-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UdRAi6svih5Fht11XojByfXKfKXlrUeq+8JEodE1TAJnVNZk3qXWhujp8Vez05Qu nT5sLBKthv8+HqYEB8EFYw== 0000910647-03-000236.txt : 20030620 0000910647-03-000236.hdr.sgml : 20030620 20030620142248 ACCESSION NUMBER: 0000910647-03-000236 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20030611 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20030620 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PARLEX CORP CENTRAL INDEX KEY: 0000724988 STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672] IRS NUMBER: 042464749 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-12942 FILM NUMBER: 03751605 BUSINESS ADDRESS: STREET 1: ONE PARLEX PLACE CITY: METHUEN STATE: MA ZIP: 01844 BUSINESS PHONE: 5086854341 8-K 1 parl-8k2.txt BODY OF FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) June 11, 2003 ----------------- PARLEX CORPORATION - ------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) Massachusetts - ------------------------------------------------------------------------------- (State or Other Jurisdiction of Incorporation) 0-12942 04-2464749 ------------------------ --------------------------------- (Commission File Number) (IRS Employer Identification No.) One Parlex Place, Methuen, Massachusetts 01844 - ------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (978) 685-4341 - ------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) Item 2. ACQUISITION OR DISPOSITION OF ASSETS ------------------------------------ On June 12, 2003, Parlex Corporation (the "Company") completed two sale-leaseback transactions relating to its worldwide headquarters and primary operating facility in Methuen, Massachusetts (the "Methuen Property"), and the headquarters and operating facility of its wholly-owned subsidiary, Poly-Flex Circuits, Inc., located in Cranston, Rhode Island (the "Cranston Property"). The Methuen Property was purchased by Taurus Methuen, LLC (the "Methuen Buyer") for a total maximum purchase price of $9,000,000. The purchase price was paid (i) with an initial payment, at closing, of $5,350,000, and (2) with a promissory note in the amount of $2,650,000. The promissory note is for a three (3) year term with a one (1) year extension at the sole option of the Methuen Buyer. Payments under the note are interest only until the maturity date, at which time the entire principal must be paid, provided there is no default under the related lease. Additionally, the purchase price shall increase on June 30, 2004, and each June 30th thereafter through and including June 30, 2009, by $200,000, up to a maximum aggregate of $1,000,000, if in the immediately preceding twelve (12) months the Company has met certain financial milestones. In addition, the Company is required to maintain an irrevocable standby letter of credit in the amount of $750,000 in favor of the Methuen Buyer to ensure performance under the related lease. The Cranston Property was purchased by Taurus Cranston, LLC (the "Cranston Buyer") for a total purchase price of $3,000,000. In addition, the Company is required to maintain an irrevocable standby letter of credit in the amount of $250,000 in favor of the Cranston Buyer to ensure performance under the related lease. The Methuen Buyer and Cranston Buyer are affiliated entities. The sole member of each of the Methuen Buyer and the Cranston Buyer is Taurus Cranston/Methuen Limited Partnership. The general partner of Taurus Cranston/Methuen Limited Partnership is Taurus New England XXIV Limited Partnership, whose general partner is Taurus Cranston/Methuen LLC. The Company's Board of Directors unanimously authorized the transactions primarily in order to reduce the indebtedness of the Company and improve cash flow. The information set forth above is qualified in its entirety by reference to (1) the Purchase and Sale Agreements for each of the properties, and the amendments thereto, copies of which are filed herewith as Exhibits 10.AA through 10.FF, and (2) the Leases for each of the properties, copies of which are filed herewith as Exhibits 10.GG and 10.HH. Item 5. OTHER EVENTS. ------------- On June 11, 2003, the Company refinanced its outstanding revolving loan indebtedness by entering into a revolving loan facility with Silicon Valley Bank ("SVB"). The new revolving loan facility replaced the Company's prior loan facility, and indebtedness under, the Company's Loan Agreement dated March 1, 2000, as subsequently amended, with Fleet Bank, which was due to expire on December 31, 2003. The proceeds of the sale-leaseback transaction described 2 in Item 2, above, were also used in connection with the repayment of the Fleet Bank loan facility. The new loan facility is for a revolving line of credit with a maximum credit limit of $10,000,000, and is secured by a lien on all of the Company's personal property. The facility is for a term of two years. In connection with the facility, the Company granted SVB a warrant to purchase up to 25,000 shares of the Company's Common Stock at an exercise price equal to the average trading price for the twenty (20) trading days preceding the closing of the transaction. The exercise price was therefore established at $6.885 per share. The exercise price is subject to adjustment for the issuance of dividends payable in shares, stock splits and other, similar corporate actions. In addition, the Company granted SVB certain "piggyback" registration rights in connection with the warrant. The information set forth above is qualified in its entirety by reference to (1) The Loan and Security Agreement, a copy of which is attached hereto as Exhibit 10.II, (2) the Warrant, a copy of which is filed herewith as Exhibit 4.A, and (3) the Registration Rights Agreement, a copy of which is filed herewith as Exhibit 4.B. Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS ------------------------------------------------------------------ (c) Exhibits. (4.A) Warrant, dated June 11, 2003, issued to Silicon Valley Bank. (4.B) Registration Rights Agreement, dated June 11, 2003, by and between Silicon Valley Bank and Parlex Corporation. 10.AA Purchase and Sale Agreement, dated May 8, 2003, by and between Taurus Methuen LLC, as buyer, and Parlex Corporation, as seller. 10.BB First Amendment to Purchase and Sale Agreement, dated May 23, 2003, by and between Taurus Methuen LLC, as buyer, and Parlex Corporation, as seller. 10.CC Second Amendment to Purchase and Sale Agreement, dated June 3, 2003, by and between Taurus Methuen LLC, as buyer, and Parlex Corporation, as seller. 10.DD Purchase and Sale Agreement, dated May 8, 2003, by and between Taurus Cranston LLC, as buyer, and Poly-Flex Circuits, Inc., as seller. 10.EE First Amendment to Purchase and Sale Agreement, dated May 23, 2003, by and between Taurus Cranston LLC, as buyer, and Poly-Flex Circuits, Inc., as seller. 10.FF Second Amendment to Purchase and Sale Agreement, dated June 3, 2003, by and between Taurus Cranston LLC, as buyer, and Poly-Flex Circuits, Inc., as seller. 3 10.GG Lease, dated June 12, 2003, by and between Taurus Methuen, LLC, as landlord, and Parlex Corporation, as tenant, for the premises located at One Parlex Place, Methuen, Massachusetts. 10.HH Lease, dated June 12, 2003, by and between Taurus Cranston, LLC, as landlord, and Poly-Flex Circuits, Inc., as tenant, for the premises located at 28 Kenney Drive, Cranston, Rhode Island. 10.II Loan and Security Agreement, dated June 11, 2003, by and among Silicon Valley Bank, as lender, and Parlex Corporation, Poly-Flex Circuits, Inc. and Parlex Dynaflex Corporation, as borrowers. 99.1 Press Release of Parlex Corporation dated June 16, 2003. 99.2 Corrected Press Release of Parlex Corporation dated June 19, 2003. 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 hereunto duly authorized. PARLEX CORPORATION (Registrant) By: /s/ Peter J. Murphy --------------------------- Peter J. Murphy President and Chief Executive Officer Dated: June 20, 2003 4 EX-4 3 park24a.txt EXHIBIT 4.A EXHIBIT 4.A THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT AND LAWS OR, SUBJECT TO SECTION 5.3 HEREOF, AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED. WARRANT TO PURCHASE STOCK Issuer: Parlex Corporation, a Massachusetts corporation Number of Shares: 25,000, subject to adjustment Class of Stock: Common Stock, $0.10 par value per share Exercise Price: $6.885, subject to adjustment Issue Date: June 11, 2003 Expiration Date: June 10, 2008 FOR THE AGREED UPON VALUE of $1.00, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, this Warrant is issued to SILICON VALLEY BANK (together with its successors and permitted assigns, "Holder") by Parlex Corporation, a Massachusetts corporation (the "Company"). Subject to the terms and conditions hereinafter set forth, the Holder is entitled upon surrender of this Warrant and the duly executed Notice of Exercise form annexed hereto as Appendix 1 ("Notice of Exercise"), at the principal office of the Company, One Parlex Place, Methuen, Massachusetts 01844 or such other office as the Company shall notify the Holder of in writing, to purchase from the Company up to Twenty-five Thousand (25,000) fully paid and non-assessable shares (the "Shares") of the Company's common stock, $0.10 par value per share ("Common Stock") at a purchase price per Share of $6.885 (the "Exercise Price"). This Warrant may be exercised in whole or in part at any time and from time to time until 5:00 PM, Eastern time, on the Expiration Date, and shall be void thereafter. Until such time as this Warrant is exercised in full or expires, the Exercise Price and the Shares are subject to adjustment from time to time as hereinafter provided. ARTICLE 1. EXERCISE. --------- 1.1 Method of Exercise. Holder may exercise this Warrant in whole or in part by delivering this Warrant along with a duly executed Notice of Exercise to the principal office of the Company. Unless Holder is exercising the conversion right set forth in Section 1.2, Holder shall also deliver to the Company a certified or cashier's check, or a wire transfer of immediately available funds, in an amount equal to the aggregate Exercise Price for the Shares being purchased. 1.2 Conversion Right. In lieu of exercising this Warrant as specified in Section 1.1, Holder may from time to time convert this Warrant, in whole or in part, into a number of Shares determined as follows: X = Y (A-B)/A where: X = the number of Shares to be issued to the Holder. Y = the number of Shares with respect to which this Warrant is being exercised. A = the Fair Market Value (as determined pursuant to Section 1.3 below) of one Share. B = the Exercise Price. 1.3 Fair Market Value. 1.3.1 If shares of Common Stock are traded on a nationally recognized securities exchange or over the counter market, the fair market value of one Share shall be the closing price of a share of Common Stock reported for the business day immediately preceding the date of Holder's Notice of Exercise to the Company. 1.3.2 If shares of Common Stock are not traded on a nationally recognized securities exchange or over the counter market, the Board of Directors of the Company shall determine the fair market value of a share of Common Stock in its reasonable good faith judgment. 1.4 Delivery of Certificate and New Warrant. Promptly after Holder exercises or converts this Warrant, the Company or its transfer agent shall deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised or converted and has not expired, a new Warrant representing the right to purchase the Shares not so acquired. 1.5 Replacement of Warrants. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor. 1.6 Assumption on Sale, Merger, or Consolidation of the Company. 1.6.1. "Acquisition". For the purpose of this Warrant, "Acquisition" means any sale, transfer, exclusive license, or other disposition of all or substantially all of the assets of the Company, or any acquisition, reorganization, consolidation or merger of the Company where the 2 holders of the Company's outstanding voting equity securities immediately prior to the transaction beneficially own less than a majority of the outstanding voting equity securities of the surviving or successor entity immediately following the transaction. 1.6.2. In connection with, and upon the closing of, any Acquisition (other than an Acquisition in which the consideration received by the Company's stockholders consists solely of cash), and as a condition precedent thereto, the successor or surviving entity shall assume the obligations of this Warrant, and this Warrant thereafter shall be exercisable for the same kind and amount of securities and other property as would be payable for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing. The Exercise Price shall be adjusted such that the product of (i) the Exercise Price in effect immediately prior to the closing of such Acquisition, and (ii) the number of Shares then issuable upon exercise of this Warrant, equals the product of (i) the number of shares or other securities or property for which this Warrant shall be exercisable immediately following the closing of such Acquisition, and (ii) the Exercise Price in effect immediately following the closing of such Acquisition, and the Exercise Price and number and class of Shares shall continue to be subject to adjustment from time to time in accordance with the provisions hereof. 1.7 Restrictions on Exercise. This Warrant may not be exercised if the issuance of the Shares upon such exercise would constitute a violation of any applicable federal or state securities laws or other applicable laws or regulations. As a condition to any exercise of this Warrant, Holder shall execute the subscription form annexed hereto. The Company covenants that it will take all steps within its power at all times to comply with all applicable federal and state securities laws and other laws and regulations. ARTICLE 2. ADJUSTMENTS TO THE SHARES. -------------------------- 2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a dividend on the outstanding shares of Common Stock, payable in Common Stock or other securities, or subdivides the outstanding Common Stock into a greater or lesser amount of Common Stock, then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without cost to Holder, the total number and kind of securities to which Holder would have been entitled had Holder owned the Shares of record as of the date the dividend or subdivision occurred. 2.2 Reclassification, Exchange or Substitution. Upon any reclassification, exchange, substitution, or other event that results in a change of the number and/or class of the securities issuable upon exercise or conversion of this Warrant, Holder shall be entitled to receive, upon exercise or conversion of this Warrant, the number and kind of securities and property that Holder would have received for the Shares if this Warrant had been exercised immediately before such reclassification, exchange, substitution, or other event. The Company or its successor shall promptly issue to Holder a new Warrant for such new securities or other property. The new Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 2 including, without limitation, adjustments to the Exercise 3 Price and to the number of securities or property issuable upon exercise of the new Warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, substitutions, or other events. 2.3 Adjustments for Combinations, Etc. If the outstanding shares of Common Stock are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Exercise Price shall be proportionately increased and the number of Shares shall be proportionately decreased. 2.4 No Impairment. The Company shall not, by amendment of its Articles of Organization or by-laws, or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out of all the provisions of this Article 2 and in taking all such action as may be necessary or appropriate to protect Holder's rights under this Article against impairment. 2.5 Fractional Shares. No fractional Shares shall be issuable upon exercise or conversion of the Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional Share interest arises upon any exercise or conversion of this Warrant, the Company shall eliminate such fractional Share interest by paying Holder an amount computed by multiplying such fractional interest by the Fair Market Value (determined in accordance with Section 1.3 above) of one Share. 2.6 Certificate as to Adjustments. Upon each adjustment of the Exercise Price, number of Shares or class of security for which this Warrant is exercisable, the Company at its expense shall promptly compute such adjustment, and furnish Holder with a certificate of its chief financial officer setting forth such adjustment and the facts upon which such adjustment is based. The Company shall, upon written request, furnish Holder a certificate setting forth the Exercise Price, number of Shares and class of security for which this Warrant is exercisable in effect upon the date thereof and the series of adjustments leading to such Exercise Price, number of Shares and class of security. ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY. --------------------------------------------- 3.1 Representations and Warranties. The Company hereby represents and warrants to the Holder as follows: (a) All Shares which may be issued upon the due exercise of this Warrant shall, upon issuance, be duly authorized, validly issued, fully paid and non-assessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws. 4 (b) The Company covenants that it shall at all times cause to be reserved and kept available out of its authorized and unissued shares such number of shares of its Common Stock and other securities as will be sufficient to permit the exercise in full of this Warrant and the conversion or exchange of such Common Stock into or for such other securities. 3.2 Notice of Certain Events. The Company shall provide Holder with copies of all proxy materials and other notices and communications to shareholders of the Company, in each case as and when such items are provided by the Company to its shareholders. 3.3 Registration Under Securities Act of 1933, as amended. The Shares issued and issuable hereunder shall have certain incidental or "piggyback" registration rights pursuant to, and as set forth in, that certain Registration Rights Agreement of even date herewith between Holder and the Company. The Company represents and warrants to Holder that the Company's foregoing grant of registration rights and its execution, delivery and performance of the aforementioned Registration Rights Agreement (a) have been duly authorized by all necessary corporate action of the Company's Board of Directors, (b) will not violate the Company's Articles of Organization or by-laws, each as amended, (c) will not violate or cause a breach or default (or an event which with the passage of time or the giving of notice or both, would constitute a breach or default) under any agreement, instrument, mortgage, deed of trust or other arrangement to which the Company is a party or by which it or any of its assets is subject or bound, and (d) do not require the approval, consent or waiver of or by any shareholder, registration rights holder or other third party which approval, consent or waiver has not been obtained as of the date of issuance of this Warrant. ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE HOLDER. --------------------------------------------- 4.1 Purchase for Own Account. This Warrant and the Shares to be acquired upon exercise hereof will be acquired for investment for Holder's account, not as nominee or agent, and not with a view to sale or distribution in violation of applicable federal and state securities laws; provided that, for regulatory reasons, Silicon Valley Bank will transfer this Warrant to its parent corporation, Silicon Valley Bancshares, promptly following issuance hereof. 4.2 Investment Experience. Holder understands that the purchase of this Warrant and the Shares covered hereby involves substantial risk. Holder (a) has experience as an investor in unregistered securities, (b) has sufficient knowledge and experience in financial and business affairs that it evaluate the risks and merits of its investment in this Warrant and the Shares, and (c) can bear the economic risk of such Holder's investment in this Warrant and the Shares. 4.3 Accredited Investor. Holder is an "accredited investor" as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended ("Regulation D"). ARTICLE 5. MISCELLANEOUS. -------------- 5 5.1 Intentionally Omitted. 5.2 Legends. This Warrant and the Shares shall be imprinted with a legend in substantially the following form: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT AND LAWS OR, SUBJECT TO SECTION 5.3 OF THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED BY THE CORPORATION TO SILICON VALLEY BANK DATED AS OF JUNE 11, 2003, AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. 5.3 Compliance with Securities Laws on Transfer. This Warrant and the Shares may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to Silicon Valley Bancshares or other affiliate of Holder who is an "accredited investor" as defined in Regulation D. 5.4 Transfer Procedure. Following its receipt of this executed Warrant, Silicon Valley Bank will transfer same in whole or in part to its parent corporation Silicon Valley Bancshares, and thereafter Holder and/or Silicon Valley Bancshares may, subject to Section 5.3 above, transfer all or part of this Warrant and/or the Shares at any time and from time to time by giving the Company notice of the portion of the Warrant and/or Shares being transferred setting forth the name, address and taxpayer identification number of the transferee and surrendering this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable); provided, that any transfer of less than all of this Warrant shall be of an amount of Shares equal to not less than twenty-five percent (25%) of the Shares originally issuable hereunder (or all Shares then-issuable hereunder, if less). 5.5 Notices. All notices and other communications from the Company to the Holder, or vice versa, shall be deemed delivered and effective when given personally, or mailed by first-class registered or certified mail, postage prepaid, or sent via reputable overnight courier service, fee prepaid, at such address as may have been furnished to the Company or the Holder, as the case may be, in writing by the Company or such holder from time to time, but in all cases, unless instructed in writing otherwise, the Company shall deliver a copy of all notices to Holder to Silicon Valley Bank, Treasury Department, 3003 Tasman Drive, HA-200, Santa Clara, California 95054. 6 5.6 Waiver. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. 5.7 Attorneys Fees. In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys' fees. 5.8 Governing Law. This Warrant shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts, without giving effect to its principles regarding conflicts of law. 5.9 No Rights as a Shareholder. Except as specifically provided in this Warrant, Holder shall have no rights as a shareholder of the Company in respect of the Shares issuable hereunder unless and until Holder exercises this Warrant as to all or any of such Shares. [REMAINDER OF PAGE LEFT BLANK INTENTIONALLY] 7 IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Stock to be executed as an instrument under seal by its duly authorized representative as of the date first above written. ATTEST: "COMPANY" PARLEX CORPORATION By: /s/ Jonathan R. Kosheff By: /s/ Peter J. Murphy ------------------------ -------------------- Name: Jonathan R. Kosheff Name: Peter J. Murphy Title: Chief Financial Officer Title: President 8 APPENDIX 1 ---------- NOTICE OF EXERCISE ------------------ 1. The undersigned hereby elects to purchase shares of the stock of pursuant to Section 1.1 of the attached Warrant, and tenders herewith payment of the Exercise Price of such shares in full. 1. The undersigned hereby elects to convert the attached Warrant into Shares in the manner specified in Section 1.2 of the attached Warrant. This conversion is exercised with respect to of shares of the Stock of . [Strike paragraph that does not apply.] 2. Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name as is specified below: - ----------------------------------- (Name) - ----------------------------------- - ----------------------------------- (Address) 3. The undersigned represents it is acquiring the shares solely for its own account and not as a nominee for any other party and not with a view toward the resale or distribution thereof except in compliance with applicable securities laws. ----------------------------------- (Signature) - ----------------------------------- (Date) EX-4 4 park24b.txt EXHIBIT 4.B EXHIBIT 4.B REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT is entered into as of June 11, 2003, by and between Silicon Valley Bank ("Purchaser") and Parlex Corporation, a Massachusetts corporation (the "Company"). RECITALS -------- A. Concurrently with the execution of this Agreement, Purchaser is acquiring from the Company a Warrant to Purchase Stock (the "Warrant") pursuant to which Purchaser has rights to acquire from the Company the Shares (as defined in the Warrant). B. By this Agreement, Purchaser and the Company desire to set forth the registration rights of the Shares as provided herein. NOW, THEREFORE, in consideration of the premises and the mutual promises, covenants and conditions hereinafter set forth, the parties hereto mutually agree as follows: 1. Registration Rights. The Company covenants and agrees as follows: 1.1 Definitions. For purposes of this Section 1: (a) The term "register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act of 1933, as amended, and the rules and regulations thereunder (the "Securities Act"), and the declaration or ordering of effectiveness of such registration statement or document; (b) The term "Registrable Securities" means (i) the Shares issued and issuable upon exercise or conversion of the Warrant, and (ii) any Common Stock or other securities of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the Shares. (c) The terms "Holder" or "Holders" means Purchaser and its qualifying transferees under subsection 1.8 hereof who hold Registrable Securities. (d) The term "SEC" means the United States Securities and Exchange Commission or any successor agency administrating the Securities Act. (e) The terms "Form S-1," "Form S-3" etc. shall mean those forms with such designations as are required by the SEC and any successor or replacement forms adopted by the SEC. 1.2 Company Registration. (a) Registration. If at any time or from time to time, the Company shall determine to register any of its securities, for its own account or the account of any of its shareholders, other than a registration on Form S-8 relating solely to employee stock option or purchase plans or on Form S-4 relating solely to an SEC Rule 145 transaction, or a registration on any registration form that does not permit secondary sales, the Company will: 1 (i) promptly give to each Holder written notice thereof (which shall include a list of the jurisdictions in which the Company intends to attempt to qualify such securities under the applicable blue sky or other state securities laws); and (ii) use its best efforts to include in such registration (and qualifications), and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made within twenty (20) days after receipt of such written notice from the Company, by any Holder or Holders, except as set forth in subsection 1.2(c) below. (b) Underwriting. If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Holders as a part of the written notice given pursuant to subsection 1.2(a)(i). In such event the right of any Holder to registration pursuant to this subsection 1.2 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company and the other shareholders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company. (c) In the case of any registration of Common Stock by the Company in an underwriting, if the managing underwriter(s) shall advise the Company that marketing factors require a limitation on the number of shares of Common Stock (or other securities convertible into or exercisable or exchangeable for Common Stock) to be offered and sold by stockholders of Company in such offering, there shall be included in the offering: (i) first, all securities proposed by Company to be sold for its account; and (ii) second, that number of shares of Common Stock, if any, requested to be included in such registration statement by Holders and by other stockholders of the Company having contractual rights to include shares in such registration, on a pro rata basis based upon the number of shares of Common Stock each Holder and each such other stockholder beneficially owns. If any Holder or other person does not agree to the terms of such underwriting or otherwise fails to comply with the terms of this Agreement, he shall be excluded therefrom upon written notice from the Company or underwriter. Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall be withdrawn from such registration. (d) Notwithstanding any other provision herein contained, the requirements of Section 1.2(a) above shall not apply with respect to not more than one transaction commonly referred to as a "private investment in public equity," or "PIPE," transaction, so long as (i) such transaction is consummated within eight (8) months from the date hereof, and (ii) no director or officer of the Company, and no holder of five percent (5%) or more of the Company's outstanding Common Stock, shall have any shares of Common Stock held by him, her or it included in the registration for such PIPE transaction. 1.3 Expenses of Registration. All expenses incurred in connection with any registration, qualification or compliance pursuant to this Section 1 including without limitation, all registration, filing and qualification fees, printing expenses, fees and disbursements of counsel for the Company and expenses of any special audits incidental to or required by such registration (but excluding underwriting fees, discounts and commissions with respect to all Registrable Securities included within such registration, which shall be the sole responsibility of the participating Holders), shall be borne by the Company. All expenses of any registered offering not otherwise borne by the Company will be borne pro rata among the Holders, any other shareholders of the Company participating in such offering and the Company. 2 1.4 Registration Procedures. In the case of each registration, qualification or compliance effected by the Company pursuant to this Registration Rights Agreement, the Company will keep each Holder participating therein advised in writing as to the initiation of each registration, qualification and compliance and as to the completion thereof. At its expense the Company will use its best efforts to: (a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for up to 120 days (the "Effective Period"). (b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement. (c) Furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. (d) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement provided that all other Holders participating in such offering do the same. (f) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. 1.5 Indemnification. (a) The Company will indemnify each Holder of Registrable Securities and each of its officers, directors and partners, and each person controlling such Holder within the meaning of Section 15 of the Securities Act ("controlling person"), and each underwriter, if any, and each controlling person of such underwriter, with respect to which registration, qualification or compliance of Registrable Securities has been effected pursuant to this Registration Rights Agreement, against all claims, losses, expenses, damages and liabilities (or actions in respect thereto) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus, offering circular or other document (including any related registration statement, notification or the like) incident to any such registration, qualification or 3 compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statement therein not misleading, or any violation or alleged violation by the Company of the Securities Act, the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder ("Exchange Act") or any state securities law applicable to the Company or any rule or regulation promulgated any such state law and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance, and will reimburse each such Holder, each of its officers, directors and partners, and each person controlling such Holder, each such underwriter and each person who controls any such underwriter, within a reasonable amount of time after incurred for any reasonable legal and any other expenses incurred in connection with investigating, defending or settling any such claim, loss, damage, liability or action; provided, however, that the indemnity agreement contained in this subsection 1.5(a) shall not apply to amounts paid in settlement of any such claim, loss, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld or delayed); and provided further, that the Company will not be liable in any such case to the extent that any such claim, loss, damage or liability arises out of or is based on any untrue statement or omission made in reliance upon and conformity with written information furnished to the Company specifically for use therein by an instrument duly executed by such Holder or by an underwriter. (b) Each Holder will, if Registrable Securities held by or issuable to such Holder are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors, officers and controlling persons, each underwriter, if any, of the Company's securities covered by such a registration statement, and each controlling person of such underwriter, and each other Holder, each of its officers, directors, partners and controlling persons, against all claims, losses, expenses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company, such Holders, such directors, officers, partners, persons or underwriters within a reasonable amount of time after incurred for any reasonable legal or any other expenses incurred in connection with investigating, defending or settling any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company specifically for use therein by an instrument duly executed by such Holder; provided, however, that the indemnity agreement contained in this subsection 1.5(b) shall not apply to amounts paid in settlement of any such claim, loss, damage, liability or action if such settlement is effected without the consent of the Holder, (which consent shall not be unreasonably withheld or delayed); and provided further, that the total amount for which any Holder shall be liable under this subsection 1.5(b) shall not in any event exceed the aggregate net proceeds received by such Holder from the sale of Registrable Securities held by such Holder in such registration. (c) Each party entitled to indemnification under this subsection 1.5 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom; provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld or delayed), and the Indemnified Party may participate in such defense at such party's expense; and provided further, 4 that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations hereunder, unless such failure resulted in prejudice to the Indemnifying Party; and provided further, that an Indemnified Party (together with all other Indemnified Parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the Indemnifying Party, if representation of such Indemnified Party by the counsel retained by the Indemnifying Party would be inappropriate due to actual or potential differing interests between such Indemnified Party and any other party represented by such counsel in such proceeding. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom. (d) In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in this Section 1.5 is due in accordance with its terms but for any reason is judicially determined to be unenforceable against the Indemnifying Party or otherwise unavailable to the Indemnified Party in respect to any losses, claims, damages and liabilities referred to herein, then the Indemnifying Party shall, in lieu of indemnifying such Indemnified Party, contribute to the amount paid or payable by such Indemnified party as a result of such losses, claims, damages or liabilities to which such party may be subject in such proportion as is appropriate to reflect the relative fault of the Company, on the one hand, and the selling Holders, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The Company and Holders agree that it would not be just and equitable if contribution pursuant to this Section 1.5(d) were determined by pro rata allocation or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this Section 1.5(d), (i) in no case shall any Holder be liable or responsible for any amount in excess of the net proceeds received by such Holder from the sale of Registrable Securities pursuant to such registration; and (ii) no person adjudged guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not adjudged guilty of such fraudulent misrepresentation. Any party entitled to contribution shall, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties under this Section 1.5(d), notify such party or parties from whom contribution may be sought, but the omission so to notify such party or parties from whom contribution may be sought shall not, in the absence of actual prejudice to such party or parties, relieve it or them from such contribution obligation. No party shall be liable for contribution with respect to any action, suit, proceeding or claim settled without its written consent, which consent shall not be unreasonably withheld or delayed. 1.6 Information by Holder. Any Holder or Holders of Registrable Securities included in any registration shall promptly furnish to the Company such information regarding such Holder or Holders and the distribution proposed by such Holder or Holders as the Company may request in writing and as it shall deem required in connection with any registration, qualification or compliance referred to herein. 1.7 Rule 144 Reporting. With a view to making available to Holders the benefits of certain rules and regulations of the SEC which may permit the sale of the Registrable Securities to the public without registration, the Company agrees at all times use its best efforts to: 5 (a) make and keep public information regarding the Company available, as those terms are understood and defined in SEC Rule 144; (b) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (c) so long as a Holder owns any Registrable Securities, to furnish to such Holder forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of said Rule 144, and of the Securities Act and the Exchange Act , a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed by the Company as the Holder may reasonably request in complying with any rule or regulation of the SEC allowing the Holder to sell any such securities without registration. 1.8 Transfer of Registration Rights. Holders' rights to cause the Company to register their securities and keep information available, granted to them by the Company under subsections 1.2 and 1.7 may be assigned to a transferee or assignee who acquires not less than twenty percent (20%) of a Holder's Registrable Securities not sold to the public, provided, that (i) the Company is given written notice by such Holder at the time of or within sixty (60) days after said transfer or assignment, stating the name and address of said transferee or assignee and identifying the securities with respect to which such registration rights are being assigned, and (ii) the transferee or assignee of such rights assumes in writing the obligations of such Holder under this Agreement. 1.9 Delay of Registration. No Holder shall have any right to take any action to restrain, enjoin, or otherwise delay any registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 1. 1.10 "Market Stand-Off" Agreement. Each Holder hereby agrees that it shall not, to the extent requested by the Company and an underwriter, sell or otherwise transfer or dispose (other than to donees who agree to be similarly bound) of any Registrable Securities during a period of time, as agreed to by the Company and the underwriters, not to exceed one hundred eighty (180) days, following the effective date of a registration statement of the Company filed under the Securities Act for a public offering of stock; provided, however, all officers and directors of the Company and holders of more than five percent (5%) of the outstanding voting securities of the Company enter into similar agreements. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Registrable Securities of each Holder thereof until the end of such period. 1.11 Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 1 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration. The expenses of such withdrawn registration shall be borne by the Company in accordance with Section 1.3 hereof. 2. General. 2.1 Waivers and Amendments. With the written consent of the record or beneficial holders of at least a majority of the Registrable Securities, the obligations of the Company and the rights of the Holders of the Registrable Securities under this agreement may be waived (either generally or in a particular instance, either retroactively or prospectively, and either 6 for a specified period of time or indefinitely), and with the same consent the Company, when authorized by resolution of its Board of Directors, may enter into a supplementary agreement for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement; provided, however, that no such modification, amendment or waiver shall reduce the aforesaid percentage of Registrable Securities without the consent of all of the Holders of the Registrable Securities. Upon the effectuation of each such waiver, consent, agreement of amendment or modification, the Company shall promptly give written notice thereof to the record holders of the Registrable Securities who have not previously consented thereto in writing, and any such waiver, consent agreement of amendment or modification shall be binding upon all Holders of Registrable Securities and each future Holder of all such Registrable Securities. This Agreement or any provision hereof may be changed, waived, discharged or terminated only by a statement in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought, except to the extent provided in this subsection 2.1. 