss) per share - basic
|
$ | (0.03 | ) | $ | (0.02 | ) | $ | 0.04 | $ | 0.08 | ||||||
Net income (loss) per share - diluted
|
$ | (0.03 | ) | $ | (0.02 | ) | $ | 0.04 | $ | 0.07 | ||||||
|
(a)
|
Evaluation of Disclosure Controls and Procedures
|
|
(b)
|
Changes in Internal Controls
|
|
(c)
|
Management’s Report on Internal Control over Financial Reporting
|
1)
|
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
|
2)
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the Company; and
|
3)
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
|
Michael A. Morrison
|
48
|
President, Chief Executive Officer and Director
|
||
Murray P. Fish
|
60
|
Chief Financial Officer, Vice President of Finance, Treasurer and Secretary
|
||
Harvey C. Gross
|
62
|
Chief Technology Officer and Vice President, Product Management & Development
|
||
Daniel F. Incropera
|
47
|
Corporate Controller & Vice President
|
|
(a)
|
1. Consolidated Financial Statements
|
(1)
|
3.1
|
Restated Certificate of Incorporation of the Registrant (Exhibit 3.2)
|
||
(5)
|
3.2
|
Certificate of Amendment of Restated Certificate of Incorporation of the Registrant (Exhibit 3.2)
|
||
(1)
|
3.3
|
By-Laws, as amended, of the Registrant (Exhibit 3.3)
|
||
(1)
|
4.1
|
Specimen certificate representing the Common Stock (Exhibit 4.4)
|
||
(10)
|
10.1*
|
Form of Incentive Stock Option Agreement of the Registrant (Exhibit 10.2)
|
||
(10)
|
10.2*
|
Form of Nonqualified Stock Option Agreement of the Registrant (Exhibit 10.3)
|
||
(1)
|
10.3
|
Software Development and Marketing Agreement by and between Personics Corporation and Raymond Huger, dated January 19, 1989 (Exhibit 10.12)
|
||
(8)
|
10.4
|
Option Purchase Agreement by and among Datawatch Corporation, Personics Corporation and Raymond J. Huger dated April 29, 2005. (Exhibit 10.1)
|
||
(7)
|
10.5
|
Distribution Agreement, dated December 10, 1992, by and between Datawatch Corporation and Ingram Micro, Inc. (Exhibit 10.2)
|
||
(2)
|
10.6*
|
1996 Non-Employee Director Stock Option Plan, as amended on December 10, 1996 (Exhibit 10.30)
|
||
(2)
|
10.7*
|
1996 International Employee Non-Qualified Stock Option Plan (Exhibit 10.31)
|
||
(7)
|
10.8*
|
1996 Stock Plan as amended as of March 7, 2003 (Exhibit 10.1)
|
||
(3)
|
10.9
|
Indemnification Agreement between Datawatch Corporation and James Wood, dated January 12, 2001 (Exhibit 10.1)
|
||
(3)
|
10.10
|
Indemnification Agreement between Datawatch Corporation and Richard de J. Osborne, dated January 12, 2001 (Exhibit 10.2)
|
||
(4)
|
10.11
|
Form of Indemnification Agreement between Datawatch Corporation and each of its Non-Employee Directors (Exhibit 10.1)
|
||
(4)
|
10.12*
|
Advisory Agreement, dated April 5, 2001, by and between Datawatch Corporation and Richard de J. Osborne (Exhibit 10.2)
|
||
(9)
|
10.13
|
Stock Purchase Agreement among Datawatch Corporation, Mergence Technologies Corporation and the Management Sellers, dated as of August 11, 2005 (Exhibit 2.1)
|
||
(9)
|
10.14
|
Form of Stock Purchase Agreement among Datawatch Corporation, Mergence Technologies Corporation and the Non-Management Sellers, dated as of August 11, 2005 (Exhibit 2.2)
|
||
(11)
|
10.15*
|
Form of Lock-up Agreement between Datawatch Corporation and each Executive Officer of Datawatch Corporation, dated September 26, 2005 (Exhibit 99.1)
|
||
(12)
|
10.16
|
February 2006 Amendment to Software Development and Marketing Agreement, dated February 21, 2006 by and among the Company, Personics Corporation, Raymond J. Huger and Math Strategies (Exhibit 10.1)
|
*
|
Indicates a management contract or compensatory plan or contract.
|
Note: The number given in parenthesis next to each item listed above indicates the corresponding exhibit in each filing listed below.
|
||
(1)
|
Previously filed as an exhibit to Registration Statement 33-46290 on Form S-1 and incorporated herein by reference.
|
|
(2)
|
Previously filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 1996 and incorporated herein by reference.
|
|
(3)
|
Previously filed as an exhibit to Registrant’s Current Report on Form 8-K dated February 2, 2001 and incorporated herein by reference.
|
|
(4)
|
Previously filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 and incorporated herein by reference.
|
|
(5)
|
Previously filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 2001 and incorporated herein by reference.
|
(6)
|
Previously filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 and incorporated herein by reference.
|
|
(7)
|
Previously filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 and incorporated herein by reference.
|
|
(8)
|
Previously filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference.
|
|
(9)
|
Previously filed as an exhibit to Registrant’s Current Report on Form 8-K dated August 20, 2004 and incorporated herein by reference.
|
|
(10)
|
Previously filed as an exhibit to Registrant’s Current Report on Form 8-K dated November 2, 2004 and incorporated herein by reference.
|
|
(11)
|
Previously filed as an exhibit to Registrant’s Current Report on Form 8-K dated September 26, 2005 and incorporated herein by reference.
|
|
(12)
|
Previously filed as an exhibit to Registrant’s Current Report on Form 8-K dated February 21, 2006 and incorporated herein by reference.
|
|
(13)
|
Previously filed as Appendix A to Registrant’s Definitive Proxy Statement dated January 30, 2006 and incorporated herein by reference.
|
|
(14)
|
Previously filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 2006 and incorporated herein by reference.
|
|
(15)
|
Previously filed as an exhibit to Registrant’s Current Report on Form 8-K dated March 10, 2006 and incorporated herein by reference.
|
|
(16)
|
Previously filed as an exhibit to Registrant’s Current Report on Form 8-K dated March 26, 2007 and incorporated herein by reference.
|
|
(17)
|
Previously filed as an exhibit to Registrant’s Current Report on Form 8-K dated August 2, 2007 and incorporated herein by reference.
|
|
(18)
|
Previously filed as an exhibit to Registrant’s Current Report on Form 8-K dated February 14, 2011 and incorporated herein by reference.
