10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended October 2, 2010

or

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number: 001-34006

THE MANAGEMENT NETWORK GROUP, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	48-1129619
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
7300 COLLEGE BLVD., SUITE 302, OVERLAND PARK, KS	66210
(Address of principal executive offices)	(Zip Code)

913-345-9315
Registrant’s telephone number, including area code

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o  Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of November 12, 2010, TMNG had outstanding 7,073,330 shares of common stock.

THE MANAGEMENT NETWORK GROUP, INC. INDEX

	PAGE
PART I. FINANCIAL INFORMATION:
ITEM 1. Condensed Consolidated Financial Statements (unaudited):
Condensed Consolidated Balance Sheets (unaudited) — October 2, 2010 and January 2, 2010	3
Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) — Thirteen and Thirty-nine weeks ended October 2, 2010 and October 3, 2009	4
Condensed Consolidated Statements of Cash Flows (unaudited) — Thirty-nine weeks ended October 2, 2010 and October 3, 2009	5
Notes to Condensed Consolidated Financial Statements (unaudited)	6
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	26
ITEM 4. Controls and Procedures	26
PART II. OTHER INFORMATION	26
ITEM 1. Legal Proceedings	26
ITEM 1A. Risk Factors	26
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	26
ITEM 3. Defaults Upon Senior Securities	26
ITEM 4. Removed and Reserved	26
ITEM 5. Other Information	26
ITEM 6. Exhibits	27
Signatures	28
Exhibits	29
EX-10.1 Lease Agreement
EX-10.2 Lease Amendment
EX-31 302 Certifications
EX-32 906 Certifications

2

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE MANAGEMENT NETWORK GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)

	October 2,			January 2,
	2010			2010
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	8,271		$	6,301
Short-term investments					5,444
Receivables:
Accounts receivable		10,702			11,991
Accounts receivable — unbilled		5,381			4,174
		16,083			16,165
Less: Allowance for doubtful accounts		(261	)		(357	)
Net receivables		15,822			15,808
Prepaid and other current assets		1,215			1,206
Total current assets		25,308			28,759
NONCURRENT ASSETS:
Property and equipment, net		1,906			1,955
Goodwill		8,079			7,772
Identifiable intangible assets, net		976			2,516
Noncurrent investments		5,902			6,852
Other noncurrent assets		211			397
Total Assets	$	42,382		$	48,251
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Trade accounts payable	$	1,297		$	1,118
Current borrowings					2,800
Accrued payroll, bonuses and related expenses		4,742			5,354
Other accrued liabilities		1,792			1,433
Deferred revenue		335			1,023
Unfavorable and other contractual obligations		238			706
Total current liabilities		8,404			12,434
NONCURRENT LIABILITIES:
Unfavorable and other contractual obligations		582			546
Other noncurrent liabilities		1,316			1,237
Total noncurrent liabilities		1,898			1,783
Commitments and contingencies (Note 10)
Total stockholders’ equity		32,080			34,034
Total Liabilities and Stockholders’ Equity	$	42,382		$	48,251

See notes to unaudited condensed consolidated financial statements.

3

THE MANAGEMENT NETWORK GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except per share data)
(unaudited)

	Thirteen Weeks Ended						Thirty-nine Weeks Ended
	October 2,			October 3,			October 2,			October 3,
	2010			2009			2010			2009
Revenues	$	16,384		$	16,812		$	50,814		$	47,834
Cost of services (includes non-cash share-based compensation expense of $19 and $53 for the thirteen weeks ended October 2, 2010 and October 3, 2009, respectively, and $80 and $221 for the thirty-nine weeks ended October 2, 2010 and October 3, 2009, respectively)		10,171			9,947			31,356			28,155
Gross Profit		6,213			6,865			19,458			19,679
Operating Expenses:
Selling, general and administrative (includes non-cash share-based compensation expense of $42 and $120 for the thirteen weeks ended October 2, 2010 and October 3, 2009, respectively, and $178 and $503 for the thirty-nine weeks ended October 2, 2010 and October 3, 2009, respectively)		6,558			6,736			20,433			21,498
Intangible asset amortization		340			506			1,061			1,471
Total operating expenses		6,898			7,242			21,494			22,969
Loss from operations		(685	)		(377	)		(2,036	)		(3,290	)
Other income (expense):
Interest income		32			50			140			188
Interest expense					(17	)		(16	)		(42	)
Other (expense) income		(32	)		45			26			151
Total other income		—			78			150			297
Loss before income tax provision		(685	)		(299	)		(1,886	)		(2,993	)
Income tax provision		(38	)		(228	)		(87	)		(68	)
Net loss		(723	)		(527	)		(1,973	)		(3,061	)
Other comprehensive income (loss):
Foreign currency translation adjustment		443			(449	)		(374	)		1,658
Unrealized (losses) gains on marketable securities		(1	)		31						720
Realized losses on marketable securities		50						50
Comprehensive loss	$	(231	)	$	(945	)	$	(2,297	)	$	(683	)
Loss per common share:
Basic and diluted	$	(0.10	)	$	(0.08	)	$	(0.28	)	$	(0.44	)
Weighted average shares used in calculation of net loss per basic and diluted common share		7,062			7,015			7,043			6,974

See notes to unaudited condensed consolidated financial statements.

4

THE MANAGEMENT NETWORK GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)

	For the Thirty-nine Weeks Ended
	October 2,			October 3,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,973	)	$	(3,061	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,076			2,529
Share-based compensation		258			724
Deferred income taxes		98			27
Recognized gains on investments		(6	)		(122	)
Other		(22	)
Other changes in operating assets and liabilities:
Accounts receivable		1,097			(1,905	)
Accounts receivable — unbilled		(1,266	)		134
Prepaid and other assets		163			426
Trade accounts payable		157			275
Deferred revenue		(658	)		566
Accrued liabilities		(434	)		493
Net cash (used in) provided by operating activities		(510	)		86
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investments		6,450
Acquisition of businesses					(1,911	)
Acquisition of property and equipment		(543	)		(459	)
Net cash provided by (used in) investing activities		5,907			(2,370	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line of credit		880			3,400
Payments on line of credit		(3,680	)		(35	)
Payments made on long-term obligations		(531	)		(508	)
Issuance of common stock through employee stock purchase plan		23			10
Net cash (used in) provided by financing activities		(3,308	)		2,867
Effect of exchange rate on cash and cash equivalents		(119	)		754
Net increase in cash and cash equivalents		1,970			1,337
Cash and cash equivalents, beginning of period		6,301			5,956
Cash and cash equivalents, end of period	$	8,271		$	7,293
Supplemental disclosure of cash flow information:
Cash paid during period for interest	$	16		$	42
Cash (refunded) paid during period for income taxes	$	(90	)	$	151
Accrued property and equipment additions	$	323		$	387
Supplemental disclosure of non-cash investing and financing transactions
Acquisition of business: common stock	$	53		$	104
Acquisition of business: consideration payable	$	344		$	981

See notes to unaudited condensed consolidated financial statements.

5

THE MANAGEMENT NETWORK GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Basis of Reporting

The condensed consolidated financial statements and accompanying notes of The Management Network Group, Inc. and its subsidiaries (“TMNG,” “TMNG Global,” “we,” “us,” “our,” or the “Company”) as of October 2, 2010, and for the thirteen and thirty-nine weeks ended October 2, 2010 and October 3, 2009 are unaudited and reflect all normal recurring adjustments which are, in the opinion of management, necessary for the fair presentation of the Company’s condensed consolidated financial position, results of operations, and cash flows as of these dates and for the periods presented. The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Consequently, these statements do not include all the disclosures normally required by U.S. GAAP for annual financial statements nor those normally made in the Company’s annual report on Form 10-K. Accordingly, reference should be made to the Company’s annual consolidated financial statements and notes thereto for the fiscal year ended January 2, 2010, included in the 2009 Annual Report on Form 10-K (“2009 Form 10-K”) for additional disclosures, including a summary of the Company’s accounting policies. The Condensed Consolidated Balance Sheet as of January 2, 2010 has been derived from the audited Consolidated Balance Sheet at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The Company has evaluated subsequent events for recognition or disclosure through the date these unaudited consolidated financial statements were issued.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The results of operations for the thirteen and thirty-nine weeks ended October 2, 2010 are not necessarily indicative of the results to be expected for the full year ending January 1, 2011.

Reverse Stock Split — On January 21, 2010, TMNG’s stockholders approved a one-for-five reverse stock split of the Company’s authorized, issued and outstanding common stock. The reverse stock split was effective on February 7, 2010. Trading of TMNG’s common stock on the NASDAQ Global Market on a split-adjusted basis began at the open of trading on February 8, 2010. The reverse stock split affected all shares of the Company’s common stock, as well as options to purchase the Company’s common stock, that were outstanding immediately prior to the effective date of the reverse stock split. All references to common shares and per-share data for prior periods have been retroactively restated to reflect the reverse stock split as if it had occurred at the beginning of the earliest period presented. The par value of the Company’s common stock was changed to $.005 per share from $.001 per share in connection with the reverse split.

Fair Value Measurement — For cash and cash equivalents, current trade receivables and current trade payables, the carrying amounts approximate fair value because of the short maturity of these items.

Research and Development and Capitalized Software Costs — During the thirteen and thirty-nine weeks ended October 2, 2010, software development costs of $116,000 and $439,000, respectively, were expensed as incurred. During the thirteen and thirty-nine weeks ended October 3, 2009, software development costs of $144,000 and $390,000, respectively, were expensed as incurred. No software development costs were capitalized during the thirteen and thirty-nine weeks ended October 2, 2010 and October 3, 2009.

Foreign Currency Transactions and Translation — TMNG Europe Ltd., Cartesian Ltd. (“Cartesian”) and the international operations of Cambridge Strategic Management Group, Inc. conduct business primarily denominated in their respective local currency. Assets and liabilities have been translated to U.S. dollars at the period-end exchange rate. Revenues and expenses have been translated at exchange rates which approximate the average of the rates prevailing during each period. Translation adjustments are reported as a separate component of accumulated other comprehensive income in the consolidated statements of stockholders’ equity. Assets and liabilities denominated in other than the functional currency of a subsidiary are remeasured at rates of exchange on the balance sheet date. Resulting gains and losses on foreign currency transactions are included in the Company’s results of operations. Exchange losses included in results of operations were $2,000 and $38,000, respectively, during the thirteen and thirty-nine weeks ended October 2, 2010. Exchange gains and (losses) included in results of operations were $128,000 and ($447,000) during the thirteen weeks and thirty-nine weeks ended October 3, 2009, respectively.

Derivative Financial Instruments — As of October 2, 2010, the Company had an open foreign currency forward contract with a notional amount of $0.2 million. This forward contract provides an economic hedge of fluctuations in euro denominated accounts receivable against the British pound, but has not been designated as a hedge for accounting purposes. The Company utilizes valuation models for this forward contract that rely exclusively on Level 2 inputs, as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurement and Disclosures. This contract expires on February 22, 2011. During the thirteen and thirty-nine weeks ended October 2, 2010, the Company recognized (losses) gains on foreign currency forward contracts of ($2,000) and $9,000, respectively. During the thirteen and thirty-nine weeks ended October 3, 2009, the Company recognized losses on these forward contracts of $53,000 and $29,000, respectively, which are included in selling, general and administrative expenses in the Condensed Consolidated Statement of Operations and Comprehensive Loss (unaudited).

6

Net Loss Per Share — The Company has not included the effect of stock options and nonvested shares in the calculation of diluted loss per share for the thirteen and thirty-nine weeks ended October 2, 2010 and October 3, 2009 as the Company reported a net loss for these periods and the effect would have been anti-dilutive.

Recent Accounting Pronouncements — In October 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-13, Revenue Recognition (Topic 605) — Multiple-Deliverable Revenue Arrangements, a consensus of the FASB Emerging Issue Task Force (“ASU 2009-13”), and ASU 2009-14, Software (Topic 985) — Certain Revenue Arrangements That Include Software Elements (“ASU 2009-14”). ASU 2009-13 requires companies to allocate revenue in multiple-element arrangements based on an element’s estimated selling price if vendor-specific or other third party evidence of value is not available. ASU 2009-14 modifies the software revenue recognition guidance to exclude from its scope tangible products that contain both software and non-software components that function together to deliver a product’s essential functionality. Both statements are effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.

In January 2010, the FASB issued ASU 2010-06, Fair Value Measures and Disclosures, (“ASU 2010-06”). ASU 2010-06 amends the Codification to require new or enhanced disclosures about: (1) transfers in and out of Levels 1, 2 and 3; (2) purchases, sales, issuances and settlements related to Level 3 measurements; (3) level of disaggregation; and (4) inputs and valuation techniques used to measure fair value. With the exception of item (2), this guidance was effective for the first reporting period beginning after December 15, 2009. The Company adopted this guidance, with the exception of item (2), upon issuance and it did not have an effect on its consolidated financial statements. The guidance concerning item (2) is effective for fiscal years beginning after December 15, 2010. The Company is currently evaluating the impact that the adoption of item (2) of this guidance will have on its consolidated financial statements.

In July 2010, the FASB issued ASU 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. The guidance will significantly expand the disclosures that companies must make about the credit quality of financing receivables and the allowance for credit losses. The disclosures as of the end of the reporting period are effective for the Company’s interim and annual periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for the Company’s interim and annual periods beginning on or after December 15, 2010. The objectives of the enhanced disclosures are to provide financial statement users with additional information about the nature of credit risks inherent in the Company’s financing receivables, how credit risk is analyzed and assessed when determining the allowance for credit losses, and the reasons for the change in the allowance for credit losses. The adoption of this Update requires enhanced disclosures and is not expected to have a significant effect on the Company’s financial statements.

2. Auction Rate Securities

As of October 2, 2010 and January 2, 2010, TMNG held $5.9 million and $12.3 million, respectively, in fair value of auction rate securities for which the underlying collateral is guaranteed through the Federal Family Education Loan Program of the U.S. Department of Education. The Company’s auction rate securities portfolio as of October 2, 2010, which is included in Noncurrent investments on the Condensed Consolidated Balance Sheet (unaudited), consisted of the following:

						Fair Value at
	Cost		Unrealized			October 2, 2010
Issuer	Basis		Losses			(Noncurrent)
	(In thousands)
Available-for-Sale Securities
Education Funding Capital Education Loan Backed Notes	$	6,250	$	(348	)	$	5,902

7

The Company’s auction rate securities portfolio as of January 2, 2010 consisted of the following:

			Realized
			Gains			Unrealized			Fair Value at January 2, 2010
Issuer	Cost Basis		(Losses)			Losses			Current		Noncurrent
	(In thousands)
Trading Securities
Kentucky Higher Education Loan Revenue Bonds	$	1,900	$	(118	)				$	1,782
Missouri Higher Education Loan Revenue Bonds		1,800		(112	)					1,688
Utah State Board of Regents Revenue Bonds		1,400		(87	)					1,313
Kentucky Higher Education Loan Revenue Bonds		400		(25	)					375
		5,500		(342	)					5,158
Available-for-Sale Securities
Education Funding Capital Education Loan Backed Notes		6,250				$	(389	)			$	5,861
Brazos Student Finance Corporation Student Loan Asset Backed Notes		1,000					( 9	)				991
		7,250					(398	)				6,852
ARS Rights				286						286
	$	12,750	$	(56	)	$	(398	)	$	5,444	$	6,852

The Company recognized no gains or losses on auction rate securities classified as trading securities during the thirteen weeks ended October 2, 2010, and recognized gains of $56,000 on auction rate securities classified as trading securities during the thirty-nine weeks ended October 2, 2010. During the thirteen and thirty-nine weeks ended October 3, 2009, the Company recognized gains of $17,000 and $122,000, respectively, on auction rate securities classified as trading securities. These gains and losses on trading securities have been recognized in Other Income in the Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited).

The auction rate securities held by the Company are long-term debt instruments that historically provided liquidity through a Dutch auction process through which interest rates reset every 28 to 35 days. Beginning in February 2008, auctions of the Company’s auction rate securities portfolio failed to receive sufficient order interest from potential investors to clear successfully, resulting in failed auctions. The principal associated with failed auctions will not be accessible until a successful auction occurs, a buyer is found outside of the auction process, the issuers redeem the securities, the issuers establish a different form of financing to replace these securities or final payments come due according to a contractual maturity of approximately 32 years.

During the third quarter of 2008, state and federal regulators reached settlement agreements with both of the brokers who advised the Company to purchase the auction rate securities currently held by the Company. The settlement agreements with the regulators were intended to eventually provide liquidity for holders of auction rate securities. On November 13, 2008, the Company entered into a settlement with UBS AG (“UBS”) to provide liquidity for the Company’s $7.6 million auction rate securities portfolio held with a UBS affiliate. Pursuant to the terms of the settlement, UBS issued to the Company Auction Rate Securities Rights (“ARS Rights”), allowing the Company to sell to UBS its auction rate securities held in accounts with UBS and UBS affiliates at par value at any time during the period beginning June 30, 2010 and ending July 2, 2012. As consideration for the issuance of the ARS Rights, the Company (1) released UBS from all claims for damages (other than consequential damages) directly or indirectly relating to UBS’s marketing and sale of auction rate securities, and (2) granted UBS the discretionary right to sell or otherwise dispose of the Company’s auction rate securities, provided that the Company is paid the par value of the auction rate securities upon any disposition. As provided for in the settlement, the Company entered into a line of credit from UBS and its affiliates for up to 75% of the fair value of its auction rate securities. The line of credit provided the Company with an uncommitted, demand revolving line of credit of up to 75% of the fair value, as determined by UBS in its sole discretion, of the Company’s auction rate securities that the Company has pledged as collateral.

While the ARS Rights resulted in a put option which represents a separate freestanding instrument, the put option did not meet the definition of a derivative instrument under FASB ASC 815, “Derivatives and Hedging.” The Company elected to measure the ARS Rights at fair value under FASB ASC 825 to better align changes in fair value of the ARS Rights with those of the underlying auction rate securities investments.

Prior to accepting the UBS settlement offer, the Company recorded all of its auction rate securities as available-for-sale investments. Upon accepting the UBS settlement, the Company made a one-time election to transfer its UBS auction rate securities holdings from available-for-sale securities to trading securities under FASB ASC 320, “Investments-Debt and Equity Securities.”

8

During the thirteen weeks ended July 3, 2010, all of the remaining auction rate securities held with a UBS affiliate were sold by the Company at par value of $5.5 million. Proceeds from the liquidation were applied first to the $3.7 million outstanding balance of the line of credit from UBS. The Company received the remaining $1.8 million in proceeds. Upon the liquidation of the Company’s auction rate securities portfolio held with the UBS affiliate, the ARS Rights terminated unexercised. The ARS Rights were measured at fair value under FASB ASC 825 until UBS’s purchase of the auction rate securities in connection with the ARS Rights.

Additionally, during the thirty-nine weeks October 2, 2010, the Company sold its Brazos Student Finance Corporation Student Loan Asset Backed Notes with a par value of $1.0 million held as part of its auction rate securities portfolio with Citigroup. These auction rate securities were classified as available-for-sale. The Company received $950,000 in proceeds from the transaction. As a result of this transaction, $50,000 in losses were reclassified from Accumulated Other Comprehensive Loss in stockholders’ equity and recognized in Other Income (Expense) in the Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited).

For auction rate securities classified as available-for-sale, the Company recognized unrealized holding losses of $1,000 during the thirteen weeks ended October 2, 2010 and no unrealized holding gains or losses during the thirty-nine weeks ended October 2, 2010. In addition, during the thirteen and thirty-nine weeks ended October 2, 2010, the Company reclassified $50,000 in previously unrealized losses from Accumulated Other Comprehensive Loss to realized losses in Other Income (Expense) upon the disposition of the related available-for-sale securities as described above. During the thirteen and thirty-nine weeks ended October 3, 2009, the Company recognized unrealized holding gains of $31,000 and $720,000, respectively.

Unrealized holding gains and losses on securities classified as available-for-sale are included as a separate component of stockholders’ equity, net of applicable taxes, and have been recognized in Other Comprehensive Income (Loss) in the Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited).

Due to the lack of observable market quotes on the Company’s auction rate securities portfolio and ARS Rights, the Company utilizes valuation models that rely exclusively on Level 3 inputs, as defined by FASB ASC 820, including those that are based on expected cash flow streams and collateral values, including assessments of counterparty credit quality, default risk underlying the security, discount rates and overall capital market liquidity. The valuation of the Company’s auction rate securities portfolio and ARS Rights is subject to uncertainties that are difficult to predict. Factors that may impact the Company’s valuation include changes to credit ratings of the securities as well as to the underlying assets supporting those securities, rates of default of the underlying assets, underlying collateral value, discount rates, counterparty risk and ongoing strength and quality of market credit and liquidity.

The following is a reconciliation of the beginning and ending balances of the Company’s auction rate securities portfolio and ARS Rights for the thirty-nine weeks ended October 2, 2010 and October 3, 2009 (in thousands):

	For the			For the
	thirty-nine			thirty-nine
	weeks ended			weeks ended
	October 2,			October 3,
	2010			2009
Fair value at beginning of period	$	12,296		$	13,404
Total unrealized and realized gains included in Other income in the Consolidated Statements of Operations and Comprehensive Loss (unaudited)		6			122
Total unrealized gains included in Other comprehensive income in the Consolidated Statements of Operations and Comprehensive Loss (unaudited)		50			720
Sales		(6,450	)
Fair value at end of period	$	5,902		$	14,246

The following is a reconciliation of the beginning and ending balances of the Company’s auction rate securities portfolio and ARS Rights for the thirteen weeks ended October 2, 2010 and October 3, 2009 (in thousands):

	For the			For the
	thirteen			thirteen
	weeks ended			weeks ended
	October 2,			October 3,
	2010			2009
Fair value at beginning of period	$	6,853		$	14,198
Total unrealized and realized (losses) gains included in Other income in the Consolidated Statements of Operations and Comprehensive Loss (unaudited)		(50	)		17
Total unrealized gains included in Other comprehensive income (loss) in the Consolidated Statements of Operations and Comprehensive Loss (unaudited)		49			31
Sales		(950	)
Fair value at end of period	$	5,902		$	14,246

9

Given the Company’s intent to exercise its right under the ARS Rights to sell to UBS its auction rate securities held in accounts with UBS and UBS affiliates at par value on June 30, 2010, the Company classified the entire amount of auction rate securities portfolio held with UBS affiliates, including the fair value of the ARS Rights, as short-term investments in the Condensed Consolidated Balance Sheet as of January 2, 2010. The remaining auction rate securities are classified as noncurrent investments in the Condensed Consolidated Balance Sheet (unaudited) as of October 2, 2010 and the Condensed Consolidated Balance Sheet as of January 2, 2010.

3. Line of Credit Agreements

As discussed above in Note 2, “Auction Rate Securities,” in November of 2008, the Company entered into a settlement with UBS to provide liquidity for the Company’s auction rate securities portfolio then held with a UBS affiliate. During the thirty-nine weeks ended October 2, 2010, the Company liquidated the auction rate securities with a par value of $5.5 million pledged as collateral for the line of credit with UBS. Proceeds from the liquidation were applied first to the $3.7 million outstanding balance of the line of credit as of the date of the transaction. The Company received the remaining $1.8 million in proceeds. Upon liquidation of the relevant auction rate securities, the line of credit with UBS was terminated. The Company classified the outstanding balance of $2.8 million as a current liability in the Condensed Consolidated Balance Sheet as of January 2, 2010. An additional $880,000 was borrowed during the thirteen weeks ended April 3, 2010. These borrowings were used to fund short-term liquidity needs. Because amounts borrowed under the line of credit accrued interest at a floating rate and had a remaining maturity of less than one year, the fair value of this financial instrument approximated its carrying value.

On March 19, 2009, the Company entered into a loan agreement with Citigroup Global Markets, Inc. (“Citigroup”) to provide liquidity for the Company’s $7.3 million auction rate securities portfolio held with Citigroup. Under the loan agreement, the Company has access to a revolving line of credit of up to 50% of the par value of the auction rate securities that the Company has pledged as collateral, or $3.125 million based upon the Company’s current holdings of $6.25 million of auction rate securities. The current interest rate on the line of credit is the federal funds rate plus 3.25%. The interest rate may change in future periods based on the change in the spread over the federal funds rate. The line of credit is not for any specific term or duration and Citigroup may demand full or partial payment of amounts borrowed on the line of credit, at its sole option and without cause, at any time. Citigroup may, at any time, in its discretion, terminate the line of credit with proper notice. No amounts have been borrowed against this line of credit.

4. Business Combinations

RVA Consulting, LLC

On August 3, 2007, the Company acquired all of the outstanding membership interests of RVA Consulting, LLC (“RVA”) pursuant to a Membership Interest Purchase Agreement with the members of RVA. TMNG assumed all liabilities of RVA, subject to certain indemnities on the part of the selling members. RVA is presented as a component of the North America segment. In addition to cash consideration paid at closing, the transaction included additional consideration for working capital true-ups and potential earn-out consideration based upon performance of RVA through June 30, 2010. The aggregate purchase price of $11.6 million consists of the following (in thousands):

Cash paid at closing	$	6,625
Transaction costs		247
Contingent cash consideration earned		3,273
Contingent cash consideration earned but not yet paid		344
Contingent stock consideration earned (based on June 30, 2008 measurement date)		921
Contingent stock consideration earned (based on June 30, 2009 measurement date)		104
Contingent stock consideration earned but not yet paid (based on June 30, 2010 measurement date)		53
Total purchase price recognized at October 2, 2010	$	11,567

The measurement date for contingent cash and stock consideration was June 30 of each of the three years subsequent to the transaction. During the thirty-nine weeks ended October 2, 2010, the Company accrued $344,000 in contingent cash consideration earned but not yet paid for the measurement period ended June 30, 2010. As of October 2, 2010, this liability is included in “Other accrued liabilities” on the Condensed Consolidated Balance Sheet (unaudited). This liability was paid during the thirteen weeks ending January 1, 2011. The final measurement date was June 30, 2010. As a result, there is no remaining contingent consideration to be earned.

10

5. Goodwill and Other Identifiable Intangible Assets

The changes in the carrying amount of goodwill for the thirty-nine weeks ended October 2, 2010 are as follows (in thousands):

	North
	America		EMEA			Total
Balance as of January 2, 2010	$	3,550	$	4,222		$	7,772
2010 RVA goodwill from contingent consideration earned		397					397
Changes in foreign currency exchange rates				(90	)		( 90	)
Balance as of October 2, 2010	$	3,947	$	4,132		$	8,079

Included in intangible assets, net are the following (in thousands):

	October 2, 2010					January 2, 2010
			Accumulated					Accumulated
	Cost		Amortization			Cost		Amortization
Customer relationships	$	5,300	$	(4,473	)	$	5,342	$	(3,511	)
Acquired software		2,375		(2,226	)		2,427		(1,820	)
Employment agreements		1,984		(1,984	)		2,018		(1,940	)
	$	9,659	$	(8,683	)	$	9,787	$	(7,271	)

Intangible amortization expense for the thirteen weeks ended October 2, 2010 and October 3, 2009 was $485,000 and $659,000, respectively, including $145,000 and $154,000 reported in cost of services for the thirteen weeks ended October 2, 2010 and October 3, 2009, respectively. Intangible amortization expense for the thirty-nine weeks ended October 2, 2010 and October 3, 2009 was $1,493,000 and $1,905,000, respectively, including $432,000 and $434,000 reported in cost of services for the thirty-nine weeks ended October 2, 2010 and October 3, 2009, respectively. Future intangible amortization expense is estimated to be as follows (in thousands):

			Estimated
			intangible
	Total estimated		amortization to
	intangible		be included in
Future Period	amortization		cost of services
Remainder of fiscal year 2010	$	480	$	148
Fiscal year 2011		496		—

The Company evaluates goodwill for impairment on an annual basis on the last day of the first fiscal month of the fourth quarter and whenever events or circumstances indicate that these assets may be impaired. The Company performs its impairment testing for goodwill in accordance with FASB ASC 350, “Intangibles-Goodwill and Other.” Management determined that there were no events or changes in circumstances during the thirteen or thirty-nine weeks ended October 2, 2010 which indicated that goodwill needed to be tested for impairment during the period.