2.2 Governing Law. This Agreement shall be governed in all respects by the laws of the Commonwealth of Massachusetts as such laws are applied to agreements between Massachusetts residents entered into and to be performed entirely within Massachusetts. 2.3 Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto. 2.4 Entire Agreement. Except as set forth below, this Agreement and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof. 2.5 Notices, etc. All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by first class mail, postage prepaid, certified or registered mail, return receipt requested, addressed (a) if to Holder, at such Holder's address(es) as set forth below, or at such other address(es) as such Holder or permitted assignee shall have furnished to the Company in writing, or (b) if to the Company, at the Company's address set forth below, or at such other address as the Company shall have furnished to the Holder in writing. All such notices and other written communications shall be deemed to be delivered (i) if mailed, five (5) days after mailing and (ii) if delivered personally by hand or nationally recognized courier, upon delivery. 2.6 Severability. In case any provision of this Agreement shall be invalid, illegal, or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement or any provision of the other Agreement s shall not in any way be affected or impaired thereby. 2.7 Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. 2.8 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 2.9 Information Confidential. Each party acknowledges that the information received by them pursuant hereto may be confidential and for its use only, and it will not use such confidential information in violation of the Securities Act or Exchange Act or reproduce, disclose or 7 disseminate such information to any other person (other than its employees or agents having a need to know the contents of such information, and its attorneys), except in connection with the exercise of rights under this Agreement, unless the Company has made such information available to the public generally or such party is required to disclose such information by a governmental body. 2.10 Further Assurances. The parties agree, from time to time and without further consideration, to execute and deliver such further documents and take such further actions as may be reasonably required to implement and effectuate the transactions contemplated in this Agreement. 2.11 No Third-Party Beneficiaries. Other than as specifically provided herein, this Agreement is intended to inure to the benefit of the parties hereto only, and no other party shall have any rights, express or implied, by reason of this Agreement. 2.12 Saturdays, Sundays, Holidays, Etc. If the last or appointed day for the taking of any action required or permitted hereby shall be a Saturday, Sunday, a nationally recognized holiday, or a state holiday in the Commonwealth of Massachusetts, then such action may be taken on the next succeeding business day. [REMAINDER OF PAGE LEFT BLANK INTENTIONALLY] 8 IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be executed by their duly authorized representatives as of the date first above written. PURCHASER COMPANY SILICON VALLEY BANK PARLEX CORPORATION By: /s/ David Rodriguez By: /s/ Jonathan R. Kosheff -------------------- ------------------------ Name: David Rodriguez Name: Jonathan R. Kosheff ---------------- -------------------- (print) (print) Title: Vice President Chief Financial Officer --------------- ----------------------- copy to: Silicon Valley Bank Treasury Department 3003 Tasman Drive, HA 200 Santa Clara, CA 95054 9 EX-10 5 park210a.txt EXHIBIT 10.AA Exhibit 10.AA PURCHASE AND SALE AGREEMENT This PURCHASE AND SALE AGREEMENT ("Agreement") is dated, made and effective as of May 8, 2003, by and among Parlex Corporation, a duly organized Massachusetts corporation, having an address at One Parlex Place, Methuen, Massachusetts, 01844 ("Seller"), and Taurus Methuen LLC, a duly organized Delaware limited liability company ("Purchaser"), with an address at c/o Taurus New England Investments Corp., 118 Milk Street, Boston, MA 02109. 1. Property. Seller agrees to sell and Purchaser agrees to buy, subject to the terms and conditions of this Agreement, the following described property: (a) the following parcels of land: (i) that certain parcel of land located at One Parlex Place, Methuen, Essex County, Massachusetts as more particularly described on Exhibit A-1 (hereinafter referred to as the "Parcel" or the "Premises"); and (ii) all right, title and interest of Seller in and to all rights, privileges and easements appurtenant to the Premises, including, without limitation, all development rights, air rights, water, water rights, riparian rights and water stock relating to the Premises and any rights-of-way or other appurtenances used in connection with the beneficial use and enjoyment of the Premises and all of Seller's right, title and interest in and to all roads and alleys adjoining or servicing the Premises; (b) the approximately 172,216 square foot building on the Parcel (the "Building") and all other improvements located on the Premises (collectively, the "Improvements"); (c) all right, title and interest of Seller in and to all permits, licenses and approvals with respect to the ownership, use and occupancy of the Premises and the Improvements any all other intangible property now or hereafter owned by Seller and used in the ownership of the Premises; and (d) all HVAC and boiler systems and other personal property owned by Seller located on or in or used in connection with the ownership of the Premises but excluding all furniture, fixtures and equipment used in Seller's business and not customarily included in real estate sales. The right, title and interest specified in subparagraphs (a) - (d) of this Section 1 are hereinafter sometimes collectively called the "Property". The right, title and interest specified in Subparagraphs (a) and (b) of this Section 1 are hereinafter sometimes collectively called the "Real Property". 2. Purchase Price. The agreed purchase price for the Property is: (i) Five Million Three Hundred and Fifty Thousand Dollars ($5,350,000) (the "Minimum/Cash Portion of the Purchase Price"); plus (ii) any portion of the Earn Out Amount (defined below) that may become due if, as and when provided for in Section 28 below; plus (iii) Two Million Six Hundred and Fifty Thousand Dollars ($2,650,000) (the "Financed Earn Out Amount") which shall be due only if no Special Default (defined below) occurs at any time on or before the maturity date of the Note (defined below). (a) Purchaser shall pay an earnest money deposit of Two Hundred Thousand Dollars ($200,000) to the Boston office of Stewart Title Guaranty Insurance Company (the "Title Company") with an address at 99 Summer Street, 4th Floor, Boston, Massachusetts 02110, Attn: Mr. Terrance Miklas, which deposit shall be payable in installments as follows: (i) On the date hereof, Purchaser will deposit One Hundred Thousand Dollars ($100,000); and (ii) On or before 5:00 p.m. (Boston time) on the Due Diligence Expiration Date (as such term is hereinafter defined), unless this Agreement terminates in accordance with Section 5(e) below, Purchaser shall deposit an additional One Hundred Thousand Dollars ($100,000). As used herein, the term "Deposit" shall mean the amounts deposited with the Title Company in accordance with the immediately preceding sentence and all interest and earnings thereon. The Deposit shall be held by the Title Company, as escrow agent. The Deposit shall be placed in an interest bearing money market or similar account reasonably acceptable to Seller and Purchaser. The Deposit shall be held in escrow subject to the terms of this Agreement and in a manner sufficient to identify such as being held in escrow pursuant to this Agreement. The Deposit, together with all interest accrued thereon, shall be applied to the Minimum Cash Portion of the Purchase Price at Closing or paid to Seller or Purchaser as provided elsewhere in this Agreement. Upon request, each of Purchaser and Seller shall provide to the Title Company taxpayer identification numbers and W-9's for the interest on the Deposit. If Purchaser shall fail to deposit all or any portion of any installment of the Deposit to be paid after the date hereof as and when required under this Section 2(a), and if such failure continues for more than two (2) business days, then this Agreement shall thereupon terminate, Purchaser shall comply with Section 5(f), any portion of the Deposit then made, 2 together with all interest accrued thereon, shall be paid to Seller, and neither party shall have any further liability hereunder except as provided in Section 18. (b) Notwithstanding the above definition of "Minimum Cash Portion of the Purchase Price", and provided that no Special Default occurs, the Two Million Six Hundred and Fifty Thousand Dollar ($2,650,000) Financed Earn Out Amount shall be paid by promissory note (the "Note") from Purchaser to Seller on the following terms and conditions: (i) The Note shall have a term of three (3) years with a one year extension option in favor of Purchaser; (ii) Interest shall accrue on the Note at the rate of five percent (5%) per annum in the first year, six percent (6%) per annum in the second year, seven percent (7%) per annum in the third year, and eight percent (8%) per annum during the fourth year (if applicable); (iii) Interest only on the Note shall be payable in arrears on the tenth (10th) day of each month; provided, however, that in no event shall amounts due under the Note in any month ever exceed the amount of rent actually paid by Seller under the Lease (defined below) and received by Purchaser in good funds for such month; (iv) The Note shall be secured by a pledge of 100% of the ownership interests in Purchaser (the "Security"). Recourse for payment of the Note shall be limited to the Security and in no event will any direct or indirect owner, manager, partner, agent, affiliate, officer, director, or employee of Purchaser have any liability with respect to the Note or any other loan document; (v) The Note shall be subordinate to any mortgage on the Property (including but not limited to the Loan (defined below)) at any time and from time to time, whether in existence as of the date of the Note or thereafter obtained. The foregoing provision shall be self- operative, but Seller shall execute such documents as the holder of such first mortgage may require from time to time to evidence, confirm and/or effectuate such subordination; (vi) If the Property or all or substantially all of the Security is sold or transferred without the Seller's prior written consent, which consent will 3 not be unreasonably withheld or delayed, then all amounts outstanding under the Note shall become due upon such sale; and (vii) The Note shall be prepayable at any time and from time to time, in whole or in part. As used herein, the term "Special Default" means: (1) any monetary default by the Tenant under the Lease: (a) as to which Landlord has given Tenant written notice (the "First Notice"); (b) that is not cured within five (5) days from the First Notice; (c) as to which Tenant has been given a second written notice (the "Second Notice"); and (d) that is not cured within five (5) days from the Second Notice; and/or (2) any nonmonetary default by the Tenant under the Lease that (y) is not cured within thirty (30) days from written notice to the Tenant or (z) is an automatic event of default under the terms of the Lease without any provision for notice or cure. Notwithstanding anything to the contrary herein or in the Note, the payment of the Financed Earn Out Amount is conditioned upon the absence of any Special Default occurring between the Closing and the maturity date of the Note and, if any Special Default does occur during such period, then no further payments or obligations of any kind or nature shall be due under the Note. If any notice of a Special Default is given, the maturity date of the Note shall automatically be deemed extended until the date that is thirty (30) days after the expiration of the applicable cure period as set forth in this paragraph. The provisions of the paragraph shall survive the Closing. (c) At the Closing, Purchaser shall pay to Seller by wire transfer of immediately available federal funds an amount equal to the Minimum/Cash Portion of the Purchase Price, increased or decreased by the amount of any adjustments thereto provided for herein, less the Deposit as provided in Section 2(a). (d) Following the Closing, Purchaser shall pay the Earn Out Amount (defined below) to Seller if, as and when required under Section 28 below. 3. Closing. The closing of the sale of the Property (the "Closing") pursuant to this Agreement shall take place at 10:00 a.m. (Boston time) on May 28, 2003, or upon such earlier date as the parties may agree upon in writing (the "Closing Date"), at the offices of Kutchin & Rufo, P.C. at 175 Federal Street, Boston, Massachusetts 02110, or at such other place and time as the parties may agree upon in writing; provided, however, that Purchaser shall have the right to extend the Closing Date for up to two (2) weeks. 4. Title. The title to the Real Property shall be free from all encumbrances, except: (a) provisions of existing building and zoning laws; 4 (b) the matters set forth in that certain Commitment for Title Insurance dated February 12, 2003 issued by the Title Company (Commitment No. C-99122429295); provided, however, that (i) notwithstanding anything herein to the contrary, and as agreed to by Seller and Purchaser before the date hereof, the legal description of the Property shall reflect the consolidation of the three parcels comprising the Property into one lot, as shown on that certain approval not required plan entitled, "Plan of Land for Parlex Corp. in Methuen, Mass" prepared by R.J. Pica Engineering, Co., October 9, 1997, recorded with the Essex County Registry of Deeds as Plan Number 13210; (ii) as agreed to by Seller and Purchaser before the date hereof, any UCC Financing Statements filed at the Essex County Registry of Deeds, the Massachusetts Secretary of State and/or the City of Methuen that relate to Monetary Liens shall be discharged and removed of record as of the Closing; and (iii) the standard exceptions as are found in an ALTA Owner's Policy of Title Insurance modified so as to exclude from exceptions to coverage (a) real estate taxes and assessments, water and sewer charges due and payable on or before the Closing Date, (b) mechanics' and materialmen's liens, (c) rights of tenants or persons in possession other than the Seller in accordance with the Lease (defined below), (d) creditors' rights, and (v) survey matters other than matters disclosed on the Plan (defined below); (c) real estate taxes and water and sewer charges assessed against the Real Property for the current year as are not due and payable on or before the Closing Date; (d) any liens for municipal betterments or special assessments assessed after the date of this Agreement; (e) such other matters affecting title to the Real Property as: (i) are disclosed on the ALTA survey entitled "Parlex Corporation 145 Milk Street, Methuen, Massachusetts" dated March 13, 2003 by Vanasse Hangen Brustlin, Inc. (project number 08477) (the "Survey"); (ii) exist as of record as of the date of the Commitment for Title Insurance referred to in Subsection (b) above; and (iii) existed as of the date of the Survey and were observable as of the date of the Survey based on an inspection of the Property; and (f) any exceptions caused by Purchaser or Purchaser's Representatives (hereinafter defined). The encumbrances referenced in clauses (a) through (f) above, other than any Monetary Liens (hereinafter defined), shall be collectively referred to herein as the "Permitted Title Exceptions". As used herein, the term "Monetary Liens" shall mean any mortgage, deed of trust, financing statement, mechanics' or materialmens' lien or other lien securing the payment of money. The amount of any past due unpaid taxes, assessments, business improvement district charges, public assembly charges, water charges and sewer charges which Seller is obligated to pay and discharge, with the interest and penalties thereon to the Closing, may at the option of Seller be 5 paid to Purchaser out of the balance of the Purchase Price, provided official bills therefor with interest and penalties thereon figured to said date are furnished by Seller at the Closing. The existence of any such taxes or charges shall not be deemed objections to title if Seller shall comply with the foregoing requirements. Simultaneous with or prior to the execution and delivery hereof, Seller has provided Purchaser with copies of the following title policy and plans with respect to the Premises: that certain Lender's Policy of Title Insurance, Policy Number G47-1277078, issued by the Lawyer's Title Insurance Corporation (the "Title Policy"), and that certain As Built Site Plan dated June 7, 1999 by R.J. Pica Engineering Co., Inc. (the "Plan"). Notwithstanding anything to the contrary in this Agreement, Seller shall be obligated, on or before the Closing, to discharge and remove of record any Monetary Liens. If the Closing occurs, Seller may use the Minimum/Cash Portion of the Purchase Price to remove Monetary Liens. 5. Limited Contingencies for Due Diligence Investigations. (a) Purchaser's Independent Investigation. Purchaser shall have the right to conduct or cause to be conducted with reputable companies, at Purchaser's sole cost and expense, such audits, assessments, reviews, investigations, inspections, tests and studies of the Property including all buildings, systems, fixtures and equipment, the environmental condition of the Premises and Improvements, the title to the Premises and Improvements, a survey of the Premises and Improvements, the compliance of the Property with applicable laws and such other engineering, legal, the financial condition of the Seller and other matters relating to or affecting the Property and/or the Seller as Purchaser deems necessary or desirable in its absolute discretion in connection with its purchase of the Property and lease back of the same to the Seller ("Investigations"). Subject to Section 5(b) below, Seller shall make available for Purchaser's review, at reasonable times after reasonable prior notice, all documents and files owned by Seller in the Seller's possession or control concerning the maintenance, management and operation of the Property, including, without limitation, all books and records, plans, specifications, Contracts, engineering and environmental reports, roof and other warranties and guarantees relating to the Improvements, certificates of occupancy and other permits and approvals relating to the Property, calculations of tax and operating reimbursements and utility bills, but specifically excluding the following (collectively, "Confidential Property Information"): internal minutes or deliberations of Seller or any governing body, committee, board or council thereof, internal memoranda prepared by or for the benefit of Seller, appraisals, financial projections, legally privileged correspondence and similar proprietary and archival information. Purchaser shall continue 6 to have access to the Real Property subsequent to the Due Diligence Expiration Date to conduct additional Investigations in accordance with the terms hereof. (b) Conduct of Investigations. All Investigations under Section 5(a) which are to be conducted at the Property shall be done after at least one business day prior notice (which may be oral) to Seller. Purchaser, its agents, employees, contractors, consultants, other representatives and anyone else acting by or on behalf of Purchaser (collectively, "Purchaser's Representatives") will at Seller's request allow a representative of Seller to be present during any Investigations. Purchaser shall take all reasonable precautions to minimize the impact to the Property of any Investigations. Purchaser agrees to discontinue any Investigations promptly upon notice from Seller in the event such Investigations present a danger to the life, health or safety of the public or would otherwise adversely impact the Property. With respect to any intrusive environmental site testing, Purchaser agrees to provide Seller at least two business days' prior notice thereof, which notice shall set forth the scope of any proposed activities relating to investigation of soil or groundwater quality or for the subsurface investigation or invasive testing of the Premises and the Improvements for Seller's prior approval, and to permit Seller's representatives to be present during any such activities. Purchaser understands that it may only conduct a so-called Phase I environmental site assessment and that it may not undertake any invasive soil or groundwater testing for contaminants or any subsurface investigation or other invasive testing of the Property without Seller's prior written approval, which consent will not be unreasonably withheld, condition or delayed and shall be deemed given unless, within two (2) business days from Purchaser's approval request, Seller provides Purchaser with a written notice of disapproval that sets forth the reasons for such disapproval in reasonable detail. If Purchaser or Purchaser's Representatives take any samples from the Property in connection with any environmental testing, then upon Seller's request, Purchaser shall provide to Seller a portion of such sample being tested to allow Seller, if it so chooses, to perform its own testing. Seller agrees to use commercially reasonable efforts (but at no cost or expense to Seller) to cooperate with Purchaser in the conduct of its Investigations. (c) Restoration, Liability, Indemnity and Insurance. Purchaser shall, immediately after any entry upon or the conduct of any Investigation of the Property, restore the Property, at Purchaser's sole risk, cost and expense, to the condition which existed immediately prior thereto. Purchaser assumes all risks associated with Purchaser's and Purchaser's Representatives' entry and Investigations of the Property and agrees to protect, defend (with counsel reasonably satisfactory to Seller), indemnify and hold harmless Seller and Seller's members, partners, attorneys, agents, employees, contractors and representatives from and against any and all costs, losses, claims, damages, liabilities, expenses and other obligations (including, without limitation, attorneys' fees) on account of any loss, damage or injury to 7 any person or property (including without limitation the Property) by reason of any act, omission or negligence of Purchaser or any of Purchaser's Representatives arising from or out of the entry or activities of Purchaser or Purchaser's Representatives on, at or with respect to the Property. Purchaser shall, prior to any such entry, obtain and maintain, and shall cause each of its contractors and agents to maintain (and shall deliver to Seller evidence thereof), at Purchaser's sole cost and expense, insurance providing coverage against any claim for personal liability or property damage caused by Purchaser or its agents, employees or contractors in connection with such inspections or tests (including liability insurance and worker's compensation insurance) with such insurance companies, as are reasonably satisfactory to Seller, and naming Seller as an additional insured, covering all activities to be conducted by Purchaser and Purchaser's Representatives. Such insurance coverages may not be materially changed or terminated without at least thirty (30) days prior written notice to Seller. Notwithstanding the foregoing, the above indemnity shall not include any costs or damages caused by (1) the acts of the Seller or its agents or representatives, (2) any claims of diminution in the value of the Property as a consequence of the results revealed by such tests and inspections or (3) any pre-existing condition of the Property. The foregoing indemnification obligation shall survive the Closing or termination of this Agreement for a period of six (6) months and no claim shall be valid unless asserted in writing within that time. (d) Confidentiality. All information obtained by Purchaser or Purchaser's Representatives with respect to the Property, whether from Seller or independently (and whether directly or through outside consultants) shall be held in confidence by Purchaser and Purchaser's Representatives and not disclosed to third parties except as necessary in connection with obtaining financing to acquire the Property. Notwithstanding the foregoing, (a) Purchaser may disclose the such information to its owners, legal counsel, accountants, lenders, potential investors, and similar third parties that need to review the same in connection with Purchaser's purchase of the Property in accordance with the terms of this Agreement, and (b) Purchaser may disclose such information to the extent that such disclosure is required by law or court order or by discovery rules in any legal proceeding, provided that Purchaser first shall provide written notice thereof to Seller. Prior to or following the Closing, (1) none of Purchaser, its members, partners, directors, officers, principals or employees, or any direct or indirect beneficial owner of Purchaser shall issue or make any public statement (written or oral) or any press release regarding the subject matter hereof without the prior written consent (including as to the content and manner of such public statement or press release) of Seller, which consent shall not be unreasonably withheld or delayed, and (2) none of Seller, its directors, officers, principals or employees, shall issue or make any public statement (written or oral) or any press release regarding the subject matter hereof without the prior written consent (including as to the content and manner of such 8 public statement or press release) of Purchaser, which consent shall not be unreasonably withheld or delayed. Notwithstanding any provision in this Agreement to the contrary and except with respect to making necessary standard inquires of the Massachusetts Department of Environmental Protection and other relevant governmental agencies and officials in connection with Purchaser's Investigations, Purchaser shall not contact any governmental official or representative regarding Hazardous Materials (hereinafter defined) on, or the environmental condition of, the Real Property without Seller's prior written consent thereto, which consent shall not be unreasonably withheld. Said consent shall be deemed given if not received by Purchaser within two (2) business days of said request. In addition, if Seller's consent is required and obtained by Purchaser, Seller shall (x) be entitled to review, modify and approve any written communication to such official or representative and (y) receive at least two (2) business days prior written notice of any intended contact and to have a representative present when Purchaser has any such contact with any governmental official or representative. Provided Purchaser has given Seller prior written notice required by this Section of the date, time and place of any such meeting Purchaser intends to have with governmental officials or representatives, Purchaser may hold such meeting(s) if Seller's representative fails to attend. (e) Purchaser's Option to Terminate. Purchaser's obligations under this Agreement are conditioned on the satisfaction of the following conditions (collectively, the "Contingencies") no later than 6:00 p.m. (Boston time) on May 23, 2003 (the "Due Diligence Expiration Date"): (i) Purchaser shall have obtained a firm written commitment for a nonrecourse loan for the acquisition of the Property of not less than Four Million Eight Hundred and Eighteen Thousand Dollars ($4,818,000.00) from a third party lender (the "Lender") on terms and conditions satisfactory to Purchaser in its sole and unreviewable discretion (the "Loan"); (ii) Purchaser shall have received a written certification from Seller stating that: (a) the Improvements as constructed conform in all material respects to those improvements approved in the 1998 Variance, the 1998 Special Permit and the 1998 Site Plan Approval; and (b) duly issued certificates of occupancy are in effect for all portions of the Property; and (iii) Purchaser shall be satisfied in its sole and unreviewable discretion with the environmental condition of the Property and all operations relating thereto. 9 If any of the Contingencies are not satisfied, Purchaser may, in its absolute and unreviewable discretion, elect not to proceed with the transactions provided for by this Agreement and terminate this Agreement by giving Seller written notice (the "Termination Notice") of Purchaser's election to terminate on or before the Due Diligence Expiration Date, in which case this Agreement shall terminate, the Deposit, together with any interest accrued thereon, shall be paid to Purchaser and neither party shall have any further liability hereunder except as provided in Section 21. In addition, and without limiting Purchaser's right to terminate this Agreement in accordance with the immediately preceding sentence, this Agreement shall automatically terminate unless, before the Due Diligence Expiration Date, Purchaser gives Seller written notice (the "Notice to Proceed") that the Contingencies are satisfied. In the event that either: (a) Purchaser gives a Termination Notice before the Due Diligence Expiration Date, or (b) Purchaser does not give a Termination Notice but fails to give the Notice to Proceed before the end of the Due Diligence Expiration Date, this Agreement shall automatically terminate, the Deposit (and all interest thereon) promptly shall be returned to Purchaser, and Seller and Purchaser shall have no further obligations or liabilities to each other hereunder. If Purchaser gives the Notice to Proceed on or before the Due Diligence Expiration Date, then Purchaser shall be deemed to have waived conclusively Purchaser's right to terminate this Agreement pursuant to this Section 5(e). (f) Return of Due Diligence Information. If for any reason other than a default by Seller a Closing does not occur with respect to the Property, Purchaser shall (i) return to Seller all materials and other information regarding the Property that Seller has provided to Purchaser and all copies or photocopies thereof; (ii) deliver immediately to Seller copies of all written reports resulting from physical Investigations of the Property conducted by Purchaser's Representatives and not previously delivered to Seller, but only upon payment to Purchaser of the costs incurred by it with respect thereto and in all events without any representations or warranties; and (iii) return to Seller or destroy any remaining such materials and information in its possession. This Section 5(f) shall survive the termination of this Agreement. (g) Investigations Resulting in Required Disclosure. Purchaser agrees that in the event the need arises under applicable law to notify any governmental authority of any condition at any of the Property, as a result of any findings in any environmental assessment or any other Investigation done by or at the direction of Purchaser or Purchaser's Representatives, Purchaser shall immediately notify Seller and Seller, not Purchaser or Purchaser's Representatives or anyone acting in favor or on behalf of Purchaser or Purchaser's Representatives, shall make such disclosure as Seller deems appropriate unless otherwise required by applicable law. 6. Condition of Premises. 10 (a) No Reliance. Except as expressly provided in this Agreement or the Lease, the Property is to be sold pursuant to this Agreement AS IS, WHERE IS. Except as expressly provided in this Agreement or the Lease, no guarantees, representations or warranties express or implied are made by Seller with respect to the Property. Except as expressly provided herein, or in the Lease, Purchaser expressly acknowledges and agrees that it is not relying on any representations or warranties of any kind whatsoever, express or implied, from Seller, its attorneys, agents, representatives or any party purportedly acting on behalf of Seller as to any matters concerning the Property. Except as expressly provided herein or in the Lease Purchaser hereby further acknowledges that any information Seller or Cushman & Wakefield of MA, Inc. ("Broker"), or the trustees, officers, members, partners, directors, employees, agents or contractors of any of them has provided to Purchaser, including, without limitation, the Title Policy and the Plan has been provided to Purchaser solely for informational purposes without any recourse, representation or warranty and that Seller does not represent, warrant or guarantee the contents or opinions contained in or the accuracy or completeness of, or the methodology of preparation used to produce, any such information. By consummating the Closing, except as otherwise expressly provided in this Agreement or the Lease, Purchaser shall be deemed to have assumed the risk that adverse matters, including but not limited to, construction defects and adverse physical and environmental conditions, may not have been revealed by Purchaser's Investigations, and Purchaser, upon Closing, shall, except as otherwise expressly provided in this Agreement or the, be deemed to have waived, relinquished and released Seller, Seller's affiliates (and Seller's and Seller's affiliates members, representatives, officers, directors, and employees) from and against any and all claims, demands, causes of action (including causes of action in tort), losses, damages, liabilities, costs and expenses (including attorneys' fees and court costs) of any and every kind or character, known or unknown, which Purchaser might have asserted or alleged against Seller, Seller's affiliates (and Seller's and Seller's affiliates members, representatives, officers, directors, and employees) at any time by reason of or arising out of any latent or patent construction defects or physical conditions, violations of any applicable law (including, without limitation, any environmental laws) and any and all other acts, omissions, events, circumstances or matters regarding the Property. Notwithstanding the foregoing provisions, (i) nothing set forth in this Section 6(a) shall be interpreted or construed as limiting, restricting, extinguishing or otherwise affecting Seller's representations, warranties and covenants made in this Agreement or the Lease or the survivability thereof for the time limitation herein provided; and (ii) Seller acknowledges and agrees that, following the Closing, it will remain responsible for the physical and environmental condition of the Property in accordance with the terms of the Lease. 11 This Section 6(a) shall survive the Closing. (b) Adequate Diligence. Purchaser acknowledges that this Agreement provides for free, full and complete access to the Property and full opportunity to fully inspect and review the Premises and the Improvements, including all buildings, systems, fixtures and equipment and including as to environmental matters. Purchaser further acknowledges that this Agreement provides for free, full and complete access to fully inspect and review (i) the environmental condition of the Property subject to the restrictions imposed by Section 5(b), (ii) the title to the Property, (iii) the compliance of the Property with applicable laws and (iv) such other engineering, legal, and other matters relating to or affecting the Property as Purchaser may find appropriate to satisfy itself as to all such matters. Except as otherwise provided herein, or in the Lease, Purchaser's decision with respect to the ultimate purchase of the Property will be based solely upon its own Investigations and the representations made herein. It is understood that Purchaser has the capability to conduct due diligence investigations sufficient for its purposes within the time periods given to Purchaser under this Agreement. 7. Representations and Warranties of Seller. Seller represents and warrants to Purchaser as follows as of the date hereof and as of the Closing: (a) Seller is a Massachusetts corporation duly organized and validly existing under the laws of Massachusetts. (b) Seller has all requisite and necessary power and authority to execute and deliver this Agreement and to perform its obligations hereunder. (c) The execution and delivery of this Agreement and the performance by Seller of its obligations hereunder has been approved as required by the terms of its formation documents. (d) This Agreement is the legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, subject to general principles of equity, bankruptcy, reorganization and other similar laws affecting the enforcement of contracts generally. (e) Other than actions or proceedings with respect to real estate taxes assessed against the Property or any pending litigation or insurance claims all of which matters are listed on Schedule 2, to Seller's knowledge, there are no actions or proceedings or pending insurance claims before any court, administrative agency or arbitrator by or against Seller concerning the Property and, to Seller's knowledge, no such actions or proceedings are threatened. 12 (f) To Seller's knowledge, Seller has received no written notice from any governmental authority of any violation of any law pertaining to the Property which violation is still outstanding or of any pending or contemplated condemnation or landmark proceedings with respect to the Property. (g) Except as set forth on Schedule 3 or in the materials, reports, documents or other instruments listed thereon, and with the exception of materials used in Seller's business, in compliance with all applicable laws and regulations to Seller's knowledge, (i) no Hazardous Materials are or have been generated, stored, released, located, discharged or disposed of, used or handled from, at or upon the Property and (ii) no Hazardous Materials are or have been located on the Property. As used in this Agreement, "Hazardous Materials" means any substance, chemical, waste or material that is or becomes regulated by any federal, state or local government or governmental agency or authority because of its toxicity, infectiousness, radioactivity, explosiveness, ignitability, corrosiveness or reactivity, including, without limitation, asbestos or any substance containing more than 0.1 percent asbestos, the group of compounds known as polychlorinated biphenyls, flammable explosives, petroleum or any refined petroleum product. (h) The operating statements, financial statements, and fiscal 2003 annual operating plan furnished by Seller to Purchaser are true and correct in all material respects, and fairly reflect the financial condition, the financial results or other subject matter referenced in this subsection (h) as of the dates thereof, and there have been no material adverse changes since the date of such statements. (i) Seller has delivered or made available to Purchaser (without representation or warranty, express or implied, as to the contents thereof) true and complete copies of all third party reports, recommendations and related materials in its possession or control pertaining to the physical conditions affecting and/or hazardous materials located on, in or at the Property. (j) Seller has delivered or made available to Purchaser all plans and specifications in Seller's possession or control and relating to the Property (the "Plans"). (k) Seller has delivered or made available to Purchaser true and complete copies of all permits, licenses and approvals in Seller's possession or control and relating to the ownership and operation of the Property (the "Permits"). To the best of Seller's knowledge, the Permits are in full force and effect and free from material default. Seller has received no written notice that any license, permit or approval, other than the Permits, is required in connection with the current ownership or use and occupancy of the Property. 13 (l) Seller has received no written notice of any violation of the Occupational Safety and Health Act and to Seller's knowledge, no such violations exist at the Property. (m) There are no leases, licenses, or other occupancy agreements pertaining to the Property currently, nor shall there be any (other than the Lease) at the Closing. (n) Schedule 5 sets forth a complete and accurate list of all service, management, leasing, brokerage, and other contracts affecting the Property or operation thereof (the "Contracts"). Seller has given Purchaser true and complete copies of: (1): the Contracts; and (2) all guarantees and warranties in Seller's possession or control and relating to the Property, including but not limited to all roof warranties. To the best of Seller's knowledge, the Contracts and such guarantees and warranties are in full force and effect and free from material default. None of the Contracts shall be assigned to Purchaser at Closing. (o) The Property is not all or substantially all of the assets of the Seller in Massachusetts. As used herein, the phrase "to Seller's knowledge" shall mean the actual knowledge of Jonathan Kosheff, Seller's CFO, and Anthony Caraco, Seller's facilities manager for the Property (collectively, Seller's "Designated Representatives") without independent investigation and shall not be construed to refer to the knowledge of any other officer, agent, or employee of Seller, or any affiliate of Seller, or to impose or have imposed upon Seller's Designated Representatives any duty to investigate the matters to which such knowledge, or the absence thereof, pertains, including, but not limited to, the contents of the files, documents and materials made available to or disclosed to Purchaser or the contents of files maintained by Seller's Designated Representatives, the Seller, or the affiliates of any of them. There shall be no personal liability on the part of the foregoing persons arising out of any the foregoing representations or warranties. Seller represents to Purchaser that Seller's Designated Representatives are the officers of Seller most knowledgeable about the subject matters covered by Seller's representations and warranties in this Agreement. To the extent that Purchaser knows or is deemed to know prior or subsequent to the execution of this Agreement, but prior to the Due Diligence Expiration Date, that Seller's representations and warranties are inaccurate, untrue or incorrect in any material way, such representations and warranties shall be deemed modified to reflect Purchaser's knowledge or deemed knowledge, as the case may be. For purposes of this Agreement, Purchaser shall be "deemed to know' that a representation or warranty was untrue, inaccurate or incorrect only to the extent that, before the Due Diligence Expiration Date, Ben Butcher or Scott Tully received written notice that such representation or warranty was untrue, inaccurate or incorrect. 