|
|
(19)
|
Previously filed as an exhibit to Registrant’s Current Report on Form 8-K dated March 10, 2011 and incorporated herein by reference.
|
|
(20)
|
Previously filed as an exhibit to Registrant’s Current Report on Form 8-K dated July 26, 2011 and incorporated herein by reference.
|
|
(21)
|
Previously filed as Appendix A to Registrant’s Definitive Revised Proxy Statement on Schedule 14A dated March 17, 2011 and incorporated herein by reference.
|
Datawatch Corporation
|
||||
Date:
|
December 22, 2011
|
By:
|
/s/ Michael A. Morrison
|
|
Michael A. Morrison
|
||||
President, Chief Executive Officer
and Director
|
SIGNATURE
|
TITLE
|
DATE
|
||
/s/ Michael A. Morrison
|
President, Chief Executive Officer and Director
|
December 22, 2011
|
||
Michael A. Morrison
|
(Principal Executive Officer)
|
|||
/s/ Murray P. Fish
|
Chief Financial Officer, Treasurer, Vice President of
|
December 22, 2011
|
||
Murray P. Fish
|
Finance and Secretary
|
|||
(Principal Financial and Accounting Officer)
|
||||
/s/ Richard de J. Osborne
|
Chairman of the Board
|
December 22, 2011
|
||
Richard de J. Osborne
|
||||
/s/ James Wood
|
Director
|
December 22, 2011
|
||
James Wood
|
||||
/s/ Thomas H. Kelly
|
Director
|
December 22, 2011
|
||
Thomas H. Kelly
|
||||
/s/ Terry W. Potter
|
Director
|
December 22, 2011
|
||
Terry W. Potter
|
||||
/s/ William B. Simmons, Jr.
|
Director
|
December 22, 2011
|
||
William B. Simmons, Jr.
|
||||
/s/ David C. Mahoney
|
Director
|
December 22, 2011
|
||
David C. Mahoney
|
___________________________
|
DATAWATCH CORPORATION
|
(Participant Signature)
|
|
___________________________
|
|
(Street Address)
|
By:__________________________________
|
Name:
|
|
___________________________
(City/State/Zip Code)
|
Title:
|
___________________________
|
DATAWATCH CORPORATION
|
(Participant Signature)
|
|
___________________________
|
|
(Street Address)
|
By:__________________________________
|
Name: Michael A. Morrison
|
|
___________________________
(City/State/Zip Code)
|
Title: President and CEO
|
Prior to
_______ __, ____
|
-0- shares
|
|
On
_______ __, ____
and at the end of each three-month period thereafter
|
-
|
An additional [____]
shares (or such number of shares at the end of the last three month period so that the total does not exceed [_____]
shares).
|
|
(i)
|
in United States dollars in cash or by check;
|
|
(ii)
|
subject to Section 7(b) below, by delivery of shares of the Company’s Common Stock having a Fair Market Value (as determined by the Committee) as of the date of the exercise equal to the cash exercise price of this option;
|
|
(iii)
|
by delivery (including by attestation) of an assignment satisfactory in form
and substance to the Company of a sufficient amount of the proceeds from the sale of the Option Shares and an instruction to the broker or selling agent to pay that amount to the Company; or
|
|
(iv)
|
by any combination of the foregoing.
|
(a)
|
The Company is merged or consolidated or reorganized into or with another corporation or other legal person, and as a result of a merger, tender offer, consolidation, reorganization or transaction, less than a majority of the combined voting power of the then-outstanding securities of such surviving, resulting or reorganized corporation or person immediately after such transaction is held in the aggregate by the holders of the then-outstanding securities entitled to vote generally in the election of directors of the Company (“Voting Stock”) immediately prior to such transaction;
|
(b)
|
The Company sells or otherwise transfers all or substantially all of its assets to any other corporation or other legal person, and as a result of such sales or transfer less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such sale or transfer is held in the aggregate by the holder of Voting Stock of the Company immediately prior to such sale or transfer;
|
(c)
|
There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), disclosing that any “person” (as such term is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the “beneficial owner” (as such term is used in Rule 13d-3 under the Exchange Act) of securities representing 35% or more of the Voting Stock of the Company;
|
(d)
|
The Company files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Company has occurred; or
|
(e)
|
If during any period of two consecutive years, individuals who at the beginning of any such period constitute the Board cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Company’s stockholders, of each director of the Company first elected during such period was approved by a vote of at least a majority of the directors then still in office who were directors of the Company at the beginning of any such period;
|
Prior to _________
__
,
____
|
-0- shares
|
|
On _________
__
,
____ and at the end of each three-month period thereafter
|
-
|
An additional [___]
shares (or such number of shares at the end of the last three month period so that the total does not exceed [____]
shares).
|
|
(i)
|
in United States dollars in cash or by check;
|
|
(ii)
|
subject to Section 7(b) below, by delivery of shares of the Company’s Common Stock having a Fair Market Value (as determined by the Committee) as of the date of the exercise equal to the cash exercise price of this option;
|
|
(iii)
|
by delivery (including by attestation) of an assignment satisfactory in form
and substance to the Company of a sufficient amount of the proceeds from the sale of the Option Shares and an instruction to the broker or selling agent to pay that amount to the Company; or
|
|
(iv)
|
by any combination of the foregoing.
|
|
if to Zoll:
|
Zoll Medical Corporation
|
Signed:
|
||||
SUBTENANT:
|
ZOLL:
|
|||
Datawatch Corporation
,
a Delaware corporation
|
Zoll Medical Corporation,
a Delaware corporation
|
|||
By:
|
/s/ Murray P. Fish
|
By:
|
/s/ Jonathan Rennelt
|
|
Name:
|
Murray P. Fish
|
Name:
|
Jonathan Rennelt
|
|
Title:
|
CFO
|
Title:
|
President
|
LANDLORD:
|
BOSTON PROPERTIES LIMITED PARTNERSHIP
|
|
LANDLORD'S ORIGINAL ADDRESS:
|
c/o Boston Properties, Inc.