The Company reviews long-lived assets and certain identifiable intangibles to be held and used for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets might not be recoverable in accordance with the provisions of FASB ASC 360, “Property, Plant and Equipment” and FASB ASC 350, “Intangibles-Goodwill and Other.” Management determined that there were no events or changes in circumstances during the thirteen or thirty-nine weeks ended October 2, 2010 which indicated that long-lived assets and intangible assets needed to be reviewed for impairment during the period.

6. Share-Based Compensation

The Company issues stock option awards and nonvested share awards under its share-based compensation plans. The key provisions of the Company’s share-based compensation plans are described in Note 6 to the Company’s consolidated financial statements included in the 2009 Form 10-K.

During the thirteen and thirty-nine weeks ended October 2, 2010 and October 3, 2009, the Company recognized no income tax benefits related to share-based compensation arrangements.

1998 Equity Incentive Plan

On May 27, 2010, the stockholders of the Company approved amendments to the Company’s Amended and Restated 1998 Equity Incentive Plan (the “1998 Plan”). The amendments to the 1998 Plan include the following: (1) an increase of 614,338 in the number of shares of common stock available for issuance under the 1998 Plan to correct a miscalculation in the 2009 amendments to the 1998 Plan; and (2) a reallocation of 291,321 shares of common stock not subject to outstanding awards under the Company’s 2000 Supplemental Stock Plan (the “ the “Supplemental Stock Plan”) from the Supplemental Stock Plan to the 1998 Plan.

11

Stock Options

A summary of the option activity under the 1998 Plan as of October 2, 2010 and changes during the thirty-nine weeks then ended is presented below:

				Weighted
				Average
				Exercise
	Shares			Price
Outstanding at January 2, 2010		763,547		$	17.57
Forfeited/cancelled		(110,997	)	$	54.21
Outstanding at October 2, 2010		652,550		$	11.34
Options vested and expected to vest at October 2, 2010		623,293		$	11.38
Options exercisable at October 2, 2010		574,027		$	11.48

Nonvested Shares

A summary of the status of nonvested stock issued under the 1998 Plan as of October 2, 2010 and changes during the thirty-nine weeks then ended is presented below:

				Weighted
				Average
				Grant Date
	Shares			Fair Value
Outstanding at January 2, 2010		1,250		$	10.95
Vested		(875	)	$	10.82
Outstanding at October 2, 2010		375		$	11.25

2000 Supplemental Stock Plan

A summary of the option activity under the Supplemental Stock Plan as of October 2, 2010 and changes during the thirty-nine weeks then ended is presented below:

				Weighted
				Average
				Exercise
	Shares			Price
Outstanding at January 2, 2010		274,612		$	11.74
Forfeited/cancelled		(23,425	)	$	10.88
Outstanding at October 2, 2010		251,187		$	11.82
Options vested and expected to vest at October 2, 2010		227,780		$	11.99
Options exercisable at October 2, 2010		187,962		$	12.40

The Supplemental Stock Plan expired May 23, 2010. The outstanding awards issued pursuant to the Supplemental Stock Plan will remain subject to the terms of the Supplemental Stock Plan following expiration of the plan.

12

7. Business Segments and Major Customers

In the first quarter of fiscal year 2010, the Company was internally reorganized to align geographically with its client base. As a result of this internal realignment, the Company’s reportable segments have changed. Corresponding segment information for prior periods has been restated to conform to the current reportable segment presentation.

The Company identifies its segments based on the way management organizes the Company to assess performance and make operating decisions regarding the allocation of resources. In accordance with the criteria in FASB ASC 280 “Segment Reporting,” the Company has concluded it has two reportable segments: the North America segment and the EMEA segment. The North America segment is comprised of three operating segments (North America Cable and Broadband, North America Telecom and Strategy), which are aggregated into one reportable segment based on the similarity of their economic characteristics. The EMEA segment is a single reportable, operating segment that encompasses the Company’s operational, technology and software consulting operations outside of North America. Both reportable segments offer management consulting, custom developed software, and technical services.

Management evaluates segment performance based upon income (loss) from operations, excluding share-based compensation (benefits), depreciation and intangibles amortization. There were no inter-segment sales in either the thirteen or thirty-nine weeks ended October 2, 2010 or October 3, 2009. In addition, in its administrative division, entitled “Not Allocated to Segments,” the Company accounts for non-operating activity and the costs of providing corporate and other administrative services to all the segments. Summarized financial information concerning the Company’s reportable segments is shown in the following table (amounts in thousands):

					Not
	North				Allocated
	America		EMEA		to Segments			Total
As of and for the thirty-nine weeks ended October 2, 2010:
Revenues	$	38,716	$	12,098				$	50,814
Income (loss) from operations		10,030		2,286	$	(14,352	)		(2,036	)
Total assets	$	10,373	$	5,448	$	26,561		$	42,382
For the thirteen weeks ended October 2, 2010:
Revenues	$	12,274	$	4,110				$	16,384
Income (loss) from operations		2,909		820	$	(4,414	)		(685	)
As of and for the thirty-nine weeks ended October 3, 2009:
Revenues	$	34,369	$	13,465				$	47,834
Income (loss) from operations		8,631		3,036	$	(14,957	)		(3,290	)
Total assets	$	8,294	$	6,077	$	36,413		$	50,784
For the thirteen weeks ended October 3, 2009:
Revenues	$	12,323	$	4,489				$	16,812
Income (loss) from operations		3,270		897	$	(4,544	)		(377	)
As of the fiscal year ended January 2, 2010
Total assets	$	9,704	$	6,461	$	32,086		$	48,251

Segment assets, regularly reviewed by management as part of its overall assessment of the segments’ performance, include both billed and unbilled trade accounts receivable, net of allowances, and certain other assets. Assets not assigned to segments include cash and cash equivalents, current and non-current investments, property and equipment, goodwill and intangible assets and deferred tax assets, excluding deferred tax assets recognized on accounts receivable reserves, which are assigned to their segments.

In accordance with the provisions of FASB ASC 280-10, revenues earned in the United States and internationally based on the location where the services are performed are shown in the following table (amounts in thousands):

					For the Thirty-nine Weeks
	For the Thirteen Weeks Ended				Ended
	October 2,		October 3,		October 2,		October 3,
	2010		2009		2010		2009
United States	$	11,943	$	12,214	$	37,657	$	33,728
International:
United Kingdom		4,296		4,182		12,465		12,538
Other		145		416		692		1,568
Total	$	16,384	$	16,812	$	50,814	$	47,834

13

Major customers in terms of significance to TMNG’s revenues (i.e. in excess of 10% of revenues) and accounts receivable were as follows (amounts in thousands):

	Revenues
	For the thirteen weeks ended				For the thirteen weeks ended
	October 2, 2010				October 3, 2009
	North				North
	America		EMEA		America		EMEA
Customer A			$	1,829			$	2,113
Customer B	$	3,240			$	5,955
Customer C	$	2,578			$	2,314
Customer D	$	1,543			$	1,755
Customer E	$	2,676			$	430

	Revenues
	For the thirty-nine weeks				For the thirty-nine weeks
	ended October 2, 2010				ended October 3, 2009
	North America		EMEA		North America		EMEA
Customer A			$	5,388			$	5,592
Customer B	$	13,350			$	16,223
Customer C	$	7,653			$	6,497
Customer D	$	5,027			$	4,919
Customer E	$	4,755			$	998

	Accounts Receivable
	As of		As of
	October 2,		October 3,
	2010		2009
Customer A	$	1,583	$	3,708
Customer B	$	2,388	$	2,494
Customer C	$	2,019	$	1,290
Customer D	$	798	$	1,938
Customer E	$	2,418	$	412

Revenues from the Company’s ten most significant customers accounted for approximately 86% and 83% of revenues during the thirteen and thirty-nine weeks ended October 2, 2010, respectively. Revenues from the Company’s ten most significant customers accounted for approximately 87% of revenues during the thirteen and thirty-nine weeks ended October 3, 2009.

8. Income Taxes

In the thirteen and thirty-nine weeks ended October 2, 2010, the Company recorded income tax provisions of $38,000 and $87,000, respectively. In the thirteen and thirty-nine weeks ended October 3, 2009, the Company recorded income tax provisions of $228,000 and $68,000, respectively. The tax provisions for the thirteen and thirty-nine weeks ended October 2, 2010 are primarily due to deferred taxes recognized on intangibles amortized for income tax purposes but not for financial reporting purposes and interest recognized on reserves for uncertain tax positions. The tax provision for the thirteen and thirty-nine weeks ended October 3, 2009 is primarily related to recording a full valuation allowance against deferred tax assets related to the Company’s United Kingdom operations and interest recognized on reserves for uncertain tax positions. During the thirteen and thirty-nine weeks ended October 2, 2010, the Company recorded full valuation allowances against income tax benefits related to domestic and international operations in accordance with the provisions of FASB ASC 740 “Income Taxes,” which requires an estimation of the recoverability of the recorded income tax asset balances. As of October 2, 2010, the Company has recorded $33.6 million of valuation allowances attributable to its net deferred tax assets.

The Company analyzes its uncertain tax positions pursuant to the provisions of FASB ASC 740 “Income Taxes.” The Company recognizes interest and penalties related to unrecognized tax benefits as a component of the income tax provision. There was no material activity related to the liability for uncertain tax positions during the thirteen and thirty-nine weeks ended October 2, 2010 and October 3, 2009. As of October 2, 2010, the Company has $1.0 million accrued for uncertain income tax positions, including interest and penalties. As of October 2, 2010, the Company believes that it is reasonably possible that the liability for uncertain tax positions will decrease by $0.8 million within the next 12 months due to the expiration of the statute of limitations of tax filings in foreign jurisdictions. The statute of limitations related to uncertain tax positions of $0.4 million expired on October 31, 2010.

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2003. As of October 2, 2010, the Company has no income tax examinations in process.

14

9. Loan to Officer

As of October 2, 2010, there is one outstanding line of credit between the Company and its Chief Executive Officer, Richard P. Nespola, which originated in fiscal year 2001. Aggregate borrowings outstanding against the line of credit at October 2, 2010 and January 2, 2010 totaled $300,000 and are due in September 2011. This amount is included in Prepaids and Other Current Assets in the current assets section of the Condensed Consolidated Balance Sheet (unaudited) as of October 2, 2010. This amount was included in other assets in the noncurrent assets section of the Condensed Consolidated Balance Sheet as of January 2, 2010. In accordance with the loan provisions, the interest rate charged on the loans is equal to the Applicable Federal Rate (AFR), as announced by the Internal Revenue Service, for short-term obligations (with annual compounding) in effect for the month in which the advance is made, until fully paid. Pursuant to the Sarbanes-Oxley Act, no further loan agreements or draws against the line may be made by the Company to, or arranged by the Company for, its executive officers. Interest payments on this loan are current as of October 2, 2010.

10. Commitments and Contingencies

The Company may become involved in various legal and administrative actions arising in the normal course of business. These could include actions brought by taxing authorities challenging the employment status of consultants utilized by the Company. In addition, future customer bankruptcies could result in additional claims on collected balances for professional services near the bankruptcy filing date. The resolution of any of such actions, claims, or the matters described above may have an impact on the financial results for the period in which they occur.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking Statements. In addition to historical information, this quarterly report contains forward-looking statements. Forward-looking statements include, but are not limited to, statements of plans and objectives, statements of future economic performance or financial projections, statements of assumptions underlying such statements, and statements of the Company’s or management’s intentions, hopes, beliefs, expectations or predictions of the future. Forward-looking statements can often be identified by the use of forward-looking terminology, such as “believes,” “expects,” “may,” “should,” “could,” “intends,” “plans,” “estimates” or “anticipates,” variations thereof or similar expressions. Certain risks and uncertainties could cause actual results to differ materially from those reflected in such forward-looking statements. Factors that might cause a difference include, but are not limited to, conditions in the industry sectors that we serve, including the slowing of client decisions on proposals and project opportunities along with scope reduction of existing projects, overall economic and business conditions, including the current economic slowdown and the difficult conditions in the credit markets, our ability to retain the limited number of large clients that constitute a major portion of our revenues, technological advances and competitive factors in the markets in which we compete, and the factors discussed in the sections entitled “Cautionary Statement Regarding Forward-Looking Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the fiscal year ended January 2, 2010. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date of this report. We undertake no obligation to revise, or publicly release the results of any revision to, these forward-looking statements. Readers should carefully review the cautionary statements contained in our annual report and in other documents that we file from time to time with the Securities and Exchange Commission.

The following should be read in connection with Management’s Discussion and Analysis of Financial Condition and Results of Operations as presented in our annual report on Form 10-K for the fiscal year ended January 2, 2010.

OVERVIEW

TMNG is among the leading providers of professional services to the converging communications, technology, media and entertainment industries and the capital formation firms that support them. We offer a fully integrated suite of consulting offerings including strategy, organizational development, knowledge management, marketing, operational, and technology consulting services. We have consulting experience with almost all major aspects of managing a global communications company. Our portfolio of solutions includes proprietary methodologies and toolsets, deep industry experience, and hands-on operational expertise and licensed software. These solutions assist clients in tackling complex business problems.

Our global investments in targeting the cable industry have re-positioned us to better serve consolidating telecommunications carriers and the converging global technology, media and entertainment companies. The convergence of communications with media and entertainment and the consolidation of large telecommunications carriers have required us to focus our strategy on building a global presence, continuing to expand our offerings and strengthening our position within the large carriers, technology, media and entertainment companies. Our efforts are helping us build what we believe is a more sustainable revenue model over the long-term, which will enable us to expand our global presence. We continue to focus our efforts on identifying, adapting to and capitalizing on the changing dynamics prevalent in the converging communications, technology, media and entertainment industries, as well as providing our wireless and IP services within the communications sector.

Our financial results are affected by macroeconomic conditions, credit market conditions, and the overall level of business confidence. Although the first three quarters of 2010 have demonstrated select positive economic indications, the global economic downturn of 2008 and 2009 has resulted in the continuance of elevated unemployment levels and reductions in capital and operating expenditures for some of our significant clients in the communications, technology, media and entertainment industries. We are also experiencing greater pricing pressure and an increased need for enhanced return on investment for projects or added sharing of risk and reward.

15

Revenues are driven by the ability of our team to secure new project contracts and deliver those projects in a way that adds value to our client in terms of return on investment or assisting clients to address a need or implement change. For the thirty-nine weeks ended October 2, 2010, revenues increased 6.2% to $50.8 million from $47.8 million for the thirty-nine weeks ended October 3, 2009 driven primarily by increased project demand for our strategic consultative offerings. Our international revenues were approximately 26% of total revenue during the thirty-nine weeks ended October 2, 2010, as compared to 29% for the thirty-nine weeks ended October 3, 2009. Our revenues are denominated in multiple currencies and are impacted by currency rate fluctuations.

Generally our client relationships begin with a short-term consulting engagement utilizing a few consultants. Our sales strategy focuses on building long-term relationships with both new and existing clients to gain additional engagements within existing accounts and referrals for new clients. Strategic alliances with other companies are also used to sell services. We anticipate that we will continue to pursue these marketing strategies in the future. The volume of work performed for specific clients may vary from period to period and a major client from one period may not use our services or the same volume of services in another period. In addition, clients generally may end their engagements with little or no penalty or notice. If a client engagement ends earlier than expected, we must re-deploy professional service personnel as any resulting non-billable time could harm margins.

Cost of services consists primarily of compensation for consultants who are employees and amortization of share-based compensation for stock options and nonvested stock, amortization of acquired software intangibles, as well as fees paid to independent contractor organizations and related expense reimbursements. Employee compensation includes certain non-billable time, training, vacation time, benefits and payroll taxes. Gross margins are primarily impacted by the type of consulting services provided; the size of service contracts and negotiated discounts; changes in our pricing policies and those of competitors; utilization rates of consultants and independent subject matter experts; and employee and independent contractor costs, which tend to be higher in a competitive labor market.

Our gross margin was 38.3% for the thirty-nine weeks ended October 2, 2010 compared with 41.1% for the thirty-nine weeks ended October 3, 2009. The decrease in gross margin in the thirty-nine weeks ended October 2, 2010 as compared to the same period of 2009 is due to a combination of factors. The most significant items that impact our margins include the mix of project types, utilization of personnel and competitive pricing decisions, including volume discount programs. In addition, during the thirty-nine weeks ended October 2, 2010, we have incurred approximately $0.3 million in the development and launch of the initial SmartXchange handset recapture project.

Sales and marketing expenses consist primarily of personnel salaries, bonuses, and related costs for direct client sales efforts and marketing staff. We primarily use a relationship sales model in which partners, principals and senior consultants generate revenues. In addition, sales and marketing expenses include costs associated with marketing collateral, product development, trade shows and advertising. General and administrative expenses consist mainly of costs for accounting, recruiting and staffing, information technology, personnel, insurance, rent and outside professional services incurred in the normal course of business.

Management has focused on aligning operating costs with operating segment revenues. Along with an increase in revenues, selling, general and administrative expenses were reduced by $1.1 million to $20.4 million for the thirty-nine weeks ended October 2, 2010 from $21.5 million for the thirty-nine weeks ended October 3, 2009. As a result, our selling, general and administrative expenses decreased as a percentage of revenues to 40.2% in the thirty-nine weeks ended October 2, 2010 from 44.9% in the thirty-nine weeks ended October 3, 2009. The reduction in selling, general and administrative expenses was driven primarily by reductions in personnel related costs. During the thirty-nine weeks ended October 2, 2010, selling, general and administrative expenses also included $0.7 million in transition and severance for personnel associated with the reorganization undertaken for 2010. In addition, selling, general and administrative expenses during the thirty-nine weeks ended October 2, 2010 included a reduction of $0.4 million in foreign currency losses as compared to the 2009 period. We will continue to evaluate selling, general and administrative expenses to maintain an appropriate cost structure relative to revenue levels.

Intangible asset amortization included in operating expenses decreased to $1.1 million in the thirty-nine weeks ended October 2, 2010 from $1.5 million in the thirty-nine weeks ended October 3, 2009. The decrease in amortization expense was due to the completion of amortization of some intangibles recorded in connection with our acquisitions of Cartesian Ltd and RVA Consulting LLC.

We recorded net losses of $0.7 million and $2.0 million for the thirteen and thirty-nine weeks ended October 2, 2010, respectively, compared to net losses of $0.5 million and $3.1 million for the thirteen and thirty-nine weeks ended October 3, 2009. The decrease in net loss for the thirty-nine weeks ended October 2, 2010 as compared to the thirty-nine weeks ended October 3, 2009 is primarily attributable to an increase in revenues and gross profit, effective cost management initiatives and a decrease in intangible amortization. We made significant strides in recent years to reduce our total operating cost structure with emphasis on selling, general and administrative expenses.

Despite the increase in revenues for the thirty-nine weeks ended October 2, 2010 as compared to the thirty-nine weeks ended October 3, 2009, the rate of change in the communications industry, driving convergence of media and telecommunications, consolidation of smaller providers and expanded deployment of wireless capabilities have added both opportunity and uncertainty for our clients. The general result is overall reduced client spending on many capital and operational initiatives. This reduction in spending, coupled with increased competition pursuing fewer opportunities, could result in further price reductions, fewer client projects, under-utilization of consultants, reduced operating margins and loss of market share. Declines in our revenues can have a significant impact on our financial results. Although we have a flexible cost base comprised primarily of employee and related costs, there is a lag in time required to scale the business appropriately if revenues are reduced. In addition, our future revenues and operating results may fluctuate from quarter to quarter based on the number, size and scope of projects in which we are engaged, the contractual terms and degree of completion of such projects, any delays incurred in connection with a project, consultant utilization rates, general economic conditions and other factors.

16

From a cash flow perspective, cash flows used in operating activities were $0.5 million during the thirty-nine weeks ended October 2, 2010 and cash flows provided by operating activities were $0.1 million during the thirty-nine weeks ended October 3, 2009. During the thirty-nine weeks ended October 2, 2010, cash used in operating activities included a negative impact of $0.9 million due to changes in working capital, partially offset by $0.4 million of positive cash flows from the results of operations (after adding back non-cash items to our net loss).

At October 2, 2010, we had working capital of approximately $16.9 million. In addition, our noncurrent investments of $5.9 million ($6.3 million par value) consist of auction rate securities held with Citigroup. Returns on our cash and investments have decreased over recent periods as a result of decreasing interest rates and a reduction in invested balances.

Our investments include auction rate securities guaranteed through the Federal Family Education Loan Program of the U.S. Department of Education. As discussed in Note 2, “Auction Rate Securities,” during the thirty-nine weeks ended October 2, 2010, our entire remaining auction rate securities portfolio held by a UBS affiliate were sold by us at par value of $5.5 million. Upon the sale of the securities, $3.7 million was applied to the line of credit from UBS and its affiliates. The line of credit was terminated, the ARS Rights expired unexercised and we received the remaining sales proceeds of $1.8 million. As a result, working capital as of October 2, 2010 includes no short-term investments or borrowings.

Additionally, during the thirty-nine weeks October 2, 2010, we sold our Brazos Student Finance Corporation Student Loan Asset Backed Notes with a par value of $1.0 million held as part of our auction rate securities portfolio with Citigroup. We received $950,000 in proceeds from the transaction.

During the first quarter of 2009, we entered into a loan agreement with Citigroup to provide liquidity for the remainder of our $7.25 million auction rate securities portfolio held with Citigroup. Under the loan agreement, we have access to a revolving line of credit of up to 50% of the par value of the auction rate securities that we have pledged as collateral, or $3.125 million based upon the Company’s current holdings of $6.25 million of auction rate securities. We have made no borrowings under the line of credit with Citigroup.

CRITICAL ACCOUNTING POLICIES

While the selection and application of any accounting policy may involve some level of subjective judgments and estimates, we believe the following accounting policies are the most critical to our condensed consolidated financial statements, potentially involve the most subjective judgments in their selection and application, and are the most susceptible to uncertainties and changing conditions:

• Marketable Securities;

• Impairment of Goodwill and Long-lived Assets;

• Revenue Recognition;

• Share-based Compensation Expense;

• Accounting for Income Taxes; and

• Research and Development and Capitalized Software Costs.

Marketable Securities — Short-term and non-current investments, which consist of auction rate securities, are accounted for under the provisions of FASB ASC 320, “Investments-Debt and Equity Securities.” Management evaluates the appropriate classification of marketable securities at each balance sheet date. These investments are reported at fair value, as measured pursuant to FASB ASC 820, “Fair Value Measurements and Disclosures.” For those securities considered to be “available-for-sale,” any temporary unrealized gains and losses are included as a separate component of stockholders’ equity, net of applicable taxes. For those securities considered to be “trading,” any unrealized gains and losses are included in the Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited), net of applicable taxes. Additionally, realized gains and losses, changes in value judged to be other-than-temporary, interest and dividends are also included in the Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited), net of applicable taxes.

As of October 2, 2010, $5.9 million in auction rate securities ($6.3 million par value) is reflected as non-current assets on our Condensed Consolidated Balance Sheet (unaudited). As of January 2, 2010, $6.9 million in auction rate securities ($7.3 million par value) was reflected as non-current assets on our Condensed Consolidated Balance Sheet (unaudited). All of these auction rate securities are classified as available-for-sale investments. For auction rate securities classified as available-for-sale, we recognized unrealized holding gains of $49,000 and $50,000, respectively during the thirteen and thirty-nine weeks ended October 2, 2010 and recognized unrealized holding gains of $31,000 and $720,000, respectively during the thirteen and thirty-nine weeks ended October 3, 2009.

As of January 2, 2010, we had $5.4 million ($5.5 million par value) in auction rate securities reflected as current assets. The auction rate securities classified as short-term investments were held with a UBS affiliate. During 2008, we reached a settlement agreement related to our auction rate securities held in accounts with a UBS affiliate. Pursuant to the terms of the settlement with UBS, UBS held discretionary rights to sell or otherwise dispose of our auction rate securities (“ARS Rights”), provided that we were entitled to the par value of the auction rate securities upon any disposition. Upon accepting the UBS settlement, we made a one-time election to transfer our UBS auction rate securities holdings from available-for-sale securities to trading securities under FASB ASC 320. For auction rate securities classified as trading

17

securities, we recognized no gains or losses on auction rate securities during the thirteen weeks ended October 2, 2010 and recognized realized holding gains of $342,000 offset by realized losses on the Company’s ARS Rights of $286,000 during the thirty-nine weeks ended October 2, 2010. For auction rate securities classified as trading securities, we recognized realized holding gains of $208,000 and $606,000, respectively, offset by realized losses on the Company’s ARS Rights of $191,000 and $484,000, respectively, during the thirteen and thirty-nine weeks ended October 3, 2009. The ARS Rights were measured at fair value under FASB ASC 825. During the thirty-nine weeks ended October 2, 2010, all of the auction rate securities classified as trading were sold at par value of $5.5 million.

Due to the lack of observable market quotes on our auction rate securities portfolio and ARS Rights, we utilize valuation models that rely exclusively on Level 3 inputs as defined in FASB ASC 820 including those that are based on expected cash flow streams and collateral values, including assessments of counterparty credit quality, default risk underlying the security, discount rates and overall capital market liquidity. The valuation of our auction rate securities portfolio and ARS Rights is subject to uncertainties that are difficult to predict. Factors that may impact our valuation include changes to credit ratings of the securities as well as to the underlying assets supporting those securities, rates of default of the underlying assets, underlying collateral value, discount rates, counterparty risk and ongoing strength and quality of market credit and liquidity.

Impairment of Goodwill and Long-lived Assets — As of October 2, 2010, we had $8.1 million in goodwill and $1.0 million in long-lived intangible assets, net of accumulated amortization. Goodwill and other long-lived intangible assets arising from our acquisitions are subjected to periodic review for impairment. FASB ASC 350 “Intangibles-Goodwill and Other” requires an evaluation of these indefinite-lived assets annually and whenever events or circumstances indicate that such assets may be impaired. The evaluation is conducted at the reporting unit level and compares the calculated fair value of the reporting unit to its book value to determine whether impairment has been deemed to occur. Any impairment charge would be based on the most recent estimates of the recoverability of the recorded goodwill. If the remaining book value assigned to goodwill in an acquisition is higher than the estimated fair value of the reporting unit, there is a requirement to write down these assets.

Fair value of our reporting units is determined using the income approach. The income approach uses a reporting unit’s projection of estimated cash flows discounted using a weighted-average cost of capital analysis that reflects current market conditions. We also consider the market approach to valuing our reporting units, however due to the lack of comparable industry publicly available transaction data, we concluded that a market approach will not adequately reflect our specific reporting unit operations. While the market approach is typically not expressly utilized, we do compare the results of our overall enterprise valuation to our market capitalization. Significant management judgments related to the income approach include:

• Anticipated future cash flows and terminal value for each reporting unit — The income approach to determining fair value relies on the timing and estimates of future cash flows, including an estimate of terminal value. The projections use management’s estimates of economic and market conditions over the projected period including growth rates in revenues and estimates of expected changes in operating margins. Our projections of future cash flows are subject to change as actual results are achieved that differ from those anticipated. Because management frequently updates its projections, we would expect to identify on a timely basis any significant differences between actual results and recent estimates.

• Selection of an appropriate discount rate — The income approach requires the selection of an appropriate discount rate, which is based on a weighted average cost of capital analysis. The discount rate is affected by changes in short-term interest rates and long-term yield as well as variances in the typical capital structure of marketplace participants. The discount rate is determined based on assumptions that would be used by marketplace participants, and for that reason, the capital structure of selected marketplace participants was used in the weighted average cost of capital analysis. Given the current volatile economic conditions, it is possible that the discount rate will fluctuate in the near term.