14 8. Representations and Warranties of Purchaser. Purchaser represents and warrants to Seller as follows: (a) Purchaser is a duly organized limited liability company validly existing and in good standing under the laws of Delaware. (b) Purchaser has all requisite and necessary power and authority to execute and deliver this Agreement and to perform Purchaser's obligations hereunder. (c) The execution and delivery of this Agreement and the performance by Purchaser of its obligations hereunder have been duly authorized by all requisite corporate action and does not conflict with or result in the breach of any of the terms of the organizational or governing documents of Purchaser. (d) This Agreement is the legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject to general principles of equity, bankruptcy, reorganization and other similar laws affecting the enforcement of contracts generally. 9. Covenants. (a) Maintenance of the Property and Insurance; Leases and Contracts. Until the Closing, Seller shall (i) maintain in full force and effect the existing policies of insurance relating to the Property (which shall not be less that 100% of replacement cost), (ii) continue to operate the Property in substantially the same manner as it is now being operated; provided, however, that Seller does not intend and shall not be obligated to repair, replace or improve the Property in any material way, (iii) not enter into any lease or other occupancy agreement with respect to any portion of the Property, (iv) not make any material alterations or additions to the Property, except as may be required by law or as may reasonably be required for the prudent repair and maintenance of the Property, (v) not change or attempt to change (or consent to any change in) the zoning or other legal requirements applicable to the Property, (vi) not cancel, amend or modify in any material respect any certificate, license, approval or permit held by or on behalf of Seller with respect to the Property, and (vii) not sell or encumber all or any portion of the Property or enter into any agreement with respect thereto. After the date hereof, no contract for maintenance will be terminated, modified or amended without the consent of Purchaser in accordance with the following procedure, such consent not to be unreasonably withheld, conditioned or delayed based on Purchaser's currently contemplated plan of improvements to the Property. If after the date hereof Seller decides (a) to enter into any contract related to the management, or operation of the Property, the term of which, in either case, would continue after the Closing Date, or (b) modify, amend or terminate any contract, Seller shall 15 first submit an unsigned draft of such contract, amendment thereto or termination thereof to Purchaser for its prior review and approval. If Purchaser does not object to such draft or fails to respond to Seller with respect thereto within three (3) business days of the delivery thereof to Purchaser, Purchaser shall be deemed to have consented to such contract, contract amendment or contract termination for all purposes hereunder. Any such contract, contract amendment or contract termination entered into by Seller after the date hereof as aforesaid shall thereupon be and become a contract, as applicable. Seller shall promptly give Purchaser a reasonably detailed written notice of: (i) any fire, flood or other material adverse change with respect to the Property of which Seller obtains actual knowledge; (ii) any actual or proposed condemnation (or proceeding in lieu thereof) of which Seller obtains actual knowledge; (iii) any written notice received by Seller claiming that the Property or the use and operation thereof fails to comply with applicable legal requirements; (iv) any written notice received by Seller claiming that Seller is default under any permit or approval with respect to the Property; and (v) any written notice received by Seller concerning any pending or threatened litigation or administrative proceeding affecting the Property or Seller. If Seller becomes aware during the term of this Agreement of any matters that render any of its representations or warranties untrue, Seller shall promptly disclose such matters to Purchaser in writing. Seller shall obtain, at its sole cost and expense, all necessary consents and approvals for the transfer of all warranties ad guaranties affecting the Property, including but not limited to all roof warranties, to Purchaser, in form and substance reasonably acceptable to Purchaser to the extent assignable. (b) Certain Schedules and Information. To the extent any Schedule hereto or any information to be set forth thereon has not been attached or provided on the date hereof, Seller shall provide such Schedule or information to Purchaser as soon as reasonably practicable after the date hereof but in any event within five (5) business days of the date hereof. (c) Access to Property Information. Seller shall be allowed to retain a copy of all property information to be delivered to Purchaser under Section 10(a)(x). For the year following the Closing, Purchaser shall permit Seller to have access to, inspect and make copies of all such property information during Purchaser's or Purchaser's property manager's normal business hours upon reasonable prior notice, at Seller's sole expense. 10. Documents to be Delivered at the Closing. (a) At the Closing, Seller shall deliver to Purchaser the following documents each fully executed and, if required, acknowledged by Seller: 16 (i) a good and sufficient quitclaim deed (the "Deed") conveying good and clear, record and marketable title to the Premises to Purchaser subject only to the Permitted Title Exceptions; (ii) an assignment and assumption of permits (the "Blanket Assignment") assigning all permits, licenses and approvals with respect to Premises and to Purchaser; (iii) a bill of sale conveying without representation, warranty or recourse all of the right, title and interest of Seller in and to the personal property used in connection with the Premises; (iv) an affidavit and indemnity as to mechanics' liens and persons in possession in a customary form reasonably acceptable to Purchaser's title insurance company; (v) an affidavit stating that Seller is not a foreign person or entity within the meaning of Section 1445 of the Internal Revenue Code, and complying with the Internal Revenue Service Regulations promulgated pursuant to said Section 1445; (vi) a designation agreement designating the party responsible for any Form 1099 filings as may be required by the Internal Revenue Service's regulations; (vii) a closing statement; (viii) an officer's certificate of Seller dated the Closing Date as to satisfaction of the conditions set forth in Section 12(b), attaching appropriate evidence of requisite corporate action with respect thereto, including, but not limited to, votes of the governing bodies of Seller; (ix) to the extent they are then in Seller's possession and have not been delivered to Purchaser: (A) any plans and specifications for the Premises; (B) all unexpired warranties and guarantees which Seller has received in connection with any work or services performed with respect to, or equipment installed in, the Premises; (C) all keys for the Premises; (D) originals of all contracts and all correspondence relating thereto and to the operation and maintenance of the Property; and (e) all other books, records, files, plans and other written information including computerized records relating to the development, construction, maintenance, use, operation, title or value of all or any portion of the Property owned by Seller in the possession or control of Seller but specifically excluding any Confidential Property Information; 17 (x) Four originals of the Lease; (xi) Intentionally Deleted; (xii) (1) written confirmation that the Broker has been paid in full all amounts then due in connection with the transactions contemplated by this Agreement; and (2) such other instruments, certificates and documents as are reasonably required in order to fully effectuate the terms of this Agreement; and (xiii) a certificate of an executive officer of Seller dated the Closing Date certifying that the representations and warranties of Seller contained in this Agreement are true and correct on and as of the Closing Date as if made on the Closing Date and attaching appropriate evidence of requisite corporate action with respect thereto, including, but not limited to, votes/resolutions or consents of governing bodies of Seller; (b) At the Closing, Purchaser shall deliver to Seller the following documents each fully executed by Purchaser: (i) the Blanket Assignment assuming the permits, licenses and approvals with respect to the Premises and the Improvements; (ii) a designation agreement designating the party responsible for any Form 1099 filings as may be required by the Internal Revenue Service's regulations; (iii) a closing statement; (iv) a manager's certificate of Purchaser dated the Closing Date certifying that the representations and warranties of Purchaser contained in this Agreement are true and correct on and as of the Closing Date as if made on the Closing Date and attaching appropriate evidence of requisite corporate action with respect thereto, including, but not limited to, votes/resolutions or consents of governing bodies of Purchaser; (v) such other instruments, certificates and documents as are reasonably required in order to fully effectuate the terms of this Agreement; (vi) Lease as provided for in Section 27; and (vii) The Note and Pledge as provided for in Section 2(b) above. 18 11. Conditions to Seller's Performance. (a) In addition to the performance or satisfaction in all material respects of all the other provisions of this Agreement by Purchaser, the Closing and the obligation of Seller to sell the Property under this Agreement shall be conditioned expressly on the satisfaction of the following conditions at the Closing Date: (i) the representations and warranties of Purchaser contained in this Agreement shall be true and correct in all material respects as of the Closing Date as if made on the Closing Date; and (ii) the payment of the Purchase Price as provided herein. (b) Seller may waive any of the foregoing conditions in this Section 11 and any such waiver shall not be deemed a waiver or modification of any other conditions. 12. Conditions to Purchaser's Performance. (a) In addition to the performance or satisfaction in all material respects of all the other provisions of this Agreement by Seller, the Closing and the obligation of Purchaser to buy the Property under this Agreement shall be conditioned expressly on the satisfaction of the following conditions at the Closing Date: (i) As used in this Agreement, the term "Material Casualty" means any damage or destruction to the Premises: (i) as to require expenditures in the aggregate of greater than $250,000 ("Restoration Cost") are required to repair and restore the Improvements to their condition existing prior to such destruction or damage; (ii) that materially and adversely affects access to or parking at the Premises; (iii) that causes the Premises to fail to comply in any material respect with applicable legal requirements; or (iv) as to which the Tenant is not entitled to repair and restore the Improvements to their condition existing prior to such destruction or damage with obtaining a variance, special permit or other similar discretionary permit or approval. If there is a Material Casualty, Purchaser may elect to terminate this Agreement and receive a return of the Deposit or to proceed with the purchase of the Property in accordance with this Agreement. In the event of a fire or other casualty that is not a Material Casualty, and in connection with any Material Casualty as to which Purchaser elects to proceed to proceed with the purchase of the Property in accordance with this Agreement, (A) Purchaser shall purchase the Property in accordance with the terms hereof without reduction in the Purchase Price (except that at the Closing Purchaser will receive a credit for any applicable 19 deductible) and (B) Seller shall assign to Purchaser at Closing all property insurance proceeds paid or payable on account of such damage, (and the amount of any deductible shall be credited against the Purchase Price). If the Closing Date would otherwise occur sooner, it shall automatically be extended to the date which is mutually agreeable to the parties but which is at a minimum of ten (10) Business Days after written notice to Purchaser of the casualty. If any insurance proceeds paid or payable on account of a fire or other casualty are to be assigned to Purchaser in accordance with the provisions of this Agreement, Seller shall cooperate as reasonably requested by Purchaser to effectuate such assignment (including, if necessary, prosecuting claims in Purchaser's name or for Purchaser's benefit), and Seller's obligation to so cooperate shall survive the Closing. (ii) If, at any time before completion of the Closing, a taking or condemnation (or proceeding in lieu thereof) is commenced or threatened in writing: (i) of all or substantially all of the Property; or (ii) of less than all or substantially all of the Property that: (1) causes the Property to fail to comply with legal requirements; (2) materially impairs access to or egress from the Property; (3) causes the loss of any parking that benefits the Property; or (4) otherwise, in Purchaser's reasonable business judgment, results in a loss of value in excess of $250,000 (any of the foregoing, a "Material Taking"), Purchaser may, at Purchaser's sole option, elect either to: (x) terminate this Agreement and receive back the Deposit; or (y) purchase the Property subject to and in accordance with this Agreement. In the event of condemnation or taking that does not constitute a Material Taking, or if there is a Material Taking but Purchaser elects to proceed under 12(a)(ii)(y), (1) Purchaser shall purchase the Property in accordance with the terms hereof (without reduction in the Purchase Price), (2) Seller shall assign to Purchaser at Closing all condemnation proceeds except for any separate award relating to Seller's business and paid or payable as a result of such condemnation, (3) Purchaser shall have the right to be present with Seller at any hearings or negotiations with respect thereto, and (4) Seller shall not settle or compromise any such matter without Purchaser's prior written consent which consent shall not be unreasonably withheld. If the Closing Date would otherwise occur sooner, it shall automatically be extended to the date that is ten (10) Business Days after written notice to Purchaser of the Material Taking. (b) the representations and warranties of Seller contained in this Agreement shall be true and correct in all material respects as of Closing Date as if made on the Closing Date; 20 (c) Seller shall have removed and discharged the Monetary Liens from the title to the Property and Purchaser shall receive good, clear, record and marketable title to the Property free and clear of all liens and encumbrances other than the Permitted Title Exceptions; (d) Simultaneously with the Closing under this Agreement, Seller shall close a new operating line loan from Silicon Valley Bank in the amount of $8,000,000.00 with availability of $3,000,000.00 as of the Closing Date and shall provide Purchaser with a written statement from the bank confirming the same. At the Closing, Seller shall provide Purchaser with evidence that all net proceeds of the sale are used at the Closing to retire outstanding debt with Fleet Bank; (e) Since the date of the most recent financial statements of Seller provided by Seller to Purchaser, there shall have been no material adverse change in the financial condition or business operations of Seller; (f) Since the Due Diligence Expiration Date, there shall have been no material adverse change in the condition of the Property (exclusive of any insured casualty, which shall be governed by Section 12(a) above, or any condemnation, which shall be governed by Section 12(a) above). (g) Possession of the Property shall be delivered to Purchaser by Seller at the Closing free and clear of (a) all leases, tenants and other occupants other than Seller under the Lease and (b) any management, leasing, service, maintenance or other contracts or agreements other than the Lease and the Permitted Title Exceptions; (h) There shall be no judicial or administrative proceeding pending or threatened concerning the Property that was not disclosed in writing to Purchaser before the Due Diligence Expiration Date, and the Property and the use and operation thereof shall comply in all material respects with all applicable legal requirements; (i) Should Purchaser choose or be obligated in the event of any casualty or any taking of any portion of the Property, to proceed to a Closing, then all unexpended insurance and taking proceeds and all rights to insurance proceeds and taking proceeds, as applicable, shall be assigned and paid over by Seller to Purchaser. (j) Seller has, at its sole cost and expense, obtained all necessary consents and approvals for the transfer of all warranties and guaranties affecting the Property and improvements thereon, including but not limited to all roof warranties, to Purchaser, in form and substance reasonably acceptable to Purchaser to the extent possible; 21 (k) Seller shall have entered into a written agreement satisfactory in scope and substance to Purchaser and the Lender with LFR Levine Fricke under which LFR Levine Fricke shall, at Seller's expense, conduct a Phase II environmental report for the Property (the "Phase II Report") and deliver the same in final form (including, without limitation, with a full set of testing results and all related information) to Seller and Purchaser within ninety (90) days following the Closing. Seller shall promptly undertake and complete in accordance with all applicable laws all requirements set forth in the Phase II Report and shall complete the same within ninety (90) days from the delivery of the Phase II Report to Seller (or within such longer or shorter period of time as may specifically be set forth in the Phase II Report, in each case subject to any delay caused by acts of God) (which obligation shall survive the Closing and shall also be set forth in the Lease); (l) Purchaser shall have obtained $5 million of environmental insurance for the benefit of Purchaser and its first mortgage lender for a term of not less than five years and otherwise in form and substance, and from an insurance company, acceptable to Purchaser and its first mortgage lender, in their sole and unreviewable discretion. At Closing, Seller shall pay $89,000 toward the cost of the premium for such policy, which payment shall be made by a credit in favor of Purchaser against the Minimum/Cash Portion of the Purchase Price; (m) Simultaneously with the Closing hereunder, (i) the closing shall occur under that certain Purchase and Sale Agreement dated as of the date hereof between Purchaser or its affiliate and Poly-Flex Circuits, Inc. concerning certain property located at 28 Kenney Drive, Cranston, Rhode Island; and (ii) the closing under the Loan shall occur; and (n) Purchaser may waive any of the foregoing conditions in this Section 12 and any such waiver shall not be deemed a waiver or modification of any other conditions. 13. Failure of Conditions; Defaults. 13.1 Termination without Default. If the sale of the Property is not consummated because of the failure of any condition precedent to Purchaser's obligations expressly set forth in this Agreement or for any other reason except a default by Purchaser in its obligation to purchase the Property in accordance with the provisions of this Agreement ("Failure of Condition"), the time of the Closing shall be extended for a period of up to 30 days, during which time Seller shall use reasonable efforts to cure such Failure of Condition. Such efforts of Seller to cure such Failure of Condition shall not require Seller to expend more than $25,000 in costs and expenses in such efforts; provided, however, if any such Failure of Condition relating to the condition of title to the Property is a result of a voluntary consensual action by Seller to so encumber the title to the Property such dollar limit to Seller's efforts shall not apply. If the time of the Closing is extended and if at the end of such extension period Seller shall have failed so to cure such Failure of 22 Condition, as herein provided, and if Purchaser, at its election, does not waive any such Failure of Condition, then Purchaser may elect, as its sole and exclusive remedy, (x) to terminate this Agreement by notice thereof to Seller in which case the Deposit and all interest accrued thereon shall be forthwith refunded to Purchaser and all other obligations of the parties hereto shall cease and this Agreement shall be null and void and the parties hereto shall have no further obligation or liability arising hereunder or (y) to proceed with the Closing in accordance with Section 14 hereof. Seller and Purchaser agree that, if the transactions contemplated hereby do not close on account of a default by Seller, then Section 13.3 below, rather than this Section 13.1, shall apply. 13.2 Purchaser's Default. If the sale contemplated hereby is not consummated because of a default by Purchaser in its obligation to purchase the Property in accordance with the terms of this Agreement, and if such default is not cured within ten (10) days from written notice thereof from Seller to Purchaser, then: (a) this Agreement shall terminate; (b) the Deposit shall be paid to and retained by Seller as liquidated damages; and (c) Seller and Purchaser shall have no further obligations to each other. PURCHASER AND SELLER ACKNOWLEDGE THAT THE DAMAGES TO SELLER IN THE EVENT OF A BREACH OF THIS AGREEMENT BY PURCHASER WOULD BE DIFFICULT OR IMPOSSIBLE TO DETERMINE, THAT THE AMOUNT OF THE DEPOSIT REPRESENTS THE PARTIES' BEST AND MOST ACCURATE ESTIMATE OF THE DAMAGES THAT WOULD BE SUFFERED BY SELLER IF THE TRANSACTION SHOULD FAIL TO CLOSE AND THAT SUCH ESTIMATE IS REASONABLE UNDER THE CIRCUMSTANCES EXISTING AS OF THE DATE OF THIS AGREEMENT AND UNDER THE CIRCUMSTANCES THAT SELLER AND PURCHASER REASONABLY ANTICIPATE WOULD EXIST AT THE TIME OF SUCH BREACH. PURCHASER AND SELLER AGREE THAT SELLER'S RIGHT TO RETAIN THE DEPOSIT SHALL BE SELLER'S SOLE REMEDY, AT LAW AND IN EQUITY, FOR PURCHASER'S FAILURE TO PURCHASE THE PROPERTY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT. 13.3 Seller's Default. If Seller defaults in its obligation to sell and/or lease the Property in accordance with the terms of this Agreement, and if such default is not cured within ten (10) days from written notice thereof from Purchaser to Seller, then Purchaser may, as its sole and exclusive remedy at law or in equity: (a) terminate this Agreement by giving written notice thereof to Seller, in which event the Deposit will promptly be returned to Purchaser, Seller promptly shall reimburse Purchaser for the third party costs which shall be defined as legal, engineering, survey, environmental and title fees as evidenced by copies of all bills relating to expenses incurred that Purchaser has incurred in connection with this Agreement and the transactions contemplated hereby, and the parties shall have no further obligation to each other; (b) waive such default and consummate the transactions contemplated hereby in accordance with the terms of this Agreement; or (c) specifically enforce this Agreement. Purchaser hereby irrevocably waives any other right or remedy for such default; provided, however, that if, in 23 breach of this Agreement, Seller sells the Property (or any portion thereof) to someone other than Purchaser or otherwise takes action that renders the remedy of specific performance impossible or impractical to obtain, Seller shall be liable for any damages suffered by Purchaser as a result of such breach. If Purchaser brings an action for specific performance, the Deposit shall be returned to Purchaser pending the outcome of such action. As a condition precedent to Purchaser exercising any right it may have to bring an action for specific performance hereunder, Purchaser must commence such an action within ninety (90) days after the Closing Date (as the same may be extended in accordance with the terms hereof). Purchaser agrees that its failure to timely commence such an action for specific performance within such ninety (90) day period shall be deemed a waiver by it of its right to commence an action for specific performance as well as a waiver by it of any right it may have to file or record a notice of lis pendens or notice of pendency of action or similar notice against all or any portion of the Property. 14. Purchaser's Election to Accept Title. Purchaser shall have the additional election, at either the original or any earlier or extended time for performance, to accept such title as Seller can deliver to the Property in its then condition and to pay therefor the Purchase Price without deduction (but subject to adjustment as provided in Section 16), in which case Seller shall convey such title. 15. Application of Purchase Money to Liens. If on the Closing Date there are any other liens or encumbrances on the Real Property other than those to which Purchaser's title is to be subject hereunder, Seller may use any portion of the balance of the Purchase Price to satisfy the same, provided Seller shall simultaneously either (a) deliver to Purchaser at the Closing instruments in recordable form and sufficient to satisfy such liens and encumbrances of record, together with the cost of recording or filing said instruments, or (b) with respect to any first mortgage lien held by an institutional lender, and provided that Seller has made arrangements with the title company employed by Purchaser in advance of Closing, deposit with said title company sufficient monies, acceptable to and required by it, to assure the obtaining and the recording of such satisfactions and the issuance of title insurance to Purchaser free of any such liens and encumbrances. The existence of any such other liens and encumbrances shall not be deemed objections to title if Seller shall comply with the foregoing requirements. 16. Apportionments and Costs. (a) In light of the fact that, pursuant to the Lease, Seller (as Tenant) shall be responsible for all real estate taxes, water, sewer and other utility charges, fuel and any fees or other amounts payable under any contracts for maintenance, and all other costs associated with the Property, no adjustment shall be made therefor at Closing and, as of 11:59 p.m. (Boston time) on the day before the Closing Date, Seller shall assume responsibility 24 therefor under the Lease. At the Closing, Seller shall make a pro rated payment of the base and additional rent due under the Lease for the period from and including the Closing to and including the last day of the month in which the Closing occurs. (b) Any real estate tax abatements in respect of any tax year prior to the tax year commencing July 1, 2002, together with any interest earned thereon, shall belong to Seller. Purchaser agrees that, should it receive any amounts from the City of Methuen or any other taxing authority for tax abatements that are attributable to such prior tax years, Purchaser shall pay such amounts over to Seller. Any real estate tax abatements in respect of any tax year commencing on or after July 1, 2002, together with any interest earned thereon, shall be apportioned pro rata amongst Seller and Purchaser based upon their respective periods of ownership. Seller agrees that, should it receive any amounts from the City of Methuen or any other taxing authority for tax abatements that are attributable to the timeframe when it did not own the Property, Seller shall pay such amounts over to Purchaser. (c) All municipal assessments or betterments assessed shall be the responsibility of Seller. (d) Seller shall pay at the Closing all Deed Stamp Excise Taxes payable in connection with the conveyance of the Property pursuant to this Agreement and any discharges of any Monetary Liens. Purchaser shall pay the costs of recording the Deed. (e) Each of the parties hereto shall pay the costs of their own respective counsel and any costs or expenses incurred by such party in connection with this transaction. Purchaser shall pay all costs of its Investigations including of title and survey matters and of obtaining any financing or title insurance in connection with acquiring the Property. Purchaser shall receive a credit of $89,000 against the Minimum/Cash Portion of the Purchase Price as provided for in Section 12(l) above. (f) The net amount of such apportionments if due to Seller shall be added to the amount payable under Section 2, and if due to Purchaser shall be subtracted from such amount. To the extent that such apportionments may not reasonably be determined on the Closing Date, they shall be determined and paid as soon as practicable after the Closing. (g) To the extent that any apportionments to be made under this Section 16 may not reasonably be determined on the Closing Date, they shall be determined and paid as soon as practicable after the Closing. All apportionments to be made under this Section 16 shall be made as of 11:59 p.m. (Boston time) on the day before the Closing Date. 25 17. Brokers. Each of Seller and Purchaser represents and warrants that it has dealt only with Broker, as a broker or finder with respect to this transaction and with respect to the Property. Upon, and only upon, the Closing and consummation of this transaction, Seller shall pay Broker per a separate agreement a commission for acting as broker to the sale and lease transactions contemplated by this Agreement. Each of Purchaser and Seller agrees to indemnify and hold harmless the other party from and against all claims for brokerage or commission or finder's fees on account of this sale and/or lease arising out of dealings with the party from whom indemnification is sought; provided, however, that Seller shall in all events be solely responsible for, and shall defend and indemnity Purchaser against, any claims by Broker with respect to the sale and/or lease transactions contemplated by this Agreement. This Section 17 shall survive the Closing or any termination of this Agreement. 18. Escrow of Deposit. The Deposit and interest accrued thereon shall be held in escrow by the Title Company as escrow agent subject to the terms of this Agreement, and shall be duly accounted for in accordance with this Agreement. The escrow agent shall not be liable for any action or failure to act taken or made in good faith in connection with the performance of its duties hereunder, but shall be liable only for its own willful default or misconduct. Purchaser and Seller agree to indemnify and hold harmless the escrow agent from any loss, damage, liability, cost or expense (including reasonable attorneys' fees and expenses) arising out of any act or action taken by it in good faith in connection with the performance of its duties hereunder, provided that Purchaser and Seller shall not indemnify the escrow agent against any loss, damage, liability, cost or expense arising out of willful misconduct, gross negligence, fraud or any violation of the terms of this Agreement. Notwithstanding anything contained in this Agreement to the contrary with respect to the obligations of the escrow agent, should any dispute arise with respect to the delivery and/or ownership or right to possession of such amount, the escrow agent shall have no liability to any party hereto for retaining dominion and control over such amount until such dispute shall have been settled: (a) by mutual agreement between the parties; or (b) by final order, decree or judgment by a court of competent jurisdiction in the United States of America (and no such order, decree or judgment shall be deemed to be "final" unless and until the time of appeal has expired and no appeal has been made); and the escrow agent shall make payment of such amount as the parties may have mutually agreed or in accordance with such final order, decree or judgment. In no event shall the escrow agent be under any duty whatsoever to institute or defend any such proceeding. 26 The Title Company may resign as escrow agent hereunder, in its sole discretion, by giving twenty-four (24) hours' written notice to Purchaser and Seller. If Purchaser and Seller are unable to agree on a substitute escrow agent within forty-eight (48) hours after such notice, the Title Company may transfer the Deposit, subject to the terms of this Agreement, to any bank with offices in Boston, Massachusetts having capital of not less than $50,000,000.00 or, the Title Company may transfer the Deposit to any Court with jurisdiction over the matter. Notwithstanding anything to the contrary in this Agreement, at Purchaser's written request made any time before the Due Diligence Expiration Date, and without the need for any confirmation or direction from Seller and without regard to any contrary instructions that may be given by or on behalf of Seller, the Title Company shall promptly return the Deposit (and all interest thereon) to Purchaser. 19. Damages; Limitations on Recovery. If Purchaser shall default in the performance of its obligations to purchase the Property subject to and in accordance with the terms of this Agreement and provided that Seller shall not be in default hereunder, then the Deposit and interest accrued thereon shall be paid to Seller in full payment of Seller's damages resulting from Purchaser's default as liquidated damages and not as a penalty as Seller's sole and exclusive remedy at law or in equity as provided for in Section 13 above. Notwithstanding the foregoing, if following the termination of this Agreement and return of the Deposit to Purchaser, Purchaser fails to indemnify and restore as provided in Section 5(c) or violates Section 25 (each a "Violation"), Seller shall be entitled to recover all damages and any costs and expenses incurred by Seller, together with attorneys' fees and costs associated with recovering and collecting the amount of any such damages, related to such Violation, provided that such recovery shall not be limited to the amount of the Deposit and interest accrued thereon. In the event of any Violation, Seller may elect any appropriate action available in equity or at law, such rights and remedies being cumulative and the exercise of one or more such right or remedy by Seller shall not be construed to be a waiver of any of the others. Purchaser hereby acknowledges and agrees that any right, remedy, recourse or recovery Purchaser may have against or from Seller hereunder or with respect hereto (including any documents delivered in connection herewith) shall be limited to (i) Seller's interest in the Property or (ii) the net proceeds received by Seller from the sale of the Property (for these purposes, any portion of the net sale proceeds used to pay obligations of the Seller shall be deemed to have been received by the Seller). Notwithstanding the foregoing, Purchaser agrees that Seller shall have no liability to Purchaser for any breach of Seller's covenants, agreements, representations or warranties hereunder or under any other agreement, document, certificate or instrument delivered by Seller to Purchaser unless the valid claims for all such breaches collectively aggregate more than $25,000, in which event the full amount of such valid claims from the first dollar shall be actionable, up to the cap set forth in the following sentence. Following the Closing, the 27 maximum aggregate liability of Seller, and the maximum aggregate amount which may be awarded to and collected by Purchaser, in connection with this Agreement (exclusive of the Lease), the sale of the Property under this Agreement (including, without limitation, in connection with the breach of any representations and warranties contained herein) and any and all documents executed pursuant hereto or in connection herewith(exclusive of the Lease) for which a claim is timely made by Purchaser shall not exceed $500,000. The foregoing shall not be deemed to limit Purchaser's right to recover the full Deposit if Purchaser is entitled thereto pursuant to this Agreement, nor to limit any right of Purchaser to seek specific performance of this Agreement or to enforce its other remedies under Section 13. Notwithstanding the foregoing, in no event will the limitations on Purchaser's remedies set forth in this Section or in Section 21 below (the time limit) apply to (x) any claims under the Lease, or (y) any claims relating to fraud by Seller. In no event shall any trustee, member, employee agent or other representative of Seller ever be personally liable hereunder or otherwise for or with respect to the acts, omissions or obligations of Seller. In no event shall any trustee, member, manager, employee, agent or other representative of Purchaser ever be personally liable hereunder or otherwise for or with respect to the acts, omissions or obligations of Purchaser. This Section 19 shall survive the Closing. 20. Assignments. Subject to the provisions of this Section 20, the terms and provisions of this Agreement shall apply to and bind the permitted successors and assigns of the parties hereto. Except as expressly provided herein, Purchaser shall not be permitted to assign its rights under this Agreement without Seller's prior written consent, which consent may be withheld in Seller's sole and absolute discretion. Notwithstanding the foregoing, Purchaser shall be permitted to assign its rights under this Agreement to an affiliate of Purchaser as long as Ben Butcher or Scott Tully manages the day to day operations; provided, however, that at least two business days prior to making any such assignment of its right, title or interest under this Agreement to such affiliate, Purchaser shall notify Seller in writing and supply all material details regarding such arrangement including information regarding the makeup of the assignee. Purchaser's proposed assignee shall expressly assume Purchaser's obligations under this Agreement. Any assignment by Purchaser of its right, title or interest under this Agreement in violation of this Section 20 shall be null and void, and shall allow Seller, at its option, to deem Purchaser in default of its obligations hereunder. Seller may not assign any of its right, title and interest under this Agreement, and any purported assignment by Seller of its right, title or interest under this Agreement shall be null and void, and shall allow Purchaser, at its option, to deem Seller in default of its obligations hereunder. Subject to the above provisions, this Agreement shall inure solely to the benefit of Seller and its successors and assigns and Purchaser and its permitted successors and assigns. No 28 person or entity other than Seller and its permitted successors and assigns and Purchaser and its permitted successors and assigns shall have any right to enforce or rely upon this Agreement. 21. Survival Provisions; Acceptance of Deed. On the termination hereof, all of the terms and provisions of this Agreement shall be void and of no further force and effect and neither Purchaser nor Seller shall have rights, obligations or liabilities hereunder except that the rights, obligations and liabilities of the parties under this Section 21 and Sections 5(c), 5(f), 17, 19 and 25 shall survive such termination and continue in effect in accordance with their terms without limit as to time. The acceptance of the Deed, by Purchaser or Purchaser's permitted assignee, as the case may be, shall be deemed to be full performance and discharge of every agreement and obligation of Seller herein contained or expressed except (i) obligations of Seller under the Lease (all of which shall survive the Closing and shall not be subject to any of the limitations on Seller's liability set forth in this Agreement), (ii) the representations and warranties of Seller made in this Agreement or any document delivered in connection with Section 10(a) (other than the Lease) which shall survive until the date which is one year after the Closing Date, (iii) any adjustments pursuant to Section 16 that cannot be finally determined after the Closing which shall survive the Closing until finally adjusted, and (iv) any terms and conditions hereof which expressly survive the Closing. 22. Further Assurances. The parties agree to execute any and all additional instruments and documents as may be reasonably required to fully effectuate the terms of this Agreement. 23. Notices. All notices or other communications required or provided to be sent by either party shall be in writing and shall be sent by: (i) by United States Postal Service, certified mail, return receipt requested, (ii) by any nationally known overnight delivery service for next day delivery, (iii) delivered in person or (iv) sent by telecopier or facsimile machine which automatically generates a transmission report that states the date and time of the transmission, the length of the document transmitted and the telephone number of the recipient's telecopier or facsimile machine (with a copy thereof sent in accordance with clause (i), (ii) or (iii) above). All notices shall be deemed to have been given upon receipt. All notices shall be addressed to the parties at the addresses below: 29 To Seller: at the address set forth in the first paragraph of this Agreement with a copy to: Edward D. Kutchin, Esq. Kutchin & Rufo, P.C. 175 Federal Street Boston, MA 02110 To Purchaser: at the address set forth in the first paragraph of this Agreement and with a copy to: Piper Rudnick LLP One International Place Boston, Massachusetts 02110-2600 Attention: John L. Sullivan, Esq. Fax No. (617) 406-6100 Any address or name specified above may be changed by notice given to the addressee by the other party in accordance with this Section. The inability to deliver notice because of a changed address of which no notice was given as provided above, or because of rejection or other refusal to accept any notice, shall be deemed to be the receipt of the notice as of the date of such inability to deliver or rejection or refusal to accept. Any notice to be given by any party hereto may be given by the counsel for such party. 