800 Boylston Street
Boston, Massachusetts 02199-8001
(with copies, if any required under Section 8.12 below)
|
|
LANDLORD'S CONSTRUCTION REPRESENTATIVE:
|
Mike Bowers
|
|
TENANT'S CONSTRUCTION REPRESENTATIVE:
|
Mike Cole
|
|
TENANT:
|
ZOLL MEDICAL CORPORATION
|
|
TENANT'S ORIGINAL ADDRESS:
|
269 Mill Road
Chelmsford, Massachusetts 01824
(with copies, if any required under Section 8.12 below)
|
COMMENCEMENT DATE: | July 1, 2011 | |
RENT COMMENCEMENT DATE:
|
January 1, 2013
|
|
ORIGINAL TERM:
|
July 1, 2011 through June 30, 2021, unless extended or sooner terminated as provided in this Lease.
|
|
EXTENSION OPTIONS:
|
||
TERM (OR LEASE TERM):
|
All references in this Lease to the Term or Lease Term shall mean the Original Term and if, but only if, extended pursuant to Section 2.4.0, the Original Term as extended by the applicable extension option periods unless otherwise specifically provided in this Lease.
|
|
THE SITE:
|
That certain parcel of land known as the Quorum Office Park in Chelmsford and Billerica, Massachusetts, being more particularly described in
Exhibit A
attached hereto.
|
|
BUILDING ONE:
|
The building known as and numbered 271 Mill Road, Chelmsford, Massachusetts, located on the Site and containing the Total Area set forth below.
|
|
BUILDING TWO:
|
(a) The building known as and numbered 269 Mill Road, Chelmsford, Massachusetts, located on the Site (the
"269 Mill Road
Building")
and containing the Total Area set forth below, together with (b) the building connector (the
"Connector"),
which connects the 269 Mill Road Building to Building One, and containing the Total
Area set forth below.
|
THE BUILDINGS: | Building One and Building Two. | |
THE PROPERTY:
|
Building One and Building Two together with all parking areas. The Site and all improvements (including. without limitation. landscaping, drives, roads) from time to time thereon and thereto.
|
|
THE PREMISES:
|
(a) All of Building Two (which includes the Connector) (the
"Building Two Premises");
and (b) a portion of Building One (the
"Building One Premises")
consisting of space on the first and second floors of Building One in accordance with the floor plan attached hereto as
Exhibit B;
subject to the provisions of Section 2.1
hereof. Collectively, the Building Two Premises and the Building One Premises are hereinafter referred to as the "Premises".
|
|
TOTAL NUMBER OF TENANT'S PARKING SPACES:
|
To be provided at the rate of four (4) spaces per 1,000 square feet of (a) the "Total Area of the 269 Mill Road Building" (as defined below) (which expressly excludes the Connector and is agreed to be 137,854 rentable square feet) plus (b) the "Floor Area of the Building One Premises" (as defined below) (agreed to be 75,274 rentable square feet). The Total Number of Tenant's Parking Spaces shall be adjusted up or down (based on the parking ratio specified above multiplied by the rentable area of the Premises from time to time) in the event that the Floor Area of the Premises is modified pursuant to the terms hereof. For purposes of clarification, in no event
shall Tenant be entitled to parking spaces attributable to the area of the Connector. As of the Commencement Date, the Total Number of Tenant's Parking Spaces shall be eight hundred and fifty three (853).
|
|
ANNUAL FIXED RENT: | (a) During the Original Term of this Lease beginning on the Commencement Date and |
continuing through the last day of the Original Term. at the net annual rate equal to the product of (i) the "Floor Area of the Premises" (hereinafter defined) and (ii)
and
|
||
(b) During the extension option periods (if exercised). as determined pursuant to Section 2.4.0.
|
||
ADDITIONAL RENT:
|
All sums, amounts, charges and additional rent payable by Tenant under this Lease except Annual Fixed Rent.
|
|
OPERATING EXPENSES: | As provided in Section 2.6 hereof. | |
REAL ESTATE TAXES: | As provided in Section 2.7 hereof. | |
TENANT ELECTRICITY: |
As provided in Section 2.8 hereof.
|
|
FLOOR AREA OF | 220,738 square feet'. | |
THE PREMISES:
|
||
TOTAL AREA OF BUILDING ONE:
|
122,063 rentable square feet. | |
FLOOR AREA OF
THE BUILDING ONE PREMISES:
|
75,274 rentable square feet. | |
TOTAL AREA OF
269 MILL ROAD BUILDING:
|
137,854 rentable square feet. | |
TOTAL AREA OF THE CONNECTOR:
|
7,610 usable square feet. | |
TOTAL AREA OF
BUILDING TWO (WHICH INCLUDES THE CONNECTOR):
|
145,464 square feet.
|
|
FLOOR AREA OF |
145,464 square feet.
|
THE BUILDING TWO PREMISES (WHICH INCLUDES THE CONNECTOR):
|
||
TOTAL AREA OF THE OF THE BUILDINGS:
|
267,527 square feet.
|
|
PERMITTED USES:
|
Business or professional office purposes, light manufacturing (including fabrication, assembly, processing, finishing work or packaging), distribution and uses ancillary or accessory to the foregoing, all to the extent permitted either as of right or by special permit or variance existing on the date hereof, from time to time, under the Town of Chelmsford Zoning By-Law and, if applicable, taking into account grandfathering rights provided therein or in Massachusetts General Laws, Chapter 40A. Subject to receipt of Landlord's approval, which approval may not be unreasonably withheld, Tenant may, at its sole cost and expense, seek a special permit or
variance for permitted use under the Town of Chelmsford Zoning By-Law, to the extent such use is one of the enumerated "uses" set forth above (which includes the "ancillary or accessory" uses expressly permitted above).
|
|
RECOGNIZED BROKER:
|
FHO Partners, LLC
One International Place
Boston, Massachusetts 02110
|
|
THE ZOLL/TELLABS SUBLEASE:
|
That certain sublease dated April 17, 2003 between Tellabs Operations, Inc., as sublandlord
("Tellabs"),
and Tenant, as subtenant, as amended by First Amendment to Sublease dated February 29, 2008, pursuant to which Tenant subleased a portion of the Premises (the
"Subleased
Premises")
and the term of which
expires on June 29, 2011 (the
°Sublease Expiration
Date").
|
|
THE ZOLL/SIEMENS SUB-SUBLEASE: |
That certain sub-sublease dated January 29, 2009 between Nokia Siemens Networks US LLC, as sub-sublandlord
("Siemens").
and Tenant, as sub-subtenant, pursuant to
wh
ich Tenant sub-subleased a portion of the Premises (the
"Sub-Subleased Premises")
and the term of which expires on June 29, 2011
(the
"Sub-Sublease Expiration Date").