In accordance with FASB ASC 360, “Property, Plant and Equipment,” we use our best estimates based upon reasonable and supportable assumptions and projections to review for impairment of finite-lived assets and finite-lived identifiable intangibles to be held and used whenever events or changes in circumstances indicate that the carrying amount of our assets might not be recoverable.

Revenue Recognition — We recognize revenues from time and materials consulting contracts in the period in which our services are performed. We recognized $7.5 million and $6.4 million in revenues from time and materials contracts during the thirteen weeks ended October 2, 2010 and October 3, 2009, respectively. We recognized $20.2 million and $19.4 million in revenues from time and materials contracts during the thirty-nine weeks ended October 2, 2010 and October 3, 2009, respectively. In addition to time and materials contracts, our other types of contracts include fixed fee contracts and contingent fee contracts. During the thirteen weeks ended October 2, 2010 and October 3, 2009, we recognized $8.9 million and $10.4 million in revenues on these other types of contracts. We recognized $30.6 million and $28.4 million in revenues from these other types of contracts during the thirty-nine weeks ended October 2, 2010 and October 3, 2009, respectively. We recognize revenues on milestone or deliverables-based fixed fee contracts and time and materials contracts not to exceed contract price using the percentage of completion-like method described by FASB ASC 605-35, “ Revenue Recognition — Construction-Type and Production-Type Contracts ” (formerly AICPA Statement of Position (“SOP”) No. 81-1, “ Accounting for Performance of Construction-Type and Certain Production-Type Contracts” ). For fixed fee contracts where services are not based on providing deliverables or achieving milestones, we recognize revenues on a straight-line basis over the period during which such services are expected to be performed. In connection with some fixed fee contracts, we receive payments from customers that exceed recognized revenues. We record the excess of receipts from customers over recognized revenue as deferred revenue. Deferred revenue is classified as a current liability to the extent it is expected to be earned within twelve months from the date of the balance sheet.

18

We also develop, install and support customer software in addition to our traditional consulting services. We recognize revenues in connection with our software sales agreements utilizing the percentage of completion method prescribed by FASB ASC 605-35. These agreements include software right-to-use licenses (“RTU’s”) and related customization and implementation services. Due to the long-term nature of software implementation and the extensive software customization based on normal customer specific requirements, both the RTU and implementation services are treated as a single element for revenue recognition purposes.

The FASB ASC 605-35 percentage-of-completion-like methodology involves recognizing revenue using the percentage of services completed, on a current cumulative cost to total cost basis, using a reasonably consistent profit margin over the period. Due to the longer term nature of these projects, developing the estimates of costs often requires significant judgment. Factors that must be considered in estimating the progress of work completed and ultimate cost of the projects include, but are not limited to, the availability of labor and labor productivity, the nature and complexity of the work to be performed, and the impact of delayed performance. If changes occur in delivery, productivity or other factors used in developing the estimates of costs or revenues, we revise our cost and revenue estimates, which may result in increases or decreases in revenues and costs, and such revisions are reflected in income in the period in which the facts that give rise to that revision become known.

In addition to the professional services related to the customization and implementation of software, we also provide post-contract support (“PCS”) services, including technical support and maintenance services. For those contracts that include PCS service arrangements which are not essential to the functionality of the software solution, we separate the FASB ASC 605-35 software services and PCS services utilizing the multiple-element arrangement model prescribed by FASB ASC 605-25, “Revenue Recognition — Multiple-Element Arrangements ” (formerly Emerging Issues Task Force No. 00-21, “ Revenue Arrangements with Multiple Deliverables ”). FASB ASC 605-25 addresses the accounting treatment for an arrangement to provide the delivery or performance of multiple products and/or services where the delivery of a product or system or performance of services may occur at different points in time or over different periods of time. We utilize FASB ASC 605-25 to separate the PCS service elements and allocate total contract consideration to the contract elements based on the relative fair value of those elements. Revenues from PCS services are recognized ratably on a straight-line basis over the term of the support and maintenance agreement.

We also may enter into contingent fee contracts, in which revenue is subject to achievement of savings or other agreed upon results, rather than time spent. Due to the nature of contingent fee contracts, we recognize costs as they are incurred on the project and defer revenue recognition until the revenue is realizable and earned as agreed to by our clients. Although these contracts can be very rewarding, the profitability of these contracts is dependent on our ability to deliver results for our clients and control the cost of providing these services. These types of contracts are typically more results-oriented and are subject to greater risk associated with revenue recognition and overall project profitability than traditional time and materials contracts. Revenues associated with contingent fee contracts were not material during the thirteen and thirty-nine weeks ended October 2, 2010 or October 3, 2009.

Share-based Compensation Expense — We grant stock options and non-vested stock to our employees and also provide employees the right to purchase our stock at a discount pursuant to an employee stock purchase plan. The benefits provided under these plans are share-based payment awards subject to the provisions of FASB ASC 718, “Compensation-Stock Compensation.” Under FASB ASC 718, we are required to make significant estimates related to determining the value of our share-based compensation. Our expected stock-price volatility assumption is based on historical volatilities of the underlying stock which are obtained from public data sources. The expected term of options granted is based on the simplified method in accordance with the SEC’s Staff Accounting Bulletin (“SAB”) No. 110 as our historical share option exercise experience does not provide a reasonable basis for estimation.

If factors change and we develop different assumptions in the application of FASB ASC 718 in future periods, the compensation expense that we record under FASB ASC 718 may differ significantly from what we have recorded in the current period. There is a high degree of subjectivity involved when using option pricing models to estimate share-based compensation under FASB ASC 718. Changes in the subjective input assumptions can materially affect our estimates of fair values of our share-based compensation. Certain share-based payment awards, such as employee stock options, may expire worthless or otherwise result in zero intrinsic value as compared to the fair values originally estimated on the grant date and reported in our financial statements. Alternatively, values may be realized from these instruments that are significantly in excess of the fair values originally estimated on the grant date and reported in our financial statements. Although the fair value of employee share-based awards is determined in accordance with FASB ASC 718 and SAB No. 110 using an option pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction.

In addition, under FASB ASC 718 we are required to net estimated forfeitures against compensation expense. This requires us to estimate the number of awards that will be forfeited prior to vesting. If actual forfeitures in future periods are different than our initial estimate, the compensation expense that we ultimately record under FASB ASC 718 may differ significantly from what was originally estimated. The weighted average estimated forfeiture rate for unvested options outstanding as of October 2, 2010 is 39%.

Accounting for Income Taxes — Accounting for income taxes requires significant estimates and judgments on the part of management. Such estimates and judgments include, but are not limited to, the effective tax rate anticipated to apply to tax differences that are expected to reverse in the future, the sufficiency of taxable income in future periods to realize the benefits of net deferred tax assets and net operating losses currently recorded and the likelihood that tax positions taken in tax returns will be sustained on audit. We account for income taxes in accordance with FASB ASC 740 “Income Taxes.” As required by FASB ASC 740, we record deferred tax assets or liabilities based on differences between financial reporting and tax bases of assets and liabilities using currently enacted rates that will be in effect when the differences are expected to reverse. FASB ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. As of October 2, 2010, cumulative valuation allowances in the amount of $33.6 million were recorded in connection with the net deferred income tax assets. As required by FASB ASC 740, we have

19

performed a comprehensive review of our portfolio of uncertain tax positions in accordance with recognition standards established by the guidance. Pursuant to FASB ASC 740, an uncertain tax position represents our expected treatment of a tax position taken in a filed tax return, or planned to be taken in a future tax return, that has not been reflected in measuring income tax expense for financial reporting purposes. As of October 2, 2010, we have recorded a liability of approximately $1.0 million for unrecognized tax benefits. The statute of limitations related to uncertain tax positions of $0.4 million expired on October 31, 2010.

We have generated substantial deferred income tax assets related to our domestic operations, and to a lesser extent our international operations, primarily from the accelerated financial statement write-off of goodwill, the charge to compensation expense taken for stock options and net operating losses. Within our foreign operations, mostly domiciled within the United Kingdom, we have generated deferred tax assets primarily from the charge to compensation expense for stock options and operating losses. For us to realize the income tax benefit of these assets in either jurisdiction, we must generate sufficient taxable income in future periods when such deductions are allowed for income tax purposes. In some cases where deferred taxes were the result of compensation expense recognized on stock options, our ability to realize the income tax benefit of these assets is also dependent on our share price increasing to a point where these options have intrinsic value at least equal to the grant date fair value and are exercised. In assessing whether a valuation allowance is needed in connection with our deferred income tax assets, we have evaluated our ability to generate sufficient taxable income in future periods to utilize the benefit of the deferred income tax assets. We continue to evaluate our ability to use recorded deferred income tax asset balances. If we continue to report domestic or international operating losses for financial reporting in future years in either our domestic or international operations, no additional tax benefit would be recognized for those losses, since we will not have accumulated enough positive evidence to support our ability to utilize net operating loss carry-forwards in the future.

International operations have become a significant part of our business. As part of the process of preparing our financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. We utilize a “cost plus fixed margin” transfer pricing methodology as it relates to inter-company charges for headquarters support services performed by our domestic entities on behalf of various foreign affiliates. The judgments and estimates used are subject to challenge by domestic and foreign taxing authorities. It is possible that such authorities could challenge those judgments and estimates and draw conclusions that would cause us to incur liabilities in excess of those currently recorded. We use an estimate of our annual effective tax rate at each interim period based upon the facts and circumstances available at that time, while the actual annual effective tax rate is calculated at year-end. Changes in the geographical mix or estimated amount of annual pre-tax income could impact our overall effective tax rate.

Research and Development and Capitalized Software Costs — Software development costs are accounted for in accordance with FASB ASC 985-20, “Software — Costs of Software to Be Sold, Leased, or Marketed.” Capitalization of software development costs for products to be sold to third parties begins upon the establishment of technological feasibility and ceases when the product is available for general release. The establishment of technological feasibility and the ongoing assessment of recoverability of capitalized software development costs require considerable judgment by management concerning certain external factors including, but not limited to, technological feasibility, anticipated future gross revenue, estimated economic life and changes in software and hardware technologies. We capitalize development costs incurred during the period between the establishment of technological feasibility and the release of the final product to customers. During the thirteen and thirty-nine weeks ended October 2, 2010, software development costs of $116,000 and $439,000, respectively, were expensed as incurred. During the thirteen and thirty-nine weeks ended October 3, 2009, software development costs of $144,000 and $390,000, respectively, were expensed as incurred. No software development costs were capitalized during the thirteen and thirty-nine weeks ended October 2, 2010 and October 3, 2009.

RESULTS OF OPERATIONS

THIRTEEN WEEKS ENDED OCTOBER 2, 2010 COMPARED TO THIRTEEN WEEKS ENDED OCTOBER 3, 2009

REVENUES

Revenues decreased 2.5% to $16.4 million for the thirteen weeks ended October 2, 2010 from $16.8 million for the thirteen weeks ended October 3, 2009. The decrease in revenues is primarily due to lower revenues in our EMEA segment due to a decline in demand for technology and software services and a negative impact of $0.2 million as a result of exchange rate movements.

North America Segment — North America segment revenues were $12.3 million for the thirteen weeks ended October 2, 2010 and October 3, 2009. During the thirteen weeks ended October 2, 2010, the North America segment provided services on 91 customer projects, compared to 75 projects performed in the thirteen weeks ended October 3, 2009. Average revenue per project was $135,000 in the thirteen weeks ended October 2, 2010, compared to $176,000 in the thirteen weeks ended October 3, 2009. Revenues recognized in connection with fixed price engagements totaled $6.2 million and $8.2 million, representing 50.5% and 61.6% of total revenues of the segment, for the thirteen weeks ended October 2, 2010 and October 3, 2009, respectively.

EMEA Segment — EMEA segment revenues decreased by 8.4% to $4.1 million for the thirteen weeks ended October 2, 2010 from $4.5 million for the thirteen weeks ended October 3, 2009. All revenues were generated internationally. During the thirteen weeks ended October 2, 2010 and October 3, 2009, this segment provided services on 62 and 95 customer projects, respectively. Average revenue per project was approximately $55,000 and $40,000 for the thirteen weeks ended October 2, 2010 and October 3, 2009, respectively. The decrease in the number of customer projects and increase in revenue per project for the thirteen weeks ended October 2, 2010 as compared to the 2009 period is primarily due to the commencement of several large projects during the 2010 period as a result of our clients’ increased concentration on key business issues. Revenues from post-contract software related support services were approximately $673,000 and $632,000 for the thirteen weeks ended October 2, 2010 and October 3, 2009, respectively. There were no revenues from software

20

licensing during the thirteen weeks ended October 2, 2010. Revenues from software licensing during the thirteen weeks ended October 3, 2009 were $3,000.

COSTS OF SERVICES

Costs of services increased 2.3% to $10.2 million for the thirteen weeks ended October 2, 2010 from $9.9 million for the thirteen weeks ended October 3, 2009. Our gross margin was 37.9% for the thirteen weeks ended October 2, 2010 compared to 40.8% for the thirteen weeks ended October 3, 2009. Cost of services during the thirteen weeks ended October 2, 2010 were $7.6 million and $2.6 million, respectively, in our North America and EMEA segments. Cost of services during the thirteen weeks ended October 3, 2009 were $6.9 million and $3.0 million, respectively, in our North America and EMEA segments. Our North America segment gross margin was 38.1% for the thirteen weeks ended October 2, 2010 compared to 43.5% for the thirteen weeks ended October 3, 2009. The decrease in gross margin in the third quarter of 2010 as compared to the same period of 2009 in our North America segment is primarily due to the completion of a large management consulting project in 2009, partially offset by an increase in strategy engagements resulting in higher utilization of our fixed employee consulting base. Our EMEA segment gross margin was 34.7% for the thirteen weeks ended October 2, 2010, compared to 33.6% for the thirteen weeks ended October 3, 2009. The increase in gross margin in the EMEA segment is primarily related to reductions in delivery costs partially offset by lower revenue volumes driven by a reduction in demand for software services. Costs of services in the EMEA segment included amortization of intangible assets of $145,000 and $154,000, respectively, for the thirteen weeks ended October 2, 2010 and October 3, 2009, related to acquired software. The reduction in intangible amortization is due to exchange rate movements.

OPERATING EXPENSES

Operating expenses were $6.9 million and $7.2 million for the thirteen weeks ended October 2, 2010 and October 3, 2009, respectively. Operating expenses for both periods included selling, general and administrative expenses (inclusive of share-based compensation) and intangible asset amortization.

Selling, general and administrative expenses decreased to $6.6 million for the thirteen weeks ended October 2, 2010, compared to $6.7 million for the thirteen weeks ended October 3, 2009. As a percentage of revenues, our selling, general and administrative expenses were 40.0% for the thirteen weeks ended October 2, 2010, compared to 40.1% for the thirteen weeks ended October 3, 2009.

Intangible asset amortization decreased by $166,000 to $340,000 for the thirteen weeks ended October 2, 2010, compared to $506,000 for the thirteen weeks ended October 3, 2009. The decrease in amortization expense was primarily due to the completion of amortization of various intangibles recorded in connection with acquisitions.

OTHER INCOME AND EXPENSES

Interest income was $32,000 and $50,000 for the thirteen weeks ended October 2, 2010 and October 3, 2009, respectively, and represented interest earned on invested balances. Interest income decreased for the thirteen weeks ended October 2, 2010 as compared to the thirteen weeks ended October 3, 2009, due primarily to reductions in interest rates and reductions in invested balances. We primarily invest in money market funds and have holdings in auction rate securities. For the thirteen weeks ended October 2, 2010, other income includes $50,000 in realized holding losses for auction rate securities classified as available for sale that were sold during the period. For the thirteen weeks ended October 3, 2009, other income includes $208,000 in realized holding gains for auction rate securities classified as trading securities, offset by realized losses on our ARS Rights of $191,000. In addition, other income for the thirteen weeks ended October 3, 2009 includes $28,000 related to the settlement of a foreign withholding tax dispute.

INCOME TAXES

During the thirteen weeks ended October 2, 2010 and October 3, 2009, respectively, we recorded income tax provisions of $38,000 and $228,000. The tax provision for the thirteen weeks ended October 2, 2010 is primarily due to deferred taxes recognized on intangibles amortized for income tax purposes but not for financial reporting purposes and interest recognized on reserves for uncertain tax positions. The tax provision for the thirteen weeks ended October 3, 2009 is primarily related to recording a full valuation allowance against deferred tax assets related to our United Kingdom operations. For the thirteen weeks ended October 2, 2010 and October 3, 2009, we recorded no income tax benefit related to our domestic and international pre-tax losses in accordance with the provisions of FASB ASC 740, “Income Taxes”, which requires an estimation of our ability to use recorded deferred income tax assets. We currently have recorded a valuation allowance against all domestic and international deferred income tax assets generated due to uncertainty about their ultimate realization due to our history of operating losses. If we continue to report net operating losses for financial reporting in either our domestic or international operations, no additional tax benefit would be recognized for those losses, since we will not have accumulated enough positive evidence to support our ability to utilize the net operating loss carryforwards in the future.

NET LOSS

We had a net loss of $0.7 million for the thirteen weeks ended October 2, 2010 compared to a net loss of $0.5 million for the thirteen weeks ended October 3, 2009. The increase in net loss is due to higher cost of services on slightly lower sales.

21

THIRTY-NINE WEEKS ENDED OCTOBER 2, 2010 COMPARED TO THIRTY-NINE WEEKS ENDED OCTOBER 3, 2009

REVENUES

Revenues increased 6.2% to $50.8 million for the thirty-nine weeks ended October 2, 2010 from $47.8 million for the thirty-nine weeks ended October 3, 2009. The increase in revenues is primarily due to an increase in demand for strategic consulting within our North America segment, partially offset by a decrease in revenues in our EMEA segment.

North America Segment — North America segment revenues increased 12.7% to $38.7 million for the thirty-nine weeks ended October 2, 2010 from $34.4 million for the same period of 2009. During the thirty-nine weeks ended October 2, 2010, the North America segment provided services on 144 customer projects, compared to 125 projects performed in the thirty-nine weeks ended October 3, 2009. Average revenue per project was $269,000 in the thirty-nine weeks ended October 2, 2010, compared to $275,000 in the thirty-nine weeks ended October 3, 2009. Revenues recognized in connection with fixed price engagements totaled $23.1 million and $22.0 million, representing 59.6% and 64.0% of total revenues of the segment, for the thirty-nine weeks ended October 2, 2010 and October 3, 2009, respectively. This increase in revenues from fixed price engagements is primarily due to an increase in strategic consulting.

EMEA Segment — EMEA segment revenues decreased by 10.2% to $12.1 million for the thirty-nine weeks ended October 2, 2010 from $13.5 million for the thirty-nine weeks ended October 3, 2009. All revenues were generated internationally. The decrease in revenue for the thirty-nine weeks ended October 2, 2010 as compared to the 2009 period is primarily due to a decline in demand for technology and software services. During the thirty-nine weeks ended October 2, 2010 and October 3, 2009, this segment provided services on 134 and 179 customer projects, respectively. Average revenue per project was approximately $76,000 and $64,000, respectively, for the thirty-nine weeks ended October 2, 2010 and October 3, 2009. The decrease in the number of customer projects and increase in revenue per project for the thirty-nine weeks ended October 2, 2010 as compared to the 2009 period is primarily due to the commencement of several large projects during the 2010 period as a result of our clients’ increased concentration on key business issues. Revenues from post-contract software related support services were approximately $1,950,000 and $1,702,000 for the thirty-nine weeks ended October 2, 2010 and October 3, 2009, respectively. There were no revenues from software licensing during the thirty-nine weeks ended October 2, 2010. Revenues from software licensing during the thirty-nine weeks ended October 3, 2009 were $431,000.

COSTS OF SERVICES

Costs of services increased 11.4% to $31.4 million for the thirty-nine weeks ended October 2, 2010 compared to $28.2 million for the thirty-nine weeks ended October 3, 2009. As a percentage of revenues, our gross margin was 38.3% for the thirty-nine weeks ended October 2, 2010, compared to 41.1% for the thirty-nine weeks ended October 3, 2009. Cost of services during the thirty-nine weeks ended October 2, 2010 were $23.3 million and $8.1 million, respectively, in our North America and EMEA segments. Cost of services during the thirty-nine weeks ended October 3, 2009 were $19.6 million and $8.6 million, respectively, in our North America and EMEA segments. Our North America segment gross margin was 39.7% for the thirty-nine weeks ended October 2, 2010 compared to 43.1% for the thirty-nine weeks ended October 3, 2009. The decrease in gross margin in the first half of 2010 as compared to the same period of 2009 in our North America segment is primarily due to longer term and lower margin management consulting projects and the completion of a large management consulting project in 2009, partially offset by an increase in strategy engagements resulting in higher utilization of our fixed employee consulting base. Our EMEA segment gross margin was 32.8% for the thirty-nine weeks ended October 2, 2010, compared to 36.0% for the thirty-nine weeks ended October 3, 2009. Margin reductions in the EMEA segment are primarily related to lower revenue volumes driven by a reduction in demand for technology and software services. Costs of services in the EMEA segment included amortization of intangible assets of $432,000 and $434,000, respectively, for the thirty-nine weeks ended October 2, 2010 and October 3, 2009, related to acquired software. The reduction in intangible amortization is due to exchange rate movements.

OPERATING EXPENSES

Operating expenses decreased by 6.4% to $21.5 million for the thirty-nine weeks ended October 2, 2010, from $23.0 million for the thirty-nine weeks ended October 3, 2009. Operating expenses for both periods included selling, general and administrative expenses (inclusive of share-based compensation) and intangible asset amortization.

Selling, general and administrative expenses decreased to $20.4 million for the thirty-nine weeks ended October 2, 2010, compared to $21.5 million for the thirty-nine weeks ended October 3, 2009. As a percentage of revenues, our selling, general and administrative expense was 40.2% for the thirty-nine weeks ended October 2, 2010, compared to 44.9% for the thirty-nine weeks ended October 3, 2009. The decrease in selling, general and administrative expenses was primarily due to reductions in personnel related costs of $1.1 million and professional fees of $0.1 million, partially offset by an increase of $0.5 million in severance costs. The severance costs in the 2010 period relate to transition and severance for personnel associated with the reorganization undertaken for 2010. In addition, selling, general and administrative expenses during the thirty-nine weeks ended October 2, 2010 included a reduction of $0.4 million in foreign currency losses as compared to the 2009 period. We continue to evaluate alignment of costs to revenues for each operating segment.

Intangible asset amortization decreased from $1,471,000 for the thirty-nine weeks ended October 3, 2009 to $1,061,000 for the thirty-nine weeks ended October 2, 2010. The decrease in amortization expense was primarily due to the completion of amortization of various intangibles recorded in connection with acquisitions.

22

OTHER INCOME AND EXPENSES

Interest income was $140,000 and $188,000 for the thirty-nine weeks ended October 2, 2010 and October 3, 2009, respectively, and represented interest earned on invested balances. Interest income decreased for the thirty-nine weeks ended October 2, 2010 as compared to the thirty-nine weeks ended October 3, 2009 due primarily to reductions in invested balances and reductions in interest rates. We primarily invest in money market funds and have holdings in auction rate securities. For the thirty-nine weeks ended October 2, 2010, other income includes $342,000 in realized holding gains for auction rate securities classified as trading securities, offset by realized losses on our ARS Rights of $286,000. In addition, Other Income for the thirty-nine weeks ended October 2, 2010 includes $50,000 in realized holding losses for auction rate securities classified as available for sale that were sold during the period. For the thirty-nine weeks ended October 3, 2009, other income includes $606,000 in realized holding gains for auction rate securities classified as trading securities, offset by realized losses on our ARS Rights of $484,000. In addition, other income for the thirty-nine weeks ended October 3, 2009 includes $28,000 related to the settlement of a foreign withholding tax dispute.

INCOME TAXES

In the thirty-nine weeks ended October 2, 2010 and October 3, 2009, we recorded income tax provisions of $87,000 and $68,000, respectively. The tax provision for the thirty-nine weeks ended October 2, 2010 is primarily due to deferred taxes recognized on intangibles amortized for income tax purposes but not for financial reporting purposes and interest recognized on reserves for uncertain tax positions. The tax provision for the thirty-nine weeks ended October 3, 2009 is primarily related to recording a full valuation allowance against deferred tax assets related to our United Kingdom operations and interest recognized on reserves for uncertain tax positions. For the thirty-nine weeks ended October 2, 2010 and October 3, 2009, we recorded no income tax benefit related to our domestic and international pre-tax losses in accordance with the provisions of FASB ASC 740, “Income Taxes”, which requires an estimation of our ability to use recorded deferred income tax assets. We currently have recorded a valuation allowance against all domestic and international deferred income tax assets generated due to uncertainty about their ultimate realization due to our history of operating losses. If we continue to report net operating losses for financial reporting in either our domestic or international operations, no additional tax benefit would be recognized for those losses, since we will not have accumulated enough positive evidence to support our ability to utilize the net operating loss carryforwards in the future.

NET LOSS

We had net loss of $2.0 million for the thirty-nine weeks ended October 2, 2010 compared to a net loss of $3.1 million for the thirty-nine weeks ended October 3, 2009. This decrease in net loss is primarily attributable to effective cost management initiatives that resulted in reduced operating expenses and a decrease in intangible amortization, partially offset by a reduction in gross profit.

STATEMENT REGARDING NON-GAAP FINANCIAL MEASUREMENT

In addition to net loss and net loss per share on a GAAP basis, our management uses a non-GAAP financial measure, “Non-GAAP adjusted net income or loss,” in its evaluation of our performance, particularly when comparing performance to the prior year’s period and on a sequential basis. This non-GAAP measure contains certain non-GAAP adjustments which are described in the following schedule entitled “Reconciliation of GAAP Net Loss to Non-GAAP Adjusted Net Income (Loss).” In making these non-GAAP adjustments, we take into account certain non-cash expenses and benefits, including tax effects as applicable, and the impact of certain items that are generally not expected to be on-going in nature or that are unrelated to our core operations. Management believes the exclusion of these items provides a useful basis for evaluating underlying business performance, but should not be considered in isolation and is not in accordance with, or a substitute for, evaluating our performance utilizing GAAP financial information. We believe that providing such adjusted results allows investors and other users of our financial statements to better understand TMNG’s comparative operating performance for the periods presented. TMNG’s non-GAAP measure may differ from similar measures by other companies, even if similar terms are used to identify such measures. Although TMNG’s management believes the non-GAAP financial measure is useful in evaluating the performance of its business, TMNG acknowledges that items excluded from such measure have a material impact on our net loss and net loss per share calculated in accordance with GAAP. Therefore, management uses non-GAAP measures in conjunction with GAAP results. Investors and other users of our financial information should also consider the above factors when evaluating TMNG’s results. All per share amounts have been adjusted to reflect the 1-for-5 reverse stock split of the Company’s common stock effective February 7, 2010.