24. Time. Time is of the essence in this Agreement. If any date for providing a notice or obtaining consent or approval should fall on any day which is not a business day in Massachusetts then such date shall be extended to the next following business day. 25. No Recording. Provided that Seller is not in default under this Agreement, Purchaser agrees not to record this Agreement or any notice hereof in the Essex County Registry of Deeds or the Essex Registry District of the Land Court. If Purchaser nonetheless records this Agreement or a notice thereof when Seller is not in default under the Agreement, Seller, at its option, may declare 30 Seller's obligations hereunder to be null and void and may deem Purchaser in default of its obligations hereunder, whereupon this Agreement shall terminate except as provided in Section 21 and any recorded copy of this Agreement or notice thereof shall for all purposes be considered null and void between the parties hereto and shall not be a notice to or binding in any way on third parties. 26. Miscellaneous. This instrument may be executed in one or more counterparts which together shall constitute one instrument. The invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of any other term or provision hereof. The captions to the paragraphs hereof are for convenience of reference only and are not intended to affect the meaning of the provisions of this Agreement. Unless otherwise provided herein, references in this Agreement to (i) any "Section" shall mean the sections and subsections of this Agreement, as applicable and (ii) any "Schedule" or "Exhibit" are references to the schedules and exhibits attached hereto which are incorporated into this Agreement by this reference. This Agreement is to be construed as a Massachusetts contract, is to take effect as a sealed instrument, sets forth the entire contract and understanding between the parties superseding any prior oral or written agreements, and may be canceled, modified or amended only by a written instrument executed by both Seller and Purchaser. 27. Lease Execution. At the Closing, Seller and Purchaser shall execute and deliver the lease attached hereto as Schedule 6 (the "Lease"). 28. Earn-Out Provisions. As provided in Section 2(d), as of June 30, 2004, and on each June 30th thereafter through and including June 30, 2009, the Purchase Price shall be increased by Two Hundred Thousand Dollars ($200,000) (up to a maximum aggregate increase of $1,000,000) if and only for the immediately preceding twelve month period Seller has met the Financial Milestones (defined below) and other conditions set forth below. Subject to the provisions of this Section, any amounts due to Seller under this Section 28 (the "Earn Out Amount") shall be contingent upon Seller's full and faithful performance of its obligations under the Lease. In the event that the Seller does not meet the Financial Milestones as of the end of a particular fiscal year, then the $200,000.00 installment of the Earn Out Amount that would have been due if such conditions were met shall be deferred without interest until the end of the next fiscal year, at which time such deferred amount shall be earned if, but only if, the Financial Milestones and other conditions of this Section 28 are satisfied at such time and provided further that, if the Financial Milestones and other conditions of this Section 28 are not satisfied by June 30, 2009, then Purchaser's obligation to pay any and all unpaid portions of the Earn Out Amount shall permanently terminate and this Section 28 shall be of no further force or effect. Notwithstanding anything contained herein to the contrary, in no event shall the total aggregate Earn Out Amount exceed One Million Dollars ($1,000,000). Subject to the provisions of this Section, each installment of the Earn Out Amount shall be due thirty (30) days after Purchaser receives audited 31 financial statements prepared by Seller's outside independent auditors and written evidence in form and substance reasonably acceptable to Purchaser from Seller's outside independent auditors demonstrating that the financial tests set forth below are satisfied; provided, however, that Purchaser shall have the option of paying any such installment by having it added to the balance of the Note. Without limiting the other conditions to payment of the Earn Out Amount set forth herein, Purchaser shall not be obligated to pay any installment of the Earn Out Amount if, at the time such installment would otherwise be due: (i) the leasehold created by the Lease shall be taken on execution, or by other process of law, or if any assignment shall be made by Seller for the benefit of creditors, or a receiver, trustee in bankruptcy or similar officer shall be appointed by a court of competent jurisdiction to take charge of all or any part of property of Seller or if a petition including, without limitation, a petition for reorganization or arrangement is filed by Seller under any bankruptcy law or is filed against Seller; or (ii) Seller is under default under the Lease; provided, however, that if the default is cured within any applicable notice and cure period and the Financial Milestones and other conditions to payment set forth in this Section 28 are satisfied, then such installment of the Earn Out Amount shall be paid as provided for herein within thirty (30) days from the date on which the default is cured and all such conditions are satisfied; provided further that in no event shall any portion of the Earn Out Amount be due unless the conditions to payment set forth in this Section 28 are satisfied by September 1, 2009. In addition, in the event of a default by Tenant under the Lease and its failure to cure said default beyond any applicable cure periods, then any balance of the Earn Out Amount then unpaid shall automatically be extinguished in full and the obligation of Purchaser to pay the same shall be null and void. The "Financial Milestones" for the purposes of this Section 28 are as set forth below and shall be calculated in accordance with Generally Accepted Accounting Principles and certified by Seller's outside independent auditors: 1. Seller shall have gross revenues for each fiscal year beginning in fiscal year 2003 on a consolidated basis of at least $100 million and Seller's earnings before taxes for each such fiscal year shall not be less than $1.00. 2. The current ratio of Seller's current assets to its current liabilities, determined on a consolidated basis, shall be not less than 1.05 to 1; 32 3. Seller's current debt to equity ratio shall not be greater than 0.5 to 1.0; and 4. No material defaults shall exist under Seller's then current loan agreements with its lending institutions and Seller shall certify the same to Purchaser. Seller hereby represents and warrants to Purchaser that Seller's current debt to equity ratio is not greater than 0.5 to 1.0. The terms of this Section 28 shall survive the Closing. 29. Attorney's Fees. In the event legal proceedings through the courts are commenced to enforce the parties' respective rights and obligations herein, the prevailing party shall be entitled to reimbursement for all costs and expenses, including reasonable legal fees, incurred with respect to said legal proceedings. [The remainder of this page is intentionally left blank] 33 IN WITNESS WHEREOF, this Agreement has been executed by each of the parties hereto, under seal, as of the day and year first written above. PURCHASER: Taurus Methuen, LLC By: /s/ Scott R. Tully ------------------------------- Scott R. Tully Manager SELLER: Parlex Corporation By: /s/ Jonathan R. Kosheff ------------------------------- Jonathan R. Kosheff Chief Financial Officer ESCROW AGENT: Stewart Title Guaranty Insurance Company By: /s/ Marie L. Franco ------------------------------- National Underwriting Counsel 35 EX-10 6 park210b.txt EXHIBIT 10.BB Exhibit 10.BB FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT This First Amendment to Purchase and Sale Agreement (this "Amendment") is entered into as of May 23, 2003 by and between Parlex Corporation ("Seller") and Taurus Methuen LLC ("Purchaser"). BACKGROUND ---------- A. Seller and Purchaser entered into a Purchase and Sale Agreement dated as of May 8, 2003 (the "P&S Agreement") concerning certain premises located at One Parlex Place, Methuen, Massachusetts. Capitalized terms used herein without definition have the meaning given to them in the P&S Agreement. B. Seller and Purchaser wish to amend the P&S Agreement as provided below. AGREEMENT --------- NOW THEREFORE, for valuable consideration, the Seller and Purchaser agree as follows: 1. The Due Diligence Expiration Date (as defined in Section 5(e) of the P&S Agreement) is extended to 6:00 P.M. (local time in Boston, Massachusetts) on May 30, 2003. 2. Section 3 of the P&S Agreement is amended by changing "May 28, 2003" to "June 11, 2003". 3. This Amendment may be executed by facsimile and in counterparts and it shall be sufficient that the signature of each party appear on one or more of such counterparts. 4. Except as otherwise provided above, the P&S Agreement is ratified and confirmed and remains in full force and effect. All references in the P&S Agreement to "this Agreement" shall mean the P&S Agreement as amended by this Amendment. [Balance of this page intentionally left blank] EXECUTED under seal as of the date first written above. SELLER: Parlex Corporation By: /s/ Edward D. Kutchin ---------------------- Name: Edward D. Kutchin Title: Attorney PURCHASER: Taurus Methuen LLC By: /s/ Scott R. Tully ------------------- Name: Scott R. Tully Title: Manager 2 EX-10 7 park210c.txt EXHIBIT 10.CC Exhibit 10.CC SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT This Second Amendment to Purchase and Sale Agreement (this "Amendment") is entered into as of June 3, 2003 by and between Parlex Corporation ("Seller") and Taurus Methuen LLC ("Purchaser"). BACKGROUND ---------- A. Seller and Purchaser entered into a Purchase and Sale Agreement dated as of May 8, 2003 concerning certain premises located at One Parlex Place, Methuen, Massachusetts, as amended by a First Amendment to Purchase and Sale Agreement dated May 23, 2003 (as so amended, the "P&S Agreement"). Capitalized terms used herein without definition have the meaning given to them in the P&S Agreement. B. The Due Diligence Period expires as of the date hereof and, subject to the execution and delivery of this Amendment by Seller, Purchaser intends to give its Notice to Proceed. C. Seller and Purchaser wish to amend the P&S Agreement as provided below. AGREEMENT --------- NOW THEREFORE, for valuable consideration, the Seller and Purchaser agree as follows: 1. Section 5(e)(i) of the P&S Agreement is hereby amended by deleting the phrase "Four Million Eight Hundred and Eighteen Thousand Dollars ($4,818,000.00)" and substituting therefor "Six Million and Six Hundred Thousand Dollar ($6,600,000.00)." 2. Section 10(a)(xi) of the P&S Agreement is hereby amended by deleting such section in its entirety and substituting therefore the following language: "(xi) a written certification from Seller stating that: (a) the Improvements as constructed conform in all material respects to those improvements approved in the 1998 Variance, the 1998 Special Permit and the 1998 Site Plan Approval; and (b) duly issued certificates of occupancy are in effect for all portions of the Property;" 3. Section 12(k) of the P&S Agreement is hereby deleted in its entirety and the following language is hereby substituted therefore: "(k) Reference is made to a Level 2 Environmental Site Assessment for the Property performed by LFR Levine Fricke ("LFR") and the Summary of Findings thereof dated May 20, 2003 (the "Phase II Interim Report"). Seller shall, at its sole expense, use commercially reasonable efforts to cause LFR promptly to issue the final Phase II report together with a letter, in form and substance reasonably acceptable to Purchaser (the "Reliance Letter"), allowing Purchaser and its lender to rely on such final Phase II report and any additional reports, findings or certifications provided to Seller in connection therewith (such final phase II report, together with the Phase II Interim Report, is hereinafter referred to as the "Phase II Report"), provided that such reliance shall be in accordance with the terms and conditions of LFR's proposal to Seller dated October 20, 2002. Purchaser acknowledges that, because the final phase II report will not be delivered until after the Closing, the Reliance Letter will not be delivered until after the Closing (it being agreed, however, that in such event, the final Phase II report, together with the Reliance Letter, shall be delivered to Purchaser as promptly as possible following the Closing and no later than three business days after the date on which such final Phase II report is delivered to Seller). Seller shall as soon as reasonably possible after the Closing Date, but in any event within 360 days after the Closing Date or such shorter period as may be required by applicable law, time being of the essence (in each case subject to any delay caused by acts of God), complete each of the following: (W) cause the additional testing, investigation, and studies recommended in the Phase II Report to be conducted, (X) cause all remedial action and cleanup recommended in the Phase II Report to be undertaken and completed as set forth in the Phase II Report and otherwise in accordance with applicable law, and carry out and complete any further remediation in accordance with applicable law, such that a Permanent Solution Response Action Outcome will have been achieved for the Property pursuant to a 310 CMR 40.000 et seq. and all other applicable law, with only such Activity and Use Limitations or other ongoing conditions or requirements as are reasonably acceptable (in form and substance) to Purchaser (it being agreed that it shall be reasonable for Purchaser to reject any Activity and Use Limitation or other ongoing condition or requirement that would have a material adverse impact on the value or marketability of the Property for manufacturing, distribution, office or warehousing uses); (Y) cause all notifications and submittals described in the Phase II Report or otherwise required under applicable law to be timely made to the appropriate governmental authorities and provide copies of such notifications to Purchaser, including without limitation the following submittals to the Massachusetts Department of Environmental Protection: a 120-day written Release Notification Form (to be submitted by September 16, 2003); a "Phase I/Tier Classification" submittal; a Release Abatement Measure (RAM) Plan to the extent recommended by the LSP or otherwise required by applicable law; a RAM Completion Report; and a Response Action Outcome; and (Z) provide Purchaser with third party documentation reasonably acceptable to Purchaser and Lender that all remedial action described in clause (X) and (Y) above has been carried out in accordance with the Phase II Report and otherwise in accordance with applicable law, including without limitation providing written evidence reasonably satisfactory to Purchaser and Lender that a Permanent Solution Response Action Outcome, with only such Activity and Use Limitations or other ongoing conditions or requirements as are reasonably acceptable to Purchaser, has been achieved and has become effective with respect to the environmental conditions at the Property and that all filings, submission, and approvals relating to such Permanent Solution Response Action Outcome have been carried out in accordance with 310 CMR 40.000 et seq. and all other applicable law. Seller shall thereafter, at all times during the term of the Lease, at its sole expense, cause all actions to be taken necessary to maintain such Permanent Solution Response Action Outcome in full force at all times, including without limitation complying with any ongoing monitoring, maintenance, or reporting obligations required under such Permanent Solution Response Action Outcome and providing evidence of such compliance to Purchaser upon Purchaser's reasonable 2 request. The obligations in this Section 12(k) shall survive the Closing and shall also be set forth in the Lease.;" 3. Section 28 of the P&S Agreement is amended by inserting, immediately after existing subsection (ii) of such Section 28 (in the middle of page 32), the following language as new subsection (iii): "(iii) Seller shall have failed to comply with the provisions and requirements of Section 12(k) of this Agreement or the second-to-last paragraph of Section 5.10 of the Lease, including without limitation the failure to have caused a Permanent Solution Response Action Outcome to have been achieved, become effective, and to have remained in full force with respect to the Property." 4. Schedule 3 of the P&S Agreement is amended by adding the following to such schedule: "Summary of Findings - Level 2 Environmental Site Assessment , Parlex Corporation, One Parlex Place, Methuen, Massachusetts" prepared by LFR Levine Fricke and dated May 20, 2003." 5. Schedule 6 of the P&S Agreement, which attaches the Lease, is amended by deleting the second-to-last paragraph of Section 5.10 of the Lease, and replacing such paragraph with the following: "Reference is made to a Level 2 Environmental Site Assessment for the Property performed by LFR Levine Fricke and the Summary of Findings thereof dated May 20, 2003 (the "Phase II Interim Report"). Tenant shall, at its sole expense, use commercially reasonable efforts to cause LFR promptly to issue the final Phase II report together with a letter, in form and substance reasonably acceptable to Landlord (the "Reliance Letter"), allowing Landlord and its lender to rely on such final Phase II report and any additional reports, findings or certifications provided to Tenant in connection therewith (such final phase II report, together with the Phase II Interim Report, is hereinafter referred to as the "Phase II Report"), provided that such reliance shall be in accordance with the terms and conditions of LFR's proposal to Tenant dated October 20, 2002. Tenant agrees that the final Phase II report, together with the Reliance Letter, shall be delivered to Landlord as promptly as possible following the date hereof and no later than three business days after the date on which such final Phase II report is delivered to Tenant. Tenant shall as soon as reasonably possible after the Closing Date, but in any event within 360 days after the Closing Date or such shorter period as may be required by applicable law, time being of the essence (in each case subject to any delay caused by acts of God), complete each of the following: (W) cause the additional testing, investigation, and studies recommended in the Phase II Report to be conducted, (X) cause all remedial action and cleanup recommended in the Phase II Report to be undertaken and completed as set forth in the Phase II Report and otherwise in accordance with applicable law, and carry out and complete any further remediation in accordance with applicable law, such that a Permanent Solution Response Action Outcome will have been achieved for the Property pursuant to a 310 CMR 40.000 et seq. and all other applicable law, with only such Activity and Use Limitations or other ongoing conditions or requirements as are reasonably acceptable (in form and substance) to Landlord (it being agreed that it shall be reasonable for Landlord to reject any Activity and Use Limitation or other ongoing condition or requirement that would have a material adverse impact on the value or 3 marketability of the Property for manufacturing, distribution, office or warehouse uses); (Y) cause all notifications and submittals described in the Phase II Report or otherwise required under applicable law to be timely made to the appropriate governmental authorities and provide copies of such notifications to Landlord, including without limitation the following submittals to the Massachusetts Department of Environmental Protection: a 120-day written Release Notification Form (to be submitted by September 6, 2003); a "Phase I/Tier Classification" submittal; a Release Abatement Measure (RAM) Plan to the extent recommended by the LSP or otherwise required by applicable law; a RAM Completion Report; and a Response Action Outcome; and (Z) provide Landlord and any third party lender to Landlord with third party documentation reasonably acceptable to Landlord and any such lender that all remedial action described in clause (X) and (Y) above has been carried out in accordance with the Phase II Report and otherwise in accordance with applicable law, including without limitation providing written evidence satisfactory to Landlord and any such lender that a Permanent Solution Response Action Outcome, with only such Activity and Use Limitations or other ongoing conditions or requirements as are reasonably acceptable to Landlord, has been achieved and has become effective with respect to the environmental conditions at the Property and that all filings, submission, and approvals relating to such Permanent Solution Response Action Outcome have been carried out in accordance with 310 CMR 40.000 et seq. and all other applicable law. Tenant shall thereafter, at all times during the term of the Lease, at its sole expense, cause all actions to be taken necessary to maintain such Permanent Solution Response Action Outcome in full force at all times, including without limitation complying with any ongoing monitoring, maintenance, or reporting obligations required under such Permanent Solution Response Action Outcome and providing evidence of such compliance to Landlord upon Landlord's reasonable request. If during the term of the Lease Landlord is ever required to undertake any action to maintain such Permanent Solution Response Action Outcome in full force, Tenant shall promptly reimburse all costs incurred by Landlord in undertaking such action. Tenant's indemnity obligations set forth elsewhere in this Lease shall include any cost, loss, or damage incurred by Landlord and arising in connection with any subsequent audit by the Massachusetts Department of Environmental Protection (or any successor governmental entity) of the Permanent Solution Response Action Outcome or any submissions, reports, or conditions relating thereto, including without limitation the cost of any additional remediation required pursuant to such audit." Section 8.1(ix) of the Lease shall contain a specific reference to Tenant's obligations under the immediately preceding paragraph. 6. Schedule 6 of the P&S Agreement, which attaches the Lease, is amended by deleting Section 5.17 of the Lease in its entirety and inserting the following language in its place: "Section 5.17 Additional Payments for Certain Improvements. (a) Commencing on the Commencement Date and by the first day of each subsequent calendar month during the first five years of the Term until the Approved Parking Area Work (defined below) is fully completed and paid for as provided below, Tenant shall pay to Landlord $7,176.00 (all such amounts paid to Landlord, the "Improvement Funds"). The Improvement Funds may be commingled with other funds of Landlord and shall not constitute an asset of Tenant, and no fiduciary relationship shall be created with respect to such funds. 4 (b) On or prior to September 15, 2003, Tenant shall submit plans, specifications, and contractors bids for the improvement and repair of the Lower Gravel Parking Lot (defined below). Upon request of Landlord, Tenant shall submit any other materials reasonably requested by Landlord in connection with such proposed improvement. After consultation with Tenant, Landlord shall notify Tenant as to the scope of improvement and repair reasonably approved by Landlord for the Lower Gravel Parking Lot. Tenant shall obtain all permits and approvals necessary for the proposed improvements. Within thirty (30) days following receipt of such notification, but subject to any delay resulting from causes beyond Tenant's control, Tenant shall commence and thereafter diligently work to complete the improvement and repair the Lower Gravel Parking Lot at its sole cost and expense in accordance with the scope of work approved by Landlord and otherwise in accordance with the requirements applicable to Tenant Work in this Lease and applicable law ("Approved Parking Area Work"). The term "Lower Gravel Parking Lot" means the parking area at the Property more particularly shown on the sketch attached hereto as Exhibit I. (c) Except as hereinafter provided and so long as no Event of Default has occurred, upon completion of the Approved Parking Area Work or portions thereof, Tenant may submit third party invoices and evidence of payment for such work to Landlord and may request reimbursement for such costs actually incurred by Tenant to the extent of the amount of the Improvement Funds actually paid to Landlord by Tenant. In no event shall any approval from Landlord relating to the Approved Parking Area Work be deemed to be a judgment from Landlord that the Approved Parking Area Work can be completed within a certain budget or for an amount less than or equal to the amount of the Improvement Funds actually paid to Landlord by Tenant; to the extent any Tenant Work on the Lower Gravel Parking Lot exceeds the amount of the Improvement Funds actually paid to Landlord by Tenant, all excess cost shall be borne by Tenant at its expense without reimbursement. (d) If Tenant has not completed improvement and repair of the Lower Gravel Parking Lot satisfactory to Landlord on or before June 30, 2004, Landlord may, in its sole discretion and without obligation to do so, use all or any portion of the Improvement Funds to carry out such improvement and repair of the Lower Gravel Parking Lot substantially in accordance with the plans approved by Landlord as provided for above (or, if no such plans have been approved by Landlord, then as Landlord may deem appropriate). (e) If there is a monetary or other material default by Tenant in its obligations under this Lease, and if such default continues beyond any applicable notice and cure period (or if the giving of notice is barred by applicable law), Landlord may, but shall not be obliged to, apply all or any portion of the Improvement Funds to the extent necessary to cure the default. After any such application by Landlord of the Improvement Funds, Tenant shall promptly pay to Landlord an amount equal to the Improvement Funds so expended. Within thirty (30) days after the expiration or sooner termination of the Term, and provided that no default exists under this Lease, the amount of the Improvement Funds not expended as provided for above shall be returned to the Tenant. (f) In the event of a sale of the Premises or lease, conveyance or transfer of the Premises, Landlord shall have the right to transfer the Improvement Funds to the transferee and Landlord shall upon such transfer be released by Tenant from all liability for the return or use of such Improvement Funds; and subject to Article IX, following such transfer Tenant agrees to look to the transferee solely for the return of said Improvement Funds. The provisions hereof shall apply to every transfer or assignment made of the Improvement Funds to such a transferee. Tenant further covenants that it will not assign or encumber or attempt to assign or encumber its rights with respect to the Improvement 5 Funds, and that neither Landlord nor its successors or assigns shall be bound by any assignment, encumbrance, attempted assignment or attempted encumbrance. Tenant will enter into such agreements as Landlord's lender may request with respect to the assignment of the Improvement Funds to such lender. In connection with any transfer of the Premises, Tenant shall cooperate with Landlord in the assignment of the Improvement Funds to the transferee and, if requested by the transferee. 7. Before the Closing, Purchaser and Seller shall agree upon a sketch of the Lower Gravel Parking Lot that and such sketch shall be attached as an exhibit to the P&S Agreement and the Lease. 8. Sections 12(l) and 16(e) of the P&S Agreement are amended by striking "89,000" and substituting "$122,569.00". The last paragraph of Section 5.10 of the Lease is amended by striking "89,000" and substituting "$122,569.00". 9. Exhibit H to the Lease is amended by deleting the references to Full Depth Asphalt Repairs ($15,000) and New Asphalt Overlay ($35,000), Seller and Purchaser acknowledging that such matters shall be subsumed within the Approved Parking Area Work to be undertaken as provided for in Section 5.17 of the Lease. The reference to $117,000.00 in Section 5.16(a) of the Lease is changed to $67,185.00. 10. Seller agrees that, at the Closing, it shall execute and deliver a Subordination, Non-Disturbance and Attornment Agreement substantially in the form sent by John Sullivan to Edward Kutchin and Andrew Stempler on June 2, 2003. 11. When duly executed and delivered by both parties hereto, this Amendment shall constitute Purchaser's Notice to Proceed under Section 5(e) of the P&S Agreement. 12. This Amendment may be executed by facsimile and in counterparts and it shall be sufficient that the signature of each party appear on one or more of such counterparts. 13. Except as otherwise provided above, the P&S Agreement is ratified and confirmed and remains in full force and effect. All references in the P&S Agreement to "this Agreement" shall mean the P&S Agreement as amended by this Amendment. [The balance of this page is intentionally left blank; signature page follows] 6 EXECUTED under seal as of the date first written above. SELLER: Parlex Corporation By: /s/ Jonathan R. Kosheff 6/3/03 ------------------------------- Name: Jonathan R. Kosheff Title: Chief Financial Officer PURCHASER: Taurus Methuen LLC By: /s/ Scott R. Tully ------------------- Name: Scott R. Tully Title: Manager 7 EX-10 8 park210d.txt EXHIBIT 10.DD Exhibit 10.DD PURCHASE AND SALE AGREEMENT --------------------------- This PURCHASE AND SALE AGREEMENT ("Agreement") is dated, made and effective as of May 8, 2003, by and among Poly-Flex Circuits, Inc., a duly organized Rhode Island corporation, having an address at 28 Kenney Drive, Cranston, Rhode Island, 02920 ("Seller"), and Taurus Cranston LLC, a duly organized Delaware limited liability company having an address at c/o Taurus New England Investments Corp., 118 Milk Street, Boston, MA 02109 ("Purchaser"). 1. Property. Seller agrees to sell and Purchaser agrees to buy, subject to the terms and conditions of this Agreement, the following described property: (a) the following parcels of land: (i) that certain parcel of land located at 28 Kenney Drive, Cranston, Rhode Island as more particularly described on Exhibit A-1 (hereinafter referred to as the "Parcel" or the "Premises"); and (ii) all right, title and interest of Seller in and to all rights, privileges and easements appurtenant to the Premises, including, without limitation, all development rights, air rights, water, water rights, riparian rights and water stock relating to the Premises and any rights-of-way or other appurtenances used in connection with the beneficial use and enjoyment of the Premises and all of Seller's right, title and interest in and to all roads and alleys adjoining or servicing the Premises; (b) the approximately 54,580 square foot building on the Parcel (the "Building") and all other improvements located on the Premises (collectively, the "Improvements"); (c) all right, title and interest of Seller in and to all permits, licenses and approvals with respect to the ownership, use and occupancy of the Premises and the Improvements any all other intangible property now or hereafter owned by Seller and used in the ownership of the Premises; and (d) all HVAC and boiler systems and other personal property owned by Seller located on or in or used in connection with the ownership of the Premises but excluding all furniture, fixtures and equipment used in Seller's business and not customarily included in real estate sales. The right, title and interest specified in subparagraphs (a) - (d) of this Section 1 are hereinafter sometimes collectively called the "Property". The right, title and interest specified in Subparagraphs (a) and (b) of this Section 1 are hereinafter sometimes collectively called the "Real Property". 2. Purchase Price. The agreed purchase price for the Property is Three Million Dollars ($3,000,000) (the "Purchase Price") payable as follows: (a) Purchaser shall pay Seller an earnest money deposit of One Hundred Thousand Dollars ($100,000) to the Boston office of Stewart Title Guaranty Insurance Company (the "Title Company") with an address at 99 Summer Street, 4th Floor, Boston, Massachusetts 02110, Attn: Mr. Terrance Miklas, which deposit shall be payable in installments as follows: (i) No later than three business days following the date of execution of this Agreement, Purchaser will deposit Fifty Thousand Dollars ($50,000); and (ii) On or before 5:00 p.m. (Boston time) on the Due Diligence Expiration Date (as such term is hereinafter defined), unless this Agreement terminates in accordance with Section 5(e) below, Purchaser shall deposit an additional Fifty Thousand Dollars ($50,000). As used herein, the term "Deposit" shall mean the amounts deposited with the Title Company in accordance with the immediately preceding sentence and all interest and earnings thereon. The Deposit shall be held by the Title Company, as escrow agent. The Deposit shall be placed in an interest bearing money market or similar account reasonably acceptable to Seller and Purchaser. The Deposit shall be held in escrow subject to the terms of this Agreement and in a manner sufficient to identify such as being held in escrow pursuant to this Agreement. The Deposit, together with all interest accrued thereon, shall be applied to the Purchase Price at Closing or paid to Seller or Purchaser as provided elsewhere in this Agreement. Upon request, each of Purchaser and Seller shall provide to the Title Company taxpayer identification numbers and W-9's for the interest on the Deposit. If Purchaser shall fail to deposit all or any portion of any installment of the Deposit to be paid after the date hereof as and when required under this Section 2(a), and if such failure continues for more than two (2) business days , then this Agreement shall thereupon terminate, Purchaser shall comply with Section 5(f), any portion of the Deposit then made, together with all interest accrued thereon, shall be paid to Seller, and neither party shall have any further liability hereunder except as provided in Section 18. (b) At the Closing, Purchaser shall pay to Seller by wire transfer of immediately available federal funds an amount equal to the Purchase Price, increased or decreased by the amount of any adjustments thereto provided for herein, less the Deposit as provided in Section 2(a). 3. Closing. The closing of the sale of the Property (the "Closing") pursuant to this Agreement shall take place at 10:00 a.m. (Boston time) on May 28, 2003, or upon such earlier date as the parties may agree upon in writing (the "Closing Date"), at the offices of Kutchin & Rufo, P.C. at 175 Federal Street, Boston, Massachusetts 02110, or at such other place and time as the parties may agree upon in writing provided, however, that Purchaser shall have the right to extend the Closing Date for up to two (2) weeks. 4. Title. The title to the Real Property shall be free from all encumbrances, except: (a) provisions of existing building and zoning laws; (b) the standard exceptions as are found in an ALTA Owner's Policy of Title Insurance modified so as to exclude from exceptions to coverage (i) real estate taxes and assessments, water and sewer charges due and payable on or before the Closing Date, (ii) mechanics' and materialmen's liens, (iii) rights of tenants or persons in possession other than the Seller in accordance with the Lease (defined below), (iv) creditors' rights, and (v) survey matters other than matters disclosed on the Plan (defined below); (c) real estate taxes and water and sewer charges assessed against the Real Property for the current year as are not due and payable on or before the Closing Date; 2 (d) any liens for municipal betterments or special assessments assessed after the date of this Agreement; (e) those encumbrances listed on Schedule 1; (f) such other matters affecting title to the Real Property as are disclosed on the Plan (hereinafter defined); (g) any exceptions caused by Purchaser or Purchaser's Representatives (hereinafter defined); and (h) such other easements, rights, restrictions or reservations of record as of the date of this Agreement. The encumbrances referenced in clauses (a) through (h) above, other than any Monetary Liens (hereinafter defined) shall be collectively referred to herein as the "Permitted Title Exceptions". As used herein, the term "Monetary Liens" shall mean any mortgage, deed of trust, financing statement, mechanics' or materialmens' lien or other lien securing the payment of money. The amount of any past due unpaid taxes, assessments, business improvement district charges, public assembly charges, water charges and sewer charges which Seller is obligated to pay and discharge, with the interest and penalties thereon to the Closing, may at the option of Seller be paid to Purchaser out of the balance of the Purchase Price, provided official bills therefor with interest and penalties thereon figured to said date are furnished by Seller at the Closing. The existence of any such taxes or charges shall not be deemed objections to title if Seller shall comply with the foregoing requirements. Simultaneous with or prior to the execution and delivery hereof, Seller has provided Purchaser with copies of the following title policy and plans with respect to the Premises: that certain Owner's Policy of Title Insurance, Policy Number 136-00-880275, issued by the Lawyer's Title Insurance Corporation (the "Title Policy"), and that certain ALTA/ACSM Land Title Survey in Cranston, R.I. dated December 13, 1999 by Middlesex Survey Inc. (the "Plan"). Purchaser shall review the Title Policy and Plan and update the Title Policy and Plan as it finds appropriate and obtain such other information regarding title to the Premises including any additional survey Purchaser chooses to obtain. Purchaser shall provide a copy of such updated Title Policy (together with all title exceptions documents not listed as exceptions on the Title Policy), updated Plan and surveys to Seller. Purchaser shall have the right from time to time to object to any title matters that are not Permitted Title Exceptions and which arise of record after the date of the Title Policy, or to any matters shown on any update of the Plan, by giving notice thereof (a "Title Defect Notice") to Seller no later than the Due Diligence Expiration Date (defined below). Any such title exceptions or survey matters first arising of record subsequent to the respective dates of the applicable Title Policy or Plan and to which Purchaser shall have timely objected shall be referred to herein as a "Title Objection". Notwithstanding anything to the contrary in this Agreement, Seller shall be obligated, on or before the Closing or within 5 business days after notification of said Title Objection, to discharge and remove of record Title Objections which constitute Monetary Liens. Seller may elect (but shall not be obligated) to remove, or cause to be removed any Title Objections not constituting Monetary Liens ("Non-Monetary Title Objections") at its expense. Seller shall give Purchaser notice (a "Title Response Notice") within five (5) business days after receipt of Purchaser's Title Defect Notice whether Seller 3 elects to remove any Non-Monetary Title Objections. Seller's failure to respond within such five (5) business day period as to any Non- Monetary Title Objection shall be deemed to be an election not to remove the same. Seller shall have the one time right, by notice to Purchaser given not less than five (5) business days before the Closing, to extend the Closing (not to exceed 45 calendar days) in order to provide Seller additional time in which to remove any such Non-Monetary Title Objection (it being agreed that Seller has no right to extend the Closing on account of any Monetary Lien). If Seller is unable to remove any Non-Monetary Title Objection it is required to remove hereunder prior to the Closing or any extended Closing as provided herein, or if Seller has elected not to remove one or more Non-Monetary Title Objections, Purchaser may elect either to (x) terminate this Agreement by notice to Seller, in which event Purchaser shall comply with Section 5(f), this Agreement shall terminate, the Deposit, together with all interest accrued thereon, shall be paid to Purchaser and, thereafter, the parties shall have no further rights or obligations hereunder, or (y) waive such Title Objections, in which event such Title Objections shall be deemed Permitted Title Exceptions and the Closing shall occur as herein provided without any reduction of or credit against the Purchase Price. The provisions of the preceding sentence shall not be construed or interpreted so as to permit Seller to avoid removing any Monetary Lien which, pursuant to the terms of this Agreement, are required to be removed by Seller prior to or concurrently with the Closing. Furthermore, if, prior to the Due Diligence Expiration Date (hereinafter defined), Seller has elected or deemed elected not to remove any Non-Monetary Title Objections and Purchaser does not terminate this Agreement pursuant to clause (x) above, then such Non- Monetary Title Objections shall also be deemed to be additional Permitted Title Exceptions hereunder. If on the Closing Date, as the same may be extended pursuant to the terms hereof, there are any Title Objections that Seller is required to remove as provided herein, Seller shall remove the same at the Closing to the reasonable satisfaction of Purchaser. If the Closing occurs, Seller may use the proceeds of the Purchase Price to remove Title Objections. 