|
|
(a)
|
Compensation, wages and all fringe benefits, worker'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 Buildings or the Site (equitably adjusted if such persons are also employed on other properties of Landlord or its affiliates);
|
(b)
|
Payments under service contracts with independent contractors for operating, maintaining or cleaning of the Buildings or the Site;
|
(c)
|
Steam, water, sewer, gas, oil, electricity and telephone charges (excluding such utility charges separately chargeable to Tenant or other tenants for additional or separate services);
|
(d)
|
Cost of maintenance, cleaning and repairs (other than repairs not properly chargeable against income or reimbursed from contractors under guarantees);
|
(e)
|
Cost of snow and ice removal, sanding and the like and care and replacement of landscaping;
|
(f)
|
Cost of building and cleaning supplies and equipment;
|
(g)
|
Premiums for insurance carried by Landlord with respect to the Property (including, without limitation, liability insurance, insurance against loss in case of fire and/or casualty and of monthly installments of Annual Fixed Rent and any Additional Rent for periods not to exceed twelve (12) months which may be due under this Lease and other leases of space in the Buildings, and if there be any first mortgage on the Property, including such insurance relating to the Property and its ownership and operation as may be required by the holder of such first mortgage);
|
(h)
|
For each year during the Lease Term, an annual management fee of two and one half percent (2.5%) of the "Gross Rent for the Buildings" (as hereinafter defined), provided, however, in the event that Landlord hires a third party manager to manage the Building(s), the annual management fee shall be a reasonable, market based property management fee for third party managed property of similar type, use and quality. For purposes hereof, "Gross Rent for the Buildings" shall mean the sum of (i) the applicable Annual Fixed Rent set forth in all leases of the Buildings plus (ii) the "Operating Expenses Allocable to the Premises" as provided below in this Section 2.6 plus all other Operating Expenses payable under other leases of the
Buildings, excluding therefrom the aforesaid management fee and any amounts paid directly to the provider by Tenant or any other tenant for utilities and janitorial services, plus (iii) "Landlord's Tax Expenses Allocable to the Premises" (as set forth and calculated in
|
(i)
|
Depreciation for capital expenditures made by Landlord (x) to reduce operating expenses if Landlord reasonably shall have determined that the annual reduction in operating expenses shall exceed depreciation therefor or, and such reduction does, in fact, occur (y) to comply with applicable laws, rules, regulations, requirements, statutes, ordinances, by-laws and court decisions of all public authorities which are hereafter first in force or first become applicable to the Building(s) or the Site on or after the Commencement Date (herein collectively called "Legal Requirements"),(the capital expenditures described in subsections (x) and (y) being
hereinafter referred to as "Permitted Capital Expenditures"); plus in the case of both (x) and (y) 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 locality in which the Building is located; depreciation in the case of both (x) and (y) shall be determined by dividing the original cost of such capital expenditure by the number of years of useful life of the capital item acquired and the useful life shall be reasonably determined by Landlord in accordance with generally accepted accounting principles and practices in effect at the time of acquisition of the capital item; and
|
(j)
|
Costs of operating and maintaining amenities for tenants including a food service and fitness center operation; and
|
(k)
|
All other reasonable and necessary expenses paid in connection with the operating, cleaning and maintenance of the Buildings, the Site and the common areas and facilities and properly chargeable against income.
|
(i)
|
Interest on indebtedness, debt amortization, ground rent and other costs related to any sale, transfer, financing, mortgage, ground lease or overlease of the Property or any portion thereof or sale or transfer of the Landlord entity; provided, however, that the foregoing shall not exclude the inclusion of the amortization and interest permitted to be included in Landlord's Operating Expenses under Section 2.6 (i) above nor shall it exclude the inclusion of any costs which Landlord is required to incur as a result of its obligations under this Lease;
|
(ii)
|
Leasing fees or commissions, marketing, advertising and promotional expenses, legal fees or expenses in connection with lease negotiations, the cost of tenant improvements, build-out allowances, moving expenses,
|
(iii)
|
The cost of repairs or replacements incurred by reason of tire or other casualty or condemnation other than costs not in excess of the deductible on any insurance maintained by Landlord (provided that the amount of any deductible shall not violate the terms of the Lease) which provides a recovery for such repair or replacement;
|
(iv)
|
Any charge for Landlord's income taxes or a corporate excise tax, excess profit taxes or franchise taxes, except to the extent any of the foregoing are explicitly deemed "real estate taxes" under Section 2.7 hereof;
|
(v)
|
The cost of any item or service to the extent reimbursable to Landlord by insurance required to be maintained under this Lease, by any tenant, or by any third party;
|
(vi)
|
Costs incurred in performing work or furnishing services for any tenant (other than Tenant), whether at such tenant's or at Landlord's expense, to the extent that such work or service is in excess of any work or service that Landlord is obligated to furnish to Tenant at Landlord's expense (e.g., if Landlord agrees to provide extra cleaning to another tenant, the cost thereof would be excluded since Landlord is not obligated to furnish extra cleaning to Tenant);
|
(vii)
|
Wages, salaries or other compensation (including fringe benefits) paid to the following positions: Director - Engineering, Regional Engineer, Chief Engineer, Chief Roving Engineer, Lease Administrator, Accounting, Assistant Director, Safety and Security, and Roving Engineer II and any position above the level of property manager. If a property manager or any personnel are shared with other buildings or have other duties not related to the Property, only the allocable portion of such person's or persons' salary shall be included in Landlord's Operating Expenses;
|
(viii)
|
The cost of any service or materials provided by any party related to Landlord, to the extent such costs exceed the reasonable cost for such service or materials absent such relationship in buildings similar to the Buildings in the vicinity of the Site; provided, however, that the provisions of this clause (viii) shall not apply to the management fee payable to Landlord or its managing agent (which such payments shall be governed by Section 2.6 (h) above);
|
(ix)
|
Any advertising, promotional or marketing expenses for the Property;
|
(x)
|
The cost of acquiring, installing, moving or restoring objects of art;
|
(xi)
|
The cost of installing. operating and maintaining any specialty such as (but not limited to) an observatory, broadcasting facilities, theater, rehearsal hall. art gallery or garage:
|
(xii)
|
The cost of repairs, maintenance and cleaning necessitated by Landlord's negligence or willful misconduct:
|
(xiii)
|
Capital expenditures (which term shall include costs for capital expenses. capital repairs and capital improvements) and depreciation, except to the extent set forth in Section 2.6 (i) above;
|
(xiv)
|
Legal, auditing, consulting and professional fees and other costs (except to the extent incurred in connection with the normal and routine maintenance and operation of the Property), including, without limitation, those: ( I) paid or incurred in connection with financings, refinancings or sales of Landlord's interest in the Site or of the Landlord entity), and (2) relating to specific disputes with tenants, and (3) paid or incurred in connection with any reporting requirements of the Landlord under applicable securities laws;
|
(xv)
|
Payments for rented equipment, the cost of which equipment would constitute a capital expenditure if the equipment were purchased;
|
(xvi)
|
Penalties and interest for late payment of any obligations of Landlord, including, without limitation, taxes, insurance, equipment leases and other past due amounts;
|
(xvii)
|
Unfunded contributions to operating expense reserves, or reserves for bad debts or for future improvements, repairs or additions;
|
(xviii)
|
Contributions to charitable organizations, political organizations or trade associations such as BOMA or NAIOP, and any entertaining, dining or travel expenses of Landlord's employees for any purpose;
|
(xix)
|
The cost of testing, remediation or removal of "Hazardous Materials" (as defined in Section 5.3) in the Buildings or on the Site required by "Hazardous Materials Laws" (as defined in Section 5.3) including costs to defend against claims in regard to the existence or release of Hazardous Materials at the Buildings or the Site, unless caused by Tenant or its contractors, subcontractors, agents, employees or invitees;
|
(xx)
|
Amounts payable by Landlord for withdrawal liability to a multi-employer pension plan (under Title IV of the Employment Retirement Income Security Act of 1974, as amended) due to complete or partial withdrawal that occurs during the term of this Lease due to events within the control of Landlord (e.g., the sale of Landlord's interest in the Building(s));
|
(xxi)
|
The cost of any services or systems for that portion of the Property occupied by the Landlord or affiliates of Landlord (exclusive of space occupied by Landlord or affiliates of Landlord in connection with the operation of the Buildings) and which are not provided generally to other tenants in the Property;
|
(xxii)
|
Costs in connection with acquiring additional land or development rights or of constructing any additional buildings on the Site;
|
(xxiii)
|
Without limitation of any other exclusions from Landlord's Operating Expenses, costs and expenses incurred by Landlord in curing, repairing or replacing any structural portion of the Building(s) (including the roof) to the extent such cure, repair or replacement was made necessary as a result of defects in the original design, workmanship or materials of the Building(s).