23

THE MANAGEMENT NETWORK GROUP, INC.
RECONCILIATION OF GAAP NET LOSS TO NON-GAAP ADJUSTED NET INCOME (LOSS)
(unaudited)
(in thousands, except per share data)

	Thirteen Weeks Ended						Thirty-nine Weeks Ended
	October 2,			October 3,			October 2,			October 3,
	2010			2009			2010			2009
Reconciliation of GAAP net loss to non-GAAP adjusted net income (loss):
GAAP net loss	$	(723	)	$	(527	)	$	(1,973	)	$	(3,061	)
Realized loss (gain) on auction rate securities		50			(17	)		(6	)		(122	)
Depreciation and amortization		683			873			2,076			2,529
Non-cash share based compensation expense		61			173			258			724
Tax effect of applicable non-GAAP adjustments		30			20			98			(200	)
Adjustments to GAAP net loss		824			1,049			2,426			2,931
Non-GAAP adjusted net income (loss)	$	101		$	522		$	453		$	(130	)
Reconciliation of GAAP net loss per diluted common share to non-GAAP adjusted net income (loss) per diluted common share:
GAAP net loss per diluted common share	$	(0.10	)	$	(0.08	)	$	(0.28	)	$	(0.44	)
Realized loss (gain) on auction rate securities		0.00			(0.00	)		(0.00	)		(0.02	)
Depreciation and amortization		0.10			0.12			0.29			0.36
Non-cash share based compensation expense		0.01			0.03			0.04			0.11
Tax effect of applicable non-GAAP adjustments		0.00			0.00			0.01			(0.03	)
Adjustments to GAAP net loss per diluted common share		0.11			0.15			0.34			0.42
Non-GAAP adjusted net income (loss) per diluted common share	$	0.01		$	0.07		$	0.06		$	(0.02	)
Weighted average shares used in calculation of diluted net income (loss) per common share		7,062			7,015			7,043			6,974

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities was $0.5 million the thirty-nine weeks ended October 2, 2010. Net cash provided by operating activities was $0.1 million for the thirty-nine weeks ended October 3, 2009. During the thirty-nine weeks ended October 2, 2010, cash used in operating activities included a negative impact of $0.9 million due to changes in working capital, partially offset by $0.4 million of positive cash flows from the results of operations (after adding back non-cash items to our net loss). For the thirty-nine weeks ended October 3, 2009, cash provided by operating activities was primarily due to the results of operations (after adding back non-cash items to our net loss).

Net cash provided by investing activities was $5.9 million the thirty-nine weeks ended October 2, 2010. Net cash used in investing activities was $2.4 million for the thirty-nine weeks ended October 3, 2009. Investing activities include proceeds from sales of short-term and noncurrent investments of $6.5 million in the thirty-nine weeks ended October 2, 2010. Investing activities for the thirty-nine weeks ended October 3, 2009 included $1.9 million in earn-out payments related to the acquisition of Cartesian. Investing activities also included $0.5 million for both the thirty-nine weeks ended October 2, 2010 and October 3, 2009 related to the purchase of office equipment, software and computer equipment.

Net cash used in financing activities was $3.3 million for the thirty-nine weeks ended October 2, 2010. Net cash provided by financing activities was $2.9 million for the thirty-nine weeks ended October 3, 2009. Financing activities in the thirty-nine weeks ended October 2, 2010 included $3.7 million in repayments on a line of credit and $0.9 million in proceeds from line of credit borrowings. Financing activities

24

in the 2009 period included $3.4 million in proceeds from line of credit borrowings. In addition, in both periods payments of $0.5 million were made on long-term obligations.

At October 2, 2010, we had approximately $8.3 million in cash and cash equivalents ($4.1 million of which is denominated in pounds sterling) and $16.9 million in net working capital. In addition, as discussed below, we have established lines of credit totaling $3.1 million against our remaining auction rate securities portfolio, of which we have no borrowings as of October 2, 2010. We believe we have sufficient cash and access to credit to meet anticipated cash requirements, including anticipated capital expenditures, earn-out payments, and any future operating losses that may be incurred, for at least the next 12 months. Should our cash and available lines of credit prove insufficient we may need to obtain new debt or equity financing to support our operations or complete acquisitions. Credit and capital markets have continued to experience unusual volatility and disruption, and equity and debt financing have generally become more expensive and difficult to obtain. If we need to obtain new debt or equity financing to support our operations or complete acquisitions in the future, we may be unable to obtain debt or equity financing or reasonable terms. We have established a flexible model that provides a lower fixed cost structure than most consulting firms, enabling us to scale operating cost structures more quickly based on market conditions, although there is a lag in time required to scale the business appropriately if revenues are reduced. If demand for our consulting services declines or we experience negative cash flow, we could experience liquidity challenges at some point in the future.

On March 19, 2009, we entered into a loan agreement with Citigroup Global Markets, Inc. (“Citigroup”) to provide liquidity for our $7.3 million auction rate securities portfolio held with Citigroup. Under the loan agreement, we have access to a revolving line of credit of up to 50% of the par value of the auction rate securities that we have pledged as collateral, or $3.125 million based upon our current holdings of $6.25 million of auction rate securities. The interest rate as of October 2, 2010 that we would pay on amounts borrowed is the federal funds rate plus 3.25%. The interest rate may change in future periods based on the change in the spread over the federal funds rate. The line of credit is not for any specific term or duration and Citigroup may demand full or partial payment of amounts borrowed on the line of credit, at its sole option and without cause, at any time. Citigroup may, at any time, in its discretion, terminate the line of credit with proper notice. No amounts have been borrowed against this line of credit.

As of January 2, 2010, we held auction rate securities with a UBS affiliate with a fair value of $5.4 million ($5.5 million par value). As of January 2, 2010, we had borrowed $2.8 million under the line of credit. Because we intended to exercise our right under the ARS Rights to sell to UBS our auction rate securities held in accounts with UBS and a UBS affiliate on June 30, 2010, we classified these auction rate securities as current assets and the line of credit with UBS as a current liability in the Consolidated Balance Sheet as of January 2, 2010. During the thirty-nine weeks ended October 2, 2010, we borrowed an additional $880,000 on the line of credit, making the outstanding balance $3.68 million.

During the thirty-nine weeks ended October 2, 2010, our entire auction rate securities portfolio held by a UBS affiliate was sold by us at par value of $5.5 million. Upon the sale of the securities, $3.7 million was applied to the line of credit from UBS. The line of credit was terminated, the ARS Rights expired unexercised and we received the remaining sales proceeds of $1.8 million.

In addition, during the thirty-nine weeks ended October 2, 2010, we sold the Brazos Student Finance Corporation Student Loan Asset Backed Notes with a par value of $1.0 million held as part of the Company’s auction rate securities portfolio with Citigroup. We received $950,000 in proceeds from the transaction. As a result of this transaction, $50,000 in losses were reclassified from Accumulated Other Comprehensive Loss in stockholders’ equity and recognized in Other Income (Expense) in the Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited).

As of October 2, 2010, we held auction rate securities with Citigroup in the face amount of $6.3 million collateralized by government guaranteed student loans. The estimated fair value of the auction rate securities is $5.9 million as of October 2, 2010.

As we are able to liquidate any of our remaining auction rate securities portfolio we intend to reinvest in money market or similar investments any amounts not used to repay any amounts borrowed under the remaining line of credit. We continually monitor the credit quality and liquidity of our auction rate securities. To the extent we believe we will not be able to collect all amounts due according to the contractual terms of a security, we will record an other-than-temporary impairment. This could require us to recognize losses in our Condensed Consolidated Statement of Operations and Comprehensive Loss (unaudited) in accordance with FASB ASC 320, which could be material.

FINANCIAL COMMITMENTS

During fiscal year 2007, we acquired all of the outstanding membership interests of RVA. In addition to consideration paid at closing for this acquisition, we accrued $344,000 during the thirteen weeks ended July 3, 2010 for consideration earned by RVA and payable during the fourth quarter 2010. See Note 4, “Business Combinations,” in the Notes to the Condensed Consolidated Financial Statements (unaudited).

During the thirty-nine weeks ended October 3, 2009, we entered into an agreement under which we have a commitment to purchase a minimum of $401,000 in computer software over a three year period. As of October 2, 2010, we have an obligation of $189,000 remaining under this commitment.

During August 2010, we executed a lease agreement for new office space in Boston, Massachusetts. The lease commences on February 1, 2011 and runs for five years and three months from the commencement date. Future minimum payments over the term of this lease are $2.0 million.

25

During September 2010, we executed a lease amendment for our office space in London, United Kingdom. The amendment extends the lease through November 2015 and adjusts the payments due under the lease. Future minimum payments as of October 2, 2010 over the remaining term of this lease are $3.0 million.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures and Changes in Internal Control Over Financial Reporting

The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“the Exchange Act”)) that are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms; and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. We have established a Disclosure Committee, consisting of certain members of management, to assist in this evaluation. The Disclosure Committee meets on a regular quarterly basis, and as needed.

A review and evaluation was performed by our management, including our Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Based upon this evaluation, the Company’s CEO and CFO have concluded that the Company’s disclosure controls and procedures were effective as of October 2, 2010.

There were no changes in our internal control over financial reporting during the fiscal quarter ended October 2, 2010, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We have not been subject to any material new litigation since the filing on April 1, 2010 of our Annual Report on Form 10-K for the year ended January 2, 2010.

ITEM 1A. RISK FACTORS

Not applicable

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. REMOVED AND RESERVED

ITEM 5. OTHER INFORMATION

(a) Information Required to be Disclosed in a Report on Form 8-K, but not Reported

On August 16, 2010, we executed a Lease Agreement with Two Financial Center, LLC for new office space in Boston, Massachusetts. The lease commences on February 1, 2011 and runs for five years and three months from the commencement date. Future minimum payments over the term of this lease are $2.0 million. A copy of the Lease Agreement is filed as Exhibit 10.1 to this Form 10-Q.

On September 30, 2010, we executed a lease amendment in the form of a Deed of Variation with EPO (Norman) Limited and EPO (Norman 2) Limited for our office space in London, United Kingdom. The amendment extends the lease through November 2015 and adjusts the payments due under the lease. Future minimum payments as of October 2, 2010 over the remaining term of this lease are $3.0 million. A copy of the Deed of Variation is filed as Exhibit 10.2 to this Form 10-Q.

26

ITEM 6. EXHIBITS

(a) Exhibits

Exhibit 10.1	Lease Agreement between Two Financial Center, LLC and the Company, dated August 16, 2010, is attached to this Form 10-Q as Exhibit 10.1.
Exhibit 10.2	Deed of Variation of the lease between EPO (Norman) Limited, EPO (Norman 2) Limited and the Company, dated September 30, 2010, is attached to this Form 10-Q as Exhibit 10.2.
Exhibit 31.	Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.	Certifications furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

27

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	The Management Network Group, Inc.
	(Registrant)
Date: November 16, 2010	By	/s/ Richard P. Nespola
		(Signature)
		Richard P. Nespola Chairman and Chief Executive Officer (Principal executive officer)
Date: November 16, 2010	By	/s/ Donald E. Klumb
		(Signature)
		Donald E. Klumb Chief Financial Officer and Treasurer (Principal financial officer and principal accounting officer)

28

EXHIBIT INDEX

Exhibit No.	Description of Exhibit
Exhibit 10.1	Lease Agreement between Two Financial Center, LLC and the Company, dated August 16, 2010, is attached to this Form 10-Q as Exhibit 10.1.
Exhibit 10.2	Deed of Variation of the lease between EPO (Norman) Limited, EPO (Norman 2) Limited and the Company, dated September 30, 2010, is attached to this Form 10-Q as Exhibit 10.2.
Exhibit 31.	Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.	Certifications furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

29

EX-10.1

Exhibit 10.1

LEASE

     This instrument is an indenture of lease by and between TWO FINANCIAL CENTER, LLC, a Delaware limited liability company (“Landlord”), and The Management Network Group, Inc. d/b/a TMNG Global, a Delaware corporation (“Tenant”).

     The parties to this Lease hereby agree with each other as follows:

ARTICLE I
SUMMARY OF BASIC LEASE PROVISIONS

1.1 INTRODUCTION

     As further supplemented in the balance of this instrument and its Exhibits, the following sets forth the basic terms of this Lease, and, where appropriate, constitutes definitions of certain terms used in this Lease.

1.2 BASIC DATA

Date:	August 16, 2010.
Present Mailing Address of Landlord:	c/o ASB Capital Management, LLC
	7501 Wisconsin Avenue
	Suite 200 East
	Bethesda, MD 20814
	Attn: Mandi Wedin
	and:
	c/o Lincoln Property Company
	225 Franklin Street, 23rd Floor
	Boston, MA 02110
	Attn: John Miller
Rent Payment Address of Landlord:	Lincoln Property Company
	225 Franklin Street, 23rd floor
	Boston, MA 02110
	Attn: Barbara Oddo
Present Mailing Address of Tenant:	The Management Network Group, Inc.
	7300 College Blvd — Suite 302
	Overland Park, KS 66210
Premises:	Approximately 11,763 rentable square feet of space on the eighth (8th) floor of the Building, as shown on Exhibit FP attached hereto.

Building:	The building known as Two Financial Center in Boston, Massachusetts, situated on the Lot.
Lot:	The real property described in Exhibit LOT.
Lease Term or Term:	Five (5) years and three (3) months.
Commencement Date:	February 1, 2011
Rent Commencement Date:	Three (3) months following the Commencement Date.
Base Rent:	Commencing on the Rent Commencement Date and throughout the initial Term, Tenant shall pay Base Rent as follows:

					Rent Per Square
Lease Year	Annual Base Rent		Monthly Base Rent		Foot of Premises
1	$	382,297.50	$	31,858.13	$	32.50
2	$	394,060.50	$	32,838.38	$	33.50
3	$	405,823.50	$	33,818.63	$	34.50
4	$	417,586.50	$	34,798.88	$	35.50
5	$	429,349.50	$	35,779.13	$	36.50

Permitted Use:

First-class business offices and uses ancillary thereto to the extent permitted by applicable laws and codes and no other purpose or purposes.

Tenant’s Proportionate Share:

A ratio, the numerator of which is the number of rentable floor area in the Premises as compared to the total square feet of rentable floor area of the Building. Initially, Tenant’s Proportionate Share shall be 5.4%. From time-to-time during the term of the Lease, Tenant’s Proportionate Share shall be adjusted in the event of any increase or decrease in the total square footage of rentable floor area contained within the Premises and/or

2

	the Building, based upon the square footage of rentable floor area contained within the Premises as compared to the square footage of rentable floor area contained within the Building, as increased or decreased.
Base Tax Amount:	The Taxes (as defined in Section 4.2(a)) assessed for fiscal year ending June 30, 2011 (i.e. July 1, 2010 through June 30, 2011).
Base Operating Costs:	The Operating Costs (as defined in Section 4.3) for the calendar year 2011.
Business Days:	All days during the Term except Saturdays, Sundays, and days observed in the Commonwealth of Massachusetts as legal holidays.
Business Hours:	8:00 a.m. to 6:00 p.m. on all Business Days, and 8:00 a.m. to 1:00 p.m. on Saturdays.
Security Deposit Amount:	Cash or irrevocable letter of credit as set forth in Section 17.15 in the amount of three (3) months’ rent based on the Annual Base Rent for each lease year during the Term, subject to reduction as set forth in Section 17.15.
Broker(s):	CB Richard Ellis and Lincoln Property Company.

1.3 ENUMERATION OF EXHIBITS

EXHIBITS

FP:	Floor Plan Showing Tenant’s Premises
LOT:	Description of the Lot
CS:	Cleaning Specifications
RULES:	Rules and Regulations
L/C:	Form of Letter of Credit

3

ARTICLE II
DESCRIPTION OF PREMISES AND APPURTENANT RIGHTS

2.1 LOCATION OF PREMISES

     The Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the Premises.

2.2 APPURTENANT RIGHTS AND RESERVATIONS

     Subject to the terms and conditions of this Lease, and except in the event of a casualty or eminent domain event, and subject to causes beyond Landlord’s reasonable control, Tenant will have access to the Premises on a twenty-four (24) hour per day, seven (7) days per week basis. Tenant shall have, as appurtenant to the Premises, rights to use in common with others entitled thereto the common facilities included in or serving the Building, including, common walkways, lobbies, hallways, ramps, stairways, elevators, and loading docks. Such rights shall be subject to reasonable rules and regulations from time to time established by Landlord, and to the right of Landlord to designate and to change from time to time the areas and facilities so to be used, provided that such changes do not unreasonably interfere with the use of the Premises for the Permitted Use.

     Not included in the Premises are the roof or ceiling, the floor and all perimeter walls of the space identified in Exhibit FP, except the inner surfaces thereof and the perimeter doors and windows. Tenant shall have the right to use one four (4) inch riser for telecommunications purposes at no cost to Tenant provided that any and all wiring shall be removed at the end of the Term. Landlord reserves the right to install, use, maintain, repair and replace in the Premises (but in such manner as not unreasonably to interfere with Tenant’s use of the Premises) utility lines, shafts, pipes, and the like, in, over and upon the Premises, provided that the same are located above the dropped ceiling (or, if there is no dropped ceiling, then within three (3) feet of the roof deck), below the floor surfaces or tight against demising walls or columns. Landlord agrees to repair any damage to the Premises caused by the installation of any such items. Such utility lines, shafts, pipes and the like shall not be deemed part of the Premises under this Lease. Landlord also reserves the right to alter or relocate any common facility, provided that substitutions are at least equivalent in quality and functional utility to the common facilities as of the date of this Lease.

2.3 PARKING

     So long as no Default of Tenant shall have occurred, Landlord will make available to Tenant during the Term following the Commencement Date, five (5) automobile parking permits in the garage in the Building (the “Garage”). The parking permit(s) referenced in this Section 2.3 shall be made available to Tenant for the first year following the Commencement Date at no cost to Tenant and thereafter commencing on the first anniversary of the Commencement Date at the then current prevailing rates for Building parking payable to Landlord or the Garage operator, as such rates may change from time to time. Any additional parking permit(s) requested by Tenant shall be made available to

4

Tenant on a first-come, first-served basis at the then current prevailing rates for Building parking payable to Landlord or the Garage operator, as such rates may change from time to time. Any failure to pay the parking charges provided in this Section within thirty (30) days of billing shall be treated as a Default of Tenant. The parking permit(s) shall be subject to the terms and conditions of the form of parking agreement from time to time used in connection with the operation of the Garage and shall be subject to the reasonable rules and regulations from time to time promulgated by Landlord or the Garage operator.

ARTICLE III
TERM OF LEASE; BUILDING; CONDITION OF PREMISES

3.1 TERM OF LEASE; DELIVERY OF POSSESSION

     The term of this Lease shall be the period specified in Section 1.2 hereof as the “Lease Term” commencing upon the Commencement Date specified in Section 1.2, unless earlier terminated as hereinafter provided.

3.2 CONDITION OF PREMISES

     (a) Tenant’s Improvements

     Landlord and Tenant have approved Tenant’s Preliminary Space Plan attached as Exhibit FP. Based on such space plan, Landlord will prepare detailed plans (the “Tenant Improvement Plans”) for the construction of Tenant’s improvements in the Premises using Building standard materials and quantities (the “Tenant Improvements”) and promptly deliver the same to Tenant. Within five (5) business days after delivery of the Tenant Improvement Plans or any revision thereof to Tenant, Tenant, acting reasonably, shall either approve the same or request changes therein (any such requested changes shall be consistent with Exhibit FP and Building standard specifications). If Tenant requests changes therein, Landlord shall revise the Tenant Improvement Plans and promptly submit the revised Tenant Improvement Plans to Tenant for Tenant’s approval or disapproval as provided in the preceding sentence. Any changes to the Tenant Improvement Plans requested by Tenant following Tenant’s approval of such plans shall be performed by Landlord at Tenant’s expense.

     Landlord’s general contractor shall obtain competitive bids from at least two subcontractors for each portion of the work (except for smaller portions of the work which Landlord or its general contractor determines appropriate not to bid) and shall award each such subcontract to the lowest bidder unless it has reasonable grounds to do otherwise.

     Except for installation of furniture, furnishings, movable equipment and the installation of telephone outlets (which must be performed by a telephone company at Tenant’s direction and expense) and the installation of telephone, television and computer cabling (which must be installed and removed in accordance with Rules and Regulations) and except for changes to the approved Tenant Improvement Plans described above in this Section 3.2, all work described in the approved Tenant Improvement Plans shall be performed by Landlord’s general contractor at Landlord’s expense.

5

     Tenant’s interior furnishings, i.e., specification, coordination, supply and installation of furniture, furnishings, telephone, computer and movable equipment, will be the responsibility of Tenant. Tenant’s installation of furnishings, and later changes or additions, shall be coordinated with any work being performed by Landlord in such manner as to maintain harmonious labor relations and so not to damage the Building or unreasonably interfere with Building operations.

     Tenant shall have access to the Premises during construction of the Tenant Improvements to permit Tenant to install its equipment when construction of the Tenant Improvements has been sufficiently completed for Tenant do so, provided the same shall not unreasonably interfere with Landlord’s construction of the Tenant Improvements.

     The Tenant Improvements shall be part of the Building and shall not be removed, except that at the expiration of this Lease Tenant shall remove such portions thereof as Landlord shall have specified at the time of preparation of the Tenant Improvement Plans.

     Landlord agrees to use reasonable efforts to substantially complete construction of the Tenant Improvements as provided in this Article IV on or before the Commencement Date, which date shall, however, be extended for a period equal to that of any delays in the substantial completion of the Tenant Improvements due to causes beyond Landlord’s reasonable control. The Tenant Improvements shall be constructed in accordance with all applicable legal requirements.

     Upon substantial completion of the Tenant Improvements, Landlord and Tenant shall prepare a punchlist of unfinished items. Landlord shall promptly complete such unfinished items.

     The Tenant Improvements shall be deemed substantially complete on the date on which (i) construction of the same shall have been substantially completed (with the exception of items that can be completed without material interference to the conduct of Tenant’s business in the Premises) and (ii) a certificate of occupancy (or sign off) shall have been issued by the City of Boston, provided, however, that the requirement of the issuance of a certificate of occupancy (or sign off) by the City of Boston shall be waived and substantial completion shall be deemed to have occurred if the same cannot be obtained or such construction has not been substantially completed due to delays caused by Tenant (each, a “Tenant Delay Event”), including, without limitation, change orders, lack of timely cooperation by Tenant, or action with respect to the Tenant Improvement Plans, long lead time items in the Tenant Improvement Plans or any other actions or inactions by Tenant that may prevent Landlord from completing (or that may delay) any construction to be performed by it or its general contractor. Within five (5) business days of a Tenant Delay Event (except as otherwise expressly provided below), Landlord shall notify Tenant in writing of the Tenant Delay Event. The failure of Landlord to notify Tenant of a Tenant Delay Event precludes Landlord from claiming Tenant-caused delays in substantial completion of Tenant Improvements, other than any delay by Tenant in reviewing or responding to Tenant Improvement Plans or any revision thereof, which delay shall automatically be a Tenant Delay Event without need for notice to Tenant.

6

3.3 EXTENSION OPTION

     Subject to the rights of KPMG LLP that exist as of the date of this Lease and provided no Default of Tenant has occurred hereunder and the original named Tenant is occupying the entirety of the Premises then demised hereunder both on the date such notice is given and on the commencement date of the Extension Term, Tenant may elect to extend the Lease Term for one (1) five-year period (the “Extension Term”), by giving Landlord notice of such election (the “Extension Notice”) not less than twelve (12) months before the expiration of the Lease Term. Such extension shall be upon all of the same terms, covenants, and conditions contained in this Lease, except that (a) Tenant shall have no further right to extend the Lease Term, (b) the Base Rent for the Extension Term shall be at a rate equal to the fair market rent for the Premises as of the commencement date of the Extension Term, and (c) Landlord shall have no obligation to make or pay for any improvements to the Premises or to pay any allowances or inducements of any kind.

     Fair market rent for the Premises shall be computed as of the commencement of the Extension Term and shall be at the then current annual rental charges, including provisions for subsequent increases and other adjustments, for extensions of existing leases then currently being negotiated or executed in comparable space and buildings located in downtown Boston. In determining fair market rent, the following factors, among others, shall be taken into account and given effect: size of the premises, condition of the premises, location and age of the Building, escalation charges, location of the premises, location and age of the Building, tenant improvements, concessions or inducements such as tenant improvement allowances, and lease term.

If Landlord and Tenant are unable to agree on the amount of such fair market rent by the date that is the later of thirty (30) days after the date of delivery of the Extension Notice or eleven (11) months before the expiration of the Lease Term, then the fair market rent shall be established by appraisal in the following manner. Within ten (10) days after the later of the two dates described in the preceding sentence, Landlord and Tenant shall each appoint one (1) qualified appraiser (as hereinafter defined) and the two (2) appraisers so appointed shall determine the fair market rent within seventy-five (75) days of the date of delivery of the Extension Notice. As used herein, the term “qualified appraiser” shall mean any independent unaffiliated person (a) who is employed by an appraisal firm of recognized competence in the greater Boston area and (b) who has not less than ten (10) years experience in appraising and valuing properties of the general location, type and character as the Premises. If either Landlord or Tenant fails to appoint an appraiser within such ten (10) day period, then the other party shall have the power to appoint the appraiser for the defaulting party. If the appraisers are unable to agree on the fair market rent within such seventy-five (75) day period, then they jointly shall appoint a third qualified appraiser within ten (10) days of the expiration of such seventy-five (75) day period, and within thirty (30) days thereafter all three appraisers shall meet and determine the fair market rent. If all three appraisers are unable unanimously to agree upon the fair market rent, then the first two appraisers simultaneously shall deliver their final fair market rent numbers to the third appraiser, and the third appraiser shall select one or the other number as the fair market rent numbers to the third appraiser, and the fair market rent so determined shall be conclusive and binding upon the Landlord and Tenant. Each party shall bear the cost of its

7

appraiser, and the cost of the third appraiser shall be borne equally between the parties. Until such time as the fair market rent is so determined, from and after the commencement date of the Extension Term, Tenant shall pay Base Rent at Landlord’s appraiser’s initial designation of fair market rent, with an appropriate adjustment once the fair market rent has been determined.

3.4 RIGHT OF FIRST OFFER FOR EIGHTH FLOOR SPACE

     Reference is made to certain space that is contiguous to the Premises and on the eighth (8th) floor of the Building (the “First Offer Space”). Following the initial lease-up of the Building, but before thereafter entering into a lease for the First Offer Space with a third party (other than any current tenant or occupant of such space) and subject to the rights of KPMG LLP that exist as of the date of this Lease, Landlord shall notify Tenant of the terms on which Landlord intends to lease the space (“Landlord’s Notice”). Within five (5) business days after receipt of Landlord’s Notice, Tenant may, by written notice delivered to Landlord, (i) reject Landlord’s Notice, or (ii) reject Landlord’s Notice but unconditionally and irrevocably offer to lease such space from Landlord for its own use at an Annual Base Rate proposed in Tenant’s response and otherwise on the terms set forth in Landlord’s Notice, or (iii) unconditionally and irrevocably offer to lease such space from Landlord for its own use on the terms set forth in Landlord’s Notice (the failure by Tenant to timely respond as aforesaid being deemed Tenant’s rejection of Landlord’s Notice under clause (i)). The lease term of the First Offer Space shall be coterminous with the Term hereof.

     If Landlord’s Notice is rejected under clause (i) above (or deemed rejected by Tenant’s failure to timely respond), then Landlord may enter into any lease for such space.

     If Tenant timely offers to lease the space on alternative terms as set forth in clause (ii) above, then Landlord may, by written notice delivered within thirty (30) days of receipt thereof, accept or decline such offer (the failure to so respond being deemed Landlord’s election to decline Tenant’s offer). If such offer under clause (ii) is declined (or deemed declined), then, for a period of one year after Landlord’s receipt of Tenant’s offer, Landlord may enter into any lease for such space at an effective rent (after taking into account any tenant improvement allowance) greater than that set forth in Tenant’s offer. If, during such one-year period, Landlord desires to enter into a third-party lease at an effective rent less than or equal to the effective rent set forth in Tenant’s offer, Landlord shall deliver to Tenant a new Landlord’s Notice. If Landlord does not enter into any lease within such one-year period, Landlord shall re-commence the process under this Section before entering into a lease for the space.

     If Tenant timely offers to lease the space as set forth in clause (iii) above, then Landlord may, by written notice delivered within thirty days of receipt thereof, accept such offer or abandon the proposed lease (the failure to so respond being deemed Landlord’s election to abandon the proposed lease). If such offer is declined (or deemed declined), Landlord shall re-commence the process under this Section before entering into a new lease for the space.