5. Contingencies for Due Diligence Investigations. (a) Purchaser's Independent Investigation. Subject to the provisions of this Agreement, Purchaser shall have the right to conduct or cause to be conducted with reputable companies, at Purchaser's sole cost and expense, such audits, assessments, reviews, investigations, inspections, tests and studies of the Property including all buildings, systems, fixtures and equipment, the environmental condition of the Premises and Improvements, the title to the Premises and Improvements, a survey of the Premises and Improvements, the compliance of the Property with applicable laws and such other engineering, legal, the financial condition of the Seller and other matters relating to or affecting the Property and/or the Seller as Purchaser deems necessary or desirable in its absolute discretion in connection with its purchase of the Property and lease back of the same to the Seller ("Investigations"). Subject to Section 5(b) below, Seller shall make available for Purchaser's review, at reasonable times after reasonable prior notice, all documents and files owned by Seller in the Seller's possession or control concerning the maintenance, management and operation of the Property, including, without limitation, all books and records, plans, specifications, Contracts, engineering and environmental reports, roof and other warranties and guarantees relating to the Improvements, certificates of occupancy and other permits and approvals relating to the Property, calculations of tax and operating reimbursements and utility bills, but specifically excluding the following (collectively, "Confidential Property Information"): internal minutes or deliberations of Seller or any governing body, committee, board or council thereof, internal memoranda 4 prepared by or for the benefit of Seller, appraisals, financial projections, legally privileged correspondence and similar proprietary and archival information. Purchaser shall continue to have access to the Real Property subsequent to the Due Diligence Expiration Date to conduct additional Investigations in accordance with the terms hereof. (b) Conduct of Investigations. All Investigations under Section 5(a) which are to be conducted at the Property shall be done after at least one business day prior notice (which may be oral) to Seller. Purchaser, its agents, employees, contractors, consultants, other representatives and anyone else acting by or on behalf of Purchaser (collectively, "Purchaser's Representatives") will at Seller's request allow a representative of Seller to be present during any Investigations. Purchaser shall take all reasonable precautions to minimize the impact to the Property of any Investigations. Purchaser agrees to discontinue any Investigations promptly upon notice from Seller in the event such Investigations present a danger to the life, health or safety of the public or would otherwise adversely impact the Property. With respect to any intrusive environmental site testing, Purchaser agrees to provide Seller at least two business days' prior notice thereof, which notice shall set forth the scope of any proposed activities relating to investigation of soil or groundwater quality or for the subsurface investigation or invasive testing of the Premises and the Improvements for Seller's prior approval, and to permit Seller's representatives to be present during any such activities. Purchaser understands that it may only conduct a so-called Phase I environmental site assessment and that it may not undertake any invasive soil or groundwater testing for contaminants or any subsurface investigation or other invasive testing of the Property without Seller's prior written approval, which consent (i) may be withheld in Seller's sole and absolute discretion with respect to any soil or groundwater testing or invasive testing of the Improvements the scope of which testing includes boring, drilling or otherwise cutting holes in the foundation of the Improvements and (ii) in all other cases will not be unreasonably withheld, condition or delayed and shall be deemed given unless, within two (2) business days from Purchaser's approval request, Seller provides Purchaser with a written notice of disapproval that sets forth the reasons for such disapproval in reasonable detail; provided, however, that, in either case, (x) Purchaser's environmental consultants shall have determined that such further testing is needed and (y) Purchaser shall have provided Seller with reasonable assurances of its ability, financial or otherwise, to perform its obligation to restore the Property under Section 5(c). If Purchaser or Purchaser's Representatives take any samples from the Property in connection with any environmental testing, then upon Seller's request, Purchaser shall provide to Seller a portion of such sample being tested to allow Seller, if it so chooses, to perform its own testing. Seller agrees to use commercially reasonable efforts (but at no cost or expense to Seller) to cooperate with Purchaser in the conduct of its Investigations. (c) Restoration, Liability, Indemnity and Insurance. Purchaser shall, immediately after any entry upon or the conduct of any Investigation of the Property, restore the Property, at Purchaser's sole risk, cost and expense, to the condition which existed immediately prior thereto. Purchaser assumes all risks associated with Purchaser's and Purchaser's Representatives' entry and Investigations of the Property and agrees to protect, defend (with counsel reasonably satisfactory to Seller), indemnify and hold harmless Seller and Seller's members, partners, attorneys, agents, employees, contractors and representatives from and against any and all costs, losses, claims, damages, liabilities, expenses and other obligations (including, without limitation, attorneys' fees) on account of any loss, damage or injury to any person or property (including without limitation the Property) by reason of any act, 5 omission or negligence of Purchaser or any of Purchaser's Representatives arising from or out of the entry or activities of Purchaser or Purchaser's Representatives on, at or with respect to the Property. Purchaser shall, prior to any such entry, obtain and maintain, and shall cause each of its contractors and agents to maintain (and shall deliver to Seller evidence thereof), at Purchaser's sole cost and expense, insurance providing coverage against any claim for personal liability or property damage caused by Purchaser or its agents, employees or contractors in connection with such inspections or tests (including liability insurance and worker's compensation insurance) with such insurance companies, as are reasonably satisfactory to Seller, and naming Seller as an additional insured, covering all activities to be conducted by Purchaser and Purchaser's Representatives. Such insurance coverages may not be materially changed or terminated without at least thirty (30) days prior written notice to Seller. Notwithstanding the foregoing, the above indemnity shall not include any costs or damages caused by (1) the acts of the Seller or its agents or representatives, (2) any claims of diminution in the value of the Property as a consequence of the results revealed by such tests and inspections or (3) any pre-existing condition of the Property. The foregoing indemnification obligation shall survive the Closing or termination of this Agreement for a period of six (6) months and no claim shall be valid unless asserted in writing within that time. (d) Confidentiality. All information obtained by Purchaser or Purchaser's Representatives with respect to the Property, whether from Seller or independently (and whether directly or through outside consultants) shall be held in confidence by Purchaser and Purchaser's Representatives and not disclosed to third parties except as necessary in connection with obtaining financing to acquire the Property. Notwithstanding the foregoing, (a) Purchaser may disclose the such information to its owners, legal counsel, accountants, lenders, potential investors, and similar third parties that need to review the same in connection with Purchaser's purchase of the Property in accordance with the terms of this Agreement, and (b) Purchaser may disclose such information to the extent that such disclosure is required by law or court order or by discovery rules in any legal proceeding, provided that Purchaser first shall provide written notice thereof to Seller. Prior to or following the Closing, (1) none of Purchaser, its members, partners, directors, officers, principals or employees, or any direct or indirect beneficial owner of Purchaser shall issue or make any public statement (written or oral) or any press release regarding the subject matter hereof without the prior written consent (including as to the content and manner of such public statement or press release) of Seller, which consent shall not be unreasonably withheld or delayed, and (2) none of Seller, its directors, officers, principals or employees, shall issue or make any public statement (written or oral) or any press release regarding the subject matter hereof without the prior written consent (including as to the content and manner of such public statement or press release) of Purchaser, which consent shall not be unreasonably withheld or delayed. Notwithstanding any provision in this Agreement to the contrary and except with respect to making necessary standard inquires of the Rhode Island Department of Environmental Management and other relevant governmental agencies and officials in connection with Purchaser's Investigations, Purchaser shall not contact any governmental official or representative regarding Hazardous Materials (hereinafter defined) on, or the environmental condition of, the Real Property without Seller's prior written consent thereto, which consent shall not be unreasonably withheld. Said consent shall be deemed given if not received by Purchaser within two (2) business days of said request. In addition, if Seller's consent is required and obtained by Purchaser, Seller shall (x) be 6 entitled to review, modify and approve any written communication to such official or representative and (y) receive at least two (2) business days prior written notice of any intended contact and to have a representative present when Purchaser has any such contact with any governmental official or representative. Provided Purchaser has given Seller prior written notice required by this Section of the date, time and place of any such meeting Purchaser intends to have with governmental officials or representatives, Purchaser may hold such meeting(s) if Seller's representative fails to attend. (e) Purchaser's Option to Terminate. Purchaser may, in its absolute and unreviewable and for any reason or no reason, elect not to proceed with the transactions provided for by this Agreement and terminate this Agreement by giving Seller written notice (the "Termination Notice") of Purchaser's election to terminate on or before 6:00 p.m. (Boston time) on May 23, 2003, (the "Due Diligence Expiration Date"), in which case this Agreement shall terminate, the Deposit, together with any interest accrued thereon, shall be paid to Purchaser and neither party shall have any further liability hereunder except as provided in Section 21. In addition, and without limiting Purchaser's right to terminate this Agreement in accordance with the immediately preceding sentence, this Agreement shall automatically terminate unless, before the Due Diligence Expiration Date, Purchaser gives Seller written notice (the "Notice to Proceed") that Purchaser, in its absolute and unreviewable discretion, elects to proceed with the purchase of the Property subject to and in accordance with the terms of this Agreement. In the event that either: (a) Purchaser gives a Termination Notice before the Due Diligence Expiration Date, or (b) Purchaser does not give a Termination Notice but fails to give the Notice to Proceed before the end of the Due Diligence Expiration Date, this Agreement shall automatically terminate, the Deposit (and all interest thereon) promptly shall be returned to Purchaser, and Seller and Purchaser shall have no further obligations or liabilities to each other hereunder. If Purchaser gives the Notice to Proceed on or before the Due Diligence Expiration Date (as extended, if extended as set forth herein), then Purchaser shall be deemed to have waived conclusively Purchaser's right to terminate this Agreement pursuant to this Section 5(e). (f) Return of Due Diligence Information. If for any reason other than a default by Seller a Closing does not occur with respect to the Property, Purchaser shall (i) return to Seller all materials and other information regarding the Property that Seller has provided to Purchaser and all copies or photocopies thereof; (ii) deliver immediately to Seller copies of all written reports resulting from physical Investigations of the Property conducted by Purchaser's Representatives and not previously delivered to Seller, but only upon payment to Purchaser of the costs incurred by it with respect thereto and in all events without any representations or warranties; and (iii) return to Seller or destroy any remaining such materials and information in its possession. This Section 5(f) shall survive the termination of this Agreement. (g) Investigations Resulting in Required Disclosure. Purchaser agrees that in the event the need arises under applicable law to notify any governmental authority of any condition at any of the Property, as a result of any findings in any environmental assessment or any other Investigation done by or at the direction of Purchaser or Purchaser's Representatives, Purchaser shall immediately notify Seller and Seller, not Purchaser or Purchaser's Representatives or anyone acting in favor or on behalf of Purchaser or Purchaser's Representatives, shall make such disclosure as Seller deems appropriate unless otherwise required by applicable law. 7 6. Condition of Premises. (a) No Reliance. Except as expressly provided in this Agreement or the Lease, the Property is to be sold pursuant to this Agreement AS IS, WHERE IS. Except as expressly provided in this Agreement or the Lease, no guarantees, representations or warranties express or implied are made by Seller with respect to the Property. Except as expressly provided herein, or in the Lease, Purchaser expressly acknowledges and agrees that it is not relying on any representations or warranties of any kind whatsoever, express or implied, from Seller, its attorneys, agents, representatives or any party purportedly acting on behalf of Seller as to any matters concerning the Property. Except as expressly provided herein or in the Lease Purchaser hereby further acknowledges that any information Seller or Cushman & Wakefield of MA, Inc. ("Broker"), or the trustees, officers, members, partners, directors, employees, agents or contractors of any of them has provided to Purchaser, including, without limitation, the Title Policy and the Plan has been provided to Purchaser solely for informational purposes without any recourse, representation or warranty and that Seller does not represent, warrant or guarantee the contents or opinions contained in or the accuracy or completeness of, or the methodology of preparation used to produce, any such information. By consummating the Closing, except as otherwise expressly provided in this Agreement or the Lease, Purchaser shall be deemed to have assumed the risk that adverse matters, including but not limited to, construction defects and adverse physical and environmental conditions, may not have been revealed by Purchaser's Investigations, and Purchaser, upon Closing, shall, except as otherwise expressly provided in this Agreement or the, be deemed to have waived, relinquished and released Seller, Seller's affiliates (and Seller's and Seller's affiliates members, representatives, officers, directors, and employees) from and against any and all claims, demands, causes of action (including causes of action in tort), losses, damages, liabilities, costs and expenses (including attorneys' fees and court costs) of any and every kind or character, known or unknown, which Purchaser might have asserted or alleged against Seller, Seller's affiliates (and Seller's and Seller's affiliates members, representatives, officers, directors, and employees) at any time by reason of or arising out of any latent or patent construction defects or physical conditions, violations of any applicable law (including, without limitation, any environmental laws) and any and all other acts, omissions, events, circumstances or matters regarding the Property. Notwithstanding the foregoing provisions, (i) nothing set forth in this Section 6(a) shall be interpreted or construed as limiting, restricting, extinguishing or otherwise affecting Seller's representations, warranties and covenants made in this Agreement or the Lease or the survivability thereof for the time limitation herein provided; and (ii) Seller acknowledges and agrees that, following the Closing, it will remain responsible for the physical and environmental condition of the Property in accordance with the terms of the Lease. This Section 6(a) shall survive the Closing. (b) Adequate Diligence. Purchaser acknowledges that this Agreement provides for free, full and complete access to the Property and full opportunity to fully inspect and review the Premises and the Improvements, including all buildings, systems, fixtures and equipment and including as to environmental matters. Purchaser further acknowledges that this Agreement provides for free, full and complete access to fully inspect and review (i) the environmental condition of the Property subject to the restrictions imposed by Section 5(b), 8 (ii) the title to the Property, (iii) the compliance of the Property with applicable laws and (iv) such other engineering, legal, and other matters relating to or affecting the Property as Purchaser may find appropriate to satisfy itself as to all such matters. Except as otherwise provided herein, or in the Lease, Purchaser's decision with respect to the ultimate purchase of the Property will be based solely upon its own Investigations and the representations made herein. It is understood that Purchaser has the capability to conduct due diligence investigations sufficient for its purposes within the time periods given to Purchaser under this Agreement. 7. Representations and Warranties of Seller. Seller represents and warrants to Purchaser as follows as of the date hereof and as of the Closing: (a) Seller is a Rhode Island corporation duly organized and validly existing under the laws of Rhode Island. (b) Seller has all requisite and necessary power and authority to execute and deliver this Agreement and to perform its obligations hereunder. (c) The execution and delivery of this Agreement and the performance by Seller of its obligations hereunder has been approved as required by the terms of its formation documents. (d) This Agreement is the legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, subject to general principles of equity, bankruptcy, reorganization and other similar laws affecting the enforcement of contracts generally. (e) Other than actions or proceedings with respect to real estate taxes assessed against the Property or any pending litigation or insurance claims all of which matters are listed on Schedule 2, to Seller's knowledge, there are no actions or proceedings or pending insurance claims before any court, administrative agency or arbitrator by or against Seller concerning the Property and, to Seller's knowledge, no such actions or proceedings are threatened. (f) To Seller's knowledge, Seller has received no written notice from any governmental authority of any violation of any law pertaining to the Property which violation is still outstanding or of any pending or contemplated condemnation or landmark proceedings with respect to the Property. (g) Except as set forth on Schedule 3 or in the materials, reports, documents or other instruments listed thereon, and with the exception of materials used in Seller's business, in compliance with all applicable laws and regulations to Seller's knowledge, (i) no Hazardous Materials are or have been generated, stored, released, located, discharged or disposed of, used or handled from, at or upon the Property and (ii) no Hazardous Materials are or have been located on the Property. As used in this Agreement, "Hazardous Materials" means any substance, chemical, waste or material that is or becomes regulated by any federal, state or local government or governmental agency or authority because of its toxicity, infectiousness, radioactivity, explosiveness, ignitability, corrosiveness or reactivity, including, without limitation, asbestos or any substance containing more than 0.1 percent asbestos, the group of compounds known as polychlorinated biphenyls, flammable explosives, petroleum or any refined petroleum product. 9 (h) The operating statements, financial statements, and fiscal 2003 annual operating plan furnished by Parlex Corporation ("Parlex") or Seller to Purchaser are true and correct in all material respects, and fairly reflect the financial condition, the financial results or other subject matter referenced in this subsection (h) as of the dates thereof, and there have been no material adverse changes since the date of such statements. (i) Seller has delivered or made available to Purchaser (without representation or warranty, express or implied, as to the contents thereof) true and complete copies of all third party reports, recommendations and related materials in its possession or control pertaining to the physical conditions affecting and/or hazardous materials located on, in or at the Property. Without limiting the foregoing, Seller has delivered or made available to Purchaser true and complete copies of all hazardous material release notifications, material correspondence, soil management plans, site investigation reports and other information relating to that certain No Further Action Letter dated April 11, 2003 from the Rhode Island Department of Environmental Management to Seller (the "NFA") or the subject matter of the NFA. A true and complete copy of the NFA, the Environmental Land Usage Restrictions and all material documents relating thereto are attached hereto as Schedule 3. The NFA is in full force and effect, has not been modified or amended and is free from default. Seller has received no notice that the Department of Waste Management or any other governmental agency intends to require additional actions relating to hazardous materials at the Property. Seller shall at all times comply with its obligations under the NFA, all soil management plans and all land use restrictions affecting the Property. (j) Seller has delivered or made available to Purchaser all plans and specifications in Seller's possession or control and relating to the Property (the "Plans"). (k) Seller has delivered or made available to Purchaser true and complete copies of all permits, licenses and approvals in Seller's possession or control and relating to the ownership and operation of the Property (the "Permits"). To the best of Seller's knowledge, the Permits are in full force and effect and free from material default. Seller has received no written notice that any license, permit or approval, other than the Permits, is required in connection with the current ownership or use and occupancy of the Property. (l) Seller has received no written notice of any violation of the Occupational Safety and Health Act and to Seller's knowledge, no such violations exist at the Property. (m) There are no leases, licenses, or other occupancy agreements pertaining to the Property currently, nor shall there be any (other than the Lease) at the Closing. (n) Schedule 5 sets forth a complete and accurate list of all service, management, leasing, brokerage, and other contracts affecting the Property or operation thereof (the "Contracts"). Seller has given Purchaser true and complete copies of: (1): the Contracts; and (2) all guarantees and warranties in Seller's possession or control and relating to the Property, including but not limited to all roof warranties. To the best of Seller's knowledge, the Contracts and such guarantees and warranties are in full force and effect and free from material default. None of the Contracts shall be assigned to Purchaser at Closing. (o) The Property is not all or substantially all of the assets of the Seller in Rhode Island. (p) Since the date of the Plan, there have been no changes in the foot print of the Building, no changes in the height of the Building, no additions to the Building and no other material 10 changes to the matters shown on the Plan. Seller shall provide the Title Company with such certificates and evidence of the foregoing as the Title Company may reasonably request in order to allow the Title Company to limit the survey exception on Purchaser's title insurance policy to matters shown on the Plan. As used herein, the phrase "to Seller's knowledge" shall mean the actual knowledge of Jonathan Kosheff, Seller's CFO, and Edward Simmons, Seller's facilities manager for the Property (collectively, Seller's "Designated Representatives") without independent investigation and shall not be construed to refer to the knowledge of any other officer, agent, or employee of Seller, or any affiliate of Seller, or to impose or have imposed upon Seller's Designated Representatives any duty to investigate the matters to which such knowledge, or the absence thereof, pertains, including, but not limited to, the contents of the files, documents and materials made available to or disclosed to Purchaser or the contents of files maintained by Seller's Designated Representatives, the Seller, or the affiliates of any of them. There shall be no personal liability on the part of the foregoing persons arising out of any the foregoing representations or warranties. Seller represents to Purchaser that Seller's Designated Representatives are the officers of Seller most knowledgeable about the subject matters covered by Seller's representations and warranties in this Agreement. To the extent that Purchaser knows or is deemed to know prior or subsequent to the execution of this Agreement, but prior to the Due Diligence Expiration Date, that Seller's representations and warranties are inaccurate, untrue or incorrect in any material way, such representations and warranties shall be deemed modified to reflect Purchaser's knowledge or deemed knowledge, as the case may be. For purposes of this Agreement, Purchaser shall be "deemed to know' that a representation or warranty was untrue, inaccurate or incorrect only to the extent that, before the Due Diligence Expiration Date, Ben Butcher or Scott Tully received written notice that such representation or warranty was untrue, inaccurate or incorrect. 8. Representations and Warranties of Purchaser. Purchaser represents and warrants to Seller as follows: (a) Purchaser is a duly organized limited liability company validly existing and in good standing under the laws of Delaware, and at closing will be validly existing, registered to do business, and is in good standing under the laws of Rhode Island. (b) Purchaser has all requisite and necessary power and authority to execute and deliver this Agreement and to perform Purchaser's obligations hereunder. (c) The execution and delivery of this Agreement and the performance by Purchaser of its obligations hereunder have been duly authorized by all requisite corporate action and does not conflict with or result in the breach of any of the terms of the organizational or governing documents of Purchaser. (d) This Agreement is the legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject to general principles of equity, bankruptcy, reorganization and other similar laws affecting the enforcement of contracts generally. 9. Covenants. 11 (a) Maintenance of the Property and Insurance; Leases and Contracts. Until the Closing, Seller shall (i) maintain in full force and effect the existing policies of insurance relating to the Property (which shall not be less that 100% of replacement cost), (ii) continue to operate the Property in substantially the same manner as it is now being operated; provided, however, that Seller does not intend and shall not be obligated to repair, replace or improve the Property in any material way, (iii) not enter into any lease or other occupancy agreement with respect to any portion of the Property, (iv) not make any material alterations or additions to the Property, except as may be required by law or as may reasonably be required for the prudent repair and maintenance of the Property, (v) not change or attempt to change (or consent to any change in) the zoning or other legal requirements applicable to the Property, (vi) not cancel, amend or modify in any material respect any certificate, license, approval or permit held by or on behalf of Seller with respect to the Property, (vii) not sell or encumber all or any portion of the Property or enter into any agreement with respect thereto, and (viii) not cancel, amend or modify the NFA or any land use restriction affecting the Property. After the date hereof, no contract for maintenance will be terminated, modified or amended without the consent of Purchaser in accordance with the following procedure, such consent not to be unreasonably withheld, conditioned or delayed based on Purchaser's currently contemplated plan of improvements to the Property. If after the date hereof Seller decides (a) to enter into any contract related to the management, or operation of the Property, the term of which, in either case, would continue after the Closing Date, or (b) modify, amend or terminate any contract, Seller shall first submit an unsigned draft of such contract, amendment thereto or termination thereof to Purchaser for its prior review and approval. If Purchaser does not object to such draft or fails to respond to Seller with respect thereto within three (3) business days of the delivery thereof to Purchaser, Purchaser shall be deemed to have consented to such contract, contract amendment or contract termination for all purposes hereunder. Any such contract, contract amendment or contract termination entered into by Seller after the date hereof as aforesaid shall thereupon be and become a contract, as applicable. Seller shall promptly give Purchaser a reasonably detailed written notice of: (i) any fire, flood or other material adverse change with respect to the Property of which Seller obtains actual knowledge; (ii) any actual or proposed condemnation (or proceeding in lieu thereof) of which Seller obtains actual knowledge; (iii) any written notice received by Seller claiming that the Property or the use and operation thereof fails to comply with applicable legal requirements or any use restrictions; (iv) any written notice received by Seller claiming that Seller is default under any permit or approval with respect to the Property; and (v) any written notice received by Seller concerning any pending or threatened litigation or administrative proceeding affecting the Property or Seller or concerning any hazardous materials or environmental conditions relating to the Property. If Seller becomes aware during the term of this Agreement of any matters that render any of its representations or warranties untrue, Seller shall promptly disclose such matters to Purchaser in writing. Seller shall obtain, at its sole cost and expense, all necessary consents and approvals for the transfer of all warranties ad guaranties affecting the Property, including but not limited to all roof warranties, to Purchaser, in form and substance reasonably acceptable to Purchaser to the extent assignable. (b) Certain Schedules and Information. To the extent any Schedule hereto or any information to be set forth thereon has not been attached or provided on the date hereof, Seller shall provide such Schedule or information to Purchaser as soon as reasonably practicable after the date hereof but in any event within five (5) business days of the date hereof. 12 (c) Access to Property Information. Seller shall be allowed to retain a copy of all property information to be delivered to Purchaser under Section 10(a)(ix). For the year following the Closing, Purchaser shall permit Seller to have access to, inspect and make copies of all such property information during Purchaser's or Purchaser's property manager's normal business hours upon reasonable prior notice, at Seller's sole expense. 10. Documents to be Delivered at the Closing. (a) At the Closing, Seller shall deliver to Purchaser the following documents each fully executed and, if required, acknowledged by Seller: (i) a good and sufficient limited warranty deed (the "Deed") conveying good and clear, record and marketable title to the Premises to Purchaser subject only to the Permitted Title Exceptions; (ii) an assignment and assumption of permits (the "Blanket Assignment") assigning all permits, licenses and approvals with respect to Premises and to Purchaser; (iii) a bill of sale conveying without representation, warranty or recourse all of the right, title and interest of Seller in and to the personal property used in connection with the Premises; (iv) an affidavit and indemnity as to mechanics' liens and persons in possession in a customary form reasonably acceptable to Purchaser's title insurance company; (v) an affidavit stating that Seller is not a foreign person or entity within the meaning of Section 1445 of the Internal Revenue Code, and complying with the Internal Revenue Service Regulations promulgated pursuant to said Section 1445; (vi) a designation agreement designating the party responsible for any Form 1099 filings as may be required by the Internal Revenue Service's regulations; (vii) a closing statement; (viii) an officer's certificate of Seller dated the Closing Date as to satisfaction of the conditions set forth in Section 12(b), attaching appropriate evidence of requisite corporate action with respect thereto, including, but not limited to, votes of the governing bodies of Seller; (ix) to the extent they are then in Seller's possession and have not been delivered to Purchaser: (A) any plans and specifications for the Premises; (B) all unexpired warranties and guarantees which Seller has received in connection with any work or services performed with respect to, or equipment installed in, the Premises; (C) all keys for the Premises; (D) originals of all contracts and all correspondence relating thereto and to the operation and maintenance of the Property; and (e) all other books, records, files, plans and other written information including computerized records relating to the development, construction, maintenance, use, operation, title or value of all or any portion of the Property owned by Seller in the possession or control of Seller but specifically excluding any Confidential Property Information; 13 (x) Four originals of the Lease and Guaranty; (xi) Intentionally Deleted; (xii) (1) written confirmation that the Broker has been paid in full all amounts then due in connection with the transactions contemplated by this Agreement; and (2) such other instruments, certificates and documents as are reasonably required in order to fully effectuate the terms of this Agreement; and (xiii) a certificate of an executive officer of Seller dated the Closing Date certifying that the representations and warranties of Seller contained in this Agreement are true and correct on and as of the Closing Date as if made on the Closing Date and attaching appropriate evidence of requisite corporate action with respect thereto, including, but not limited to, votes/resolutions or consents of governing bodies of Seller; (b) At the Closing, Purchaser shall deliver to Seller the following documents each fully executed by Purchaser: (i) the Blanket Assignment assuming the permits, licenses and approvals with respect to the Premises and the Improvements; (ii) a designation agreement designating the party responsible for any Form 1099 filings as may be required by the Internal Revenue Service's regulations; (iii) a closing statement; (iv) a manager's certificate of Purchaser dated the Closing Date certifying that the representations and warranties of Purchaser contained in this Agreement are true and correct on and as of the Closing Date as if made on the Closing Date and attaching appropriate evidence of requisite corporate action with respect thereto, including, but not limited to, votes/resolutions or consents of governing bodies of Purchaser; (v) such other instruments, certificates and documents as are reasonably required in order to fully effectuate the terms of this Agreement; and (vi) Lease as provided for in Section 27. 11. Conditions to Seller's Performance. (a) In addition to the performance or satisfaction in all material respects of all the other provisions of this Agreement by Purchaser, the Closing and the obligation of Seller to sell the Property under this Agreement shall be conditioned expressly on the satisfaction of the following conditions at the Closing Date: (i) the representations and warranties of Purchaser contained in this Agreement shall be true and correct in all material respects as of the Closing Date as if made on the Closing Date; and (ii) the payment of the Purchase Price as provided herein. 14 (b) Seller may waive any of the foregoing conditions in this Section 11 and any such waiver shall not be deemed a waiver or modification of any other conditions. 12. Conditions to Purchaser's Performance. (a) In addition to the performance or satisfaction in all material respects of all the other provisions of this Agreement by Seller, the Closing and the obligation of Purchaser to buy the Property under this Agreement shall be conditioned expressly on the satisfaction of the following conditions at the Closing Date: (i) As used in this Agreement, the term "Material Casualty" means any damage or destruction to the Premises: (i) as to require expenditures in the aggregate of greater than $250,000 ("Restoration Cost") are required to repair and restore the Improvements to their condition existing prior to such destruction or damage; (ii) that materially and adversely affects access to or parking at the Premises; (iii) that causes the Premises to fail to comply in any material respect with applicable legal requirements; or (iv) as to which the Tenant is not entitled to repair and restore the Improvements to their condition existing prior to such destruction or damage with obtaining a variance, special permit or other similar discretionary permit or approval. If there is a Material Casualty, Purchaser may elect to terminate this Agreement and receive a return of the Deposit or to proceed with the purchase of the Property in accordance with this Agreement. In the event of a fire or other casualty that is not a Material Casualty, and in connection with any Material Casualty as to which Purchaser elects to proceed to proceed with the purchase of the Property in accordance with this Agreement, (A) Purchaser shall purchase the Property in accordance with the terms hereof without reduction in the Purchase Price (except that at the Closing Purchaser will receive a credit for any applicable deductible) and (B) Seller shall assign to Purchaser at Closing all property insurance proceeds paid or payable on account of such damage, (and the amount of any deductible shall be credited against the Purchase Price). If the Closing Date would otherwise occur sooner, it shall automatically be extended to the date which is mutually agreeable to the parties but which is at a minimum of ten (10) Business Days after written notice to Purchaser of the casualty. If any insurance proceeds paid or payable on account of a fire or other casualty are to be assigned to Purchaser in accordance with the provisions of this Agreement, Seller shall cooperate as reasonably requested by Purchaser to effectuate such assignment (including, if necessary, prosecuting claims in Purchaser's name or for Purchaser's benefit), and Seller's obligation to so cooperate shall survive the Closing. (ii) If, at any time before completion of the Closing, a taking or condemnation (or proceeding in lieu thereof) is commenced or threatened in writing: (i) of all or substantially all of the Property; or (ii) of less than all or substantially all of the Property that: (1) causes the Property to fail to comply with legal requirements; (2) materially impairs access to or egress from the Property; (3) causes the loss of any parking that benefits the Property; or (4) otherwise, in Purchaser's reasonable business judgment, results in a loss of value in excess of $250,000 (any of the foregoing, a "Material Taking"), Purchaser may, at Purchaser's sole option, elect either to: (x) terminate this Agreement and receive back the Deposit; or 15 (y) purchase the Property subject to and in accordance with this Agreement. In the event of condemnation or taking that does not constitute a Material Taking, or if there is a Material Taking but Purchaser elects to proceed under 12(a)(ii)(y), (1) Purchaser shall purchase the Property in accordance with the terms hereof (without reduction in the Purchase Price), (2) Seller shall assign to Purchaser at Closing all condemnation proceeds except for any separate award relating to Seller's business and paid or payable as a result of such condemnation, (3) Purchaser shall have the right to be present with Seller at any hearings or negotiations with respect thereto, and (4) Seller shall not settle or compromise any such matter without Purchaser's prior written consent which consent shall not be unreasonably withheld. If the Closing Date would otherwise occur sooner, it shall automatically be extended to the date that is ten (10) Business Days after written notice to Purchaser of the Material Taking. (b) the representations and warranties of Seller contained in this Agreement shall be true and correct in all material respects as of Closing Date as if made on the Closing Date; (c) Seller shall have removed and discharged the Monetary Liens from the title to the Property and Purchaser shall receive good, clear, record and marketable title to the Property free and clear of all liens and encumbrances other than the Permitted Title Exceptions; (d) Simultaneously with the Closing under this Agreement, Parlex shall close a new operating line commitment from Silicon Valley Bank in the amount of $8,000,000.00 with availability of $3,000,000.00 as of the Closing Date and shall provide Purchaser with a written statement from the bank confirming the same. At the Closing, Seller shall provide Purchaser with evidence that all net proceeds of the sale are used at the Closing to retire outstanding debt with Fleet Bank; (e) Since the date of the most recent financial statements of Parlex provided by Parlex to Purchaser, there shall have been no material adverse change in the financial condition or business operations of Seller or Parlex; (f) Since the Due Diligence Expiration Date, there shall have been no material adverse change in the condition of the Property (exclusive of any insured casualty, which shall be governed by Section 12(a) above, or any condemnation, which shall be governed by Section 12(a) above). (g) Possession of the Property shall be delivered to Purchaser by Seller at the Closing free and clear of (a) all leases, tenants and other occupants other than Seller under the Lease and (b) any management, leasing, service, maintenance or other contracts or agreements other than the Lease and the Permitted Title Exceptions; (h) There shall be no judicial or administrative proceeding pending or threatened concerning the Property that was not disclosed in writing to Purchaser before the Due Diligence Expiration Date, and the Property and the use and operation thereof shall comply in all material respects with all applicable legal requirements; (i) Should Purchaser choose or be obligated in the event of any casualty or any taking of any portion of the Property, to proceed to a Closing, then all unexpended insurance and taking 16 proceeds and all rights to insurance proceeds and taking proceeds, as applicable, shall be assigned and paid over by Seller to Purchaser. (j) Seller has, at its sole cost and expense, obtained all necessary consents and approvals for the transfer of all warranties and guaranties affecting the Property and improvements thereon, including but not limited to all roof warranties, to Purchaser, in form and substance reasonably acceptable to Purchaser to the extent possible; (k) The NFA shall be in full force and effect and free from default and Seller shall have received no notice that the Department of Waste Management or any other governmental agency intends to require additional actions relating to hazardous materials at the Property or alleging that any default exists under the NFA, the Environmental Land Usage Restriction or the soil management plan; (l) Simultaneously with the Closing hereunder, (i) the closing shall occur under that certain Purchase and Sale Agreement dated as of the date hereof between Purchaser or its affiliate and Parlex Corporation concerning certain property located in Methuen, Massachusetts; and (ii) the closing shall occur under Purchaser's third party acquisition loan for the Property of not more than $1,782,000; (m) Purchaser may waive any of the foregoing conditions in this Section 12 and any such waiver shall not be deemed a waiver or modification of any other conditions. 