|
2.7
|
REAL ESTATE TAXES.
In the event that Tenant has not elected (or having once elected, has subsequently ceased) to pay real estate taxes directly to the appropriate taxing authorities pursuant to Section 2.7.1 below, for each full Tax Year falling within the Term, Tenant shall pay to Landlord, as Additional Rent, Landlord's Tax Expenses Allocable to the Premises as hereinafter defined for the applicable full Tax Year. In addition, for each fraction of a Tax Year falling within the Term either at the beginning or end thereof, Tenant shall pay to Landlord, as Additional Rent, the product of such fraction of a
Tax Year and the Landlord's Tax Expenses Allocable to the Premises for the
|
(i)
|
"Tax Year" means the twelve-month period beginning July I each year during the Term or if the appropriate governmental tax fiscal period shall begin on any date other than July 1, such other date.
|
(ii)
|
"Landlord's Tax Expenses Allocable to the Premises" shall mean (a) the same proportion of Landlord's Tax Expenses for and pertaining to Building Two as the Floor Area of the Building Two Premises bears to the Total Area of Building Two
plus
(b) the same proportion of Landlord's
|
(iii)
|
"Landlord's Tax Expenses" with respect to any Tax Year means the aggregate real estate taxes on the Buildings and Site with respect to that Tax Year, reduced by any abatement receipts with respect to that Tax Year. Landlord shall refund Tenant's pro-rata share of any abatement received by Landlord with respect to any payments made by Tenant on account of real estate taxes for the Tax Year for which the abatement is received. Where Tenant is paying real estate taxes directly under Section 2.7.1 below and Tenant receives the benefit of an abatement, if applicable, Tenant shall refund Landlord's pro-rata share of any such abatement with respect to any payments made by Landlord on account of real estate taxes for the Tax Year for
which the benefit of abatement is received.
|
(iv)
|
"Real estate taxes" means all taxes and special assessments of every kind and nature assessed by any governmental authority on the Buildings or Site which the Landlord shall become obligated to pay because of or in connection with the ownership, leasing and operation of the Site, the Buildings and the Property 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. Special assessments and special taxes shall be
paid over the longest period of time permitted by the relevant taxing authority. There shall be excluded from such taxes all income, estate, succession, inheritance and transfer taxes; provided, however, that if at any time during the Term the present system of ad valorem taxation of real property shall be changed so that in lieu of or in addition to 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 Buildings or Property, 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 rents, then any and all of such taxes, assessments, levies or
charges, to the extent so measured or based, shall be deemed to be included within the term "real estate taxes" but only to the extent that the same would be payable if the Site and Buildings were the only property of Landlord.
|
4.1.1
|
SERVICES FURNISHED BY LANDLORD.
To furnish services, utilities, facilities and supplies set forth in
Exhibit D
and
Exhibit D-I
equal in type and quality to those customarily provided by landlords in high quality buildings in the Route 3/1-495 North market subject to reimbursement in accordance with Section 2.6. Landlord shall have no obligation whatsoever to provide, contract for, pay for or otherwise arrange for the "Specified Services" to Building Two (as
defined in Section 5.3 (B) below). The Specified Services shall be performed by Tenant at its sole cost, expense and risk.
|
4.1.2
|
ADDITIONAL SERVICES AVAILABLE TO TENANT.
To furnish, at Tenant's expense, reasonable additional Building(s) operation services to Building One which are usual and customary in similar multi-tenant office buildings of comparable quality in the Boston Northwest Suburban Market upon reasonable advance request of Tenant at reasonable and equitable rates from time to time established by Landlord.
|
4.1.3
|
BUILDING STRUCTURAL REPAIRS.
Subject to the provisions of Article VI hereof respecting damage caused by tire or other casualty and by eminent domain. 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 Buildings: the exterior and load bearing walls. exterior windows. the foundation, the structural columns and floor slabs. beams. shafts. conduits and all other structural elements of the Buildings; 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 was caused by the willful misconduct, negligence or breach of this Lease by Tenant, any assignee or subtenant or any agent, servant, employee, customer, visitor or contractor of any of them. Notwithstanding anything to the contrary set forth in this Section 4.1.3 or in Section 4.1.4 or in Section 4.1.5 hereof, Tenant shall be solely responsible, at its cost and expense (except to the extent Tenant shall use Landlord's contractor to perform such work and such work shall be covered by Landlord's roof warranty), to make any and all repairs and replacements to the roof resulting from penetrations to or through the roof made by or for Tenant, any assignee or subtenant.
|
4.1.4
|
BUILDING FACILITIES AND ROOF OBLIGATIONS.