8

     If Landlord timely accepts an offer by Tenant under this Section, the space shall, subject to the following paragraph below and without further action by the parties, be leased by Tenant on the accepted terms and otherwise on all of the terms of the Lease in effect immediately prior to such expansion, provided that, at the request of either party, Landlord and Tenant shall promptly execute and deliver an agreement confirming such expansion of the Premises and the estimated date the Premises are to be expanded pursuant to this Paragraph with a provision for establishing the effective date of such expansion based on actual delivery. Landlord’s failure to deliver, or delay in delivering, all or any part of the First Offer Space, for any reason, shall not give rise to any liability of Landlord, shall not alter Tenant’s obligation to accept such space when delivered, shall not constitute a default of Landlord, and shall not affect the validity of the Lease, except as hereafter provided. If Landlord is delayed more than 240 days in delivering the First Offer Space (as such outside delivery date is defined in an amendment to this Lease for the First Offer Space, and as such outside delivery date may be extended by notice from Landlord to Tenant from time to time), Tenant’s sole remedy shall be the right to decline acceptance of the First Offer Space and rescind any amendment to this Lease for the First Offer Space by delivering at least 30 days’ notice of the same to Landlord within five (5) business days following such outside delivery date (as the same may be extended), provided that if Landlord delivers the First Offer Space within such 30-day period, then Tenant’s notice shall not be effective, such amendment shall remain in full force and effect, and Tenant shall be obligated to accept the First Offer Space when delivered and commence paying rent for the First Offer Space at that time. If Landlord is delayed for less than such 240 day period (as the same may be extended) in delivering the First Offer Space, Tenant shall be obligated to accept such space when delivered and commence paying rent for the First Offer Space at that time.

     Notwithstanding any provision of this Section to the contrary, Tenant’s rights under this Section shall be void, at Landlord’s election, if (i) Tenant is in default hereunder, after any applicable notice and cure periods have expired, at any time prior to the time Tenant makes any election with respect to the First Offer Space under this Section or at the time the First Offer Space would be added to the Premises, or (ii) any assignment, subletting or other transfer of the Premises has occurred other than a permitted transfer under Section 7.7 hereunder. Tenant shall only have the right of first offer under this Section 3.4 during the initial Term and further, if there are less than two (2) lease years left in the initial Term at the time Tenant proposes to lease the First Offer Space, then Tenant may exercise its right to lease the First Offer Space only if Tenant has remaining, and exercises, the Extension Option under Section 3.3 for the Premises so that the Offered Space shall be leased by Tenant for more than a two (2) year term. Nothing in this Section shall be construed to grant to Tenant any rights or interest in any space in the Building, and any claims by Tenant alleging a failure of Landlord to comply herewith shall be limited to claims for monetary damages. Tenant may not assert any rights in any space nor file any lis pendens or similar notice with respect thereto.

9

ARTICLE IV
RENT

4.1 RENT PAYMENTS

     (a) The Base Rent (at the rates specified in Section 1.2 hereof), and the additional rent and other charges payable pursuant to this Lease (collectively the “Rent”) shall be payable by Tenant to Landlord in good funds at the Rent Payment Address of Landlord or such other place as Landlord may from time to time designate by notice to Tenant, without any demand, and without any counterclaim, offset or deduction, of any kind, whatsoever.

     (b) Commencing on the Rent Commencement Date and thereafter throughout the term of this Lease, Tenant shall pay Base Rent and the monthly installments of Tenant’s Proportionate Share of the Tax Excess (as hereinafter defined) and Tenant’s Proportionate Share of the Operating Costs Excess (as hereinafter defined) in advance on the first day of each and every calendar month. Additional rent and other charges payable pursuant to this Lease shall be payable at the times and in the manner set forth in this Lease.

     (c) The Base Rent and the monthly installments of Tenant’s Proportionate Share of the Tax Excess and Tenant’s Proportionate Share of the Operating Costs Excess for any partial month shall be paid by Tenant to Landlord at such rate on a pro rata basis. Any other charges payable by Tenant on a monthly basis, as hereinafter provided, shall likewise be prorated.

     (d) Tenant shall pay to Landlord, upon request, as additional rent, a late charge equal to five percent (5%) of the amount of any Rent not paid within five (5) days of the date due hereunder.

     (e) Rent not paid within fifteen (15) days of the date due shall bear interest at a rate (the “Lease Interest Rate”) equal to the lesser of (i) the so-called base rate of interest charged from time to time by Bank of America (or its successors), plus three percent (3%) per annum or (ii) the maximum legally permissible rate, from the due date until paid.

     (f) Tenant hereby acknowledges and agrees that it has been represented by counsel of its choice and has participated fully in the negotiation of this Lease, that Tenant understands that the remedies available to Tenant in the event of a default by Landlord may be more limited than those that would otherwise be available to Tenant under the common law in the absence of certain provisions of this Lease, and that the so-called “dependent covenants” rule as developed under the common law (including, without limitation, the statement of such rule as set forth in the Restatement (Second) of Property, Section 7.1) shall not apply to this Lease or to the relationship of landlord and tenant created hereunder.

10

4.2 REAL ESTATE TAXES

     (a) The term “Taxes” shall mean all taxes and assessments (including, without limitation, assessments for public improvements or benefits and water and sewer use charges), and other charges or fees in the nature of taxes for municipal services which at any time during or in respect of the Lease Term may be assessed, levied, confirmed or imposed on or in respect of, or be a lien upon, the Building and/or the lot on which the Building is situated (the “Lot”), or any part thereof, or any rent therefrom or any estate, right, or interest therein, or any occupancy, use, or possession of such property or any part thereof, and ad valorem taxes for any personal property used in connection with the Building or Lot. As long as the 6A Contract (defined below) is in effect, “Taxes” shall also mean the amounts payable thereunder. Without limiting the foregoing, Taxes shall also include any payments made by Landlord in lieu of taxes and all business improvement district payments. Landlord agrees that Tenant’s share of any special assessment shall be determined (whether or not Landlord avails itself of the privilege so to do) as if Landlord had elected to pay the same in installments over the longest period of time permitted by applicable law and Tenant shall be responsible only for those installments (including interest accruing and payable thereon) or parts of installment that are attributable to periods within the Lease Term.

     “6A Contract” shall mean the contract dated June 22, 2007 between the City of Boston and 60 South Street, Limited Partnership pursuant to Section 6A of Chapter 121A of the Massachusetts General Laws which provides for certain payments in lieu of real estate taxes.

     Should the Commonwealth of Massachusetts, or any political subdivision thereof, or any other governmental authority having jurisdiction over the Building, (1) impose a tax, assessment, charge or fee, which Landlord shall be required to pay, by way of substitution for or as a supplement to such Taxes, or (2) impose an income or franchise tax or a tax on rents in substitution for or as a supplement to a tax levied against the Building and/or the Lot or any part thereof and/or the personal property used in connection with the Building and/or the Lot or any part thereof, all such taxes, assessments, fees or charges (“Substitute Taxes”) shall be deemed to constitute Taxes hereunder. Taxes shall also include, in the year paid, all fees and costs incurred by Landlord in seeking to obtain a reduction of, or a limit on the increase in, any Taxes, regardless of whether any reduction or limitation is obtained. Except as hereinabove provided with regard to Substitute Taxes, Taxes shall not include any inheritance, estate, succession, transfer, gift, franchise, net income or capital stock tax.

     The term “Tax Period” shall mean the then-applicable period of time with respect to which Taxes are required to be paid under applicable law. Thus, under the law presently in effect in the Commonwealth of Massachusetts, “Tax Period” means the period from July 1 of a calendar year to June 30 of the subsequent calendar year. If and to the extent that any Tax Period contains less than twelve (12) complete calendar months, then the Base Tax Amount shall be reduced on a pro rata basis.

11

     (b) If the Taxes during any Tax Period exceed the Base Tax Amount, then Tenant shall pay to Landlord, as additional rent, Tenant’s Proportionate Share of such excess (the “Tax Excess”). The Tenant shall pay to Landlord, together with monthly payments of Base Rent, pro rata monthly installments on account of the projected Tax Excess for each Tax Period, in amounts reasonably calculated by Landlord from time to time with an adjustment made after the close of the Tax Period to account for the actual Tax Excess for such Tax Period. If the total of such monthly installments paid by Tenant with respect to any Tax Period is greater than Tenant’s Proportionate Share of the actual Tax Excess for such Tax Period, then Tenant shall be entitled to a credit against Tenant’s monthly installment payments on account of the projected Tax Excess hereunder in the amount of such difference or, if the Lease Term has expired and Tenant has no outstanding monetary obligations to Landlord, then Landlord shall promptly pay such amount to Tenant. If the total of such monthly installments actually paid by Tenant is less than Tenant’s Proportionate Share of the actual Tax Excess for such Tax Period, then Tenant shall pay to Landlord, as additional rent, the amount of such difference within thirty (30) days after Tenant receives Landlord’s invoice therefor.

     (c) If any Taxes with respect to which Tenant shall have paid Tenant’s Proportionate Share of the Tax Excess shall be adjusted to take into account any abatement or refund, then Tenant shall be entitled to a credit against rental obligations hereunder, in the amount of Tenant’s Proportionate Share of such abatement or refund less Landlord’s costs or expenses, including, without limitation, appraisal and attorneys’ fees, of securing such abatement or refund or, if the Lease Term has expired and Tenant has no outstanding monetary obligations to Landlord, Landlord shall promptly pay such amount to Tenant, but such credit shall in no event exceed the amount originally paid by Tenant. Tenant shall not apply for any real estate tax abatement or refund without the express prior written consent of Landlord.

     (d) Tenant shall pay or cause to be paid, prior to delinquency, any and all taxes and assessments levied upon all trade fixtures, inventories and other personal property placed in and upon the Premises by Tenant.

4.3 OPERATING COSTS

     If the Operating Costs (as hereinafter defined) during any lease year exceed the Base Operating Costs, then Tenant shall pay to Landlord, as additional rent, Tenant’s Proportionate Share of such excess (the “Operating Costs Excess”). The Tenant shall pay to Landlord pro rata monthly installments on account of the projected Operating Costs Excess for each lease year in amounts reasonably calculated from time to time by Landlord, with an adjustment made after the close of the lease year to account for the actual Operating Costs Excess for such lease year. If the total of such monthly installments paid by Tenant with respect to any lease year is greater than Tenant’s Proportionate Share of the actual Operating Costs Excess for such lease year, then Tenant shall be entitled to a credit against Tenant’s monthly installments on account of projected Operating Costs Excess hereunder in the amount of such difference or, if the Lease Term has expired and Tenant has no outstanding monetary obligations to Landlord, then Landlord shall promptly pay such amount to Tenant. If the total of such monthly

12

installments actually paid by Tenant is less than Tenant’s Proportionate Share of the actual Operating Costs Excess for such lease year, then Tenant shall pay to Landlord the amount of such difference, as additional rent, within thirty (30) days after Tenant receives Landlord’s invoice therefor.

     As used in this Lease, the term “lease year” shall mean each calendar year (or part thereof) in which any part of the Term occurs.

     As used in this Lease, the term “Operating Costs” shall mean all costs and expenses incurred by Landlord in connection with operating, insuring, repairing, equipping, maintaining, replacing, managing, cleaning and protecting (collectively, “the Operation”) the Building, the Building heating, ventilating, electrical, plumbing, and other systems, and the Lot (collectively, “the Property”), including, without limitation, the following:

          (1) All expenses incurred by Landlord or its agents which shall be related to employment of day and night supervisors, janitors, handymen, carpenters, engineers, mechanics, electricians, plumbers, guards, cleaners and other personnel (including amounts incurred for wages, salaries and other compensation for services, payroll, social security, unemployment and similar taxes, workmen’s compensation insurance, disability benefits, pensions, hospitalization, retirement plans and group insurance, uniforms and working clothes and the cleaning thereof, and expenses imposed on Landlord or its agents pursuant to any collective bargaining agreement), for services in connection with the Operation of the Property, and personnel engaged in supervision of any of the persons mentioned above; provided, however, that the costs of employing personnel who work less than full-time in connection with the Operation of the Property shall be equitably adjusted;

          (2) The cost of services, materials and supplies furnished or used in the Operation of the Property, including, without limitation, the cost to perform Landlord’s obligations pursuant to Section 8.2 and Article IX of this Lease;

          (3) The amounts paid to managing agents and for legal and other professional fees relating to the Operation of the Property, but excluding such fees paid in connection with (x) negotiations for or the enforcement of leases; and (y) seeking abatements of Taxes; provided, however, that management fees shall not exceed prevailing market rates;

          (4) Insurance premiums;

          (5) Costs for electricity, steam, and other utilities not billed or separately charged to tenants of the Building;

          (6) Water and sewer use charges;

          (7) The costs of snow-plowing and removal and landscaping;

          (8) Amounts paid to independent contractors for services, materials and supplies furnished for the Operation of the Property; and

13

          (9) All other expenses incurred arising out of or in connection with the Operation of the Property.

     If Landlord shall make a capital expenditure (determined under generally accepted accounting principles) for the purpose of (i) reducing or conserving the use of energy in the Building or reducing other Operating Costs pursuant to a reasonable cost-benefit analysis that justifies such capital expenditure or (ii) complying with any building code or other law, regulation or legal requirement, the annual amortization of such capital expenditure amortized over the useful life thereof (as reasonably determined by Landlord) with interest at two points above the so-called base rate or prime rate from time to time announced by Bank of America shall be included in Operating Costs, provided that, in the event Landlord’s estimate of the annual savings from a capital expenditure intended to reduce Operating Costs shall exceed such annual amortization, Operating Costs shall include, in lieu of such amortization, Landlord’s estimate of such annual savings until the cost of such capital expenditure shall have been completely amortized.

     If during all or part of any lease year, Landlord is not performing or furnishing any item to any portion of the Building (the cost of which, if performed or furnished by Landlord to such portion of the Building would constitute a part of Operating Costs) (a) as a result of such portion of the Building not then being occupied or leased, (b) as a result of such item not being required or desired by a tenant, (c) as a result of any tenant itself obtaining or providing such item, or (d) for any other reason, whether similar or dissimilar to the foregoing, then Operating Costs shall be deemed to be increased by an amount equal to the additional costs and expenses which would reasonably have been incurred during such period by Landlord if it had performed or furnished such item to 95% of the rentable area of the Building.

     Operating Costs may be incurred directly or by way of reimbursement, and shall include taxes applicable thereto.

     The following shall be excluded from Operating Costs:

          (1) Capital expenditures except as provided above.

          (2) Employees of Landlord above the level of Building General Manager;

          (3) Costs and expenses which are properly allocable to other properties of Landlord (e.g., where a service is provided at a single cost to both the Property and another property of Landlord), with said allocation to be determined and calculated by Landlord in its reasonable discretion to exclude the costs fairly attributable to such other property;

          (4) Expenses relating to tenants’ alterations;

          (5) Interest on indebtedness;

14

          (6) Expenses for which Landlord, by the terms of this Lease, makes a separate charge;

          (7) Ad valorem real estate taxes;

          (8) The cost of electricity or other utilities furnished to other tenants of the Building, to the extent separately billed to tenants; and

          (9) Leasing fees or commissions.

ARTICLE V
USE OF PREMISES

5.1 PERMITTED USE

     Tenant agrees that the Premises shall be used and occupied by Tenant only for the purposes specified as the Permitted Use thereof in Section 1.2 of this Lease, and for no other purpose or purposes.

     The Tenant shall comply and shall cause its employees, agents, and invitees to comply with the Rules and Regulations attached to this Lease as Exhibit Rules and such other reasonable rules and regulations as Landlord shall from time to time establish for the proper regulation of the Building and the Lot, provided that Landlord gives Tenant reasonable advance notice to Tenant of such other rules and regulations.

5.2 COMPLIANCE WITH LAWS

     Tenant agrees that no trade or occupation shall be conducted in the Premises or use made thereof which will be unlawful, improper, or contrary to any law, ordinance, by-law, code, rule, regulation or order applicable in the municipality in which the Premises are located or which will disturb the quiet enjoyment of the other tenants of the Building. Tenant shall obtain any and all approvals, permits, licenses, variances and the like from governmental or quasi-governmental authorities, including without limitation any Architectural Access Board and Board of Fire Underwriters (collectively, “Approvals”) which are required for Tenant’s use of the Premises, including, without limitation, as may be required to perform any construction work and installations, alterations, or additions made by Tenant to, in, on, or about the Premises; provided, however, that Tenant shall not seek or apply for any Approvals without first having given Landlord a reasonable opportunity to review any applications for Approvals and all materials and plans to be submitted in connection therewith and obtaining Landlord’s written consent. In any event, Tenant shall be responsible for all costs, expenses, and fees in connection with obtaining all Approvals. Without limiting the general application of the foregoing, Tenant shall be responsible for compliance of the Premises, including, without limitation, any alterations it may make to the Premises, with the requirements of the Americans with Disabilities Act (42 U.S.C. Section 12101 et seq.) and the regulations and Accessibility Guidelines for Buildings and Facilities issued pursuant thereto, as the same may be amended from time to time (collectively, the “ADA”). Landlord shall be responsible for the compliance of the common areas of the Building and Lot with the requirements of the ADA except to the

15

extent the need for such compliance shall arise from any work or construction performed by Tenant or from Tenant’s particular use of the Premises. Tenant’s inability to obtain or delay in obtaining any such Approval shall in no event reduce, delay, or terminate Tenant’s rental, payment, and performance obligations hereunder. Without limiting the generality of the foregoing, Tenant shall, at its own cost and expense, (i) make all installations, repairs, alterations, additions, or improvements to the Premises required by any law, ordinance, by-law, code, rule, regulation or order of any governmental or quasi-governmental authority; (ii) keep the Premises equipped with all required safety equipment and appliances; and (iii) comply with all laws, ordinances, codes, rules, regulations, and orders and the requirements of Landlord’s and Tenant’s insurers applicable to the Premises, Building and Lot. Tenant shall not place a load upon any floor in the Premises exceeding the lesser of (a) the floor load per square foot of area which such floor was designed to carry as certified by Landlord’s architect and (b) the floor load per square foot of area which is allowed by law. Landlord reserves the right to prescribe the weight and position of all business machines and mechanical equipment, including safes, which shall be placed in the Premises so as to distribute the weight.

5.3 INSURANCE RISKS

     Tenant shall not permit any use of the Premises which will make voidable or, unless Tenant pays the extra insurance premium attributable thereto as provided below, increase the premiums for any insurance on the Building or which shall be contrary to any law or regulation from time to time established by the New England Fire Insurance Rating Association (or any successor organization) or which shall require any alteration or addition to the Building. Tenant shall, within thirty (30) days after written demand therefor, reimburse Landlord and all other tenants for the costs of all extra insurance premiums caused by Tenant’s use of the Premises. Any such amounts shall be deemed to be additional rent hereunder.

5.4 ELECTRICAL EQUIPMENT

     Tenant shall not, without Landlord’s written consent in each instance, connect to the electrical distribution system any fixtures, appliances, or equipment which will operate individually or collectively at a wattage in excess of the capacity of the electrical system serving the Premises (6 watts per square foot), and Landlord may audit Tenant’s use of electric power to determine Tenant’s compliance herewith. If Landlord, in its sole discretion, permits such excess usage, Tenant will pay, as additional rent, for the cost of power necessary to accommodate such usage, together with the cost of installing any additional risers, meters, and/or other facilities that may be required to furnish and/or measure such excess power to the Premises.

5.5 TENANT’S OPERATIONAL COVENANTS

     (a) Affirmative Covenants

          In regard to the use and occupancy of the Premises, Tenant will at its expense: (1) keep the inside and outside of all glass in the doors and windows of the Premises reasonably clean and replace promptly any cracked or broken glass with glass of

16

similar or like quality; (2) maintain the Premises in a clean, orderly and sanitary condition and free of insects, rodents, vermin and other pests; (3) keep any garbage, trash, rubbish or other refuse in vermin-proof containers within the interior of the Premises until removed; (4) keep all mechanical apparatus free of vibration and loud noise which may be transmitted beyond the Premises; and (5) comply with and observe all rules and regulations established by Landlord from time to time.

     (b) Negative Covenants

          In regard to the use and occupancy of the Premises and common areas, Tenant will not: (6) place or maintain any trash, refuse or other articles in any vestibule or entry of the Premises, on the sidewalks or corridors adjacent thereto or elsewhere so as to obstruct any corridor, stairway, sidewalk or common area; (7) permit undue accumulations of garbage, trash, rubbish or other refuse within or without the Premises; (8) cause or permit objectionable odors to emanate or to be dispelled from the Premises; (9) commit, or suffer to be committed, any waste upon the Premises or any public or private nuisance or other act or thing which may disturb the quiet enjoyment of any other tenant or occupant of the Building, or use or permit the use of any portion of the Premises for any unlawful purpose; or (10) park trucks or other vehicles in a manner that will block access to the loading docks serving the Building, except when Tenant is actively using such loading docks.

5.6 SIGNS

     Tenant shall not place any signs, placards, or the like on the Building or in the Premises that will be visible from outside of the Premises (including without limitation both interior and exterior surfaces of the windows). Landlord agrees to maintain a building directory in the lobby of the Building on which will be placed Tenant’s name and the location of the Premises within the Building. There shall be no charge for the initial listings on said directories. However, Tenant shall pay to Landlord, as additional rent, within thirty (30) days after receipt of Landlord’s invoice therefor, the costs and expenses of revising or replacing Tenant’s directory signage.

5.7 HAZARDOUS MATERIALS

     The Tenant shall not use, handle, transport, store, or dispose of any oil, hazardous or toxic substances, materials or wastes (collectively “Hazardous Materials”) in, under, on or about the Premises, the Building and/or the Lot except for usual and customary commercial cleaners which contain Hazardous Materials; provided, that (i) such cleansers, office supplies and products are ordinarily and customarily used in the ordinary course of first-class business offices and (ii) any such use is in strict compliance with all applicable laws, regulations, codes, orders, by-laws, ordinances and guidelines. Without limiting the foregoing, any Hazardous Materials in the Premises, and all containers therefor, shall be used, kept, stored and disposed of with due care and in conformity with all applicable laws, ordinances, codes, rules, regulations and orders of governmental authorities. If the transportation, storage, use, handling, or disposal of Hazardous Materials in the Premises, the Building, the Lot or anywhere on the Property arising out of or resulting from the acts or omissions of Tenant or its agents, employees, contractors, invitees, guests or others

17

acting by, through or under Tenant, or Tenant’s use of the Premises, results in (1) contamination of the soil, air, surface or ground water or (2) loss, damage or harm to person(s) or property, then Tenant agrees (i) to notify Landlord immediately of any contamination, claim of contamination, loss or damage, (ii) after consultation with and approval by Landlord, to clean up all contamination in full compliance with all applicable statutes, regulations and standards, and (iii) to indemnify, defend and hold Landlord harmless from and against any claims, suits, causes of action, costs and fees, including, without limitation, attorneys’ fees, arising from or connected with any such contamination, claim of contamination, loss or damage. The provisions of this Section 5.7 shall survive the expiration or termination of this Lease. No consent or approval of Landlord shall in any way be construed as imposing upon Landlord any liability for the means, methods, or manner of removal, containment or other compliance with applicable law for and with respect to the foregoing. The terms of this Section 5.7 shall apply to any transportation, handling, storage, use or disposal of Hazardous Materials irrespective of whether Tenant has obtained Landlord’s consent therefor.

ARTICLE VI
INSTALLATIONS, ALTERATIONS, AND ADDITIONS

6.1 (a) Tenant shall not make any alterations, additions, improvements, or other physical changes in, about or to the Premises (collectively, “Alterations”) (other than decorative Alterations such as painting, wall coverings and carpeting) without Landlord’s prior consent in each instance. Without limiting the foregoing, Landlord shall not unreasonably withhold its consent to Alterations so long as such Alterations (i) are non-structural and do not affect the Building systems, (ii) are performed only by Landlord’s designated contractors or by contractors or mechanics approved by Landlord to perform such Alterations, (iii) affect only the Premises, and (iv) are in compliance with all applicable Requirements.

     (b) Prior to making any Alterations, Tenant, at its expense, shall (i) submit to Landlord for its written approval, detailed plans and specifications (including layout, architectural, mechanical, electrical, plumbing, sprinkler and structural drawings) of each proposed Alteration, (ii) obtain all permits, approvals and certificates required by any governmental authorities, (iii) furnish to Landlord duplicate original policies or certificates of worker’s compensation insurance (covering all persons to be employed by Tenant, and Tenant’s contractors and subcontractors in connection with such Alteration), commercial general liability (including property damage coverage) and builder’s risk insurance coverage (issued on a completed value basis) all in such form, with such companies, for such periods and in such amounts as Landlord may reasonably require, naming Landlord, Landlord’s managing agent, and their respective employees and agents, and any mortgagee as additional insureds, and (iv) furnish to Landlord such other evidence of Tenant’s ability to complete and to fully pay for such Alterations as is reasonably satisfactory to Landlord, and, if requested by Landlord, Tenant shall furnish to Landlord prior to commencement of any such work a bond or other security acceptable to Landlord assuring that any work by Tenant will be completed in accordance with the approved plans and specifications and fully paid for. Upon Tenant’s request, Landlord shall exercise reasonable efforts to cooperate with Tenant in obtaining any permits, approvals or certificates required to be

18

obtained by Tenant in connection with any permitted Alteration (if the provisions of the applicable laws, requirements, regulations, rules, codes, or guidelines (each, a “Requirement”) require that Landlord join in such application), provided Landlord shall incur no cost, expense or liability in connection therewith.

     (c) Within ten (10) Business Days following completion of any Alterations, Tenant, at its expense, shall obtain and deliver to Landlord: (i) copies of paid invoices covering all of the Alterations, (ii) final waivers of lien from all contractors, subcontractors and material suppliers performing work or providing material in connection with the Alterations, (iii) proof of the satisfactory completion of all required inspections and the issuance of any required approvals and sign-offs by Governmental Authorities with respect thereto, (iv) “as-built” plans and specifications for such Alterations, (v) a written certification in the form of the AIA Document G702 (or, if such document is no longer in use, such other form as Landlord shall reasonably approve) from Tenant’s architect stating that (A) the Alterations have been completed in accordance with the plans and specifications approved by Landlord, (B) such work has been paid in full by Tenant, and (C) all contractors, subcontractors and materialmen have delivered to Tenant waivers of lien with respect to such work (copies of which shall be included with such architect’s certification), and (vi) such other documents and information as Landlord may reasonably request.

     (d) All Alterations shall be performed (a) in a good and first-class workmanlike manner and free from defects, (b) in accordance with the plans and specifications approved by Landlord, and by contractors approved by Landlord, (c) excepting only decorative alterations, under the supervision of a licensed architect reasonably satisfactory to Landlord, and (d) in compliance with all Requirements, the terms of this Lease, all procedures and regulations then prescribed by Landlord for coordinating all work performed in the Building. All materials and equipment to be used in the Premises shall be of first quality and at least equal to the applicable standards for the Building then established by Landlord, and no such materials or equipment shall be subject to any lien or other encumbrance.

     (e) All voice, data, video, audio and other low voltage control transport system cabling and/or cable bundles installed in the Building by Tenant or its contractor shall be (i) plenum rated and/or have a composition makeup suited for its environmental use in accordance with NFPA 70/National Electrical Code; (ii) labeled every 3 meters with Tenant’s name and origination and destination points; (iii) installed in accordance with all EIA/TIA standards and the National Electric Code; and (iv) installed and routed in accordance with a routing plan shown “as built” or “as installed” configurations of cable pathways, outlet identification numbers, locations of all wall, ceiling and floor penetrations, riser cable routing and conduit routing (if applicable), and such other information as Landlord may request. The routing plan shall be available to Landlord and its agents at the Building upon request.