13. Failure of Conditions; Defaults. 13.1 Termination without Default. If the sale of the Property is not consummated because of the failure of any condition precedent to Purchaser's obligations expressly set forth in this Agreement or for any other reason except a default by Purchaser in its obligation to purchase the Property in accordance with the provisions of this Agreement ("Failure of Condition"), the time of the Closing shall be extended for a period of up to 30 days, during which time Seller shall use reasonable efforts to cure such Failure of Condition. Such efforts of Seller to cure such Failure of Condition shall not require Seller to expend more than $25,000 in costs and expenses in such efforts; provided, however, if any such Failure of Condition relating to the condition of title to the Property is a result of a voluntary consensual action by Seller to so encumber the title to the Property such dollar limit to Seller's efforts shall not apply. If the time of the Closing is extended and if at the end of such extension period Seller shall have failed so to cure such Failure of Condition, as herein provided, and if Purchaser, at its election, does not waive any such Failure of Condition, then Purchaser may elect, as its sole and exclusive remedy, (x) to terminate this Agreement by notice thereof to Seller in which case the Deposit and all interest accrued thereon shall be forthwith refunded to Purchaser and all other obligations of the parties hereto shall cease and this Agreement shall be null and void and the parties hereto shall have no further obligation or liability arising hereunder or (y) to proceed with the Closing in accordance with Section 14 hereof. Seller and Purchaser agree that, if the transactions contemplated hereby do not close on account of a default by Seller, then Section 13.3 below, rather than this Section 13.1, shall apply. 13.2 Purchaser's Default. If the sale contemplated hereby is not consummated because of a default by Purchaser in its obligation to purchase the Property in accordance with the terms of this Agreement, and if such default is not cured within ten (10) days from written notice thereof from Seller to Purchaser, then: (a) this Agreement shall terminate; (b) the Deposit shall be paid to and retained by Seller as liquidated damages; and (c) Seller and Purchaser shall have no further 17 obligations to each other. PURCHASER AND SELLER ACKNOWLEDGE THAT THE DAMAGES TO SELLER IN THE EVENT OF A BREACH OF THIS AGREEMENT BY PURCHASER WOULD BE DIFFICULT OR IMPOSSIBLE TO DETERMINE, THAT THE AMOUNT OF THE DEPOSIT REPRESENTS THE PARTIES' BEST AND MOST ACCURATE ESTIMATE OF THE DAMAGES THAT WOULD BE SUFFERED BY SELLER IF THE TRANSACTION SHOULD FAIL TO CLOSE AND THAT SUCH ESTIMATE IS REASONABLE UNDER THE CIRCUMSTANCES EXISTING AS OF THE DATE OF THIS AGREEMENT AND UNDER THE CIRCUMSTANCES THAT SELLER AND PURCHASER REASONABLY ANTICIPATE WOULD EXIST AT THE TIME OF SUCH BREACH. PURCHASER AND SELLER AGREE THAT SELLER'S RIGHT TO RETAIN THE DEPOSIT SHALL BE SELLER'S SOLE REMEDY, AT LAW AND IN EQUITY, FOR PURCHASER'S FAILURE TO PURCHASE THE PROPERTY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT. 13.3 Seller's Default. If Seller defaults in its obligation to sell and/or lease the Property in accordance with the terms of this Agreement, and if such default is not cured within ten (10) days from written notice thereof from Purchaser to Seller, then Purchaser may, as its sole and exclusive remedy at law or in equity: (a) terminate this Agreement by giving written notice thereof to Seller, in which event the Deposit will promptly be returned to Purchaser, Seller promptly shall reimburse Purchaser for the third party costs which shall be defined as legal, engineering, survey, environmental and title fees as evidenced by copies of all bills relating to expenses incurred that Purchaser has incurred in connection with this Agreement and the transactions contemplated hereby, and the parties shall have no further obligation to each other; (b) waive such default and consummate the transactions contemplated hereby in accordance with the terms of this Agreement; or (c) specifically enforce this Agreement. Purchaser hereby irrevocably waives any other right or remedy for such default; provided, however, that if, in breach of this Agreement, Seller sells the Property (or any portion thereof) to someone other than Purchaser or otherwise takes action that renders the remedy of specific performance impossible or impractical to obtain, Seller shall be liable for any damages suffered by Purchaser as a result of such breach. If Purchaser brings an action for specific performance, the Deposit shall be returned to Purchaser pending the outcome of such action. As a condition precedent to Purchaser exercising any right it may have to bring an action for specific performance hereunder, Purchaser must commence such an action within ninety (90) days after the Closing Date (as the same may be extended in accordance with the terms hereof). Purchaser agrees that its failure to timely commence such an action for specific performance within such ninety (90) day period shall be deemed a waiver by it of its right to commence an action for specific performance as well as a waiver by it of any right it may have to file or record a notice of lis pendens or notice of pendency of action or similar notice against all or any portion of the Property. 14. Purchaser's Election to Accept Title. Purchaser shall have the additional election, at either the original or any earlier or extended time for performance, to accept such title as Seller can deliver to the Property in its then condition and to pay therefor the Purchase Price without deduction (but subject to adjustment as provided in Section 16), in which case Seller shall convey such title. 15. Application of Purchase Money to Liens. If on the Closing Date there are any other liens or encumbrances on the Real Property other than those to which Purchaser's title is to be subject hereunder, Seller may use any portion of the balance of the Purchase Price to satisfy the same, provided Seller shall simultaneously either (a) deliver to Purchaser at the Closing instruments in 18 recordable form and sufficient to satisfy such liens and encumbrances of record, together with the cost of recording or filing said instruments, or (b) with respect to any first mortgage lien held by an institutional lender, and provided that Seller has made arrangements with the title company employed by Purchaser in advance of Closing, deposit with said title company sufficient monies, acceptable to and required by it, to assure the obtaining and the recording of such satisfactions and the issuance of title insurance to Purchaser free of any such liens and encumbrances. The existence of any such other liens and encumbrances shall not be deemed objections to title if Seller shall comply with the foregoing requirements. 16. Apportionments and Costs. (a) In light of the fact that, pursuant to the Lease, Seller (as Tenant) shall be responsible for all real estate taxes, water, sewer and other utility charges, fuel and any fees or other amounts payable under any contracts for maintenance, and all other costs associated with the Property, no adjustment shall be made therefor at Closing and, as of 11:59 p.m. (Boston time) on the day before the Closing Date, Seller shall assume responsibility therefor under the Lease. At the Closing, Seller shall make a pro rated payment of the base and additional rent due under the Lease for the period from and including the Closing to and including the last day of the month in which the Closing occurs. (b) Any real estate tax abatements in respect of any tax year prior to the tax year in which the Closing occurs, together with any interest earned thereon, shall belong to Seller. Purchaser agrees that, should it receive any amounts from the City of Cranston or any other taxing authority for tax abatements that are attributable to such prior tax years, Purchaser shall pay such amounts over to Seller. Any real estate tax abatements in respect of the tax year in which the Closing occurs, together with any interest earned thereon, shall be apportioned pro rata amongst Seller and Purchaser based upon their respective periods of ownership. Seller agrees that, should it receive any amounts from the City of Cranston or any other taxing authority for tax abatements that are attributable to the timeframe when it did not own the Property, Seller shall pay such amounts over to Purchaser. (c) All municipal assessments or betterments assessed shall be the responsibility of Seller. (d) Seller shall pay at the Closing all Deed Stamp Excise Taxes and all other transfer taxes (including, without limitation, any non-resident Grantor tax) payable in connection with the conveyance of the Property pursuant to this Agreement and any discharges of any Monetary Liens. Purchaser shall pay the costs of recording the Deed. (e) Each of the parties hereto shall pay the costs of their own respective counsel and any costs or expenses incurred by such party in connection with this transaction. Purchaser shall pay all costs of its Investigations including of title and survey matters and of obtaining any financing or title insurance in connection with acquiring the Property. (f) The net amount of such apportionments if due to Seller shall be added to the amount payable under Section 2, and if due to Purchaser shall be subtracted from such amount. To the extent that such apportionments may not reasonably be determined on the Closing Date, they shall be determined and paid as soon as practicable after the Closing. (g) To the extent that any apportionments to be made under this Section 16 may not reasonably be determined on the Closing Date, they shall be determined and paid as soon as 19 practicable after the Closing. All apportionments to be made under this Section 16 shall be made as of 11:59 p.m. (Boston time) on the day before the Closing Date. 17. Brokers. Each of Seller and Purchaser represents and warrants that it has dealt only with Broker, as a broker or finder with respect to this transaction and with respect to the Property. Upon, and only upon, the Closing and consummation of this transaction, Seller shall pay Broker per a separate agreement a commission for acting as broker to the sale and lease transactions contemplated by this Agreement. Each of Purchaser and Seller agrees to indemnify and hold harmless the other party from and against all claims for brokerage or commission or finder's fees on account of this sale and/or lease arising out of dealings with the party from whom indemnification is sought; provided, however, that Seller shall in all events be solely responsible for, and shall defend and indemnity Purchaser against, any claims by Broker with respect to the sale and/or lease transactions contemplated by this Agreement. This Section 17 shall survive the Closing or any termination of this Agreement. 18. Escrow of Deposit. The Deposit and interest accrued thereon shall be held in escrow by the Title Company as escrow agent subject to the terms of this Agreement, and shall be duly accounted for in accordance with this Agreement. The escrow agent shall not be liable for any action or failure to act taken or made in good faith in connection with the performance of its duties hereunder, but shall be liable only for its own willful default or misconduct. Purchaser and Seller agree to indemnify and hold harmless the escrow agent from any loss, damage, liability, cost or expense (including reasonable attorneys' fees and expenses) arising out of any act or action taken by it in good faith in connection with the performance of its duties hereunder, provided that Purchaser and Seller shall not indemnify the escrow agent against any loss, damage, liability, cost or expense arising out of willful misconduct, gross negligence, fraud or any violation of the terms of this Agreement. Notwithstanding anything contained in this Agreement to the contrary with respect to the obligations of the escrow agent, should any dispute arise with respect to the delivery and/or ownership or right to possession of such amount, the escrow agent shall have no liability to any party hereto for retaining dominion and control over such amount until such dispute shall have been settled: (a) by mutual agreement between the parties; or (b) by final order, decree or judgment by a court of competent jurisdiction in the United States of America (and no such order, decree or judgment shall be deemed to be "final" unless and until the time of appeal has expired and no appeal has been made); and the escrow agent shall make payment of such amount as the parties may have mutually agreed or in accordance with such final order, decree or judgment. In no event shall the escrow agent be under any duty whatsoever to institute or defend any such proceeding. The Title Company may resign as escrow agent hereunder, in its sole discretion, by giving twenty-four (24) hours' written notice to Purchaser and Seller. If Purchaser and Seller are unable to agree on a substitute escrow agent within forty-eight (48) hours after such notice, the Title Company may transfer the Deposit, subject to the terms of this Agreement, to any bank with offices in Boston, Massachusetts having capital of not less than $50,000,000.00 or, the Title Company may transfer the Deposit to any Court with jurisdiction over the matter. 20 Notwithstanding anything to the contrary in this Agreement, at Purchaser's written request made any time before the Due Diligence Expiration Date, and without the need for any confirmation or direction from Seller and without regard to any contrary instructions that may be given by or on behalf of Seller, the Title Company shall promptly return the Deposit (and all interest thereon) to Purchaser. 19. Damages; Limitations on Recovery. If Purchaser shall default in the performance of its obligations to purchase the Property subject to and in accordance with the terms of this Agreement and provided that Seller shall not be in default hereunder, then the Deposit and interest accrued thereon shall be paid to Seller in full payment of Seller's damages resulting from Purchaser's default as liquidated damages and not as a penalty as Seller's sole and exclusive remedy at law or in equity as provided for in Section 13 above. Notwithstanding the foregoing, if following the termination of this Agreement and return of the Deposit to Purchaser, Purchaser fails to indemnify and restore as provided in Section 5(c) or violates Section 25 (each a "Violation"), Seller shall be entitled to recover all damages and any costs and expenses incurred by Seller, together with attorneys' fees and costs associated with recovering and collecting the amount of any such damages, related to such Violation, provided that such recovery shall not be limited to the amount of the Deposit and interest accrued thereon. In the event of any Violation, Seller may elect any appropriate action available in equity or at law, such rights and remedies being cumulative and the exercise of one or more such right or remedy by Seller shall not be construed to be a waiver of any of the others. Purchaser hereby acknowledges and agrees that any right, remedy, recourse or recovery Purchaser may have against or from Seller hereunder or with respect hereto (including any documents delivered in connection herewith) shall be limited to (i) Seller's interest in the Property or (ii) the net proceeds received by Seller from the sale of the Property (for these purposes, any portion of the net sale proceeds used to pay obligations of the Seller shall be deemed to have been received by the Seller). Notwithstanding the foregoing, Purchaser agrees that Seller shall have no liability to Purchaser for any breach of Seller's covenants, agreements, representations or warranties hereunder or under any other agreement, document, certificate or instrument delivered by Seller to Purchaser unless the valid claims for all such breaches collectively aggregate more than $25,000, in which event the full amount of such valid claims from the first dollar shall be actionable, up to the cap set forth in the following sentence. Following the Closing, the maximum aggregate liability of Seller, and the maximum aggregate amount which may be awarded to and collected by Purchaser, in connection with this Agreement (exclusive of the Lease), the sale of the Property under this Agreement (including, without limitation, in connection with the breach of any representations and warranties contained herein) and any and all documents executed pursuant hereto or in connection herewith (exclusive of the Lease) for which a claim is timely made by Purchaser shall not exceed $500,000. The foregoing shall not be deemed to limit Purchaser's right to recover the full Deposit if Purchaser is entitled thereto pursuant to this Agreement, nor to limit any right of Purchaser to seek specific performance of this Agreement or to enforce its other remedies under Section 13. Notwithstanding the foregoing, in no event will the limitations on Purchaser's remedies set forth in this Section or in Section 21 below (the time limit) apply to (x) any claims under the Lease, or (y) any claims relating to fraud by Seller. In no event shall any trustee, member, employee agent or other representative of Seller ever be personally liable hereunder or otherwise for or with respect to the acts, omissions or obligations of Seller. In no event shall any trustee, member, manager, employee, agent or other 21 representative of Purchaser ever be personally liable hereunder or otherwise for or with respect to the acts, omissions or obligations of Purchaser. This Section 19 shall survive the Closing. 20. Assignments. Subject to the provisions of this Section 20, the terms and provisions of this Agreement shall apply to and bind the permitted successors and assigns of the parties hereto. Except as expressly provided herein, Purchaser shall not be permitted to assign its rights under this Agreement without Seller's prior written consent, which consent may be withheld in Seller's sole and absolute discretion. Notwithstanding the foregoing, Purchaser shall be permitted to assign its rights under this Agreement to an affiliate of Purchaser as long as Ben Butcher or Scott Tully manages the day to day operations; provided, however, that at least two business days prior to making any such assignment of its right, title or interest under this Agreement to such affiliate, Purchaser shall notify Seller in writing and supply all material details regarding such arrangement including information regarding the makeup of the assignee. Purchaser's proposed assignee shall expressly assume Purchaser's obligations under this Agreement. Any assignment by Purchaser of its right, title or interest under this Agreement in violation of this Section 20 shall be null and void, and shall allow Seller, at its option, to deem Purchaser in default of its obligations hereunder. Seller may not assign any of its right, title and interest under this Agreement, and any purported assignment by Seller of its right, title or interest under this Agreement shall be null and void, and shall allow Purchaser, at its option, to deem Seller in default of its obligations hereunder. Subject to the above provisions, this Agreement shall inure solely to the benefit of Seller and its successors and assigns and Purchaser and its permitted successors and assigns. No person or entity other than Seller and its permitted successors and assigns and Purchaser and its permitted successors and assigns shall have any right to enforce or rely upon this Agreement. 21. Survival Provisions; Acceptance of Deed. On the termination hereof, all of the terms and provisions of this Agreement shall be void and of no further force and effect and neither Purchaser nor Seller shall have rights, obligations or liabilities hereunder except that the rights, obligations and liabilities of the parties under this Section 21 and Sections 5(c), 5(f), 17, 19 and 25 shall survive such termination and continue in effect in accordance with their terms without limit as to time. The acceptance of the Deed, by Purchaser or Purchaser's permitted assignee, as the case may be, shall be deemed to be full performance and discharge of every agreement and obligation of Seller herein contained or expressed except (i) obligations of Seller under the Lease (all of which shall survive the Closing and shall not be subject to any of the limitations on Seller's liability set forth in this Agreement), (ii) the representations and warranties of Seller made in this Agreement or any document delivered in connection with Section 10(a) (other than the Lease) which shall survive until the date which is one year after the Closing Date, (iii) any adjustments pursuant to Section 16 that cannot be finally determined after the Closing which shall survive the Closing until finally adjusted, and (iv) any terms and conditions hereof which expressly survive the Closing. 22. Further Assurances. The parties agree to execute any and all additional instruments and documents as may be reasonably required to fully effectuate the terms of this Agreement. 23. Notices. All notices or other communications required or provided to be sent by either party shall be in writing and shall be sent by: (i) by United States Postal Service, certified mail, return receipt requested, (ii) by any nationally known overnight delivery service for next day delivery, (iii) 22 delivered in person or (iv) sent by telecopier or facsimile machine which automatically generates a transmission report that states the date and time of the transmission, the length of the document transmitted and the telephone number of the recipient's telecopier or facsimile machine (with a copy thereof sent in accordance with clause (i), (ii) or (iii) above). All notices shall be deemed to have been given upon receipt. All notices shall be addressed to the parties at the addresses below: To Seller: at the address set forth in the first paragraph of this Agreement with a copy to: Edward D. Kutchin, Esq. Kutchin & Rufo, P.C. 175 Federal Street Boston, MA 02110 To Purchaser: at the address set forth in the first paragraph of this Agreement and with a copy to: Piper Rudnick LLP One International Place Boston, Massachusetts 02110-2600 Attention: John L. Sullivan, Esq. Fax No. (617) 406-6100 Any address or name specified above may be changed by notice given to the addressee by the other party in accordance with this Section. The inability to deliver notice because of a changed address of which no notice was given as provided above, or because of rejection or other refusal to accept any notice, shall be deemed to be the receipt of the notice as of the date of such inability to deliver or rejection or refusal to accept. Any notice to be given by any party hereto may be given by the counsel for such party. 24. Time. Time is of the essence in this Agreement. If any date for providing a notice or obtaining consent or approval should fall on any day which is not a business day in Massachusetts then such date shall be extended to the next following business day. 25. No Recording. Provided that Seller is not in default under this Agreement, Purchaser agrees not to record this Agreement or any notice hereof in the Registry of Deeds or the Registry District of the Land Court. If Purchaser nonetheless records this Agreement or a notice thereof when Seller is not in default under the Agreement, Seller, at its option, may declare Seller's obligations hereunder to be null and void and may deem Purchaser in default of its obligations hereunder, whereupon this Agreement shall terminate except as provided in Section 21 and any recorded copy of this Agreement or notice thereof shall for all purposes be considered null and void between the parties hereto and shall not be a notice to or binding in any way on third parties. 23 26. Miscellaneous. This instrument may be executed in one or more counterparts which together shall constitute one instrument. The invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of any other term or provision hereof. The captions to the paragraphs hereof are for convenience of reference only and are not intended to affect the meaning of the provisions of this Agreement. Unless otherwise provided herein, references in this Agreement to (i) any "Section" shall mean the sections and subsections of this Agreement, as applicable and (ii) any "Schedule" or "Exhibit" are references to the schedules and exhibits attached hereto which are incorporated into this Agreement by this reference. This Agreement is to be construed as a Massachusetts contract, is to take effect as a sealed instrument, sets forth the entire contract and understanding between the parties superseding any prior oral or written agreements, and may be canceled, modified or amended only by a written instrument executed by both Seller and Purchaser. 27. Lease and Guaranty Execution. At the Closing Seller and Purchaser shall execute and deliver the lease in the form attached hereto as Schedule 7 (the "Lease"), and Parlex shall execute and deliver to Purchaser a guaranty of all of Seller's obligations under the Lease in the form attached hereto as Schedule 6 (the "Guaranty"). 28. Attorney's Fees. In the event legal proceedings through the courts are commenced to enforce the parties' respective rights and obligations herein, the prevailing party shall be entitled to reimbursement for all costs and expenses, including reasonable legal fees, incurred with respect to said legal proceedings. [The remainder of this page is intentionally left blank] 24 IN WITNESS WHEREOF, this Agreement has been executed by each of the parties hereto, under seal, as of the day and year first written above. PURCHASER: Taurus Cranston LLC By: /s/ Scott R. Tully ------------------- Scott R. Tully Manager SELLER: Poly-Flex Circuits, Inc. By: /s/ Peter J. Murphy -------------------- Peter J. Murphy Treasurer Parlex Corporation is executing this Agreement for the sole purpose of confirming its agreement to execute and deliver the Guaranty as and when provided for above: Parlex Corporation By: /s/ Jonathan R. Kosheff ------------------------ Jonathan R. Kosheff Chief Financial Officer 25 ESCROW AGENT: Stewart Title Guaranty Insurance Company By: /s/ Marie L. Franco ------------------------ National Underwriting Counsel 26 EX-10 9 park210e.txt EXHIBIT 10.EE Exhibit 10.EE FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT This First Amendment to Purchase and Sale Agreement (this "Amendment") is entered into as of May 23, 2003 by and between Poly-Flex Circuits, Inc. ("Seller") and Taurus Cranston LLC ("Purchaser"). BACKGROUND ---------- A. Seller and Purchaser entered into a Purchase and Sale Agreement dated as of May 8, 2003 (the "P&S Agreement") concerning certain premises located at 28 Kenney Drive, Cranston, Rhode Island. Capitalized terms used herein without definition have the meaning given to them in the P&S Agreement. B. Seller and Purchaser wish to amend the P&S Agreement as provided below. AGREEMENT --------- NOW THEREFORE, for valuable consideration, the Seller and Purchaser agree as follows: 1. The Due Diligence Expiration Date (as defined in Section 5(e) of the P&S Agreement) is extended to 6:00 P.M. (local time in Boston, Massachusetts) on May 30, 2003. 2. Section 3 of the P&S Agreement is amended by changing "May 28, 2003" to "June 11, 2003". 3. This Amendment may be executed by facsimile and in counterparts and it shall be sufficient that the signature of each party appear on one or more of such counterparts. 4. Except as otherwise provided above, the P&S Agreement is ratified and confirmed and remains in full force and effect. All references in the P&S Agreement to "this Agreement" shall mean the P&S Agreement as amended by this Amendment. [Balance of this page intentionally left blank] EXECUTED under seal as of the date first written above. SELLER: Poly-Flex Circuits, Inc. By: /s/ Edward D. Kutchin ---------------------- Name: Edward D. Kutchin Title: Attorney PURCHASER: Taurus Cranston LLC By: /s/ Scott R. Tully ------------------- Name: Scott R. Tully Title: Manager 2 EX-10 10 park210f.txt EXHIBIT 10.FF Exhibit 10.FF SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT This Second Amendment to Purchase and Sale Agreement (this "Amendment") is entered into as of June 3, 2003 by and between Poly-Flex Circuits, Inc. ("Seller") and Taurus Cranston LLC ("Purchaser"). BACKGROUND ---------- A. Seller and Purchaser entered into a Purchase and Sale Agreement dated as of May 8, 2003 concerning certain premises located at 28 Kenney Drive, Cranston, Rhode Island, as amended by a First Amendment to Purchase and Sale Agreement dated May 23, 2003 (as so amended, the "P&S Agreement"). Capitalized terms used herein without definition have the meaning given to them in the P&S Agreement. B. The Due Diligence Period expires as of the date hereof and, subject to the execution and delivery of this Amendment by Seller, Purchaser intends to give its Notice to Proceed. C. Seller and Purchaser wish to amend the P&S Agreement as provided below. AGREEMENT --------- NOW THEREFORE, for valuable consideration, the Seller and Purchaser agree as follows: 1. Section 12 of the P&S Agreement is amended by renumbering the existing subsection (m) thereof to be subsection (o) thereof and by inserting the following as new subsections (m) and (n) of such Section 12: "(m) Reference is made to that certain Declaration of Protective Controls affecting the Property dated November 29, 1977 made by Howard Development Corporation, and recorded in the Land Evidence Records of the City of Cranston, Rhode Island in Land Evidence Book 427, Page 897 (the "Declaration"). Purchaser shall have received a duly executed estoppel from the Rhode Island Economic Development Corporation in a form acceptable to Purchaser and any third party mortgage lender to Purchaser certifying, among other things, that (1) the construction of the improvements on the Property was commenced and completed in accordance with the requirements of the Declaration and neither the Property nor any improvements thereon are in violation of any provision of the Declaration and (2) the provisions of the Declaration relating to rights of plan approval and of repurchase are no longer of any force and effect with respect to the Property; (n) Purchaser shall have received written confirmation from the City of Cranston Building Department in a form acceptable to Purchaser and any third party mortgage lender to Purchaser that (1) the Property, and all improvements thereon, is located in the "M-2" zoning district under the applicable Zoning Ordinance of the City of Cranston, (2) the present uses of the Property (office, research and development, warehousing and manufacturing) were, at the time of initial construction, and are currently, permitted as of right under the zoning classification of "M-2" and such uses of the Property do not otherwise violate any applicable zoning regulations, (3) the Property and all improvements thereon are otherwise in compliance with the applicable zoning and building codes and regulations, (4) the Property is a legally-subdivided parcel in accordance with the terms of the applicable subdivision laws, (5) there are no outstanding zoning or building code violations which have been cited by the City of Cranston against the Property, and (6) the Building Inspector of the City of Cranston is not aware of any circumstances which would render the existing certificates of occupancy for the Property invalid or cause them to be revoked. 2. Section 12(l) of the P&S Agreement is hereby amended by deleting "$1,782,000" and substituting therefor the following: "Six Million and Six Hundred Thousand Dollar ($6,600,000.00), to be secured by both the Property and the property in Methuen Massachusetts being acquired simultaneously with the closing hereunder by an affiliate of Purchaser pursuant to that certain Purchase and Sale Agreement between Taurus Methuen LLC and Parlex Corporation." 3. Seller shall provide Purchaser with such certifications relating to the number of employees of Seller at the Property as Purchaser may reasonably require in order to confirm that the Property complies with all applicable laws relating to parking. 4. The deed to Purchaser shall contain the following certification from Seller: ""No R.I.G.L. withholding is required as Seller is a resident corporation, as that term is defined in the Rhode Island tax law pertaining to the Seller, as evidenced by Affidavit." At the Closing, Seller shall execute and deliver an affidavit in the form attached to this Amendment as Exhibit A. 5. Seller represents and warrants to Purchaser that Seller has applied for a renewal of its industrial wastewater discharge permit and that Seller has no reason to believe that such renewal will not be granted. Seller shall use reasonable efforts to obtain such renewal by Closing or as soon as possible thereafter and shall provide Purchaser with evidence of such renewal promptly upon receipt thereof by Seller. The provisions of this Section 5 shall survive the Closing. 6. Seller agrees that, at the Closing, it shall execute and deliver a Subordination, Non-Disturbance and Attornment Agreement substantially in the form sent by John Sullivan to Edward Kutchin and Andrew Stempler on June 1, 2003. 7. When duly executed and delivered by both parties hereto, this Amendment shall constitute Purchaser's Notice to Proceed under Section 5(e) of the P&S Agreement. 8. This Amendment may be executed by facsimile and in counterparts and it shall be sufficient that the signature of each party appear on one or more of such counterparts. 9. Except as otherwise provided above, the P&S Agreement is ratified and confirmed and remains in full force and effect. All references in the P&S Agreement to "this Agreement" shall mean the P&S Agreement as amended by this Amendment. [Balance of this page intentionally left blank] 2 EXECUTED under seal as of the date first written above. SELLER: Poly-Flex Circuits, Inc. By: /s/ Peter J. Murphy ----------------------------- Name: Peter J. Murphy Title: Treasurer PURCHASER: Taurus Cranston LLC By: /s/ Scott R. Tully ---------------------------- Name: Scott R. Tully Title: Manager 3 EX-10 11 park210g.txt EXHIBIT 10.GG Exhibit 10.GG LEASE OF ONE PARLEX PLACE, METHUEN, MASSACHUSETTS BY TAURUS METHUEN LLC, AS LANDLORD TO PARLEX CORPORATION, AS TENANT TABLE OF CONTENTS ----------------- Page ---- ARTICLE I - Fundamental Lease Provisions 1 1.1 Reference Subjects 1 ARTICLE II - Premises and Term 2 2.1 Premises 2 2.2 Existing Conditions; "As-Is" 2 2.3 Term 3 ARTICLE III - Rent 5 3.1 Annual Base Rent 5 3.2 Additional Rent 5 3.3 Method of Payment 5 ARTICLE IV - Net Lease, True Lease 5 4.1 Net Lease 5 4.2 Non-Terminability; No Offset or Abatement 6 4.3 True Lease 7 4.4 Quiet Enjoyment 7 ARTICLE V - Tenant's Covenants 7 5.1 Tenant Work 7 5.2 Utilities and Services 9 5.3 Maintenance and Repairs 9 5.4 Use and Compliance with Law 11 5.5 Taxes and Impositions 11 5.6 Indemnity 13 5.7 Landlord's Entry Right 13 5.8 Signs 14 5.9 Personal Property 14 5.10 Damage and Hazardous Materials 14 5.11 Liens 17 5.12 Condition on Expiration 17 5.13 Holding Over 18 5.14 Intentionally Omitted 18 5.15 Financial Reporting 18 5.16 Capital Expenditures 18 5.18 Landlord Repair 20 ARTICLE VI - Assignment and Subletting 21 6.1 Landlord's Consent Required 21 6.2 Intentionally Omitted 21 6.3 Right of Termination or Recapture 22 6.4 Procedures 22 6.5 Profits 23 6.6 No Release 23 ARTICLE VII - Insurance, Casualty, Taking 24 7.1 Insurance 24 7.2 Damage or Destruction of Premises 26 7.3 Eminent Domain 27 ARTICLE VIII - Default 29 8.1 Events of Default 29 8.2 Remedies for Default 30 8.3 Remedies Cumulative; Jury Waiver; Late Performance 31 8.4 Waivers of Default; Accord and Satisfaction 31 8.5 Landlord's Curing 32 8.6 Security Deposit 32 ARTICLE IX - Protection of Lenders 34 9.1 Subordination and Superiority of Lease 34 9.2 Rent Assignment 34 9.3 Other Instruments 35 ARTICLE X - Miscellaneous Provisions 35 10.1 Notice 35 10.2 Landlord's Default 36 10.3 Limitation of Landlord's Liability 36 10.4 Excusable Delay 36 10.5 Applicable Law and Construction 36 10.6 Estoppel Certificate 37 10.7 Notice of Lease 38 10.8 Brokers 38 10.9 Tenant and Landlord as Business Entity 38 10.10 Reasonable Cooperation in Refinancing and Sale 39 10.11 Deposit Delivery 39 ARTICLE XI - Fair Market Value Purchase Option 39 11.1 Term of Option and Exercise 39 11.2 Purchase Price 39 11.3 Deposit 41 11.4 Title 41 11.5 Closing 41 11.6 Option Benefit 42 11.7 Subordination 42 11.8 No Brokers 42 ARTICLE XII - Index of Defined Terms 43 EXHIBITS - -------- Exhibit A - Land Exhibit B - Annual Base Rent Exhibit C - Permitted Exceptions Exhibit D - Tenant Work Insurance Requirements Exhibit E - Reporting Requirements Exhibit F - Minimum Insurance Requirements Exhibit G - Subordination, Non-Disturbance and Attornment Agreement Form Exhibit H - Capital Expenditure Items Exhibit I - Lower Gravel Parking Lot LEASE ----- ARTICLE I --------- Fundamental Lease Provisions ---------------------------- 1.1 Reference Subjects. Each reference in this Lease to any of the following subjects shall incorporate the following information. Other terms are defined throughout this Lease and are indexed in the last Article. DATE OF LEASE EXECUTION: As of June __, 2003 PROPERTY: The land known and numbered as One Parlex Place, Methuen, Massachusetts, more particularly described in Exhibit A. PREMISES: The Property, including all buildings, structures, and all improvements thereon. LANDLORD: Taurus Methuen LLC ORIGINAL ADDRESS OF LANDLORD: c/o Taurus New England Investment Corp., 118 Milk Street, Boston, Massachusetts 02109, Attn: Mr. Scott R. Tully TENANT: Parlex Corporation, a Massachusetts corporation ORIGINAL ADDRESS OF TENANT: One Parlex Place, Methuen, Massachusetts 01844, Attn: Jonathan Kosheff TERM: The term of this Lease shall commence on the Commencement Date and end on the Expiration Date COMMENCEMENT DATE: The Date of Lease Execution. (See Section 2.3) LEASE YEAR: Each Lease Year shall consist of twelve (12) calendar months beginning with the Commencement Date, except that if the Commencement Date is not the first day of a calendar month, then Lease Year 1 shall include the partial month at the beginning of the Term in addition to the following twelve (12) calendar months, and the Annual Base Rent for Lease Year 1 shall be proportionately increased. EXPIRATION DATE: The last day of the fifteenth (15th) Lease Year, unless extended pursuant to the provisions of Section 2.3.1 ANNUAL BASE RENT: The amounts set forth on Exhibit B. (See Article III.) PERMITTED USES: (i) Office, warehouse, distribution and manufacturing; and (ii) such other lawful uses as may be reasonably approved in writing by Landlord. (See Section 5.4) SECURITY DEPOSIT: $750,000, subject to increase in accordance with Section 8.6. TENANT WORK THRESHOLD AMOUNT: $250,000 (See Section 5.1.1) BROKERS: Cushman & Wakefield of Massachusetts, Inc. (See Section 11.8) EXHIBITS A Land ---- B Annual Base Rent ---------------- C Permitted Exceptions -------------------- D Tenant Work Insurance Requirements ---------------------------------- E Reporting Requirements ---------------------- F Minimum Insurance Requirements ------------------------------ G Subordination, Non-Disturbance and Recognition Agreement Form ------------------------------------------------------------- H. Capital Expenditure Items ------------------------- ARTICLE II ---------- Premises and Term ----------------- 2.1 Premises. Landlord leases the Premises to Tenant and Tenant leases the Premises from Landlord, subject to matters of record and matters referred to below. (a) Title and Condition. The Premises are demised and leased subject to (i) the existing state of the title as of the Commencement Date, including the Permitted Exceptions set forth on Exhibit C hereto, and (ii) the "as is" condition of the buildings, structures, and other improvements located thereon, as of the Commencement Date, without representation or warranty by Landlord. (b) Reservations. Landlord reserves the right from time to time to grant and relocate easements, to alter and diminish the shape and size of the Land and to alter driveways, walkways, parking areas, and utilities serving the Premises, all of which may be done by Landlord so long as the same do not adversely interfere with Tenant's use of the Land and improvements constituting the Premises. (c) No Merger. There shall be no merger of this Lease or the leasehold estate hereby created with the fee estate in the Premises or any part thereof by reason of the same person acquiring or holding, directly or indirectly, this Lease or the leasehold estate hereby created or any interest in this Lease or in such leasehold estate as well as the fee estate in the Premises or any portion thereof. 