(A) Except as otherwise provided in this Lease and subject to provisions for reimbursement by Tenant as contained in Section 2.6, Landlord agrees to keep and maintain in good order, condition and repair and in compliance with applicable Legal Requirements and applicable requirements of insurers the "Building Facilities" (hereinafter defined), the base building heating, ventilating, air conditioning, plumbing, elevator, sprinkler, electrical, and other base Building(s) systems equipment servicing the Premises, and the roof of each of the Buildings, except that Landlord shall in no event be responsible to Tenant for (a) the condition,
repair or maintenance of any supplemental heating, ventilating or air conditioning equipment or other supplemental utilities systems or services installed by or on behalf of or through Tenant at any time before and/or during the Term (collectively, "Tenant's Supplemental Systems"), (b) 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 therefore shall be Tenant's), or (c) for any condition in the Site or the Building(s) caused by the willful misconduct, negligence or breach of this Lease by Tenant or any agent, employee, contractor, assignee, subtenant or invitee of Tenant. Without limitation, Landlord shall not be responsible to make any improvements or repairs to the Building(s) or the Site other
than as expressly provided in Section 4.1 .3 or in this Section 4.1.4, unless expressly otherwise provided in this Lease. For purposes hereof, the "Building Facilities" shall mean common areas and facilities described in Section 2.2 including, without limitation, the first floor lobby areas of the Buildings, the loading docks of the Buildings and the restrooms of the Buildings, excluding, however, in each case, the "Tenant's Property" (as defined in Section 5.8 below), Tenant's Supplemental Systems, "Tenant's Equipment" (as defined in Section 8.23 below) and other personal property, furniture, fixtures, equipment, modular furniture and partitions
|
4.1.5
|
DRIVEWAYS, ROADWAYS AND LANDSCAPING.
Except as otherwise provided in this Lease and subject to provisions for reimbursement by Tenant as contained in Section 2.6 hereof, Landlord agrees to maintain the drives, parking lots, access ways, sidewalks, pedestrian walks, the lighting, the open space, and other hard and soft landscaped area within or on the Site and other similar improvements and Landlord shall perform snow and ice removal from the walkways and drives located, within the Site, but shall not be obligated to remove snow and ice down to bare pavement but shall in conjunction with such snow and ice removal apply sand or other material to the affected area as is commercially
reasonable and consistent with Legal Requirements and Insurance Requirements.
|
4.2
|
INTERRUPTIONS AND DELAYS IN SERVICES AND REPAIRS.
Landlord shall not be liable to Tenant for any compensation or reduction of rent by reason of inconvenience or annoyance or for loss of business arising from the necessity of Landlord or its agents entering the Premises for any of the purposes in this Lease authorized, or for repairing the Premises or any portion of the Building(s) however the necessity may occur, so long as such entry or repair is performed in accordance with the terms and provisions of this Lease. 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 beyond Landlord's reasonable control, then, for so long as such cause beyond Landlord's reasonable control shall continue (and for a reasonable period thereafter to enable Landlord to undertake any appropriate actions and address the same) Landlord shall not be liable to Tenant therefore, nor, except as expressly otherwise provided in this Section 4.2 or in Article VI below, 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. Subject to events beyond Landlord's reasonable control and subject to Landlord's right to dispute whether any of the following actions is
necessary or required under the terms of the Lease, upon receipt of actual notice of the need therefore, Landlord shall promptly commence and diligently pursue any repairs, alterations or improvements, or furnishing any services or performing any other covenant or duty to be performed on Landlord's part hereunder. In the event that the base building electrical, heating, ventilation, air conditioning or all elevator service within the Premises shall be shut down such that Tenant shall be prevented from conducting its business operations therein, but only as a result of causes which are covered by Landlord's loss of rentals insurance, then Tenant shall be entitled to an
|
(a)
|
The proposed assignee or subtenant is not of a character consistent with the operation of a similar class and use building (by way of example Landlord shall not be deemed to be unreasonably withholding its consent to an assignment or subleasing to any governmental agency), or
|
(b)
|
The proposed assignee or subtenant is not of good character and reputation, or
|
(c)
|
Except with respect to subleases for subleased premises that are less than 25,000 rentable square feet, the proposed assignee or subtenant does not in Landlord's reasonable determination possess adequate financial capability and liquidity to perform the Tenant obligations as and when due or required (taking into account the continued liability of Tenant), or
|
(d)
|
The assignee or subtenant proposes to use the Premises (or part thereof) for a purpose other than the purpose for which the Premises may be used as stated in Section 1.1 hereof, or
|
(e)
|
There shall be existing an Event of Default (defined in Section 7.1), or
|
(f)
|
The proposed assignee or subtenant is then
a
tenant or subtenant in either
of the Buildings or has made to or received from Landlord or an affiliate of Landlord, a written proposal to lease comparable space and is in active negotiation with Landlord or an affiliate of Landlord for premises in either of the Buildings, or
|
(g)
|
Any part of the rent payable under the proposed assignment or sublease
shall be based in whole or in part on the income or profits derived from the Premises or if any proposed assignment or sublease shall potentially have any adverse effect on the real estate investment trust qualification requirements applicable to Landlord and its affiliates, or
|
(h)
|
The holder of any first mortgage on real property which includes the Premises does not approve of the proposed assignment or sublease for any reason that is permitted under the terms of its mortgage loan documents.
|
(i)
|
Tenant shall fail to pay the fixed rent or additional rent for which provision is made herein for the payment by Tenant in regular installments (including, without limitation, on account of Operating Expenses and Real Estate Taxes) on or before the date on which the same become due and payable, or Tenant shall fail to pay any other charges not contemplated above within thirty (30) days after invoice and, with respect to any such failure specified in this subsection (i), the same continues for seven (7) days after written notice from Landlord thereof, or
|
(ii)
|
Landlord having rightfully given the notice specified in subdivision (i) above twice in an calendar
y
ear, Tenant shall thereafter in the same calendar year fail to pay (X) the fixed rent or additional rent for which provision is made herein for the payment by Tenant in regular installments (including, without limitation, on account of Operating Expenses and Real Estate Taxes) on or before the date on which the same become due and payable, or (Y) any other charges within thirty (30) days after invoice, in both instances without the need for a separate notice of default or,
|
(iii)
|
Tenant shall neglect or fail to perform or observe any other covenant herein contained on Tenant's part to be performed or observed and Tenant shall fail to remedy the same within thirty (30) days after notice to Tenant specifying in reasonable detail such neglect or failure, or if such failure is of such a nature that Tenant cannot reasonably remedy the same within such thirty (30) day period, Tenant shall fail to commence promptly to remedy the same and to prosecute such remedy to completion with diligence and continuity; or
|
(iv)
|
Tenant's leasehold interest in the Premises shall be taken on execution or by other process of law directed against Tenant; or
|
(v)
|
Tenant shall make an assignment for the benefit of creditors or shall file a voluntary petition in bankruptcy or shall be adjudicated bankrupt or insolvent, or shall file any petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief for itself under any present or future Federal, State or other statute, law or regulation for the relief of debtors, or shall seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator of Tenant or of all or any substantial part of its properties, or shall admit in writing its inability to pay its debts generally as they become due; or
|
(vi)
|
A petition shall be filed against Tenant in bankruptcy or under any other law seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future Federal, State or other statute, law or regulation and shall remain undismissed or unstayed for an aggregate of ninety (90) days (whether or not consecutive), or if any debtor in possession (whether or not Tenant) trustee, receiver or liquidator of Tenant or of all or any substantial part of its properties or of the Premises shall be appointed without the consent or acquiescence of Tenant and such appointment shall remain unvacated or unstayed for an aggregate of ninety (90) days (whether or not
consecutive),
|
(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.