     (f) All personal property, trade fixtures and other movable equipment (“Tenant’s Property”) shall be and remain the property of Tenant and Tenant may remove the same at any time on or before the expiration date. Tenant shall repair and restore, in a

19

good and workmanlike manner, any damage to the Premises or the Building resulting from or caused by Tenant’s removal of any Tenant’s Property and if Tenant fails to do so, Tenant shall reimburse Landlord, on demand, for Landlord’s cost of repairing and restoring such damage. Any Tenant’s Property not removed as of the expiration date shall be deemed abandoned and Landlord may remove and dispose of same, and repair and restore any damage caused thereby, at Tenant’s cost and without liability to or recourse by Tenant or anyone claiming by, through or under Tenant. The foregoing provisions shall survive the expiration or earlier termination of this Lease.

     (g) All contractors and subcontractors at any tier performing any construction, repair, refurbishment or restoration (“Work”) in the Building, including, without limitation, tenant improvements, build-out, alterations, additions, improvements, renovations, repairs, remodeling, painting and installations of fixtures, mechanical, electrical, plumbing, data, security, telecommunication, low voltage or elevator equipment or systems or other equipment, or with respect to any other construction work in, on, or to the Building (including Work performed by any person providing any services to the Building such as DSL, cable, communications, telecommunications or similar services) are required to be approved in advance by ASB Capital Management, LLC, on behalf of Landlord (“ASB”) and the business manager of the applicable local AFL-CIO Building and Construction Trades Council. ASB will only approve such contractors or subcontractors that: (i) are bound by and signatory to a collective bargaining agreement with a labor organization (a) whose jurisdiction covers the type of work to be performed at the Building, and (b) that is an Approved Building Trades Department Contractor or Subcontractor; and (ii) observe area standards for wages and other terms and conditions of employment, including fringe benefits. For purposes hereof, an “Approved Building Trades Department Contractor or Subcontractor” is a contractor or subcontractor that is currently affiliated with the Building and Construction Trades Department of the AFL-CIO (the “BCTD”) or, if no such BCTD-affiliated contractor or subcontractor is available for a particular trade (e.g., carpentry work), a contractor or subcontractor that is affiliated with a national trade union which was formerly affiliated with the BCTD and which recognizes (and will recognize and respect, for its work at the Building), the jurisdictional limitations established by the local BCTD. Further, Tenant shall comply with any contractor selection and payment policy promulgated by Landlord from time to time. Upon the request of Landlord, each such contractor and subcontractor shall provide written certification that all work performed by such contractor or subcontractor was performed in compliance with this policy. Contractors may not engage any subcontractor that does not satisfy the provisions of clauses (i) and (ii) above. If at any time a contractor or subcontractor does not satisfy clauses (i) and (ii) above, such contractor or subcontractor shall not be considered to be approved by Landlord.

     (h) Tenant, at its expense, shall discharge any lien or charge filed against the Premises and/or the Property (or any part thereof) arising out of or resulting from any work claimed to have been done by or on behalf of, or materials claimed to have been furnished to, Tenant, within 10 days after Tenant’s receipt of notice thereof.

     (i) Tenant shall pay promptly to Landlord or its designee, upon demand, all reasonable out-of-pocket costs actually incurred by Landlord in connection with Tenant’s

20

Alterations including costs incurred in connection with (a) Landlord’s review of the Alterations (including review of requests for approval thereof) and (b) the provision of Building personnel during the performance of any Alteration to operate elevators or otherwise to facilitate any Alterations. In addition, if Tenant’s Alterations shall cost more than $25,000.00, Tenant shall pay to Landlord or its designee, upon demand, an administrative fee at the then-market rate, in respect of the performance of such Alterations and the scheduling of equipment, facilities and personnel in connection therewith, provided that such administrative fee shall not be applied to the initial Tenant Improvements. As of the Date of this Lease set forth in Section 1.2, the market rate for the administrative fee described in the preceding sentence is three percent (3%) of the total cost of the Alterations.

     (j) The approval of plans or specifications, or consent by Landlord to the making of any Alterations, shall not constitute Landlord’s agreement or representation that such plans, specifications or Alterations comply with any applicable codes, laws, rules, regulations, ordinances, or by-laws. Landlord shall have no liability to Tenant or any other party in connection with Landlord’s approval of any plans and specifications for any Alterations, or Landlord’s consent to Tenant’s performing any Alterations.

ARTICLE VII
ASSIGNMENT AND SUBLETTING

7.1 PROHIBITION

     Notwithstanding any other provision of this Lease, Tenant shall not, directly or indirectly, assign, mortgage, pledge or otherwise transfer, voluntarily or involuntarily, this Lease or any interest herein or sublet (which term without limitation, shall include granting of concessions, licenses, and the like) or allow any other person or entity to occupy the whole or any part of the Premises, without, in each instance, having first received the express consent of Landlord. Except as provided in Section 7.7, any assignment, mortgage, pledge, transfer of this Lease or subletting of the whole or any part of the Premises by Tenant without Landlord’s express consent shall be invalid, void and of no force or effect. This prohibition includes, without limitation, any assignment, subletting, or other transfer which would occur by operation of law, merger, consolidation, reorganization, acquisition, transfer, or other change of Tenant’s corporate, ownership, and/or proprietary structure, including, without limitation, a change in the partners of any partnership, a change in the members and/or managers of any limited liability company, and/or the sale, pledge, or other transfer of any of the issued or outstanding capital stock of any corporate Tenant.

     In any case where Landlord shall consent to any assignment or subletting, the Tenant originally named herein shall remain fully liable for all obligations of Tenant hereunder, including, without limitation, the obligation to pay the rent and other amounts provided under this Lease and such liability shall not be affected in any way by any future amendment, modification, or extension of this Lease or any further assignment, other transfer, or subleasing and Tenant hereby irrevocably consents to any and all such transactions. It shall be a condition of the validity of any permitted assignment or

21

subletting that the assignee or sublessee agree directly with Landlord, in form reasonably satisfactory to Landlord, to be bound by all obligations of Tenant hereunder, including, without limitation, the obligation to pay all Rent and other amounts provided for under this Lease and the covenant against further assignment or other transfer or subletting.

7.2 FURTHER ASSIGNMENT AND SUBLETTING

     Landlord’s consent to any assignment or subletting shall not relieve Tenant from the obligation to obtain Landlord’s express consent to any further assignment or subletting. In no event shall any permitted subtenant or assignee assign or encumber its sublease or further sublet any portion of the Premises, or otherwise suffer or permit any portion of the Premises to be used or occupied by others.

7.3 NOTICE OF ASSIGNMENT OR SUBLEASE; TERMINATION RIGHTS

     If Tenant desires to assign this Lease or sublet all or any portion of the Premises, then Tenant shall give notice thereof to Landlord, which notice shall be accompanied by (a) the date Tenant desires the assignment or sublease to be effective, (b) the material business terms on which Tenant would assign this Lease or sublet all or such portion of the Premises, and (c) in the case of a sublease, a description of the portion of the Premises to be sublet. Such notice shall also include (i) a true and complete statement reasonably detailing the identity of the proposed assignee or subtenant, the nature of its business, and its proposed use of the Premises, (ii) current financial information with respect to the proposed assignee or subtenant, including, without limitation, its most recent financial statements, and (iii) such other information Landlord may reasonably request.

     If Tenant desires either (x) to assign the Lease, (y) to sublet all or any portion of the Premises for the remainder of the Term, or (z) to sublet fifty percent (50%) or more of the Premises, such notice shall be deemed an offer from Tenant to Landlord whereby Landlord (or Landlord’s designee) shall be granted the right, at Landlord’s option, to terminate this Lease with respect to all or such portion of the Premises affected by any such sublet, upon the terms and conditions hereinafter set forth. Such option may be exercised by notice from Landlord to Tenant within forty-five (45) days after Landlord’s receipt of Tenant’s notice. If Landlord exercises its option to terminate this Lease pursuant to the foregoing provisions, then (a) this Lease shall end and expire on the date that such assignment or sublease was to commence (as if such date were the expiration date of the term hereof), (b) Rent shall be apportioned, paid or refunded as of such date, (c) Tenant, upon Landlord’s request, shall enter into an agreement confirming such termination, and (d) Landlord shall be free to lease the Premises or any part thereof, to any person or persons, including, without limitation, to Tenant’s prospective assignee or subtenant.

7.4 CONSENT TO ASSIGNMENT OR SUBLEASE

     If Landlord shall not exercise Landlord’s option to terminate all or a portion of this Lease as aforesaid, and provided that no Default of Tenant has occurred hereunder, then, subject to the following provisions, Landlord’s consent to the proposed assignment or subletting shall not be unreasonably withheld or delayed. Tenant shall, upon demand, reimburse Landlord for all expenses incurred by Landlord in connection with such

22

assignment or sublease, including, without limitation, all legal fees and expenses reasonably incurred by Landlord in connection with the granting of any requested consent.

     In no event shall Landlord be considered to have withheld its consent unreasonably to any proposed assignment or subletting if:

          (1) the proposed assignee or subtenant is not a reputable person or entity of good character with sufficient financial means to perform all of its obligations under this Lease or the sublease, as the case may be, and/or Landlord has not been furnished with reasonable proof thereof;

          (2) the proposed assignee or sublessee may, in Landlord’s reasonable determination, use the Premises for (a) a use which does not comply with the conditions and restrictions set forth in this Lease, or (b) a use which could overburden the Premises, the Building, the parking areas or other common areas on the Property, or (c) a use which could cause an increase in the insurance premiums payable with respect to the Property or in the Operating Costs;

          (3) the proposed assignee or subtenant is a person or entity (or affiliate of a person or entity) with whom Landlord or Landlord’s agent is then or has been within the prior six months negotiating in connection with the rental of space in the Building;

          (4) the form of the proposed sublease or instrument of assignment is not reasonably satisfactory to Landlord;

          (5) after such assignment or sublease, there shall be more than two subtenants of the Premises;

          (6) the proposed subtenant or assignee shall be entitled, directly or indirectly, to diplomatic or sovereign immunity, regardless of whether the proposed assignee or subtenant agrees to waive such diplomatic or sovereign immunity, and/or shall not be subject to the service of process in, and the jurisdiction of the courts of, the Commonwealth of Massachusetts.

          (7) The proposed assignee or sublessee shall be an employment agency or a domestic or foreign governmental or quasi-governmental entity or agency.

          (8) any mortgagee whose consent to such assignment or sublease is required fails to consent thereto; or

          (9) a lawsuit is then pending or threatened between Landlord or any affiliate of Landlord or any affiliate of Landlord and the proposed assignee or subtenant (or affiliates thereof).

     If a Default of Tenant shall occur at any time prior to the effective date of such assignment or subletting, then Landlord’s consent thereto, if previously granted, shall be immediately deemed revoked without further notice to Tenant, and such consent shall be

23

void and without force and effect, and such assignment or subletting shall constitute a further Default of Tenant hereunder.

     Notwithstanding any term or provision of this Lease to the contrary, Tenant shall not sublease all or any portion of the Premises or assign this Lease to, or permit all or any portion of the Premises to be used or occupied by, any of the following nine entities or any person or entity then controlling, controlled by or under common control with any of such entities or any then successors thereto: (i) Deloitte & Touche, (ii) Ernst and Young, (iii) PricewaterhouseCoopers, (iv) Grant Thornton, (v) BDO Seidman, (vi) Vitale Caturano, (vii) Tofias, (viii) McGladrey and Pulen and (ix) Carlin Charoon & Rosen. The foregoing sentence shall not prohibit (subject to receipt of Landlord’s consent as provided above) any merger or sale of Tenant with or to, or the purchase by Tenant of, any of such nine entities or their successors, provided that none of Deloitte and Touche, Ernst & Young or PricewaterhouseCoopers, or any successor thereto, (x) does business at the Building under the name Deloitte & Touche, Ernst & Young or Pricewaterhouse Coopers (or the name of their respective successors) or has any such names displayed in any elevator lobby, elevator or other public areas in and around the Building or (y) is the surviving entity in connection with any such merger or sale unless the entity or division which occupies space in the Building does not do business under the names of any of such three entities (or their respective successors) and the names of such three entities (or their respective successors) are not displayed at any time in any elevator lobby, elevators or other public areas in and around the Building.

7.5 SUBORDINATION

     Each sublease shall be subject and subordinate to this Lease and to the matters that this Lease is or shall be subordinate, it being the intention of Landlord and Tenant that Tenant shall assume and be liable to Landlord for any and all acts and omissions of all subtenants and anyone claiming under or through any subtenants which, if performed or omitted by Tenant, would be a default under this Lease. Each sublease shall terminate upon the expiration or termination of this Lease, provided that if this Lease shall expire or terminate during the term of any sublease for any reason, or if Tenant shall surrender this Lease to Landlord during the term of any sublease, Landlord, in its sole discretion, upon written notice given to Tenant and the subtenant not more than thirty (30) days after the effective date of such expiration, termination or surrender, without any additional or further agreement of any kind on the part of subtenant, may elect to continue such sublease with the same force and effect as if Landlord as lessor and subtenant as lessee had entered into a lease as of such effective date for a term equal to the then unexpired term of such sublease and containing the same terms and conditions as those contained in the sublease, and, if Landlord shall so elect, the subtenant shall attorn to Landlord and Landlord and the subtenant shall thereupon have the same rights, obligations and remedies thereunder as were had by Tenant and the subtenant thereunder prior to such effective date, respectively, except that in no event shall Landlord be (a) liable for any act or omission by Tenant, or (b) subject to any offsets or defenses which the subtenant had or might have against Tenant, (c) bound by any rent or additional rent or other payment paid by the subtenant to Tenant in advance or (d) bound by any amendment to the Sublease not consented to by Landlord.

24

7.6 PROFITS

     If Tenant shall enter into any assignment or sublease permitted hereunder or consented to by Landlord, Tenant shall, within sixty (60) days after Landlord’s consent to such assignment or sublease, deliver to Landlord a complete list of Tenant’s reasonable third-party brokerage fees, legal fees and architectural fees paid or to be paid in connection with such transaction, together with a list of all of Tenant’s personal property to be transferred to such assignee or sublessee. Tenant shall deliver to Landlord evidence of the payment of such fees promptly after the same are paid. In consideration of such assignment or subletting, Tenant shall pay to Landlord:

     (a) In the case of an assignment of this Lease, on the effective date of the assignment, an amount equal to 50% of all sums and other consideration paid to Tenant by the assignee for or by reason of such assignment (including sums paid for the rental of Tenant’s personal property and any Personal Property Sale Proceeds, as defined below) after first deducting Tenant’s reasonable third-party brokerage fees, legal fees and architectural fees in connection with such assignment; or

     (b) in the case of a sublease, 50% of the excess of (i) the rent and other sums payable under the sublease to Tenant by the subtenant (together with any sums paid for the rental of Tenant’s personal property and any Personal Property Sale Proceeds, as defined below) over the Base Rent and other sums payable under this Lease (appropriately pro-rated for any sublease of less than the entire Premises) and Tenant’s reasonable third-party brokerage fees, legal fees and architectural fees in connection with such sublease amortized ratably over the term of such sublease. The sums payable under this clause shall be paid by Tenant to Landlord as and when paid by the subtenant to Tenant.

As used herein, “Personal Property Sale Proceeds” shall mean any sums paid, in connection with an assignment of this Lease or sublease of all or any portion of the Premises under rental terms that are below fair market value at the time of such transaction (taking into account all relevant factors), for the sale of Tenant’s personal property, less the then fair market value of such personal property, as reasonably determined by Landlord.

7.7 PERMITTED TRANSFERS

     If Tenant is a corporation, the transfer (by one or more transfers) of a majority of the stock of Tenant shall be deemed a voluntary assignment of this Lease. However, subject to the last paragraph of Section 7.4, the prohibition contained in Section 7.1 hereof shall not apply to the transfer of shares of stock of Tenant if and so long as the voting stock of Tenant is publicly traded on a nationally recognized stock exchange. For purposes of this Section 7.7 the term “transfers” shall be deemed to include the issuance of new stock which results in a majority of the stock of Tenant being held by a person or entity that does not hold a majority of the stock of Tenant on the date hereof. If Tenant is a partnership, the transfer (by one or more transfers) of a majority interest in the partnership shall be deemed a voluntary assignment of this Lease. If Tenant is a limited liability company, trust, or any other legal entity, the transfer (by one or more transfers) of a majority of the beneficial ownership interests in, or the right(s) to manage and/or direct the operations of,

25

such entity, however characterized, shall be deemed a voluntary assignment of this Lease. The prior consent of Landlord shall not be required with respect to transactions with a corporation into or with which Tenant is merged or consolidated or to which substantially all of Tenant’s assets are transferred so long as (i) such transfer was made for a legitimate independent business purpose and not for the purpose of transferring this Lease, (ii) the successor to Tenant has a tangible net worth computed in accordance with generally accepted accounting principles at least equal to the greater of (1) the tangible net worth of Tenant, as so computed, immediately prior to such merger, consolidation or transfer, and (2) the tangible net worth, as so computed, of the original Tenant on the date of this Lease, (iii) proof satisfactory to Landlord of such net worth is delivered to Landlord at least 10 days prior to the effective date of any such transaction and (iv) there will be no violation of the last paragraph of Section 7.4. Subject to the last paragraph of Section 7.4, Tenant may also, upon prior notice to and with the consent of Landlord, which consent shall not be unreasonably withheld, permit any corporation or other business entity which controls, is controlled by, or is under common control with the original Tenant named herein (a “Related Corporation”) to sublet all or part of the Premises for any Permitted Use, provided the Related Corporation is in Landlord’s reasonable judgment of a character and engaged in a business which is in keeping with the standards for the Building and the occupancy thereof and the space utilized by the Related Corporation is not separately demised. Such sublease shall not be deemed to vest in any such Related Corporation any right or interest in this Lease or the Premises nor shall it relieve, release, impair or discharge any of Tenant’s obligations hereunder. For the purposes hereof, “control” shall be deemed to mean ownership of not less than fifty percent (50%) of all of the voting stock of such corporation or not less than fifty percent (50%) of all of the legal and equitable interest in any other business entity if Tenant is not a corporation.

7.8 NO WAIVER

     The acceptance by Landlord of the payment of Rent, additional rent or other charges from an assignee or sublease shall not be considered to be a consent by Landlord to any such assignment, sublease, or other transfer, nor shall the same constitute a waiver of any right or remedy of Landlord. The listing of any name other than that of Tenant on the doors of the Premises, the Building directory or elsewhere shall not vest any right or interest in this Lease or in the Premises, nor be deemed to constitute Landlord’s consent to any assignment or transfer of this Lease or to any sublease of the Premises or to the use or occupancy thereof by others. Any such listing shall constitute a privilege revocable in Landlord’s discretion by notice to Tenant.

ARTICLE VIII
REPAIRS AND MAINTENANCE

8.1 TENANT OBLIGATIONS

     From and after the date that possession of the Premises is delivered to Tenant and until the end of the Lease Term, Tenant shall keep the Premises and every part thereof in good order, condition, and repair, reasonable wear and tear and damage by casualty, as a result of condemnation, or as a result of the failure of Landlord to provide services

26

required to be provided hereunder only excepted; and shall return the Premises to Landlord at the expiration or earlier termination of the Lease Term in such condition.

8.2 LANDLORD OBLIGATIONS

     Except as may be provided in Articles XII and XIII, Landlord agrees to keep in good order, condition, and repair the structural components and the roof of the Building, the common utility and Building systems, the common hallways, entrances, restrooms and elevators, and the sprinkler system to the extent the same is located outside the Premises (Tenant being responsible for all portions of the sprinkler system located within the Premises); provided, however, that Tenant shall reimburse Landlord, as additional rent hereunder, within thirty (30) days after receipt of Landlord’s invoice therefor, for the costs of maintaining, repairing, or otherwise correcting any condition caused by or arising out of an act, omission, neglect or default under this Lease of Tenant or any employee, agent, or contractor of Tenant or any other party for whose conduct Tenant is responsible. Without limitation, Landlord shall not be responsible to make any improvements or repairs other than as expressly provided in this Section 8.2. In addition, Landlord shall not be liable for any failure to make such repairs unless and until Tenant has given notice to Landlord of the need to make such repairs and Landlord has failed to commence to make such repairs within a reasonable time thereafter.

8.3 CAUSES BEYOND CONTROL OF THE LANDLORD

     The Landlord shall in no event be liable for failure to perform any of its obligations under this Lease when prevented from doing so by causes beyond its reasonable control, including, without limitation, labor dispute, breakdown, accident, order or regulation of or by any governmental authority, or failure of supply, or inability by the exercise of reasonable diligence to obtain supplies, parts, or employees necessary to furnish services required under this Lease, or because of war or other emergency, or for any cause due to any act, neglect, or default of Tenant or Tenant’s servants, contractors, agents, employees, licensees or any person claiming by, through or under Tenant. Without limiting the foregoing, in no event shall Landlord ever be liable to Tenant for any indirect, special or consequential damages under the provisions of this Section 8.3 or any other provision of this Lease.

ARTICLE IX
SERVICES TO BE FURNISHED BY LANDLORD; UTILITIES

9.1 HEATING, VENTILATION AND AIR CONDITIONING

     Landlord shall, during Business Hours, furnish to the Premises, heating, ventilation and cooling service (“HVAC Service”) substantially equivalent to the HVAC service then being furnished in comparably aged and similarly equipped office buildings in Downtown Boston. If Tenant shall require additional HVAC Service at any times other than during Business Hours and/or Business Days, then Tenant shall provide not less than twenty-four (24) hours prior notice thereof to Landlord. Landlord shall furnish such additional HVAC Service to the Premises and Tenant shall pay to Landlord, as additional rent, within thirty (30) days after receipt of Landlord’s invoice therefor, such overtime HVAC charges as

27

may from time to time be established by Landlord. Tenant shall not install any supplementary or auxiliary HVAC equipment to serve the Premises without Landlord’s prior consent in each instance, which consent shall not be unreasonably withheld, conditioned or delayed but which may include the requirement to pay for condenser water or other costs of Landlord related thereto. Landlord shall not be responsible if the building standard systems providing HVAC Service to the Premises shall fail to provide cooled or heated air, as the case may be, by reason of (i) any machinery or equipment installed by or on behalf of Tenant, which shall have an electrical load in excess of the average electrical load for the HVAC System as designed, or (ii) any alterations, additions or improvements made or performed by or on behalf of Tenant. Tenant at all times shall cooperate fully with Landlord and shall abide by the rules and regulations which Landlord may reasonably prescribe for the proper functioning and protection of the HVAC System. Without limitation, in no event shall Tenant introduce into the Premises personnel or equipment which overloads the capacity of the HVAC System or in any other way interferes with the system’s ability to perform adequately its proper functions, or which affects the temperature otherwise maintained by the HVAC System.

9.2 ELECTRICITY

     Landlord shall permit the Building’s electricity provider to furnish electrical energy required for lights and electrical outlets in the Premises in accordance with the provisions of the Lease. The Premises shall be served by an electric meter measuring use of electrical energy in the Premises and Tenant shall be billed directly on a monthly basis by the utility company providing such energy. Tenant agrees to pay all such utility bills within fifteen (15) days of the date the same are received.

9.3 CLEANING

     Landlord shall provide nightly cleaning services for the Premises (Mondays through Fridays only, holidays excepted), including removal and disposal of usual and customary office trash and refuse, substantially in accordance with the specifications set forth in Exhibit CS.

9.4 WATER

     Landlord shall provide at the Building core water for usual and customary drinking, cleaning and lavatory purposes. If Tenant requires water for any other purpose, including without limitation, in connection with the business conducted in the Premises, Tenant shall pay the Landlord an appropriate charge stipulated by Landlord to reimburse Landlord for the cost of such water and related sewer use charge (including, without limitation, a charge to reimburse Landlord for the cost of metering Tenant’s usage).

9.5 OTHER UTILITIES AND SERVICES

     Tenant shall contract directly with the providers for, and shall pay directly to the providers as they become due, all charges for gas, telephone, cable, data transmission and other utilities and services furnished to or consumed in the Premises. Landlord shall not be liable for any interruption or failure in the supply of any such services. Without limitation,

28

if Tenant is not charged directly by the providers of any such services or utilities, then Tenant shall pay, as additional rent within thirty (30) days after receipt of Landlord’s invoice therefor, its allocable share of thereof, as determined by Landlord in its reasonable discretion. Except as expressly set forth in this Article IX, Tenant agrees to contract separately for all utilities and building and other services required for Tenant’s use and occupancy of the Premises hereunder.

9.6 INTERRUPTION

     Landlord shall not be liable to Tenant, nor shall Tenant have a claim for any compensation or reduction of Rent, arising out of or resulting from interruptions or shortages of utilities or building services, or from Landlord’s entering the Premises for any of the purposes authorized by this Lease or for repairing the Premises, or any portion of the Building and/or the Property. If Landlord is prevented or delayed from making any repairs, alterations or improvements, or furnishing any utility or service or performing any other obligation to be performed on Landlord’s part, by reason of any cause, Landlord shall not be liable to Tenant therefor, nor shall Tenant be entitled to any abatement or reduction of rent by reason thereof, nor shall the same give rise to any claim by Tenant that such failure constitutes actual or constructive, total or partial, eviction from the Premises. Landlord reserves the right to stop any service or utility system when necessary by reason of accident or emergency or until necessary repairs have been completed. Except in case of emergency repairs, Landlord will give Tenant not less than twenty-four (24) hours advance notice of any contemplated stoppage and will use diligent efforts to avoid unreasonable inconvenience to Tenant by reason thereof. Landlord also reserves the right to institute such policies, programs and measures as may be necessary, required or expedient for the conservation or preservation of energy or energy services or as may be necessary or required to comply with applicable codes, rules, regulations or standards. In so doing, Landlord shall make diligent efforts to avoid unreasonable inconvenience to Tenant by reason thereof.

     Notwithstanding the foregoing, Landlord’s failure to furnish, or any interruption or termination of, services due to the application of applicable Legal Requirements then enforced, the failure of any equipment, the performance of repairs, improvements or alterations, or the occurrence of any event or cause each as a result of Landlord’s gross negligence or intentional misconduct (a “Service Failure”) shall not render Landlord liable in any respect for damages to either person or property, nor be construed as a constructive eviction of Tenant, nor give rise to an abatement of Rent (except as expressly provided below), nor relieve Tenant from the obligation to fulfill any covenant or agreement under this Lease. However, if Tenant was previously occupying the Premises and the Premises, or a material portion of the Premises, is made untenantable for a period in excess of five (5) consecutive calendar days following notice to Landlord as a result of a Service Failure that is within Landlord’s control to provide (and Tenant in fact does not use the Premises or such material portion thereof during such period), then Tenant, as its sole remedy, shall be entitled to receive an abatement, pro rata based on the portion of the Rentable Area of the Premises rendered untenantable, of Rent payable hereunder during the period beginning on the sixth (6th) consecutive calendar day of the Service Failure and ending on

29

the earlier of the day such service has been restored or the day on which Tenant commences use of the Premises or such material portion thereof.

ARTICLE X
INDEMNITY

10.1 TENANT’S INDEMNITY

     To the maximum extent permitted by law, Tenant shall indemnify and save harmless Landlord and the members, managers, partners, directors, officers, agents, and employees of Landlord, against and from all claims, expenses, or liabilities of whatever nature (a) arising directly or indirectly from any default or breach by Tenant and/or Tenant’s contractors, licensees, agents, servants, employees, invitees, and/or anyone claiming by, through, or under Tenant, under any of the terms or covenants of this Lease or the failure of Tenant or such persons to comply with any rule, order, regulation, or lawful direction now or hereafter in force of any public authority, in each case to the extent the same are related, directly or indirectly, to the Premises or the Building or Tenant’s use thereof; or (b) arising directly or indirectly from any accident, injury, or damage, however caused, to any person or property, on or about the Premises; or (c) arising directly or indirectly from any accident, injury, or damage to any person or property occurring outside the Premises but within the Building or on the Lot, where such accident, injury, or damage results, or is claimed to have resulted, from any act, omission, or negligence on the part of Tenant, or Tenant’s contractors, licensees, agents, servants, employees, or customers, or anyone claiming by, through, or under Tenant: provided, however, that in no event shall Tenant be obligated under this clause (c) to indemnify Landlord, the directors, officers, agents, employees of Landlord, to the extent such claim, expense, or liability results from any negligence or other misconduct of Landlord or the members, managers, officers, agents, or employees of Landlord on or about the Premises or the Building. The indemnification set forth in this Section 10.1 shall survive the expiration or termination of this Lease.