2.2 Existing Conditions; "As-Is. Tenant acknowledges that Tenant or its affiliates owned and occupied the Premises prior to the Commencement Date and that it has inspected the Premises and accepts the same in the condition they are in on the Commencement Date, it being expressly agreed that Landlord shall have no obligation, liability, or risk whatsoever with respect to the Premises or their condition. Landlord shall have no obligation to provide any tenant improvement allowance or to perform 2 any work or improvements in the Premises, except as expressly set forth in Section 5.18. Tenant further acknowledges that neither Landlord nor any person acting under Landlord has made or implied any representations or warranties concerning this Lease, the Premises, or their condition or suitability for Tenant's use. To the extent permitted by applicable law, Tenant waives any right or remedy otherwise accruing to Tenant on account of the condition or suitability of the Premises, or title to the Premises, and Tenant agrees that it takes the Premises "as-is," with all faults and without any such representation or warranty, including any implied warranties. 2.3 Term. The Term of the Lease shall commence at 12:01 a.m. on the Commencement Date and end at 12:00 midnight on the Expiration Date set forth in Section 1.1. 2.3.1 Extension Option. Subject to the terms and conditions below, Tenant shall have the option to extend the Term for two (2) additional five (5) year extension terms (each an "Extension Term") by notice given to Landlord at least one (1) year before the then applicable Expiration Date (any such notice, "Tenant's Option Exercise Notice"). Tenant's election shall be exercised, and Annual Base Rent for the Extension Term determined, as set forth below. If Tenant fails timely to exercise its option for any Extension Term, Tenant shall have no further extension rights hereunder. Tenant's option so to extend the Term shall be void, at Landlord's election, if Tenant is in monetary or other material default at the time Tenant elects to extend the Term or at the time the Term would expire but for such extension. The extension of the Term shall be applicable to the entire Premises and Tenant shall have no right to extend the Term for only a portion of the Premises. During the Extension Term, all provisions of this Lease shall apply except that Tenant shall have no further option to extend the Term after the last Extension Term. During each Extension Term, Tenant shall pay Annual Base Rent equal to the greater of (i) the Annual Base Rent then being paid under the Lease or (ii) ninety-five percent (95%) of the then prevailing market rate for a five (5) year lease of space in the same market area as the Premises and comparable to the Premises in terms of finish, age, building quality and amenities for a tenant of equal size and financial strength as Tenant, under terms and conditions substantially the same as those of this Lease as though then available for single occupancy for the Permitted Uses (or any higher and better use then being made by Tenant) in "as-is" condition or such better condition in which Tenant is required to maintain the Premises (the "Fair Market Rent"). Fair Market Rent shall not include any increased rental value attributable solely to improvements to the Premises made and paid for by Tenant after the date of this Lease to the extent that the same: (a) improve the overall quality of the Property above the quality that exists as of the date of this Lease; and (b) do not consist of improvements that: (1) are necessary in order to cause the Premises to comply with any applicable legal requirements or to cause the Tenant to comply with its obligations under this Lease; (2) are necessary in order to maintain the Premises in at least as good a condition as the Premises are in as of the date of this Lease; (3) relate to ordinary maintenance and repair; (4) are made in connection with any casualty or condemnation; or (5) are necessary on account of any overburdening of the Premises by Tenant, any failure by the Tenant to care for, inspect and maintain the Premises and Building Systems in accordance with this Lease and otherwise in a commercially reasonable manner or any other act or omission of Tenant or its agents, contractors or invitees. Landlord shall notify Tenant of its estimate of the Fair Market Rent within thirty (30) days after its receipt of Tenant's Option Exercise Notice. Tenant shall have the option to accept or reject by written notice Landlord's estimate, or to withdraw its exercise of the extension option, in any case provided that : (1) Tenant gives Landlord written notice of such rejection or withdrawal within twenty one (21) days following delivery of Landlord's estimate, and (2) any notice of rejection contains Tenant's estimate of the Fair Market Rent (any such notice, "Tenant's Rejection Notice"). Tenant's failure to deliver a 3 Tenant's Rejection Notice within such twenty one (21) day period shall be deemed to constitute Tenant's acceptance of Landlord's estimate of Fair Market Rent. In the event Tenant timely gives a Tenant Rejection Notice in accordance with the above terms, then the Fair Market Rent shall be arbitrated in accordance with the following procedure. In the event Landlord fails to notify Tenant of its estimate of Fair Market Rent as provided above, the parties shall determine Fair Market Rent by arbitration as set forth below. All estimates of Fair Market Rent shall consist of a single rent number and not a range. Within twenty (20) days after any Tenant's Rejection Notice given by Tenant, Landlord and Tenant each shall appoint as an arbitrator an MAI appraiser with at least ten (10) years experience as an appraiser of buildings in the Greater Boston area similar in size and character to the Premises, and shall give notice of such appointment to the other party. If either Landlord or Tenant shall fail to appoint an arbitrator within such twenty (20) day period, the other may apply to the Boston office of the American Arbitration Association ("AAA") for appointment of such an arbitrator five (5) business days after notice of such failure to the delinquent party if such arbitrator has not then been appointed. The two arbitrators shall, within five (5) business days after appointment of the second arbitrator, appoint a third arbitrator who shall be similarly qualified. If, within five (5) business days after appointment of the second arbitrator, the two arbitrators do not agree on the selection of the third arbitrator, then either arbitrator on behalf of both may request such appointment from the Boston office of the AAA. The arbitration shall be conducted in accordance with the commercial arbitration rules of the AAA insofar as such rules are not inconsistent with the provisions of this Lease (in which case the provisions of this Lease shall govern). The arbitrators shall be charged to reach a majority written decision in accordance with the standards for the Fair Market Rent as provided herein, within twenty (20) days after the third arbitrator is appointed. The arbitrators shall not be obligated to select the estimates provided by Landlord or Tenant. If the AAA shall cease to provide arbitration for commercial disputes in Boston, the second or third arbitrator, as the case may be, shall be appointed by any successor organization providing substantially the same services, and in the absence of such an organization, by a court of competent jurisdiction under the arbitration act of The Commonwealth of Massachusetts. If Landlord should delay in giving the notice which begins the valuation procedures of this Section 2.3.1, or if the process should otherwise be delayed for any reason, then such procedures shall nevertheless remain in effect and be applicable when and as invoked with respect to Annual Base Rent payable during the Extension Term; but until such procedures are completed, Tenant shall pay on account of Annual Base Rent at 110% of the rate established for Annual Base Rent for the last twelve (12) months of the Term (and upon Fair Market Rent being established, Tenant shall pay the same within ten (10) days of such determination, retroactively to the beginning of the Extension Term). Each party shall bear the costs of the arbitrator selected by it and the cost of its own attorneys and witnesses; the parties shall share equally in the costs of the third arbitrator selected in accordance herewith and any other costs of the arbitration. The parties shall adjust for over or under payments within twenty (20) days after the decision of the arbitrators is announced. Promptly after the Annual Base Rent is determined for each Extension Term, Landlord and Tenant shall enter into an amendment of this Lease confirming the extension of the Term and the new rate for Annual Base Rent. 4 ARTICLE III ----------- Rent 3.1 Annual Base Rent. Commencing on the Commencement Date and by the first day of each subsequent calendar month during the Term, Tenant shall pay to Landlord the Annual Base Rent set forth in Section 1.1, together with any and all Additional Rent due to Landlord in accordance with this Lease, all as set forth in this Article III. 3.2 Additional Rent. All taxes, costs, expenses, charges, amounts and other sums that Tenant assumes, agrees or is required to pay pursuant to this Lease (other than Annual Base Rent), together with every fine, penalty, interest and cost that may be added for non-payment or late payment thereof, shall constitute additional rent ("Additional Rent"). All Additional Rent shall be paid directly by Tenant to the party to whom such Additional Rent is due. If Tenant shall fail to pay any such Additional Rent or any other sum due hereunder when the same shall become due, Landlord shall have all rights, powers and remedies with respect thereto as are provided herein or by law in the case of non-payment of any Annual Base Rent and shall, except as expressly provided herein, have the right, but not the obligation, to pay the same on behalf of Tenant pursuant to Section 8.5. The term "rent" shall mean Annual Base Rent and Additional Rent. 3.3 Method of Payment. Tenant agrees to pay the Annual Base Rent to Landlord in advance in equal monthly installments by the first day of each calendar month during the Term. Tenant shall make a ratable payment of Annual Base Rent and Additional Rent (to the extent applicable) for any period of less than a month at the beginning or end of the Term. Unless Landlord and Tenant otherwise agree in writing, all payments of Annual Base Rent, and all payments of Additional Rent and other sums due and payable to Landlord, shall be paid by wire transfer of immediately available funds in accordance with such wire instructions as Landlord may from time to time provide, without demand (except as otherwise expressly set forth in Section 8.1(i) of this Lease), set-off or other deduction. ARTICLE IV ---------- Net Lease; True Lease --------------------- 4.1 Net Lease. This Lease is an absolutely triple net lease to Landlord. It is the intent of the parties hereto that the Annual Base Rent payable under this Lease shall be an absolutely net return to Landlord and that Tenant shall pay all costs and expenses relating to the Premises as set forth in this Lease, except as expressly set forth in Section 5.18, and the business carried on therein. Without limiting the generality of the preceding sentence, Tenant shall at its sole cost and expense be responsible for payment of all real estate taxes, all electricity, gas, water, sewer, telephone, refuse disposal, and other charges for utilities and services supplied to the Premises, all costs (except as expressly set forth in Section 5.18) of cleaning, maintaining, repairing, and replacing the Premises (including all costs of cleaning, maintaining, repairing, and replacing the roof, windows, walls, foundation, floors, and structural elements, mechanical, electrical and plumbing systems, HVAC systems, and the sidewalks, parking areas, and other exterior areas), all amounts payable from time to time by the owner of the Premises under any Title Documents (defined below), a property management fee equal to 1.75% of the rent due under this Lease (which may be paid to Landlord or an affiliate of Landlord) and all costs of insurance. Any amount or obligation herein relating to the Premises that is not expressly declared to be that of Landlord shall be deemed to be an obligation of Tenant to be performed by Tenant at Tenant's expense and Tenant shall indemnify Landlord against, and hold Landlord harmless from, the same in the manner provided in 5 Section 5.6, and Tenant's liability for the payment of any of the same which shall become payable after the Term is hereby expressly provided to survive the Term. Annual Base Rent, Additional Rent, and all other sums payable hereunder by Tenant, shall be paid without notice or demand, and without set off, counterclaim, recoupment, abatement, suspension, deduction, or defense (other than payment) whatsoever, so that this Lease shall yield net to Landlord the Annual Base Rent under all circumstances and conditions whether now or hereinafter existing and whether or not within the contemplation of the parties. As used herein, the term "Title Documents" means any and all easements, covenants, conditions, and restrictions, industrial park association agreements, and other agreements, encumbrances, and restrictions of record affecting all or part of the Premises, as the same may now exist, or as the same may hereafter be created or amended without materially expanding the obligations of Tenant without Tenant's approval (which approval shall not be unreasonably withheld), but excluding any mortgage; provided that any future ground lease shall be a Title Document if reasonably approved by Tenant as aforesaid (and does not require Tenant to pay any ground rent or additional charges) and the parties thereto enter into a subordination, nondisturbance, and recognition agreement that complies with the provision of Section 9.1. 4.2 Non-Terminability; No Offset or Abatement. Tenant's obligation to pay rent shall not be discharged or otherwise affected by any law or regulation now or hereafter applicable to the Premises, or any other restriction on Tenant's use, or any casualty or taking (except as otherwise expressly provided for in Section 7.2(b) and Section 7.3(f)), or any failure by Landlord to perform any obligation or other occurrence, event or circumstance; and Tenant waives all rights now or hereafter existing to quit or surrender this Lease or the Premises or any part thereof, or to assert any defense in the nature of constructive eviction to any action seeking to recover rent. Without limiting the generality of the foregoing, this Lease shall not terminate, nor shall Tenant have any right to terminate this Lease, nor shall Tenant be entitled to any set-off or abatement of rent, nor shall the obligations of Tenant under this Lease be affected, by reason of (i) any damage to or destruction of all or any part of the Premises from whatever cause (except as otherwise expressly provided for in Section 7.2(b)); (ii) the taking of the Premises or any portion thereof by condemnation, requisition, or otherwise (except as otherwise expressly provided for in Section 7.3(f)); (iii) the prohibition, limitation, cessation, restriction or prevention of Tenant's use, occupancy or enjoyment of all or any part of the Premises, or any interference with such use, occupancy or enjoyment, or any insufficiency of condition, design, operation or fitness for use, occupancy or enjoyment of the Premises or any portion thereof or any failure of the Premises to comply with applicable laws; (iv) any eviction by paramount title or otherwise; (v) any default on the part of Landlord under this Lease, or under any other agreement to which Landlord and Tenant (or their respective affiliates) may be parties; (vi) any interruption of utilities or services to the Premises, (vii) any litigation, claim, or other proceeding affecting the use or occupancy of the Premises, whether arising before or after the Commencement Date (Tenant agreeing to be solely responsible for defending, and to indemnify and hold harmless Landlord from and against, any and all claims, liabilities, damages, or expenses, including reasonable attorneys' fees, arising from such matters), (viii) the impossibility or illegality of performance by Landlord, Tenant or both, (ix) any action of any governmental authority (including changes in laws), or (x) any other cause whether similar or dissimilar to the foregoing. The preceding sentence shall apply to the maximum extent now or hereafter permitted by law, it being acknowledged and agreed that Tenant or its affiliate is the former owner of the Premises, that Landlord would not have agreed to purchase the Premises absent Tenant's agreement to enter into this Lease, and that the provisions of this Article IV reflect the parties' express agreement as to the allocation of certain risks relating to the Premises and its use and are a material part of the economic inducements for Landlord to enter into this Lease. It is the intention of the parties hereto that the obligations of Tenant hereunder shall be separate and independent covenants and agreements, that the Annual Base Rent, the Additional Rent, and all other sums payable by Tenant hereunder shall continue to be payable in all events, and that the obligations of Tenant hereunder shall continue unaffected, unless the requirement to pay or perform the same shall have been terminated pursuant to an express provision of this Lease. Notwithstanding anything to the contrary contained 6 above, in the event that Tenant does bring a separate and independent action against Landlord, any judgment in favor of Tenant shall not abate Annual Base Rent or Additional Rent or terminate the Tenant's obligations hereunder. 4.3 True Lease. Landlord and Tenant agree that the parties intend this Lease to constitute a lease and not a financing arrangement, joint venture or any other type of relationship other than that of landlord and tenant. Each party shall reflect the transaction represented hereby in all applicable books, records and reports (including income tax filings) in a manner consistent with "true lease" treatment rather than "financing" treatment, subject to future modifications of accounting or tax rules or guidelines and subject to contrary determinations or positions by governmental agencies or the like. 4.4 Quiet Enjoyment. Upon performing all covenants of this Lease, Tenant may peaceably and quietly enjoy the Premises during the Term free from any claim by Landlord or persons claiming under Landlord, subject always to the terms of this Lease, provisions of law, and matters of record to which this Lease is or may become subordinate. Except as otherwise expressly provided herein, this covenant of quiet enjoyment is in lieu of any other covenant of quiet enjoyment, express or implied. ARTICLE V --------- Tenant's Covenants ------------------ Tenant agrees during the Term and such further time as Tenant (or any person acting under it) occupies any part of the Premises to perform the following, all at Tenant's cost. 5.1 Tenant Work. 5.1.1 General. As used in this Lease, the term "Tenant Work" shall mean all work, including demolition, improvements, additions and alterations, in or to the Premises. Without limitation, Tenant Work includes any apertures in the walls, partitions, ceilings or floors and all attached carpeting, all signs visible from the exterior of the Premises, and any change in the exterior appearance of the Premises. All Tenant Work shall be subject to Landlord's prior written approval, not to be unreasonably withheld, conditioned or delayed, and shall be arranged and paid for by Tenant all as provided herein; provided that any interior, non- structural Tenant Work (including any series of related Tenant Work projects) that costs less than the Tenant Work Threshold Amount and does not affect any mechanical, electrical, plumbing, or telecommunications systems of the Premises (collectively, the "Building Systems") shall not require Landlord's prior approval if Tenant delivers the Construction Documents for such work to Landlord at least five (5) business days' prior to commencing such work and such work does not require the approval of Landlord's mortgagee. Whether or not Landlord's approval is required, Tenant shall neither propose nor effect any Tenant Work that would in Landlord's reasonable judgment (i) adversely affect any structural component of the Premises, (ii) is incompatible with the Building Systems, (iii) affects the exterior appearance of the Premises or areas around the Building or other property than the Premises, (iv) diminishes the value of the Premises, or (v) requires any unusual expense to readapt the Premises. Title to all additions, alterations, improvements and replacements made to the Premises, including all Tenant Work, shall vest in Landlord and remain part of the realty subject to this Lease, except to the extent provided in Section 5.12, without any obligation to pay any compensation therefor to Tenant. 5.1.2 Construction Documents. No Tenant Work shall be effected except in accordance with complete, coordinated construction drawings and specifications ("Construction 7 Documents"). For interior cosmetic Tenant Work that does not require Landlord's approval under Section 5.1.1, the "Construction Documents" may constitute only sketches accompanied by a reasonably detailed description of the Tenant Work. Before commencing any Tenant Work requiring Landlord's approval under Section 5.1.1, Tenant shall obtain Landlord's prior written approval of the Construction Documents for such work, which approval shall not be unreasonably withheld. Landlord shall use reasonable efforts to respond to Tenant's submission of Construction Documents within 5 business days, or within such longer period as is required in order for Landlord to obtain any approval needed from Landlord's mortgagee. The Construction Documents shall be prepared by an architect ("Tenant's Architect") experienced in the construction of improvements in and to comparable buildings in the area where the Premises are located and, if such work will exceed the Tenant Work Threshold Amount or involve matters other than interior, non-structural alterations, the identity of such Architect shall be subject to Landlord's approval in advance, such approval not to be unreasonably withheld. Tenant shall be solely responsible for the liabilities associated with and expenses of all architectural and engineering services relating to Tenant Work and for the adequacy, accuracy, and completeness of the Construction Documents even if approved by Landlord (and even if Tenant's Architect has been otherwise engaged by Landlord in connection with the Premises). The Construction Documents shall set forth in detail the requirements for construction of the Tenant Work and shall show all work necessary to complete the Tenant Work including all cutting, fitting, and patching and all connections to the Building Systems. Submission of the Construction Documents to Landlord for approval shall be deemed a warranty that all Tenant Work described in the Construction Documents (i) complies with all applicable laws, regulations, building codes, and high design standards, (ii) does not materially and adversely affect any structural component of the Premises (including exterior walls, exterior windows, core walls, roofs or floor slabs), (iii) is compatible with and does not materially and adversely affect the Building Systems, (iv) does not affect any property other than the Premises, (v) conforms to floor loading limits, (vi) and with respect to all materials, equipment and special designs, processes or products, does not infringe on any patent or other proprietary rights of others. Landlord's approval of Construction Documents shall only signify Landlord's consent to the Tenant Work shown and shall not result in any responsibility of Landlord concerning compliance of the Tenant Work with laws, regulations, or codes, or coordination or compatibility with any component or system of the Premises, or the feasibility of constructing the Tenant Work without damage or harm to the Premises, all of which shall be the sole responsibility of Tenant. Within thirty (30) days after substantial completion of any Tenant Work, whether or not the same costs less than the Tenant Work Threshold Amount or otherwise requires Landlord's approval, Tenant shall furnish to Landlord "as built" plans showing the Tenant Work and adjoining portions of the Premises. Tenant's construction contract(s) for Tenant Work shall provide that any and all warranties thereunder shall inure to the benefit of Landlord (and its successors and assigns) as well as Tenant, and Tenant shall furnish Landlord with copies of such warranties promptly after the completion of Tenant Work. To the extent Landlord's approval is required hereunder (but not otherwise), Tenant shall pay to Landlord, within ten (10) days after Landlord's demand therefor, the reasonable direct third-party costs and expenses of reviewing Construction Documents incurred by Landlord, not to exceed $3,000. 5.1.3 Performance. The identity of any person or entity (including any employee or agent of Tenant) performing any Tenant Work ("Tenant's Contractor") shall, if the cost of such work in any instance is in excess of the Tenant Work Threshold Amount or involves any work other than interior, nonstructural alterations, be approved in advance by Landlord, such approval not to be unreasonably withheld or delayed. Once any Tenant's Contractor has been approved, then the same Contractor may thereafter be used by Tenant for the same type of work until Landlord notifies Tenant that such Tenant's Contractor is no longer approved. Tenant shall procure at Tenant's expense all necessary permits and licenses before undertaking any Tenant Work. Tenant shall perform all Tenant Work at Tenant's risk in compliance with all applicable laws and in a good and workmanlike manner employing new materials of good quality and producing a result at least equal in quality to the other parts of the Premises. When any 8 Tenant Work is in progress, Tenant shall cause to be maintained insurance as described in the Tenant Work Insurance Schedule attached as Exhibit D and such other insurance as may be reasonably required by Landlord covering any additional hazards due to such Work, and, if the cost of such Work exceeds the Tenant Work Threshold Amount also such bonds or other assurances as Landlord may reasonably require that the work will be satisfactorily completed and the costs thereof timely paid, in each case for the benefit of Landlord. If the Tenant Work in any instance requires Landlord's approval hereunder, Tenant shall reimburse Landlord's reasonable costs of inspecting installation of the Tenant Work not to exceed $1000 per inspection. At all times while performing Tenant Work, Tenant shall require any Tenant's Contractor to comply with all applicable laws, regulations, permits and Landlord's rules and regulations relating to such work, including use of loading areas, elevators and lobbies. Each Tenant's Contractor shall work on the Premises without causing labor disharmony, coordination difficulties, or delay to or impairing of any guaranties, warranties or the work of any other contractor. Each Tenant's Contractor shall, by entry into the Premises, be deemed to have agreed to indemnify and hold the Indemnitees (as defined in Section 5.6) harmless from any claim, loss or expense arising in whole or in part out of any act or neglect committed by or under such person while on or about the Premises to the same extent as Tenant has so agreed in this Lease, the indemnities of Tenant and Tenant's Contractor being joint and several. 5.1.4 Payment. Tenant shall pay the entire cost of all Tenant Work and shall keep the Premises, free of liens for labor or materials relating to such Tenant Work. If any such lien or notice of contract is filed that is claimed to be attributable to Tenant or persons acting under Tenant, then Tenant shall promptly (and always within thirty (30) days) discharge or record a bond (in form and substance reasonably acceptable to Landlord and Landlord's title insurer and acceptable to Landlord's mortgagee from time to time) over the same; provided, however, that Tenant shall not be entitled to bond over the same in any circumstance in which the failure to pay and discharge such lien could cause a default under any loan secured by the Premises. 5.2 Utilities and Services. Tenant shall arrange, provide and pay directly (and assume all risk of service interruptions) for all water, sewer, steam, oil, gas, telecommunications, electricity and other energy or utility services that serve the Premises and deposits or bonds in connection therewith. It is understood and agreed that Landlord shall be under no obligation whatsoever to furnish any utilities or services (including snow removal, cleaning or security) to the Premises, and in no event shall Landlord be liable for (or suffer any reduction in any rent on account of) any interruption or failure in the supply of the same. 5.3 Maintenance and Repairs. (a) Tenant shall, in a commercially reasonable manner, manage, maintain, repair, replace, clean, secure, protect, defend and keep in good condition, repair and appearance and in compliance with all governmental requirements and laws the Premises and all improvements and appurtenances and all utilities, facilities, installations and equipment used in connection therewith, except as expressly provided in Section 5.18, including the structural elements of all walls, roof decks, floor slabs and foundations, all floor coverings, roof waterproofing and membranes, glass, windows, doors, partitions, exterior lighting, elevators, electrical, telecommunications, plumbing, heating, ventilating and other building systems, pipes, drains, water and sewage systems and other fixtures or equipment serving the Premises. Without limitation, Tenant shall provide all cleaning, painting, janitorial services, security, rubbish disposal, periodic exterior waterproofing treatments to the Premises, window caulking, maintenance of all gas, water, electric, telecommunications and other utility lines from surrounding ways to the Premises, and shall repair and maintain the grounds and landscaping, roads, parking areas (including periodic resurfacing), and walkways appurtenant to the Premises, and shall provide landscaping and snowplowing services thereto, keeping the Premises and all improvements and appurtenances in at least as good condition as on the Commencement Date, reasonable wear and tear 9 excepted, except as expressly provided in Section 5.18. Tenant shall not injure, overload, deface, or commit waste in the Premises nor use or permit any use of the Premises that is improper or offensive or that constitutes a nuisance. Except as expressly provided in Section 5.18, Tenant shall make promptly all structural and nonstructural, foreseen and unforeseen, ordinary and extraordinary changes and repairs of every kind that may be required to be made to keep and maintain the Premises in good condition, repair, and appearance, reasonable wear and tear excepted. Tenant shall keep the Premises orderly and free and clear of rubbish. Tenant shall keep the Premises equipped with fire extinguishers and other safety appliances as are required by applicable laws and the insurance required to be carried by Tenant hereunder and as otherwise reasonably appropriate for Tenant's use. Tenant covenants to perform or observe all terms, covenants or conditions of any Title Documents or any maintenance agreement to which it may at any time be a party or to which the Premises may be subject and Landlord shall have no obligations whatsoever thereunder. Tenant shall, at its expense, use reasonable efforts to enforce compliance with any provisions of any Title Documents or maintenance agreement having a material effect on the value or use of the Premises by any other person subject to such agreement. Landlord shall not be required to maintain, repair or rebuild, or to make any alterations, replacements, or renewals of any nature to the Premises, or any part thereof, whether ordinary or extraordinary, structural or nonstructural, foreseen or not foreseen to maintain the Premises or any part thereof in any way, except as expressly provided in Section 5.18. Tenant hereby expressly waives the right to make repairs at the expense of Landlord that may be provided for in any law. To the maximum extent permitted by law, Tenant assumes all risk of damage or injury to any person or property located in, on, or about the Premises and Landlord shall not be liable for any loss or damage to person or property resulting from any accident, theft, vandalism, or other occurrence on the Premises. Tenant shall, in all events, make all repairs, replacements and perform maintenance and other work for which it is responsible hereunder promptly, in a good, proper and workmanlike manner at its sole cost and expense. (b) If Landlord believes that Tenant has failed to comply with its maintenance, repair and related obligations under this Lease, Landlord may send a notice thereof to the Tenant (the "Property Condition Notice"). Promptly following the issuance of any Property Condition Notice, Landlord and Tenant will meet and attempt to agree in writing upon a mutually acceptable plan of action by the Tenant to address the matters set forth in the Property Condition Notice. If, for any reason, Landlord and Tenant have not agreed in writing on a plan of action within thirty (30) days from the date of the Property Condition Notice, Landlord shall be entitled to send Tenant a notice (the "Landlord Notice") naming a third- party engineering firm (such third-party engineering firm, the "Landlord's Designated Consultant") to investigate the matters described in the Property Condition Notice. Tenant may, within twenty (20) days from the date of the Landlord Notice, provide Landlord with written notice (the "Tenant Notice") stating that Tenant disapproves of Landlord's Designated Consultant and naming another proposed third-party engineering firm (such third-party engineering firm, the "Tenant's Designated Consultant") to investigate the matters described in the Property Condition. If Tenant fails to send a Tenant Notice to Landlord within twenty (20) days following the Landlord Notice, and if the Landlord Notice contained the following words at the top of the notice, "TENANT MUST RESPOND TO THIS REQUEST WITHIN 20 DAYS FROM THE DATE OF THIS LANDLORD NOTICE OR TENANT SHALL BE DEEMED TO HAVE APPROVED AND AGREED TO THE LANDLORD NOTICE," then Tenant shall be deemed to have agreed to the use of Landlord's Designated Consultant and Landlord's Designated Consultant shall promptly issue a written report to Landlord and Tenant (the "Property Condition Report") setting forth the results of its investigation and outlining the steps, if any, that should be taken by Tenant in order to address those matters. If Tenant issues a Tenant Notice to Landlord within twenty (20) days following the Landlord Notice, the Landlord's Designated Consultant and the Tenant's Designated Consultant shall, within ten (10) days from the Tenant Notice, send a written notice to Landlord and Tenant designating a third-party engineering firm (which shall not be either the Landlord's Designated Consultant nor the Tenant's Designated Consultant) to issue the Property Condition Report. 10 Promptly following the issuance of the Property Condition Report, Tenant shall commence the work described in the Property Condition Report and shall complete the same as soon as reasonably practicable in a good and workmanlike manner and in compliance with all applicable laws. If the Landlord's Designated Consultant and the Tenant's Designated Consultant fail to name a third party engineering firm within ten (10) days from the date of the Tenant Notice, either Landlord or Tenant may apply to the Boston office of the American Arbitration Association for appointment of a single arbitrator to select such third party engineering firm. Any such arbitration shall be conducted in accordance with the Fast-Track Commercial Arbitration Rules and the decision of the arbitrator shall be binding on Landlord and Tenant. The third party costs of all engineering firms engaged under this Section 5.3(b), as well as costs payable to any arbitration association or arbiter, shall be borne equally by Landlord and Tenant. If at any time the American Arbitration Association shall cease to provide arbitration services for commercial disputes in the Greater Boston area, the arbitrator shall be appointed by any successor organization providing substantially the same services and, in the absence of any such successor organization, by a court of competent jurisdiction. 