|
8.13
|
WHEN LEASE BECOMES BINDING.
Employees or agents of Landlord or Tenant have no authority to make or agree to make a lease or any other agreement or undertaking in connection herewith. The submission of this document for examination and negotiation does not constitute an offer to lease, or a reservation of, or option for, the Premises, and this document shall become effective and binding only upon the execution and delivery hereof by both Landlord and Tenant. All negotiations, considerations, representations and understandings between Landlord and Tenant are incorporated herein and may be modified or altered only by written agreement between Landlord and Tenant, and no act or omission
of any employee or agent of Landlord shall alter, change or modify any of the provisions hereof.
|
8.14
|
ARTICLE TITLES AND SECTION HEADINGS.
The titles of the, Articles sections and subsections throughout this Lease are for convenience and reference only, and the words
|
8.15
|
RIGHTS OF MORTGAGEE.
This Lease shall be subject and subordinate to any mortgage now or hereafter on the Site or the Building(s) or portion thereof and to each advance made or hereafter to be made under any mortgage, and to
all renewals,
modifications, consolidations, replacements and extensions thereof and all substitutions
therefor provided that the holder of such mortgage agrees. by a written instrument (an
"SNDA") in the customary form required by such mortgagee as amended by such
commercially reasonable changes as Tenant may request and the mortgagee may
reasonably approve, to recognize this Lease and the rights of Tenant hereunder
(including the right to use and occupy the Premises) upon the payment of rent and other charges payable by Tenant under this Lease and the performance by Tenant of Tenant's obligations hereunder. Tenant acknowledges and agrees that any SNDA shall require that Tenant provide to the holder of such mortgage written notice of any defaults of Landlord and commercially reasonable cure periods to be negotiated
between Tenant and such holder. In confirmation of such subordination and recognition, Tenant shall execute and deliver promptly such instruments of subordination and recognition as such mortgagee may reasonably request. 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.
|
8.16
|
STATUS REPORTS AND FINANCIAL STATEMENTS.
Recognizing that Landlord may find it necessary to establish to third parties, such as accountants, banks, potential or existing mortgagees, potential purchasers or the like, the then current status of performance hereunder, Tenant, on the request of Landlord made from time to time, will promptly furnish to Landlord, or any existing or potential holder of any mortgage encumbering the Premises, the Building(s), the Site and/or the Property or any potential purchaser of the Premises, the Building(s), the Site and/or the Property, (each an "Interested Party"), a statement of the status of any matter pertaining to this Lease, including, without
limitation, acknowledgments that (or the extent to which) each party is in compliance with its obligations under the terms of this Lease. In addition, Tenant shall deliver to Landlord, or any Interested Party designated by Landlord, financial statements of Tenant, as reasonably requested by Landlord, including, but not limited to financial statements for the past three (3) years (provided however, that for so long as Tenant is an
|
8.17
|
LANDLORD'S AND TENANT'S SELF HELP.
(A) If Tenant shall at any time default in the performance of any obligation under this Lease beyond any applicable notice and cure period set forth in Section 7.1(a), Landlord shall have the right, but shall not be obligated, to enter upon the Premises and to perform such obligation notwithstanding the fact that no specific provision for such substituted performance by Landlord is made in this Lease with respect to such default. In performing such obligation, Landlord may make any payment of money or perform any other act. All sums so paid by Landlord (together with interest at the rate of two and one-half percentage points over the then prevailing
prime or base rate in Boston as set by Bank of America, N.A., or its successor, but in no event greater than the maximum rate permitted by applicable law) and all costs and expenses in connection with the performance of any such act by Landlord, shall be deemed to be additional rent under this Lease and shall be payable to Landlord within ten ( 10) business days after demand therefor. Landlord may exercise the foregoing rights without waiving any other of its rights or releasing Tenant from any of its obligations under this Lease.
|
8.25
|
LATE PAYMENT.
If Landlord shall not have received any payment or installment of Annual Fixed Rent or Additional Rent (the "Outstanding Amount") on or before the date on which the same first becomes payable under this Lease (the "Due Date"), the amount of such payment or installment shall incur a late charge equal to the sum of: (a) five percent (5%) of the Outstanding Amount for administration and bookkeeping costs associated with the late payment and (b) interest on the Outstanding Amount from the Due Date through and including the date such payment or installment is received by Landlord, at a rate equal to the lesser of (i) the rate announced by Bank of America, N.A (or its
successor) from time to time as its prime or base rate (or if such rate is no longer available, a comparable rate reasonably selected by Landlord), plus two percent (2%), or (ii) the maximum applicable legal rate, if any. Such interest shall be deemed Additional Rent and shall be paid by Tenant to Landlord upon demand. Landlord agrees to waive the late charges due hereunder for the first late payment by Tenant under this Lease per calendar year, provided that Landlord receives such payment from Tenant within five (5) business days of the Due Date (provided further that if such payment is not received within the aforesaid five (5) business day period, interest on the Outstanding Amount will
|
8.26
|
ARBITRATION.