     This indemnity and hold harmless agreement shall include, without limitation, indemnity against all expenses, attorney’s fees and liabilities incurred in connection with any such claim or proceeding brought thereon and the defense thereof with counsel acceptable to Landlord. At the request of Landlord, Tenant shall defend any such claim or proceeding directly on behalf and for the benefit of Landlord.

10.2 TENANT’S RISK

     Tenant agrees to use and occupy the Premises and to use such other portions of the Building and the Lot as Tenant is herein given the right to use at Tenant’s sole risk; and Landlord shall have no responsibility or liability for any loss or damage, however caused, to furnishings, fixtures, equipment, or other personal property of Tenant or of any persons claiming by, through, or under Tenant.

30

10.3 INJURY CAUSED BY THIRD PARTIES

     The Tenant agrees that Landlord shall not be responsible or liable to Tenant, or to those claiming by, through, or under Tenant, for any loss or damage resulting to Tenant or those claiming by, through, or under Tenant, or its or their property, that may be occasioned by or through the acts or omissions of persons occupying any part of the Building, or for any loss or damage from the breaking, bursting, crossing, stopping, or leaking of electric cables and wires, and water, gas, sewer, or steam pipes, or like matters.

10.4 SECURITY

     Tenant agrees that, in all events, Tenant is responsible for providing security to, and installing locks and access control systems serving, the Premises and Tenant’s personnel and Landlord shall have no obligations or liabilities, of any kind, in connection therewith. Tenant shall provide Landlord with master keys, access cards and codes and all other necessary means of access to all locks and access control systems for and with respect to the Premises.

ARTICLE XI
INSURANCE

11.1 PUBLIC LIABILITY INSURANCE

     Tenant agrees to maintain in full force from the date upon which Tenant first enters the Premises for any reason, throughout the Lease Term, and thereafter so long as Tenant is in occupancy of any part of the Premises, (a) a policy of commercial general liability insurance, written on an occurrence basis with a general aggregate per location extension and including contractual liability coverage to cover any liabilities assumed under this Lease, insuring against all claims for bodily injury, property damage, personal injury or advertising injury on or about the Premises or arising out of the use of the Premises, including products liability, and completed operations liability, (b) automobile liability insurance covering all owned vehicles, hired vehicles, and all other non-owned vehicles, (c) worker’s compensation insurance in accordance with applicable statutory legal requirements, and (d) employer’s liability insurance with a limit of not less than $500,000.00 per accident, a $500,000.00 policy limit, and $500,000.00 disease limit per employee. The general liability and umbrella policies shall designate Landlord and the fee owner of the Lot as additional named insureds and its managing agent, if any, and any mortgagees (as may be set forth in a notice given from time to time by Landlord) shall be named as additional insureds, as their interests appear, and shall be in form and substance reasonably satisfactory to Landlord.

     Each such policy shall expressly provide that it shall not expire or be amended or canceled unless the provider of such policy shall endeavor to provide at least thirty (30) days’ prior written notice to Landlord in each instance and that the interests of Landlord thereunder or therein shall not be affected by any breach by Tenant of any policy provision. A certificate evidencing such insurance coverages (or, if requested by Landlord, a certified copy of such policy) shall be provided to Landlord prior to the Commencement Date, and thereafter on an annual basis (and in any event such provider

31

shall agree to endeavor to provide Landlord with notice not less than thirty (30) days prior to the expiration thereof). The minimum limits of liability of such insurance shall be in an amount of not less than the greater of (a) $5,000,000.00 per occurrence/aggregate or (b) such amount as determined by Landlord from time-to-time in its reasonable discretion to be the amounts then customarily being carried on like property in the Boston area, and Landlord shall not discriminate against Tenant (as compared to other similarly-situated tenants of the Building) in making the determination provided in this subclause (b). Each such policy shall be written by insurance companies licensed in the Commonwealth of Massachusetts, having a rating in Best’s Key Rating Guide of at least “A-” and a financial size category of not less than “Class VII.”

11.2 HAZARD INSURANCE

     Tenant agrees to maintain in full force from the date upon which Tenant first enters the Premises for any reason, throughout the Lease Term, and thereafter so long as Tenant is in occupancy of any part of the Premises, all risk” insurance including flood and boiler and machinery (if applicable) and such other insurable hazards as, under good insurance practices are insured against by other tenants in similar premises. Covered property shall include but not be limited to all fixtures, equipment and other personal property of tenant. The amount of insurance shall not be less than 100% of the replacement cost of such property, and the policy shall contain an agreed amount extension. Tenant shall also purchase time element (business income/extra expense) coverage against the perils insured by the “all risk” property policy for a period of indemnity of twelve months. Tenant shall also maintain insurance against such other hazards as may from time to time reasonably be required by Landlord, provided that such insurance is customarily carried in the area in which the Premises are located on property similar to the Building and that Tenant receives written notice specifying all such additional insurance as may be required, and Landlord shall not discriminate against Tenant (as compared to other similarly-situated tenants of the Building) in imposing any such requirements as provided in this sentence. Each such policy shall be written by insurance companies licensed in the Commonwealth of Massachusetts, having a rating in Best’s Key Rating Guide of at least “A-” and a financial size category of not less than “Class VII.”

11.3 CONSTRUCTION PERIOD INSURANCE

     At any time when demolition or construction work is being performed on or about the Premises or Building by or on behalf of Tenant, the Tenant shall keep in full force and effect the following insurance coverage, in each instance with policies in form and substance reasonably satisfactory to Landlord:

          (1) builder’s risk completed value (non-reporting form) in such form and affording such protections as required by Landlord, naming Landlord and its mortgagees as additional insureds; and

          (2) workers’ compensation or similar insurance in form and amounts required by law.

32

          (3) Employer’s liability insurance in the amount of $500,000 per accident, $500,000 per illness, per employee and $500,000 per illness, in the aggregate.

          (4) Commercial general liability and umbrella excess liability coverage including but not limited to bodily injury, property damage, personal injury and advertising injury, with limits not less than $5,000,000 per occurrence and in the aggregate per location.

          (5) Contractor, subcontractors and subsubcontractors shall maintain commercial general liability and umbrella excess liability coverage including but not limited to bodily injury, property damage, personal injury and advertising injury with limits not less than $5,000,000 per occurrence and in the aggregate per location/project. Landlord, its managing agent, its mortgagee and the fee owner of the Lot shall be listed as additional insureds under each policy.

     Tenant shall cause a certificate or certificates of such insurance to be delivered to Landlord prior to the commencement of any work in or about the Building or the Premises, in default of which Landlord shall have the right, but not the obligation, to obtain any or all such insurance at the expense of Tenant, in addition to any other right or remedy of Landlord. The provisions of this §11.3 shall survive the expiration or earlier termination of this Lease.

11.4 RENTAL ABATEMENT INSURANCE

     The Landlord may elect to keep and maintain in full force and effect during the Lease Term, rental abatement insurance against abatement or loss of Rent in case of fire or other casualty, in an amount at least equal to the amount of the Rent payable by Tenant during the then current lease year as reasonably determined by Landlord. All premiums for such insurance shall be included in Operating Costs for the purposes of this Lease.

11.5 WAIVER OF SUBROGATION

     Insofar as and to the extent that the following provisions may be effective without invalidating or making it impossible to secure insurance coverage from responsible insurance companies doing business in The Commonwealth of Massachusetts (even though extra premium may result therefrom): Landlord and Tenant mutually agree that with respect to any loss which is covered by property insurance then being carried by them, the one carrying such insurance and suffering said loss releases the other of and from any and all claims with respect to such loss; and they further mutually agree that their insurance companies shall have no right of subrogation against the other on account thereof. In the event that an additional premium is payable by either party as a result of this provision, the other party shall reimburse the party paying such premium the amount of such extra premium. If, at the written request of one party, this release and non-subrogation provision is waived, then the obligation of reimbursement shall cease for such period of time as such waiver shall be effective, but nothing contained in this Section shall be deemed to modify or otherwise affect any releases elsewhere contained in this Lease.

33

ARTICLE XII
CASUALTY

12.1 DEFINITION OF “SUBSTANTIAL DAMAGE” AND “PARTIAL DAMAGE”

     The term “substantial damage”, as used herein, shall refer to damage which is of such a character that in Landlord’s reasonable, good faith determination the same cannot, in ordinary course, be expected to be repaired within 90 calendar days from the time that such repair work would commence. Any damage which is not “substantial damage” is “partial damage”.

12.2 PARTIAL DAMAGE

     If, during the Lease Term there shall be partial damage to the Building or the Premises by fire or casualty, and, in the case of damage outside the Premises, if such damage shall materially interfere with Tenant’s use of the Premises, then Landlord shall promptly proceed to restore the Premises and the Building (to the extent such damage materially interferes with Tenant’s use of the Premises) to substantially the condition in which the same were in immediately prior to the occurrence of such damage; provided, however, in no event shall Landlord be obligated to expend more than the insurance proceeds actually received by Landlord, plus the amount of any deductible carried by Landlord.

12.3 SUBSTANTIAL DAMAGE TO THE BUILDING

     If, during the Lease Term there shall be substantial damage to the Building by fire or casualty, then Landlord shall promptly restore the Premises if it has been affected thereby (and the Building to the extent reasonably necessary to permit Tenant to use the Premises), unless Landlord, within ninety (90) days after the occurrence of such damage, shall give notice to Tenant of Landlord’s election to terminate this Lease; provided, however, in no event shall Landlord be obligated to expend more than the insurance proceeds actually received by Landlord, plus the amount of any deductible carried by Landlord. Landlord shall have the right to make such election in the event of substantial damage to the Building whether or not such damage materially interferes with Tenant’s use of the Premises. If Landlord shall give such notice, then this Lease shall terminate as of the date of such notice with the same force and effect as if such date were the date originally established as the expiration date hereof.

12.4 ABATEMENT OF RENT

     If during the Lease Term the Building shall be damaged by fire or casualty and if such damage shall materially interfere with Tenant’s use of the Premises as contemplated by this Lease, a just proportion of the Base Rent payable by Tenant hereunder shall abate proportionately for the period in which, by reason of such damage, there is such interference with Tenant’s use of the Premises, having regard to the extent to which Tenant may be required to discontinue Tenant’s use of the Premises, but such abatement or reduction shall end if and when Landlord shall have substantially restored the Premises or so much thereof as shall have been originally constructed by Landlord (exclusive of any of

34

Tenant’s fixtures, furnishings, equipment and the like or work performed therein by Tenant) to substantially the condition in which the Premises were prior to such damage.

12.5 MISCELLANEOUS

     In no event shall Landlord have any obligation to make any repairs or perform any restoration work under this Article XII if prevented from doing so by reason of any cause beyond its reasonable control, including, without limitation, the requirements of any applicable laws, codes, ordinances, rules, or regulations, the refusal of the holder of a mortgage or ground lease affecting the Property (or any part thereof) to make available to Landlord the net insurance proceeds attributable to such restoration, or the inadequacy of such proceeds to fund the full cost of such repairs or restoration. Without limiting the foregoing, reasonably promptly after Landlord ascertains the existence of any such cause, it shall elect to either terminate this Lease or waive such condition to its restoration obligations and proceed to restore the Premises as otherwise provided herein. Further, Landlord shall not be obligated to make any repairs or perform any restoration work to any alterations, additions, or improvements to the Premises performed by or for the benefit of Tenant (all of which Tenant shall repair and restore), or to any fixtures in or portions of the Premises or the Building which were constructed or installed by or for some party other than Landlord or which are not the property of Landlord.

ARTICLE XIII
EMINENT DOMAIN

13.1 RIGHTS OF TERMINATION FOR TAKING

     If the Premises, or such portion thereof as to render the balance (if reconstructed to the maximum extent practicable in the circumstances) physically unsuitable for Tenant’s purposes, shall be taken (including a temporary taking in excess of 360 days) by condemnation or right of eminent domain or sold in lieu of condemnation, Landlord or Tenant may elect to terminate this Lease by giving notice to the other of such election not later than thirty (30) days after Tenant has been deprived of possession of the Premises.

     Further, if so much of the Building (which may, but need not include, the Premises) or the Lot shall be so taken, condemned or sold or shall receive any direct or consequential damage by reason of anything done pursuant to public or quasi-public authority to the extent that continued operation of the same would, in Landlord’s opinion, be uneconomical, Landlord may elect to terminate this Lease by giving notice to Tenant of such election not later than thirty (30) days after the effective date of such taking.

     Should any part of the Premises be so taken or condemned or receive such damage and should this Lease be not terminated in accordance with the foregoing provisions, Landlord shall promptly after the determination of Landlord’s award on account thereof, expend so much as may be necessary of the net amount which may be awarded to Landlord in such condemnation proceedings in restoring the Premises to an architectural unit that is reasonably suitable to the uses of Tenant permitted hereunder. Should the net amount so awarded to Landlord be insufficient to cover the cost of so restoring the Premises, in the reasonable estimate of Landlord, Landlord may, but shall have no

35

obligation to, supply the amount of such insufficiency and restore the Premises to such an architectural unit, with all reasonable diligence, or Landlord may terminate this Lease by giving notice to Tenant within a reasonable time after Landlord has determined the estimated cost of such restoration.

13.2 PAYMENT OF AWARD

     The Landlord shall have and hereby reserves and excepts, and Tenant hereby grants and assigns to Landlord, all rights to recover for damages to the Building and the Lot and the leasehold interest hereby created, and to compensation accrued or hereafter to accrue by reason of such taking or damage, as aforesaid. The Tenant covenants to deliver such further assignments and assurances thereof as Landlord may from time to time request. Nothing contained herein shall be construed to prevent Tenant from prosecuting in any condemnation proceedings a claim for the value of any of Tenant’s trade fixtures installed in the Premises by Tenant entirely at Tenant’s expense and for relocation expenses, provided that such action shall not affect the amount of compensation otherwise recoverable hereunder by Landlord from the taking authority.

13.3 ABATEMENT OF RENT

     In the event of any such taking of the Premises, if and to the extent Tenant is deprived of possession of the Premises, the Base Rent or a fair and just proportion thereof, according to the nature and extent of the damage sustained, shall be suspended or abated, as appropriate and equitable in the circumstances.

13.4 MISCELLANEOUS

     In no event shall Landlord have any obligation to make any repairs under this Article XIII if prevented from doing so by reason of any cause beyond its reasonable control, including, without limitation, requirements of any applicable laws, codes, ordinances, rules, or regulations or requirements of any mortgagee. Further, Landlord shall not be obligated to make any repairs to any portions of the Premises or the Building which were constructed or installed by or for some party other than Landlord or which are not the property of Landlord and Tenant shall be obligated to perform any repairs on and restorations to any alterations, additions, or improvements to the Premises performed by or for the benefit of Tenant.

ARTICLE XIV
DEFAULT

14.1 TENANT’S DEFAULT

     (a) If at any time any one or more of the following events (herein referred to as a “Default of Tenant”) shall occur:

          (1) Tenant shall fail to make payment of rent or any other monetary amount due under this Lease within five (5) days after Landlord has sent to Tenant notice of such default.

36

               However, if (A) Landlord shall have sent to Tenant a notice of such default, even though the same shall have been cured and this Lease not terminated; and (B) during one (1) year period after notice of such default has been sent by Landlord to Tenant, Tenant thereafter shall default in any monetary payment, the same shall be deemed to be a Default of Tenant upon Landlord giving Tenant written notice thereof, without the five (5) day grace period set forth above; or

          (2) Tenant shall fail to perform or observe any other covenant or provision herein contained on Tenant’s part to be performed or observed and Tenant shall fail to remedy the same within thirty (30) days after notice to Tenant specifying such neglect or failure, or, if such failure is of such a nature that Tenant cannot reasonably remedy the same within such thirty (30) day period, Tenant shall fail to commence promptly to remedy the same and diligently to prosecute such remedy to completion within not more than sixty (60) days after notice to Tenant; or

          (3) except as otherwise provided by applicable law, if the estate hereby created shall be taken on execution or by other process of law, or if Tenant shall be judicially declared bankrupt or insolvent according to law, or if any assignment shall be made of the property of Tenant for the benefit of creditors, or if a receiver, guardian, conservator, trustee in involuntary bankruptcy or other similar officer shall be appointed to take charge of all or any substantial part of Tenant’s property by a court of competent jurisdiction, or if a petition shall be filed for the reorganization of Tenant under any provisions of law now or hereafter enacted, and such proceeding is not dismissed within sixty (60) days after it is begun, or if Tenant shall file a petition for such reorganization, or for arrangements under any provisions of such laws providing a plan for a debtor to settle, satisfy, or extend the time for the payment of debts; or

          (4) Tenant shall vacate or abandon the Premises,

then, in any such case, Landlord may, in addition to any remedies otherwise available to Landlord, immediately or at any time thereafter, and without demand or notice, enter into and upon the Premises or any part thereof in the name of the whole and repossess the same as of Landlord’s former estate, and expel Tenant and those claiming by, through or under it and remove its or their effects (forcibly if necessary) without being deemed guilty of any manner of trespass, and without prejudice to any remedies which might otherwise be used for arrears of rent or preceding breach of covenant, and/or Landlord may terminate this Lease by notice to Tenant and this Lease shall come to an end on the date of such notice as fully and completely as if such date were on the date herein originally fixed for the expiration of the term of this Lease and Tenant will then quit and surrender the Premises to Landlord, but Tenant shall remain liable as herein provided. To the extent permitted by law, Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws (including M.G.L. c.186, §11), in the event of Tenant being evicted or dispossessed, or in the event of Landlord obtaining possession of the Premises, by reason of the violation by Tenant of any of the covenants and conditions of this Lease. In the event of any such termination, entry or re-entry, Landlord shall have the right to remove and store Tenant’s property and that of persons claiming by, through or under Tenant at the sole risk and expense of Tenant and, if Landlord so elects, (x) to sell such

37

property at public auction or private sale and apply the net proceeds to the payment of all sums due to Landlord from Tenant and pay the balance, if any, to Tenant, or (y) to dispose of such property in any manner in which Landlord shall elect, Tenant hereby agreeing to the fullest extent permitted by law that it shall have no right, title or interest in any property remaining in the Premises after such termination, entry or re-entry.

     (b) Tenant covenants and agrees, notwithstanding any termination of this Lease as aforesaid or any entry or re-entry by Landlord, whether by summary proceedings, termination, or otherwise, to pay and be liable for on the days originally fixed herein for the payment thereof, amounts equal to the several installments of Rent and other charges reserved as they would become due under the terms of this Lease if this Lease had not been terminated or if Landlord had not entered or re-entered, as aforesaid, and whether the Premises be relet or remain vacant, in whole or in part, or for a period less than the remainder of the Term, or for the whole thereof; but in the event the Premises be relet by Landlord, Tenant shall be entitled to a credit in the net amount of rent received by Landlord in reletting, after deduction of all expenses incurred in reletting the Premises (including, without limitation, remodeling costs, brokerage fees, attorneys’ fees and the like), and in collecting the rent in connection therewith. As an alternative, at the election of Landlord, Tenant will upon such termination pay to Landlord, as damages, such a sum as at the time of such termination represents the amount of the excess, if any, of the then value of the total Rent and other benefits which would have accrued to Landlord under this Lease for the remainder of the Lease Term if the lease terms had been fully complied with by Tenant over and above the then cash rental value (in advance) of the Premises for what would be the then unexpired Lease Term if the same remained in effect. For purposes of this Article, if Landlord elects to require Tenant to pay damages in accordance with the immediately preceding sentence, the total amount due shall be computed by assuming that Tenant’s Proportionate Share of Taxes and Tenant’s Proportionate Share of Operating Costs would be, for the balance of such unexpired term, the amount thereof respectively for the tax year and lease year, respectively, in which such termination, entry or re-entry shall occur.

     (c) In case of any Default of Tenant, re-entry, entry, expiration and dispossession by summary proceedings or otherwise, Landlord may (i) re-let the Premises or any part or parts thereof, either in the name of Landlord or otherwise, for a term or terms which may at Landlord’s option be equal to or less than or exceed the period which would otherwise have constituted the balance of the Lease Term and may grant concessions or free rent to the extent that Landlord considers advisable or necessary to re-let the Premises and (ii) make such alterations, repairs and decorations in the Premises as Landlord, in its sole judgment, considers advisable or necessary for the purpose of reletting the Premises; and no action by Landlord in accordance with the foregoing shall operate or be construed to release Tenant from liability hereunder as aforesaid. It is specifically understood and agreed that Landlord shall be entitled to take into account in connection with any reletting of the Premises all relevant factors which would be taken into account by a sophisticated developer in securing a replacement tenant for the Premises, such as, but not limited to, the first class quality of the Building and the financial responsibility of any such replacement tenant. Landlord shall in no event be liable in any way whatsoever for failure to re-let the Premises, or, in the event that the Premises are re-let, for failure to

38

collect the rent under such re-letting, and Tenant hereby waives, to the extent permitted by applicable law, any obligation Landlord may have to mitigate Tenant’s damages. Landlord agrees to list the Premises with a broker in the event of a termination, entry or re-entry under this ARTICLE XIV, provided that Landlord’s obligation to list the Premises as provided herein is independent of Tenant’s obligations under this ARTICLE XIV and shall not be construed to entitle Tenant to set-off against any amounts payable by Tenant hereunder in the event of a breach or alleged breach by Landlord of such obligation. In no event shall Landlord be obligated to give priority to the re-letting of the Premises over any other Premises in the Building or any other building owned by Landlord.

     (d) If there is at any time a guarantor or assignee of this Lease or any interest of Tenant herein or any sublessee, franchisee, concessionee, or licensee of all or any portion of the Premises, the happening of any of the events described in paragraph (a)(iii) of this Section with respect to such guarantor, assignee, sublessee, franchisee, concessionee, or licensee shall constitute a Default of Tenant hereunder.

     (e) The specified remedies to which Landlord may resort hereunder are not intended to be exclusive of any remedies or means of redress to which Landlord may, at any time, be entitled lawfully and Landlord may invoke any remedy (including the remedy of specific performance) allowed at law or in equity as if specific remedies were not herein provided for.

     (f) All costs and expenses incurred by or on behalf of Landlord (including, without limitation, attorneys’ fees and expenses) in enforcing its rights hereunder or occasioned by any Default of Tenant shall be paid by Tenant.

     (g) Upon any Default of Tenant, or the expiration or termination of this Lease, Landlord shall have the right of summary process under Massachusetts General Laws c.239, or other applicable statutes, and such other rights to recover possession as permitted by law. Tenant and Landlord each hereby waives any and all rights under the laws of any state to the right, if any, to trial by jury.

          Nothing contained in this Lease shall limit or prejudice the right of Landlord to prove for and obtain in proceedings for bankruptcy, insolvency, or like proceedings by reason of the termination of this Lease, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, the damages are to be proved, whether or not the amount be greater than, equal to, or less than the amount of the loss or damages referred to above.

14.2 LANDLORD’S DEFAULT

     Landlord shall in no event be in default in the performance of any of Landlord’s obligations hereunder unless Landlord shall have failed to perform such obligations within thirty (30) days (or such additional time as is reasonably required to correct any such default) after notice by Tenant to Landlord properly specifying wherein Landlord has failed to perform any such obligation. Without limitation, in no event shall Tenant have the right to terminate or cancel this Lease or to withhold Rent (except as expressly provided in Section 9.6 hereof) or to set-off or deduct any claim or damages against Rent

39

as a result of any default by Landlord or breach by Landlord of its covenants or any warranties or promises hereunder.

ARTICLE XV
THE LANDLORD’S ACCESS TO PREMISES

15.1 THE LANDLORD’S RIGHT OF ACCESS

     Landlord and its agents, contractors, and employees shall have the right to enter the Premises at all reasonable hours upon reasonable advance notice (except that no notice shall be required and Landlord may enter at any time in case of emergency) for the purpose of inspecting or of making repairs or alterations, to the Premises or the Building or additions to the Building, and Landlord shall also have the right to make access available at all reasonable hours to prospective or existing mortgagees or purchasers of any part of the Premises or the Building. To assure access by Landlord to the Premises, Tenant shall provide Landlord with duplicate copies of all keys used by Tenant in providing access to the Premises.

     For a period commencing twelve (12) months prior to the expiration of the Lease Term, Landlord may have reasonable access to the Premises at all reasonable hours for the purpose of exhibiting the same to prospective tenants.

ARTICLE XVI
RIGHTS OF MORTGAGEES

16.1 SUBORDINATION AND ATTORNMENT

     (a) If any holder of a mortgage or holder of a ground lease of property which includes the Premises, executed and recorded subsequent to the date of this Lease, shall so elect, the interest of Tenant hereunder shall be subordinate to the rights of such holder; or

     (b) If any holder of a mortgage or holder of a ground lease of property 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 and 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 as to Subsection (a) above shall be exercised by notice to Tenant, in the same fashion as notices under this Lease are given by Landlord to Tenant, and, if such notice is given, such subordination shall be effective as to all advances then or thereafter made by such holder under such mortgage or in connection with such ground lease. Any election as to Subsection (b) above 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 or ground lease to this Lease.

40

     (c) Forthwith upon the request of Landlord, the holder of any mortgage or deed of trust affecting the Premises, or the lessor under any ground lease affecting the Premises, Tenant shall execute and deliver to such party an attornment agreement providing that Tenant shall attorn to such holder or lessor in the event of a foreclosure of such mortgage or deed of trust or transfer in lieu thereof or a termination of such ground lease and incorporating such other terms and conditions as such party may reasonably require, provided that such agreement includes an agreement by such other party to recognize the rights of Tenant under this Lease. Irrespective of whether any such attornment agreement has been executed, in the event any proceedings are brought for the foreclosure of, or in the event of exercise of the power of sale under, any mortgage or deed of trust made by Landlord, its successors or assigns, encumbering the Premises, or any part thereof, or in the event of termination of any ground lease, Tenant shall, if so requested, attorn to the purchaser or ground lessor upon such foreclosure, sale or termination or upon any grant of a deed in lieu of foreclosure and recognize such purchaser or ground lessor as Landlord under this Lease.

     (d) Tenant agrees on request of Landlord to execute and deliver from time to time any instrument that Landlord may reasonably deem necessary to implement the provisions of this Section 16.1.

16.2 NOTICE TO MORTGAGEE AND GROUND LESSOR

     (a) After receiving notice from any person, firm, or other entity (or from Landlord on behalf of any such person, etc.) that it holds a mortgage which includes the Premises as part of the mortgaged premises, or that it is the ground lessor under a lease with Landlord as ground lessee which includes the Premises as a part of the premises demised thereunder, no notice from Tenant to Landlord shall be effective unless and until a copy of the same is given to such holder or ground lessor, and the curing of any of Landlord’s defaults by such holder or ground lessor shall be treated as performance by Landlord. Accordingly, no act or failure to act on the part of Landlord which would entitle Tenant under the terms of this Lease, or by law, to be relieved of Tenant’s obligations hereunder shall have such an effect unless and until Tenant shall have first given written notice to such holder or ground lessor, if any, specifying the act or failure to act on the part of Landlord which could or would give basis to Tenant’s rights and such holder or ground lessor, after receipt of such notice, has failed or refused to correct or cure the condition complained of within a reasonable time thereafter, but nothing contained in this Section 16 or elsewhere in this Lease shall be deemed to impose any obligation on any such holder or ground lessor to correct or cure any such condition.