Notwithstanding anything to the contrary herein, any disputes (i) under Sections 2.6, 2.7 or 2.8 (provided, however. Tenant shall not have a right to dispute any amounts paid by Tenant under Section 2.8 for Building Two or for Building One to the extent based on and determined by separate meters) above as to whether Tenant has overpaid or underpaid Operating Expenses Allocable to the Premises. Landlord's Tax Expenses Allocable to the Premises, and/or Tenant's payments on account of electricity relating to matters in excess of Fifty Thousand and 00/100 Dollars ($50,000.00) and/or (ii) under Section 8.17(B) above as to whether Landlord is required to reimburse Tenant for
costs incurred by Tenant in connection with the exercise of its self-help rights, shall be submitted to arbitration in accordance with the provisions of applicable Massachusetts state law, as from time to time amended. Arbitration proceedings, including the selection of an arbitrator, shall be conducted pursuant to the rules, regulations and procedures from time to time in effect as promulgated by the American Arbitration Association. Prior written notice of application by either party for arbitration shall be given to the other at least ten (10) days before submission of the application to the said Association's office in Boston, Massachusetts. Any award of an arbitrator rendered hereunder shall be subject to confirmation and entry of judgment thereon in any court of competent jurisdiction sitting in Suffolk or Middlesex Counties, Massachusetts, and the parties hereby consent to the
jurisdiction of such court. The costs and administration expenses of each arbitration hereunder and their apportionment between the parties shall be borne equally by the parties, and each party shall be responsible for its own attorneys' fees and expert witness fees. In connection with the foregoing, it is expressly understood and agreed that the parties shall continue to perform their respective obligations under this Lease during the pending of any such arbitration proceeding hereunder (with any adjustments or reallocations to be made on account of such continued performance as determined by the arbitrator in his or her award).
|
8.27
|
CONSENTS.
Landlord and Tenant agree that, unless otherwise addressed herein, whenever a specific consent or approval of a party is required or requested under the terms hereof, the party from whom such consent or approval is sought shall not unreasonably withhold, condition or delay its consent.
|
8.28
|
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.
|
1.
|
Tenant's Request.
Tenant shall send a notice to Landlord in accordance with the Lease.
requesting a Broker Determination of the Prevailing Market Rent, which notice to be
effective must (i) 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
Route 3/1-495 North market, and (ii) 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 (the "Third Broker").
|
4.
|
Rental Value Determination.
Within thirty (30) days after the selection of the third
broker, the first and second Brokers (that is, the brokers selected by Landlord and Tenant
aforesaid) shall each send a notice to the Third Broker, setting forth their individual determinations of such annual fair market rental value,
and the Third Broker shall select
from the two determinations that one which such Third Broker believes to be the more reasonable determination of annual fair market rental. The determination selected by the
Third Broker shall be deemed to be the determination of annual fair market rental value
and shall be final and binding on the parties.
|
5.
|
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.
|
6.
|
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 and such failure shall continue for more than ten (10)
days after notice thereof, then Tenant's broker shall alone make the determination of the
fair market rent of value 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 the third broker willing so to act, the Tenant, the Landlord or either broker
previously designated may request the president of the Commercial Brokers Association
division of the Greater Boston Real Estate Board (the "CBA") (or such organization as
|
1.
|
Tenant's Request.
In order to be effective, Tenant shall in its Tenant's Election Notice (which notice to Landlord shall be made in accordance with the notice provisions of the Lease) must (i) 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 Route 3/1-495 North market, and (ii) 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 Election 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 (the "Third Broker").
|
4.
|
Rental Value Determination.
Within thirty (30) days after the selection of the Third Broker, the first and second Brokers (that is, the brokers selected by Landlord and Tenant aforesaid) shall each send a notice to the Third Broker, setting forth their individual determinations of such Annual Market Rent, and the Third Broker shall select from the two determinations that one which such Third Broker believes to be the more reasonable determination of Annual Market Rent. The determination selected by the Third Broker shall be deemed to be the determination of
Annual Market Rent and it shall be final and binding on the parties.
|
5.
|
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.
|
6.
|
Failure to Select Broker or Failure of Broker to Serve.
If Tenant shall have requested a First Offer Space Broker Determination and Landlord shall not have designated a broker within the time period provided therefor above and such failure shall continue for more than ten (10) days after notice thereof, then Tenant's broker shall alone make the determination of the Annual 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 the third broker willing so to act, the Tenant, the Landlord or either broker previously designated may request the president of the Commercial Brokers Association division of the Greater Boston Real Estate Board (the "CBA") (or such
|
A.
|
Landlord shall provide electric power for a combined load of 4.0 watts per square foot of useable area for lighting and for office machines through standard receptacles for the typical office space.
|
B.
|
Landlord will furnish and install, at Tenant's expense, all replacement lighting tubes, lamps and ballasts required by Tenant. Landlord will clean lighting fixtures on a regularly scheduled basis at Tenant's expense.
|
1.
|
Dusting, damp mopping of resilient floors, trash removal,
sanitizing of basins, bowls and urinals as well as cleaning of mirrors and bright work.
|
2.
|
Refilling of soap, towel, tissue and sanitary dispensers to be rendered as necessary.
|
3.
|
High dusting to be rendered as needed.
|
(i)
|
Cooling season indoor temperatures of not in excess of 73-79 degrees Fahrenheit when outdoor temperatures are 91 degrees Fahrenheit ambient.
|
(ii)
|
Heating season minimum room temperature of 68-75 degrees Fahrenheit when outdoor temperatures are 6 degrees Fahrenheit ambient.
|
B.
|
In the event that Tenant has special equipment (such as computers and reproduction equipment) that requires either 3-phase electric power or any voltage other than 120 volts, or for any other usage in excess of 4.0 watts per square foot, Landlord may at its option require the installation of separate metering (Tenant being solely responsible for the costs of any such separate meter and the installation thereof) and direct billing to Tenant for the electric power required for any such special equipment.
|
C.
|
Landlord will furnish and install, at Tenant's expense, all replacement lighting tubes, lamps and ballasts required by Tenant. Landlord will clean lighting fixtures on a regularly scheduled basis at Tenant's expense.
|
PLACE OF
|
||||
SUBSIDIARY
|
INCORPORATION
|
D/B/A NAME
|
||
Personics Corporation
|
Delaware, USA
|
Personics Corporation
|
||
Auxilor, Inc.
|
Delaware, USA
|
Auxilor, Inc.
|
||
Datawatch International
|
England and Wales
|
Datawatch International
|
||
Limited
|
Limited
|
|||
Datawatch Pty Ltd.*
|
Australia
|
Datawatch Pty Ltd.
|
||
Datawatch Europe Limited*
|
England and Wales
|
Datawatch Europe
|
||
Datawatch GmbH*
|
Germany
|
Datawatch GmbH
|
||
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Michael A. Morrison
|
||
Michael A. Morrison
|
||
Chief Executive Officer
|
||
December 22, 2011 |
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Murray P. Fish
|
||
Murray P. Fish
|
||
Chief Financial Officer
|
||
December 22, 2011 |