16.3 ASSIGNMENT OF RENTS

     With reference to any assignment by Landlord of Landlord’s interest in this Lease, or the rents payable hereunder, conditional in nature or otherwise, which assignment is made to the holder of a mortgage or ground lease on property which includes the Premises, Tenant agrees:

     (a) that the execution thereof by Landlord, and the acceptance thereof by the holder of such mortgage, or the ground lessor, shall never be treated as an assumption by

41

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.

ARTICLE XVII
MISCELLANEOUS PROVISIONS

17.1 CAPTIONS

     The captions throughout this Lease are for convenience or reference only and shall in no way be held or deemed to define, limit, explain, describe, modify, or add to the interpretation, construction, or meaning of any provision of this Lease.

17.2 BIND AND INURE

     Except as herein otherwise expressly provided, the obligations of this Lease shall run with the land, and this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. The reference herein to successors and assigns of Tenant is not intended to constitute a consent to assignment by Tenant, but has reference only to those instances in which Landlord may later give consent to a particular assignment as required by the provisions of Article VII. Neither the assignment by Landlord of its interest in this Lease as security to a lender holding a mortgage on the Building, nor the acceptance thereof by such lender, nor the exercise by such lender of any of its rights pursuant to said assignment shall be deemed in any way an assumption by such lender of any of the obligations of Landlord hereunder unless such lender shall specifically otherwise elect in writing or unless such lender shall have completed foreclosure proceedings under said mortgage. Whenever the Premises are owned by a trustee or trustees, the obligations of Landlord shall be binding upon Landlord’s trust estate, but not upon any trustee, beneficiary or shareholder of the trust individually.

17.3 NO WAIVER

     The failure of Landlord or of Tenant to seek redress for violation of, or to insist upon the strict performance of any covenant or condition of this Lease shall not be deemed to be a waiver of such violation or to prevent a subsequent act, which would originally have constituted a violation, from having all the force and effect of an original violation. The receipt by Landlord of Rent or additional rent with knowledge of the breach of any covenant of this Lease shall not be deemed to be a waiver of such breach by Landlord unless such waiver be in writing signed by Landlord. No consent or waiver, express or implied, by Landlord or Tenant to or of any breach of any agreement or duty shall be construed as a waiver or consent to or of any other breach of the same or any other agreement or duty.

42

17.4 NO ACCORD AND SATISFACTION

     No acceptance by Landlord of a lesser sum than the entire Rent then due shall be deemed to be other than on account of the earliest installment of such Rent due, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as Rent or any part thereof be deemed to be an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such installment or pursue any other remedy in this Lease or at law or in equity provided.

17.5 CUMULATIVE REMEDIES

     The specific remedies to which Landlord may resort under the terms of this Lease are cumulative and not intended to be exclusive of any other remedies or means of redress to which it may be lawfully entitled in case of any breach or threatened breach by Tenant of any provisions of this Lease. In addition to the other remedies provided in this Lease, Landlord shall be entitled to the restraint by injunction of the violation or attempted or threatened violation of any of the covenants, conditions or provisions of this Lease or to a decree compelling specific performance of any such covenants, conditions or provisions. Except as otherwise set forth herein, any obligations of Tenant as set forth herein (including, without limitation, rental and other monetary obligations, repair obligations and obligations to indemnify Landlord) shall survive the expiration or earlier termination of this Lease, and Tenant shall immediately reimburse Landlord for any expense incurred by Landlord in curing Tenant’s failure to satisfy any such obligation (notwithstanding the fact that such cure might be effected by Landlord following the expiration or earlier termination of this Lease).

17.6 PARTIAL INVALIDITY

     If any term or provision of this Lease or any portion thereof or the application thereof to any person or circumstances shall, to any extent, be invalid or unenforceable, then the remainder of this Lease and of such term or provision and the application of this Lease and of such term and provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term of this Lease shall be valid and enforceable to the fullest extent permitted by law.

17.7 LANDLORD’S RIGHT TO CURE

     If Tenant shall at any time default in the performance of any obligation under this Lease, Landlord shall have the right, but not the obligation, to enter upon the Premises and/or 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 any such obligations, Landlord may make any payment of money or perform any other act. All sums so paid by Landlord (together with interest at the Lease Interest Rate) and all necessary incidental costs and expenses in connection with the performance of any such act by Landlord, shall be deemed to be additional rent under this Lease and shall be payable to Landlord immediately on demand. Landlord may exercise

43

the foregoing rights without waiving any other of its rights or releasing Tenant from any of its obligations under this Lease.

17.8 ESTOPPEL CERTIFICATES

     Tenant agrees on the Commencement Date and from time to time thereafter, within not more than fifteen (15) days’ after receipt of written request by Landlord, to execute, acknowledge and deliver to Landlord a statement in writing, certifying that this Lease is unmodified and in full force and effect, that Tenant has no defenses, offsets or counterclaims against its obligations to pay rent and other charges required under this Lease and to perform its other covenants under this Lease and that there are no uncured defaults of Landlord or Tenant under this Lease (or, if there have been any modifications, that this Lease is in full force and effect, as modified, and stating the modifications, and, if there are any defenses, offsets, counterclaims or defaults, setting them forth in reasonable detail), and the dates to which the Rent and other charges have been paid. Any such statement delivered pursuant to this Section 17.8 may be relied upon by any prospective purchaser or mortgagee of the property which includes the Premises or any prospective assignee of any such mortgagee.

17.9 BROKERAGE

     Each party hereto warrants and represents that it has dealt with no real estate broker or agent other than the Broker(s) identified in Section 1.2 in connection with this transaction and agrees to defend, indemnify and save the other party harmless from and against any and all claims for commissions or fees arising out of this Lease which, as to the respective parties, are inconsistent with such party’s warranties and representations. Landlord shall be responsible for any commissions or fees owed to the Broker in connection with this transaction in accordance with a separate agreement between Broker and Landlord.

17.10 ENTIRE AGREEMENT

     All negotiations, considerations, representations, and understandings between Landlord and Tenant are incorporated herein and this Lease expressly supersedes any proposals or other written documents relating hereto. This Lease may be modified or altered only by written agreement between Landlord and Tenant, and no act or omission of any employee or agent of Landlord shall alter, change, or modify any of the provisions hereof.

17.11 HOLDOVER

     Tenant shall have no right to hold over after expiration of the Term. Any holding over by Tenant after the expiration of the Term of this Lease shall be treated as a daily tenancy at sufferance at a rate equal to the greater of the then fair rental value of the Premises or two (2) times the sum of (i) Fixed Rent and (ii) Escalation Charges in effect on the expiration date. Tenant shall also pay to Landlord all damages, direct and/or indirect (including any loss of a tenant or rental income), sustained by reason of any such holding

44

over. Otherwise, such holding over shall be on the terms and conditions set forth in this Lease as far as applicable.

17.12 COUNTERPARTS

     This Lease is executed in any number of counterparts, each copy of which is identical, and any one of which shall be deemed to be complete in itself and may be introduced in evidence or used for any purpose without the production of the other copies.

17.13 CONSTRUCTION AND GRAMMATICAL USAGE

     This Lease shall be governed, construed and interpreted in accordance with the laws of The Commonwealth of Massachusetts, and Tenant agrees to submit to the personal jurisdiction of any court (federal or state) in said Commonwealth for any dispute, claim or proceeding arising out of or relating to this Lease. In construing this Lease, feminine or neuter pronouns shall be substituted for those masculine in form and vice versa, and plural terms shall be substituted for singular and singular for plural in any place in which the context so admits or requires. The use of the word “including” shall mean “including, without limitation.” If there be more than one party tenant, the covenants of Tenant shall be the joint and several obligations of each such party and, if Tenant is a partnership, the covenants of Tenant shall be the joint and several obligations of each of the partners and the obligations of the firm.

17.14 WHEN LEASE BECOMES BINDING

     Employees or agents of Landlord have no authority to make or agree to make a lease or any other agreement or undertaking in connection herewith. The submission of this document for examination and negotiation does not constitute an offer to lease, or a reservation of, or option for, the Premises, and this document shall become effective and binding only upon the execution and delivery hereof by both Landlord and Tenant.

17.15 SECURITY DEPOSIT

     Simultaneously with the execution and delivery of this Lease, Tenant shall deliver the Security Deposit to Landlord, either in cash or in the form of a letter of credit. Tenant shall provide additional cash or a replacement letter of credit (or amendment to the letter of credit), as applicable, in order to increase the security deposit each year during the Term based on the increases in Annual Base Rent, except as expressly provided below with respect to a reduction in the Security Deposit.

     If any portion of the Security Deposit is a letter of credit, the applicable letter of credit shall be an irrevocable standby letter of credit (the “Letter of Credit”) in the amount of the Security Deposit issued in the form attached hereto as Exhibit L/C by a bank satisfactory to Landlord (the “Bank”). Landlord shall hold the Letter of Credit as security for the performance by Tenant of all obligations on the part of Tenant to be kept and performed under this Lease. The Security Deposit may not be deemed by Tenant to constitute rent for any month. Landlord shall have the right, from time to time without prejudice to any other remedy Landlord may have on account thereof, to draw upon the

45

Letter of Credit and apply such funds to Landlord’s damages arising from any Default of Tenant, in which event Tenant shall immediately upon request by Landlord restore the balance of the Letter of Credit to the amount required hereunder. Tenant shall not have the right to call upon Landlord to apply all or any part of the Security Deposit to cure any default or fulfill any obligation of Tenant, but such use shall be solely in the discretion of Landlord. Tenant shall maintain the Letter of Credit, or a substitute Letter of Credit from the Bank (or another bank approved by Landlord and conforming to the requirements of this Section 17.15), in accordance with the terms hereof, in full force and effect at all times through the Term and for fifteen (15) days thereafter. Notwithstanding anything to the contrary herein, Landlord shall have no right to use or apply any portion of the Letter of Credit unless a Default of Tenant has occurred and is continuing or unless Landlord is entitled to do so under the following paragraph.

     If the Letter of Credit will expire, Tenant shall replace the Letter of Credit deposited with Landlord by providing Landlord with a substitute Letter of Credit at least thirty (30) days prior (each such 30th day prior being referred to herein as a “Change Date”) to the expiration date of the then effective Letter of Credit in the amount required hereunder. Any failure by Tenant to provide such a substitute Letter of Credit shall be a default under this Lease for which (without limiting the generality of any of the provisions of Section 14.1 there shall be no grace period, and shall entitle Landlord to draw on all funds available under the Letter of Credit then being held by Landlord as amounts due hereunder and hold the same as security for Tenant’s performance of its obligations under this Lease.

     If Landlord determines that the bank issuing the Letter of Credit currently held by Landlord no longer has sufficient creditworthiness, Landlord may require that Tenant, within thirty (30) days of receipt of notice thereof, obtain, at Tenant’s sole cost and expense, a substitute Letter of Credit from another bank reasonably approved by Landlord and satisfying the requirements of this Lease.

     Within fifteen (15) days following the expiration or earlier termination of the Term, Landlord shall return the Security Deposit or so much thereof as shall not have theretofore been applied in accordance with the terms of this Section or drawn upon by Landlord and applied by Landlord to cure any default of Tenant hereunder. Landlord shall have no obligation to pay interest on the Letter of Credit or any proceeds therefrom. If Landlord obtains possession of any proceeds from the Letter of Credit, prior to applying the same to Tenant’s obligations in accordance with the terms of this Section, Landlord shall hold the proceeds in a segregated account containing no funds other than the proceeds of the Letter of Credit, which account shall be in the name of, and controlled solely by, Landlord. No party other than Landlord, its successors and assigns and Tenant shall have any rights to such proceeds as a third-party beneficiary.

     If Landlord conveys Landlord’s interest under this Lease, the Letter of Credit may be assigned or negotiated by Landlord to Landlord’s grantee, and if so assigned or negotiated, provided Landlord gives Tenant notice of the name of such grantee, Tenant agrees to look solely to such grantee for proper application of the Letter of Credit in accordance with the terms of this Section and the return thereof in accordance herewith.

46

Upon such delivery, Tenant hereby releases the Landlord named herein of any and all liability with respect to the Letter of Credit, the application of any proceeds thereof and its return, and Tenant agrees to look solely to such grantee. This provision shall also apply to subsequent grantees. Neither the holder of a mortgage nor the lessor in a ground lease of property which includes the Premises shall ever be responsible to Tenant for the return or application of Security Deposit, whether or not it succeeds to the position of Landlord hereunder, unless the Security Deposit shall have been received in hand by such holder or ground lessor.

     If any portion of the Security Deposit shall be in the form of cash (the “Cash Security Deposit”), then the following provisions shall be applicable. At any time during the Term, Tenant shall have the right to substitute a Cash Security Deposit for the Letter of Credit. The Cash Security Deposit will be held by Landlord in the amount of the Security Deposit as security for the performance by Tenant of all obligations on the part of Tenant to be kept and performed under this Lease. The Cash Security Deposit may not be deemed by Tenant to constitute rent for any month. Landlord shall have no obligation to pay interest on the Cash Security Deposit. Landlord shall hold the Cash Security Deposit in a segregated account containing no funds other than the Cash Security Deposit, which account shall be in the name of, and controlled solely by Landlord. No party other than Landlord, its successors and assigns and Tenant shall have any rights to the Cash Security Deposit as a third-party beneficiary. The then remaining portion of the Cash Security Deposit shall be returned to Tenant within fifteen (15) days after expiration of the Term, provided there then exists no breach of any undertaking of Tenant hereunder. Tenant shall not have the right to call upon Landlord to apply all or any part of the Cash Security Deposit to cure any default or fulfill any obligation of Tenant, but such use shall be solely in the discretion of Landlord. In the event that Landlord applies any portion or all of the Cash Security Deposit to Landlord’s damages arising from any default on the part of Tenant hereunder, Tenant shall immediately upon request by Landlord restore the balance of the Cash Security Deposit to the amount required under this Lease. Notwithstanding anything to the contrary herein, Landlord shall have no right to use or apply any portion of the Cash Security Deposit unless a Default of Tenant has occurred and is continuing.

     Upon any conveyance by Landlord of its interest under this Lease, the Cash Security Deposit shall be delivered by Landlord to Landlord’s grantee. Upon any such delivery, provided Landlord gives Tenant notice of the name of such grantee, Tenant hereby releases Landlord herein named of any and all liability with respect to the Cash Security Deposit, its application and return, and Tenant agrees to look solely to such grantee or transferee. This provision shall also apply to subsequent grantees and transferees. Neither the holder of a mortgage nor the lessor in a ground lease of property which includes the Premises shall ever be responsible to Tenant for the return or application of Security Deposit, whether or not it succeeds to the position of Landlord hereunder, unless the Security Deposit shall have been received in hand by such holder or ground lessor.

     Except as set forth below, effective as of the first (1^st) day of the third Lease Year, the amount of the Security Deposit may at Tenant’s written request be reduced to two (2) months’ Monthly Base Rent based on the Annual Base Rent under the Lease at such time.

47

Notwithstanding the foregoing provisions of this paragraph providing such reduction in the Security Deposit, such reduction shall not be permitted if Tenant is in default under the Lease beyond any applicable notice and cure period at the time of such request.

17.16 TENANT’S FINANCIAL CONDITION.

     In the event Tenant ceases to be a reporting company under the Exchange Act of 1934 or ceases to regularly file complete quarterly (10-Q) and annual (10-K) reports with the Securities and Exchange Commission, then Landlord shall be entitled to request financial statements from Tenant pursuant to the following terms. Within ten (10) days after such request by Landlord from time to time, Tenant shall deliver to Landlord Tenant’s financial statements (which shall be audited if available and which shall be for the latest available year and in any event for a year ended not more than fifteen (15) months prior to Landlord’s request). Such financial statements shall be delivered to Landlord’s mortgagees and lenders and prospective mortgagees, lenders and purchasers. Tenant represents and warrants to Landlord that each such financial statement shall be true and accurate as of the date of such statement.

17.17 LANDLORD’S ENFORCEMENT EXPENSES

     Unless prohibited by applicable law, the Tenant agrees to pay to the Landlord the amount of all fees and expenses (including, without limitation, attorneys’ fees and costs) incurred by the Landlord arising out of or resulting from any act or omission by the Tenant with respect to this Lease or the Premises, including without limitation, any breach by the Tenant of its obligations hereunder, irrespective of whether Landlord resorts to litigation as a result thereof.

17.18 INTENTIONALLY DELETED.

17.19 NO SURRENDER

     The delivery of keys to any employee of Landlord or to Landlord’s agents or employees shall not operate as a termination of this Lease or a surrender of the Premises.

17.20 COVENANT OF QUIET ENJOYMENT

     Subject to the terms and provisions of this Lease and on payment of the Rent, and other sums due hereunder and compliance with all of the terms and provisions of this Lease, Tenant shall lawfully, peaceably, and quietly have, hold, occupy, and enjoy the Premises during the term hereof, without hindrance or ejection by Landlord or by any persons claiming under Landlord. The foregoing covenant of quiet enjoyment is in lieu of any other covenant, express or implied.

17.21 NO PERSONAL LIABILITY OF THE LANDLORD

     The Tenant agrees to look solely to Landlord’s then-equity interest in the Building and the Lot at the time owned, for recovery of any judgment from Landlord; it being specifically agreed that neither Landlord (whether Landlord be a manager, member,

48

individual, partnership, firm, corporation, limited liability company, trustee, fiduciary, or other entity) nor any partner, member, officer, trustee, manager, fiduciary, beneficiary, shareholder or director of Landlord, nor any trust of which any person holding Landlord’s interest is trustee nor any successor in interest to any of the foregoing shall ever be personally liable for any such judgment, or for the payment of any monetary obligation to Tenant. The covenants of Landlord contained in this Lease shall be binding upon Landlord and Landlord’s successors only with respect to breaches occurring during Landlord’s and Landlord’s successors’ respective periods of ownership of Landlord’s interest hereunder.

17.22 NOTICES

     Whenever, by the terms of this Lease, notice shall or may be given either to Landlord or to Tenant, such notice shall be in writing and shall be delivered by hand or sent by registered or certified mail, postage prepaid or by so-called “express” mail (such as Federal Express or U.S. Postal Service Express Mail):

     If intended for Landlord, addressed to at the address set forth in Section 1.2 with a copy to DLA Piper LLP (US), 33 Arch Street, 26th Floor, Boston, MA 02110, Attention: Barbara A. Trachtenberg, or to such other addresses as may from time to time hereafter be designated by Landlord by like notice.

     If intended for Tenant, addressed to Tenant at the address set forth on the first page of this Lease, with a copy to the Premises, or to such other address or addresses as may from time to time hereafter be designated by Tenant by like notice.

     All such notices shall be effective upon delivery, attempted delivery, or refusal, whichever occurs first, at the address or addresses of the intended recipient, as set forth above.

17.23 ANTI-TERRORISM REPRESENTATIONS

     Tenant represents and warrants to Landlord that: (a) Tenant is not, and shall not during the Term of this Lease become, a person or entity with whom Landlord is restricted from doing business under the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, H.R. 3162, Public Law 107-56 (commonly known as the “USA Patriot Act”) and Executive Order Number 13224 on Terrorism Financing, effective September 24, 2001 and regulations promulgated pursuant thereto, including, without limitation, persons and entities named on the Office of Foreign Asset Control Specially Designated Nationals and Blocked Persons List (collectively, “Prohibited Persons”); and (b) Tenant is not currently conducting any business or engaged in any transactions or dealings, or otherwise associated with, any Prohibited Persons in connection with the use or occupancy of the Premises; and (c) Tenant will not in the future during the Term of this Lease engage in any transactions or dealings, or be otherwise associated with, any Prohibited Persons in connection with the use or occupancy of the Premises; and (d) Tenant shall provide a written list of the names of the persons holding a direct ownership interest in the Tenant for purposes of compliance

49

with Presidential Executive Order 13224 (issued September 24, 2001). The provisions of this Section 17.23 shall survive the expiration or earlier termination of this Lease.

17.24 CONFIDENTIALITY

     Tenant agrees this Lease and the terms hereof, shall be treated as confidential and will not be disclosed to anyone in any fashion by Tenant, except to its affiliates, lenders, employees, attorneys, accountants, other professionals and agents, each of whom shall agree to keep this Lease and the terms hereof confidential, unless specifically agreed to by Landlord in writing. The provisions of this Section 17.24 shall survive the expiration or earlier termination of this Lease.

[Remainder of page is intentionally blank]

50

     IN WITNESS WHEREOF, the parties hereto have executed this instrument under seal as of the date set forth in Section 1.2, above.

LANDLORD: TWO FINANCIAL CENTER, LLC
By:	Lincoln ASB Two Financial, LLC, Its Sole Member
By:	Lincoln-Two Financial LLC, Its Managing Member
By:	Lincoln Non-Member Manager, Inc. Its Manager

By:	/s/ W. Frank Cofer
	Name:	W. Frank Cofer
	Title:	Senior Vice President

TENANT: THE MANAGEMENT NETWORK GROUP, INC.
By:	/s/ Don Klumb
	Name:	Don Klumb
	Title:	CFO

Signature Page to Lease

EX-10.2

Exhibit 10.2

DATED 30 September, 2010

(1)	EPO (NORMAN) LIMITED and EPO (NORMAN 2) LIMITED
(2)	CARTESIAN LIMITED

DEED OF VARIATION

of a lease of

8 Gate Street London WC2

Forsters LLP
31 Hill Street
London W1J 5LS
Tel: 020 7863 8333
Fax: 020 7863 8444
Email: Enquiries@Forsters.co.uk
Ref: MH/24626.353

TABLE OF CONTENTS

	Page No.
1. Definitions and Interpretation		1
2. Variations of the Lease		2
3. Tenant’s covenant		2
4. Applicable Law and Jurisdiction		2
5. Rights of Third Parties		2
THE SCHEDULE		3
Variations to the Lease		3

i

DEED OF VARIATION

DATE: 30 September, 2010

PARTIES:

(1) EPO (NORMAN) Limited (Company Registration Number 04676673) whose registered office is at Europa House 20 Esplanade Scarborough North Yorkshire YO11 2AQ and EPO (NORMAN 2) LIMITED (Company Registration Number 0469212) whose registered office is at Europa House 20 Esplanade Scarborough North Yorkshire YO11 2AQ (“the Landlord”)

(2) CARTESIAN LIMITED (Company Registration Number 03230513) whose registered office is at Descartes House 8 Gate Street London WC2A 3HP (“the Tenant”)

Recitals

A	This Deed is supplemental to the Lease by which the Premises were demised for the Term subject to the payment of the rents reserved by the Lease and the observance and performance of the tenant’s covenants and the conditions contained in it.
B	The reversion immediately expectant on the determination of the Term is registered at the Land Registry under Title Number LN201213 of which the Landlord is the registered proprietor and the unexpired residue of the Term remains vested in the Tenant.
C	The parties have agreed to vary the Lease on the terms set out in this Deed.

IT IS AGREED as follows:

1. Definitions and Interpretation

1.1 In this Deed unless the context otherwise requires the following words and expressions shall have the following meanings:

the Lease:	a lease of the Premises dated 23 November 2000 and made between Sun Life Assurance Company of Canada (UK) Limited (1) and the Tenant (2) and includes any variations thereto in any deeds and documents supplemental to the Lease whether or not they are expressed to be so;
the Premises:	the premises demised by and more particularly described in the Lease and known as 8 Gate Street London WC2;
the Term:	the term of years granted by the Lease and includes any continuation or extension of the Term and any holding over whether by statute, at common law or otherwise;

1.2 The expression “the Landlord” includes the person in whom the reversion immediately expectant on the determination of the Term is for the time being vested.

1.3 The expression “the Tenant” includes its successors in title.

1

1.4 Covenants made by or binding upon any party which for the time being comprises more than one person shall be deemed to be joint and several.

1.5 Nothing herein contained shall release or in any way lessen the liability of any person to the Landlord under the covenants and conditions contained in the Lease or constitute a waiver of any outstanding breach.

1.6 Nothing herein contained shall be deemed to permit any action not herein expressly permitted.

1.7 Any covenant by the Tenant not to do any act matter or thing shall be construed as including a covenant by the Tenant that such act matter or thing shall not be done.

1.8 Any reference to a specific statute or statutory provision includes references to any statutory modification extension or re-enactment of such statute or statutory provision and to any regulations orders bye-laws or other subordinate legislation made under such statute or statutory provisions from time to time.

1.9 Words importing one gender import any other gender words importing the singular import the plural and vice versa and any reference to a person includes a reference to a company authority board department or other body.

1.10 Headings are for ease of reference only and shall not affect the construction of this Deed.

2. Variations of the Lease

2.1 Variations made

From and including the date of this Deed, the Lease shall be read and construed as varied by the provisions set out in the Schedule.

2.2 Lease remains in force

The Lease shall remain fully effective as varied by this Deed.

3. Tenant’s covenant

The Tenant covenants to observe and perform the tenant’s covenants in the Lease as varied by this Deed.

4. Applicable Law and Jurisdiction

4.1 This Deed shall be governed by and construed in all respects in accordance with the laws of England and Wales.

4.2 Proceedings in connection with this Deed shall be subject (and the parties irrevocably submit) to the exclusive jurisdiction of the English and Welsh courts.

5. Rights of Third Parties

A person who is not a party to this Deed has no rights under the Contracts (Rights of Third Parties) Act 1999 in relation to it.

2

This document has been executed as a deed and is delivered and takes effect on the date stated at the beginning of it

THE SCHEDULE

Variations to the Lease

1. Deletion of existing clause

Clause 7.4 of the Lease shall be deleted.

2. Rent free periods

In respect of each of the inclusive periods 29 September 2010 to 28 January 2011, 29 September 2011 to 28 January 2012 and 29 September 2012 to 28 January 2013 the Rent as referred to and first payable under the Lease shall be a perppercorn (if demanded) but without prejudice to the Rent as referred to and first payable under the Lease at all other times.

EXECUTED as a deed by	)
EPO (NORMAN) LIMITED	)
acting by a director and its secretary/	)
two directors	)

Signature	/s/ Fraser Kennedy
	Fraser Kennedy
		Director
Signature	/s/ Marie Adlam
	Marie Adlam
		Director/Secretary

3

EXECUTED as a deed by	)
EPO (NORMAN 2) LIMITED	)
acting by a director and its secretary/	)
two directors	)

Signature	/s/ Fraser Kennedy
	Fraser Kennedy
		Director
Signature	/s/ Marie Adlam
	Marie Adlam
		Director/Secretary

EXECUTED as a deed by	)
CARTESIAN LIMITED	)
acting by a director and its secretary/	)
two directors	)

Signature	/s/ Micky K Woo
	Micky K Woo
		Director
Signature	/s/ Dermod Ranaghan
	Dermod Ranaghan
		Director/Secretary

4

EX-31

EXHIBIT 31

CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Richard P. Nespola, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Management Network Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

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.

Date: November 16, 2010

By:	/s/ Richard P. Nespola
	Chairman and Chief Executive Officer

I, Donald E. Klumb, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Management Network Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

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.

Date: November 16, 2010

By:	/s/ Donald E. Klumb
	Chief Financial Officer and Treasurer

EX-32

EXHIBIT 32

CERTIFICATIONS FURNISHED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Richard P. Nespola, Chairman and Chief Executive Officer of The Management Network Group, Inc., (the “Company”), certify that:

1. The Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended October 2, 2010 (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.

Date: November 16, 2010

By:	/s/ Richard P. Nespola
	Chairman and Chief Executive Officer

I, Donald E. Klumb, Chief Financial Officer and Treasurer of The Management Network Group, Inc., (the “Company”), certify that:

1. The Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended October 2, 2010 (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.

Date: November 16, 2010

By:	/s/ Donald E. Klumb
	Chief Financial Officer and Treasurer