5.4 Use and Compliance with Law. Tenant shall occupy the Premises continuously only for the Permitted Uses, and only as and to the extent permitted under present and future laws, ordinances and bylaws and all regulations, land use restrictions, soil management plans and the like thereunder (including those regulating the production, use, and disposal of hazardous materials, occupational health and safety laws, and access to persons with disabilities) and all permits, orders and other governmental approvals ("laws") applicable from time to time to the Premises or Tenant or both, foreseen or unforeseen, and whether or not the same necessitate structural or other extraordinary changes or improvements to the Premises or interfere with Tenant's use. Tenant shall, at its expense, except as expressly provided in Section 5.18, comply with all changes required in order to obtain the insurance required by it to be carried and with the provisions of all Title Documents and any contracts, agreements, instruments, and restrictions to which Tenant is or hereafter becomes a party or by which Tenant is or becomes bound affecting the Premises or any part thereof or the ownership, occupancy, or use thereof. Tenant shall not initiate or acquiesce in any change in any zoning or other law or regulation or land use restriction affecting the Premises without the prior consent of Landlord. Tenant shall procure all appropriate approvals, licenses and permits relating to the Premises or its occupancy, in each case promptly giving Landlord true and complete copies of the same and all applications therefor. Tenant shall, in any event, in the manner provided in Section 5.6 indemnify and save Landlord harmless on account of Tenant's failure so to comply with the obligations of this Section. It is intended that Tenant bear the sole risk of all present and future laws affecting the Premises and appurtenances, and Landlord shall not be liable for (nor suffer any reduction in any rent on account of) the enforcement of laws. Anything herein to the contrary notwithstanding, Tenant shall not use or permit the use of the Premises or any part thereof for any unlawful or illegal purposes or in violation of any certificate of occupancy or Title Documents, or for any extra-hazardous purpose or in such manner as to create or constitute a nuisance of any kind. 5.5 Taxes and Impositions. Tenant shall pay or discharge all Taxes and Impositions, for each fiscal period wholly included in the Term (and a ratable amount for the partial fiscal years included in the Term at the beginning and the end of the Term). As used in this Lease, the term "Taxes and Impositions" means: (a) all taxes, assessments, betterments, excises, levies, user fees, water and sewer rents and charges, and all other governmental charges and fees of any kind or nature, or impositions or agreed payments in lieu thereof or voluntary payments made in connection with the provision of governmental services or improvements of benefit to the Premises (including any so- called linkage, impact or voluntary betterment payments), and all penalties and interest thereon (if due to Tenant's failure to make timely payments), assessed or imposed against (i) the Premises or any portion of the Premises (including any personal property taxes levied on such 11 property or on fixtures or equipment or other personal property used in connection therewith), (ii) any Annual Base Rent and Additional Rent reserved or payable hereunder (other than a federal or state income tax of general application), and (iii) this Lease or the leasehold estate hereby created, or which arise in respect of the operation, possession, occupancy or use of the Premises, ordinary and extraordinary, whether or not the same shall have been within the express contemplation of the parties hereto, other than a federal or state income tax of general application; (b) all sales (including those imposed on lease rentals), value added, ad valorem, single business, gross receipts, use and similar taxes at any time levied, assessed or payable on account of the leasing, operation, possession or use of the Premises by Tenant; (c) any transfer, recording, stamp and real property gain taxes incurred upon the sale, transfer, foreclosure or other disposition of any interest in the Premises by Tenant; (d) all claims and demands of mechanics, laborers, materialmen and others which, if unpaid, might create a lien on the Premises; (e) all charges of utilities, communications and similar services serving the Premises; (f) charges with respect to police protection, fire protection, street and highway maintenance, construction and lighting, sanitation and water supply, if any; and (g) fines, penalties and other similar or like governmental charges applicable to the foregoing and any interest or costs with respect thereto. If during the Term the present system of ad valorem taxation of property shall be changed so that, in lieu of or in addition to the whole or any part of such ad valorem tax there shall be assessed, levied or imposed on such property or Premises or on Landlord any kind or nature of federal, state, county, municipal or other governmental capital levy, income, sales, franchise, excise or similar tax, assessment, levy, charge or fee (as distinct from the federal and state income tax in effect on the Date of Lease Execution) measured by or based in whole or in part upon Premises valuation, mortgage valuation, rents, services or any other incidents, benefits or measures of real property or real property operations, then any and all of such taxes, assessments, levies, charges and fees shall be included within the term of Taxes and Impositions. In no event shall the provisions of this paragraph obligate Tenant to pay any federal or state income tax of general application due from Landlord. Tenant shall pay any Taxes and Impositions directly to the appropriate governmental authority at least ten (10) days before the same are due, and by such time Tenant shall provide Landlord (and if requested also any Landlord's mortgagee) evidence of such payment. (If any tax bill is sent to Landlord, then Landlord shall promptly deliver such tax bill to Tenant. If such tax bill is not so delivered, then Tenant shall not be deemed to have failed to perform timely its obligations so long as Tenant pays such Taxes and Impositions within fifteen (15) days after receipt of such bill). If: (A) Tenant fails to perform timely its obligations under this Section 5.5 (if such failure continues for more than ten (10) days after notice from Landlord of such failure, or if such failure occurs two (2) times within any twelve (12) month period), or (B) tax escrows are required by Landlord's mortgagee, Landlord may require, among its other rights and remedies, that the Taxes and Impositions be paid to Landlord in monthly installments on the first day of each month in amounts reasonably estimated from time to time by Landlord to provide for the full payment of Tenant's obligation with respect to the Taxes and Impositions thirty (30) days prior to the date the same are due. Unless such funds are held by Landlord's mortgagee, they shall be deposited into an interest-bearing account held by Landlord and Landlord will apply the escrowed funds (including the interest thereon) to the payment of the Taxes and Impositions as they become due or release the funds to Tenant for such payment. Tenant shall furnish to Landlord true, correct, and complete copies of all bills relating to any Taxes and Impositions within ten (10) days after Tenant's receipt thereof. Tenant shall have the right to seek, at its own cost, to reduce, maintain the existing level of, or resist increases in (collectively, "abatements") Taxes and Impositions for any fiscal tax period wholly or partially within the Term for which Tenant has paid. If Tenant fails to notify Landlord that it intends to prosecute an abatement at least twenty (20) days prior to the date abatements may be filed without loss of rights, then Landlord shall have such right. (If Tenant does prosecute an abatement, it will not thereafter compromise or terminate such prosecution without giving Landlord at least twenty (20) days' prior notice 12 and opportunity to assume such prosecution.) If Landlord elects to prosecute any abatement not prosecuted by Tenant, Landlord shall notify Tenant and Tenant shall, within ten (10) days, elect by notice to Landlord whether Tenant desires to receive the benefits of such abatement proceeding. (Tenant's failure timely to make such election shall be deemed an election not to receive the benefits of such abatement). If Tenant elects to receive the benefits of the abatement proceeding prosecuted by Landlord, Tenant shall pay to Landlord as Additional Rent Landlord's reasonable costs (including fees of attorneys, appraisers and other consultants) incurred in seeking such abatement whether or not successful and whether or not such efforts involve filing actual abatement applications or initiation of other formal proceedings; and in such case Landlord shall pay to Tenant the net proceeds received from any abatement allocable to Taxes and Impositions that Tenant has theretofore paid. If Tenant elects (or is deemed to elect) not to receive the benefits of any abatement proceeding prosecuted by Landlord, Taxes and Impositions shall not include Landlord's costs in prosecuting such abatement; but Landlord shall be entitled to retain the entire proceeds of such abatement even if allocable to Taxes and Impositions that Tenant has theretofore paid. Both Landlord and Tenant shall reasonably cooperate with the moving party in prosecuting any abatement. 5.6 Indemnity. Subject only to those rights expressly reserved to Landlord under this Lease, Tenant shall have exclusive control of the Premises and all areas pertaining thereto including all appurtenances, improvements, utilities, water bodies, grounds, sidewalks, walkways, driveways and parking facilities on the Land, and Tenant shall bear the sole risk of all related tort liabilities. To the maximum extent permitted by applicable law, Tenant shall indemnify, save harmless and defend Landlord, its beneficiaries and affiliates, all Landlord's mortgagees, any ground lessors, and the officers, directors, stockholders, members, managers, trustees, partners, agents, and employees of any of the foregoing and any other persons reasonably designated by Landlord from time to time as having a relationship to the Premises ("Indemnitees") from all liability, claim, damage, cost or loss (including reasonable fees of legal counsel of the Indemnitees' choice) arising in whole or in part out of, or in any manner connected with (i) any injury (including death), loss, theft or damage to any person or property while on or about the Premises, except to the extent caused directly by Landlord's gross negligence or willful misconduct, or (ii) any condition of the Premises, except to the extent caused directly by Landlord's gross negligence or willful misconduct, or the possession and use thereof or any activity permitted or suffered thereon (including hazardous materials or hazardous materials activities), or (iii) any breach of any covenant, representation or certification by Tenant or persons acting under Tenant, and the consequences of any such breach (including for failure to timely pay Taxes and Impositions and third party claims), or (iv) any liability imputed to any Indemnitees because of Landlord's ownership of the Premises, or (v) any act or omission anywhere by Tenant or persons acting under Tenant, in each case paying the same to Landlord on demand as Additional Rent. Without implying that other covenants do not survive, the covenants of this Section shall survive the Term. 5.7 Landlord's Entry Right. Landlord and persons acting under Landlord may upon such notice and in such manner as is reasonable under the circumstance enter the Premises during business hours but in no event less than 24 hours notice (and in case of emergency, at any time and without prior notice) to exercise of any rights reserved to Landlord, or to inspect the Premises (including testing or sampling with respect to hazardous materials), or to take measurements of the Premises, or to secure or protect the Premises, or to remove any improvements, alterations or additions made without any required consent hereunder; and similarly at any time may show the Premises to prospective purchasers and lenders, and may show the Premises to prospective tenants and during the last two years of the Term may keep affixed in suitable places notices for letting as long as it does not materially interfere with Tenant's use of the Premises and its business operations. Except in case of emergency, Landlord shall be subject in entering the Premises to reasonable security conditions, if any, set forth in a notice by Tenant to Landlord. 13 5.8 Signs. Subject to providing Landlord with plans and specifications therefor in advance, to any approval rights of Landlord's mortgagee, and to complying with all applicable laws, Tenant may erect signs on the Premises identifying Tenant. At the end or earlier termination of the Term, Tenant will remove all signs (whether existing at the Commencement Date or later erected) and repair any damage of such removal. 5.9 Personal Property. Tenant shall be solely responsible for paying all personal property taxes assessed on all furnishings, trade fixtures, equipment, inventory, or other personal property of Tenant or any person holding under Tenant on the Premises ("Tenant Property") or any personal property of any other person at the Premises. Tenant shall use reasonable efforts to have Tenant Property taxed separately from the Premises. All Tenant Property at the Premises shall be at the sole risk of Tenant. To the maximum extent permitted by applicable law, Landlord shall not be liable for any loss or damage to person or property resulting from any accident, theft, vandalism or other occurrence on the Premises, including damage resulting from water, wind, ice, steam, explosion, fire, smoke, chemicals, the rising of water or leaking or bursting of pipes or sprinklers, defect, structural or non-structural failure, or any other cause. 5.10 Damage and Hazardous Materials. Tenant shall not itself, or permit or suffer persons to, either with or without negligence, injure, overload, deface, damage or otherwise harm the Premises or any part or component thereof; commit any nuisance; permit the existence, emission, discharge, release or other escape of any oil or petroleum products, asbestos, polychlorinated biphenyls or any biologically or chemically active or other hazardous or toxic materials, substances or wastes whether in solid, liquid or gaseous state, whether existing or released prior to or after the Commencement Date (collectively, "hazardous materials," but excluding common office products such as copy machine toner and the like that are used in compliance with applicable laws) so as to impregnate, impair or in any manner affect, even temporarily, any element or part of the Premises or the property or person of others, or allow the storage, generation, disposal or use of such (collectively "hazardous materials activities") in any manner not sanctioned by law or by the highest standards prevailing in the industry for the storage and use of such materials; nor shall Tenant permit to be brought onto the Premises any such materials except to use in the ordinary course of Tenant's business; permit any noise or odors to emanate beyond the Premises; or permit any waste whatsoever to the Premises. Landlord may inspect the Premises from time to time as long as it does not materially interfere with Tenant's use of the Premises and its business operations, and Tenant will cooperate with such inspections. Tenant shall, promptly following Landlord's written request, provide Landlord with true and complete copies of any filings or reports submitted by Tenant to any governmental agency relating to hazardous materials or hazardous materials activities. If required by Landlord's mortgagee or governmental agency or if Landlord has a good faith reason to believe a release may have occurred or a threat of release exists on or about the Premises or hazardous materials activities do not conform to all laws, then Landlord may, but need not, perform appropriate testing in a commercially reasonable manner and the reasonable costs thereof shall be reimbursed to Landlord by Tenant upon demand as additional rent. Notwithstanding the foregoing, Landlord shall notify Tenant if such testing is required by Landlord's mortgagee or by a governmental agency and, except in the case of an emergency or to the extent contrary to applicable laws or Landlord's obligations under loan documents, Landlord shall use good faith efforts to provide Tenant with a reasonable opportunity to provide information relevant to Landlord's mortgagee or the governmental agency's determination whether such testing is necessary, so long as no waiver of any Landlord rights or other material liability or cost to Landlord may result, Tenant indemnifies Landlord in connection therewith in the manner provided in Section 5.6, and Landlord's mortgagee and governmental agency confirm in writing that no such testing is necessary. Without limitation, hazardous materials shall include all substances described in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. 9601 et seq.; in the Resource Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq.; 14 in the Hazardous Materials Transportation Act; in the Massachusetts Hazardous Waste Management Act, as amended, M.G.L. Chapter 21, and the Massachusetts Oil and Hazardous Material Release Prevention Act, as amended, M.G.L. Chapter 21E and all other laws governing similar matters as they may be amended from time to time. In addition, Tenant shall execute affidavits, representations and the like from time to time at Landlord's request concerning Tenant's best knowledge and belief regarding the presence or absence of hazardous materials on the Premises or Landlord's property. Without limiting the foregoing, if any hazardous material is ever found to be present in, on, at, under or about the Premises (except as permitted as set forth above), whether caused or permitted by Tenant or persons acting under Tenant, then Tenant shall promptly take all actions at its sole expense as are necessary to return the Premises to the condition existing prior to the introduction of any such hazardous materials. In all events, and without limitation, Tenant shall indemnify Indemnitees in the manner elsewhere provided in this Lease with respect to hazardous materials and hazardous materials activities whether or not consented to by Landlord or otherwise lawful (and for these purposes, the loss indemnified shall include any costs of investigation or remediation, any claim of personal injury or property damage to any person and any claimed decrease in value of or adverse impact on marketability to the Premises or any part of Landlord's property including the Premises). Tenant's indemnifications in the preceding sentence shall not extend to hazardous materials that Tenant conclusively demonstrates were first brought to the Premises by parties other than Tenant (or anyone acting by, through or under Tenant) after the expiration or earlier termination of the Term, vacating of the Premises and removal of all of Tenant's property from the Premises. Without implying that other covenants do not survive, the covenants of this Section shall survive the Term. Tenant shall from time to time at reasonable intervals upon Landlord's request confirm all of the foregoing covenants directly to Landlord's mortgagee, and in that connection shall execute and deliver to such Landlord's mortgagee hazardous materials indemnities in such form and substance as such lenders then require of borrowers. If Tenant or any person acting under Tenant has used hazardous materials or conducted hazardous materials activities on the Premises, then not less than six (6) months prior to vacating the Premises at the expiration or earlier termination of the Term, Tenant at its sole cost shall provide Landlord with an environmental report by a qualified third party environmental assessment firm reasonably approved by Landlord, which report shall include such testing as the third party environmental assessment firm deems prudent under the circumstances. Tenant shall take such action as may be necessary in order to allow the third party environmental assessment firm to conclude in such report either that the Premises are free from any hazardous materials, or that hazardous materials are present in compliance with all applicable laws (and in such case such report shall identify the hazardous materials and contain recommendations for removing or remediating the hazardous materials). At the expiration or earlier termination of the Term, Tenant shall cause the Premises to be free of any material amounts of hazardous materials. Nothing herein contained shall be construed to limit or impair Tenant's obligation regardless of the results of any such report. It is the intent of the parties that Tenant, and not Landlord, assume all of the risks and liabilities of hazardous materials released on, at, or under the Premises before or after the Commencement Date or coming onto the Premises from any source whatsoever during the Term; provided that Tenant shall have no liability to Landlord for hazardous materials that migrate onto the Property from an adjacent property after the Commencement Date if Tenant conclusively proves that such hazardous materials so migrated onto the Premises after the Commencement Date from a source outside of the Premises for which Tenant bears no responsibility. Landlord, which purchased the Premises from Tenant, shall have no liability to Tenant for any hazardous materials (if any) released or existing on, at, or under the Premises prior to the Commencement Date. 15 Reference is made to a Level 2 Environmental Site Assessment for the Property performed by LFR Levine Fricke and the Summary of Findings thereof dated May 20, 2003 (the "Phase II Interim Report"). Tenant shall, at its sole expense, use commercially reasonable efforts to cause LFR promptly to issue the final Phase II report together with a letter, in form and substance reasonably acceptable to Landlord (the "Reliance Letter"), allowing Landlord and its lender to rely on such final Phase II report and any additional reports, findings or certifications provided to Tenant in connection therewith (such final phase II report, together with the Phase II Interim Report, is hereinafter referred to as the "Phase II Report"), provided that such reliance shall be in accordance with the terms and conditions of LFR's proposal to Tenant dated October 20, 2002. Tenant agrees that the final Phase II report, together with the Reliance Letter, shall be delivered to Landlord as promptly as possible following the date hereof and no later than three business days after the date on which such final Phase II report is delivered to Tenant. Tenant shall as soon as reasonably possible after the Closing Date, but in any event within 360 days after the Closing Date or such shorter period as may be required by applicable law, time being of the essence (in each case subject to any delay caused by acts of God), complete each of the following: (W) cause the additional testing, investigation, and studies recommended in the Phase II Report to be conducted, (X) cause all remedial action and cleanup recommended in the Phase II Report to be undertaken and completed as set forth in the Phase II Report and otherwise in accordance with applicable law, and carry out and complete any further remediation in accordance with applicable law, such that a Permanent Solution Response Action Outcome will have been achieved for the Property pursuant to a 310 CMR 40.000 et seq. and all other applicable law, with only such Activity and Use Limitations or other ongoing conditions or requirements as are reasonably acceptable (in form and substance) to Landlord (it being agreed that it shall be reasonable for Landlord to reject any Activity and Use Limitation or other ongoing condition or requirement that would have a material adverse impact on the value or marketability of the Property for manufacturing, distribution, office or warehouse uses); (Y) cause all notifications and submittals described in the Phase II Report or otherwise required under applicable law to be timely made to the appropriate governmental authorities and provide copies of such notifications to Landlord, including without limitation the following submittals to the Massachusetts Department of Environmental Protection: a 120-day written Release Notification Form (to be submitted by September 6, 2003); a "Phase I/Tier Classification" submittal; a Release Abatement Measure (RAM) Plan to the extent recommended by the LSP or otherwise required by applicable law; a RAM Completion Report; and a Response Action Outcome; and (Z) provide Landlord and any third party lender to Landlord with third party documentation reasonably acceptable to Landlord and any such lender that all remedial action described in clause (X) and (Y) above has been carried out in accordance with the Phase II Report and otherwise in accordance with applicable law, including without limitation providing written evidence satisfactory to Landlord and any such lender that a Permanent Solution Response Action Outcome, with only such Activity and Use Limitations or other ongoing conditions or requirements as are reasonably acceptable to Landlord, has been achieved and has become effective with respect to the environmental conditions at the Property and that all filings, submission, and approvals relating to such Permanent Solution Response Action Outcome have been carried out in accordance with 310 CMR 40.000 et seq. and all other applicable law. Tenant shall thereafter, at all times during the term of the Lease, at its sole expense, cause all actions to be taken necessary to maintain such Permanent Solution Response Action Outcome in full force at all times, including without limitation complying with any ongoing monitoring, maintenance, or reporting obligations required under such Permanent Solution Response Action Outcome and providing evidence of such compliance to Landlord upon Landlord's reasonable request. If during the term of the Lease Landlord is ever required to undertake any action to maintain such Permanent Solution Response Action Outcome in full force, Tenant shall promptly reimburse all costs incurred by Landlord in undertaking such action. Tenant's indemnity obligations set forth elsewhere in this Lease shall include any cost, loss, or damage incurred by Landlord and arising in connection with any subsequent audit by the Massachusetts Department of Environmental Protection (or any successor governmental entity) of the Permanent Solution Response Action Outcome or any submissions, reports, 16 or conditions relating thereto, including without limitation the cost of any additional remediation required pursuant to such audit. In addition to its other obligations under this Lease, on the date hereof, Tenant shall pay Landlord $122,569 which Landlord shall use to purchase an environmental insurance policy insuring Landlord with respect to the Premises. 5.11 Liens. Tenant shall not, directly or indirectly, create or permit to be created or to remain, and shall promptly discharge by bonding or otherwise, any lien on Landlord's fee interest in the Premises, the Annual Base Rent and/or Additional Rent, other than the mortgage(s) held by Landlord's mortgagee (and any assignment of leases or rents collateral thereto), the Permitted Exceptions in existence on the Commencement Date and any mortgage, lien, encumbrance or other charge created by or resulting from any act or omission by Landlord or those claiming by, through or under Landlord other than Tenant. Nothing contained in this Lease shall be construed as constituting the consent or request of Landlord, express or implied, to or for the performance by any contractor, laborer, materialman, or vendor of any labor or services or for the furnishing of any materials for any construction, alteration, addition, repair or demolition of or to the Premises or any part thereof. Notice is hereby given that Landlord will not be liable for any labor, services or materials furnished or to be furnished to Tenant, or to anyone holding an interest in the Premises or any part thereof through or under Tenant, and that no mechanic's or other liens for any such labor, services or materials shall attach to or affect the fee interest of Landlord in and to the Premises. 5.12 Condition on Expiration. At the expiration or earlier termination of the Term, Tenant (and all persons claiming through Tenant) shall without the necessity of notice vacate and surrender the Premises broom-clean and in good and tenantable condition reasonable wear and tear excepted. As part of such delivery, Tenant shall also provide all keys (or lock combinations, codes or electronic passes) to the Premises; remove all signs regardless of date of installation wherever located and all Tenant Work except for any items of such Work that Landlord in its sole discretion may direct Tenant to surrender; remove all Tenant Property and other personal property whether or not bolted or otherwise attached; and remove all of Tenant's signs wherever located. If requested in writing, Landlord shall advise Tenant at the time of Landlord's approval of Tenant Work (or for Tenant Work not requiring Landlord's approval, within thirty (30) days of Tenant's written request) whether Landlord requires removal of such Tenant Work at the expiration or earlier termination of the Term. Tenant shall repair all damage that results from such removal and restore the Premises substantially to a fully functional and tenantable condition (including the filling of all floor and wall holes, the removal of all disconnected wiring back to junction boxes, the replacement of all damaged ceiling tiles and the repair of any damage caused by the removal of any bolted or anchored equipment). Any property not so removed shall be deemed abandoned, shall (if Landlord so elects) become the property of Landlord, and may be disposed of in such manner as Landlord shall see fit; and Tenant shall pay the cost of removal and disposal to Landlord upon demand. Notwithstanding anything to the contrary contained herein, upon expiration or earlier termination of this Lease, all fixtures regardless of date of installation that are integral to the operation of the Premises and are not "trade fixtures" of Tenant, including the heating, ventilation and air conditioning systems, shall remain on the Premises and be the property of Landlord; provided, however, that at Landlord's election, Tenant shall, at its expense and in compliance with all applicable laws, remove any piping, venting systems and other similar equipment or fixtures not representing standard HVAC and potable water equipment or fixtures. Without implying that other covenants do not survive, the covenants of this Section shall survive the Term. 5.13 Holding Over. If Tenant (or anyone claiming through Tenant) shall remain in occupancy of the Premises or any part thereof after the expiration or early termination of the Term without a written 17 agreement therefor executed and delivered by Landlord, then without limiting Landlord's other rights and remedies the person remaining in possession shall be deemed a tenant at sufferance, and Tenant shall thereafter pay monthly rent (pro rated for such portion of any partial month as Tenant shall remain in possession) at a rate equal to the Holdover Rate (defined below) times the greater of (a) fair market rent, or (b) the amount payable as Annual Base Rent for the twelve-month period immediately preceding such expiration or termination, and in either case with all Additional Rent also payable as provided in this Lease. The Holdover Rate shall be 110% for the first month of holding over, 120% for the second month of holding over, 130% for the third month of holding over and 150% for each month thereafter. After Landlord's acceptance of the full amount of such rent for the first month of such holding over, the person remaining in possession shall be deemed a tenant at will at such rent and otherwise subject to all of the provisions of this Lease. Notwithstanding the foregoing, if Landlord desires to regain possession of the Premises promptly after the termination or expiration hereof and prior to acceptance of rent for any period thereafter, Landlord may, at its option, forthwith re-enter and take possession of the Premises or any part thereof without process or by any legal process in force in the state where the Property is located. In any case, Tenant shall remain liable to Landlord for all damages, including consequential damages, resulting from any failure by Tenant to vacate the Premises or any portion thereof when required hereunder. 5.14 Intentionally Omitted. 5.15 Financial Reporting. Tenant shall provide Landlord with accurate and complete copies of each Form 10Q and Form 10K filed with the Securities and Exchange Commission simultaneously with the filing thereof. If at any time Tenant's stock is not listed on the NYSE or the NASDAQ, Tenant shall provide Landlord with the reports set forth on Exhibit E. 5.16 Capital Expenditures. Tenant shall make third party expenditures (in calendar 2003) in the amount of Sixty Seven Thousand One Hundred Eighty Five Dollars ($67,185.00) on the Capital Expenditure items set forth in Exhibit H hereto (the "Capital Expenditure Items"). Landlord and Tenant acknowledge and agree that the work referred to as Full Depth Asphalt Repairs ($15,000) and New Asphalt Overlay ($35,000) are deemed deleted from Exhibit H because they are subsumed within the work to be undertaken in accordance with Section 5.17 below. On or before 5 p.m. on December 30, 2003, Tenant shall deliver to Landlord a statement certified by Tenant's third party consultant as to which Capital Expenditure Items have been completed and the actual costs thereof (the "Capital Expenditure Statement"). 5.17 Additional Payments for Certain Improvements. (a) Commencing on the Commencement Date and by the first day of each subsequent calendar month during the first five years of the Term until the Approved Parking Area Work (defined below) is fully completed and paid for as provided below, Tenant shall pay to Landlord $7,176.00 (all such amounts paid to Landlord, the "Improvement Funds"). The Improvement Funds may be commingled with other funds of Landlord and shall not constitute an asset of Tenant, and no fiduciary relationship shall be created with respect to such funds. (b) On or prior to September 15, 2003, Tenant shall submit plans, specifications, and contractors bids for the improvement and repair of the Lower Gravel Parking Lot (defined below). Upon request of Landlord, Tenant shall submit any other materials reasonably requested by Landlord in connection with such proposed improvement. After consultation with Tenant, Landlord shall notify Tenant as to the scope of improvement and repair reasonably approved by Landlord for the Lower Gravel 18 Parking Lot. Tenant shall obtain all permits and approvals necessary for the proposed improvements. Within thirty (30) days following receipt of such notification, but subject to any delay resulting from causes beyond Tenant's control, Tenant shall commence and thereafter diligently work to complete the improvement and repair the Lower Gravel Parking Lot at its sole cost and expense in accordance with the scope of work approved by Landlord and otherwise in accordance with the requirements applicable to Tenant Work in this Lease and applicable law ("Approved Parking Area Work"). The term "Lower Gravel Parking Lot" means the parking area at the Property more particularly shown on the sketch attached hereto as Exhibit I. (c) Except as hereinafter provided and so long as no Event of Default has occurred, upon completion of the Approved Parking Area Work or portions thereof, Tenant may submit third party invoices and evidence of payment for such work to Landlord and may request reimbursement for such costs actually incurred by Tenant to the extent of the amount of the Improvement Funds actually paid to Landlord by Tenant. In no event shall any approval from Landlord relating to the Approved Parking Area Work be deemed to be a judgment from Landlord that the Approved Parking Area Work can be completed within a certain budget or for an amount less than or equal to the amount of the Improvement Funds actually paid to Landlord by Tenant; to the extent any Tenant Work on the Lower Gravel Parking Lot exceeds the amount of the Improvement Funds actually paid to Landlord by Tenant, all excess cost shall be borne by Tenant at its expense without reimbursement. (d) If Tenant has not completed improvement and repair of the Lower Gravel Parking Lot satisfactory to Landlord on or before June 30, 2004, Landlord may, in its sole discretion and without obligation to do so, use all or any portion of the Improvement Funds to carry out such improvement and repair of the Lower Gravel Parking Lot substantially in accordance with the plans approved by Landlord as provided for above (or, if no such plans have been approved by Landlord, then as Landlord may deem appropriate). (e) If there is a monetary or other material default by Tenant in its obligations under this Lease, and if such default continues beyond any applicable notice and cure period (or if the giving of notice is barred by applicable law), Landlord may, but shall not be obliged to, apply all or any portion of the Improvement Funds to the extent necessary to cure the default. After any such application by Landlord of the Improvement Funds, Tenant shall promptly pay to Landlord an amount equal to the Improvement Funds so expended. Within thirty (30) days after the expiration or sooner termination of the Term, and provided that no default exists under this Lease, the amount of the Improvement Funds not expended as provided for above shall be returned to the Tenant. (f) In the event of a sale of the Premises or lease, conveyance or transfer of the Premises, Landlord shall have the right to transfer the Improvement Funds to the transferee and Landlord shall upon such transfer be released by Tenant from all liability for the return or use of such Improvement Funds; and subject to Article IX, following such transfer Tenant agrees to look to the transferee solely for the return of said Improvement Funds. The provisions hereof shall apply to every transfer or assignment made of the Improvement Funds to such a transferee. Tenant further covenants that it will not assign or encumber or attempt to assign or encumber its rights with respect to the Improvement Funds, and that neither Landlord nor its successors or assigns shall be bound by any assignment, encumbrance, attempted assignment or attempted encumbrance. Tenant will enter into such agreements as Landlord's lender may request with respect to the assignment of the Improvement Funds to such lender. In connection with any transfer of the Premises, Tenant shall cooperate with Landlord in the assignment of the Improvement Funds to the transferee and, if requested by the transferee. 5.18 Landlord Repair. 19 (a) Beginning in Lease Year 11, subject to Article VII, and except for damage caused by any act or omission of Tenant, or Tenant's employees, agents, contractors or invitees, Landlord shall be responsible for the reasonable repair (and if and as necessary, the replacement) of the foundations, exterior walls, structural walls and roof of the Premises in the manner set forth in Section 5.18(c). Landlord shall not be obligated to repair and replace other portions of the Premises, including glass, windows, doors, parking lots, loading bays, Building Systems or the surfaces of walls, whether interior or exterior (all of which responsibility shall be Tenant's), or to repair or maintain any part of the Tenant Work performed by Tenant under Section 5.1, or for any repair or replacement arising from any overburdening of the Premises by Tenant, any failure by the Tenant to care for, inspect and maintain the Premises and Building Systems in accordance with this Lease and otherwise in a commercially reasonable manner or any other act or omission of Tenant or its agents, contractors or invitees. Tenant shall promptly report in writing to Landlord any defective condition known to it that Tenant believes Landlord is required to repair. (b) Beginning in Lease Year 11, subject to Article VII, if a legal requirement first effective after the commencement of Lease Year 11 shall render the Premises to be in material violation of law (other than a violation arising from any work performed by or for Tenant at the Premises, Tenant's layout or manner of use or business or otherwise arising from the acts or omissions of Tenant or Tenant's employees, agents, contractors or invitees) and requires a capital expenditure to cure such violation of law, then (i) Tenant shall so notify Landlord in a written report describing the nature and causes of such failure or violation, the alternative corrective measures, and the Tenant's recommendation for replacement or correction of such violation, and (ii) Landlord shall repair the affected item in the manner set forth in Section 5.18(c). Notwithstanding anything to the contrary in this paragraph, (A) subject to Section 7.2(b) in the case of a casualty, Tenant shall be solely responsible for the cost to repair, replace or upgrade any alterations, additions, improvements, repairs, or replacements that are performed by or on behalf of Tenant in the Premises; and (B) Landlord shall have no responsibility for any capital expenditures under this paragraph until such time as the aggregate amount spent by Tenant from and after the commencement of Lease Year 11 on capital expenditures under this paragraph, exclusive of expenditures arising from any work performed by or for Tenant at the Premises, Tenant's layout or manner of use or business or otherwise arising from the acts or omissions of Tenant or Tenant's employees, agents, contractors or invitees, equals or exceeds $250,000. (c) In the event that Landlord has a repair obligation under Section 5.18(a) or Section 5.18(b), and Landlord receives written notice from Tenant thereof as required by Section 5.18(a) and Section 5.18(b), then Landlord at its election may (i) repair the affected item if Landlord determines that such repairs can be effected; and/or (ii) replace all or parts of such items (or in the case of a violation requiring a capital expenditure under Section 5.18(b), install such capital item); or (iii) require that Tenant perform such work in accordance with Section 5.1. In any case under clauses (i), (ii) and (iii) in the preceding sentence, the costs of such work shall be allocated and paid as follows. If Landlord elects to perform any work or replacements required under this Section 5.18, then, prior to the commencement of such work or replacement, Tenant shall pay to Landlord Tenant's Share (defined below) thereof; provided, however, that Landlord may elect to give Tenant the option to pay Tenant's Share during the balance of the Term through a monthly payment equal to the monthly amount necessary to amortize Tenant's Share, with interest at a rate equal to 1% over the prime rate of interest published in the Wall Street Journal, in equal monthly installments over the remainder of the Term (with such monthly payments being due on the first day of each month). If Landlord elects to have Tenant perform such work or replacement, then Landlord's Share (defined below) shall be paid within thirty (30) days after Landlord receives reasonably acceptable evidence that the work has been completed and paid in full, after deducting any amounts due and owing Landlord by Tenant. For the purposes of this Section 5.18, the 20 term "Tenant's Share" shall mean the portion of the cost of any such work or replacement, amortized over the useful life of such items determined by Landlord in accordance with generally accepted accounting principles, allocable to the remainder of the Term. The term "Landlord's Share" shall mean the portion of the cost of any such work or replacement, amortized over the useful life of such items, allocable to the period between the date the Term of this Lease is scheduled to expire and the date that represents the end of the useful life of such items determined by Landlord in accordance with generally accepted accounting principles. Landlord shall reasonably determine the amortization of such costs in accordance with generally accepted accounting principles and the calculation of Tenant's Share and Landlord's Share. If any item of repair or replacement is necessary due to casualty or condemnation, Landlord shall not be obligated to make repairs or restoration in excess of the proceeds of insurance or eminent domain award recovered net of Landlord's reasonable costs of collection. To the extent Landlord has any repair obligations under Section 5.18, the performance of any such work shall take priority over any Tenant Work in Landlord's reasonable judgment. ARTICLE VI ---------- Assignment and Subletting ------------------------- 6.1 Landlord's Consent Required. Except for Permitted Transfers, Tenant shall not assign this Lease, or sublet or license the Premises or any portion thereof, or advertise the Premises for assignment or subletting or permit the occupancy of all or any portion of the Premises by any person other than Tenant (each of the foregoing actions are collectively referred to as a "transfer") without obtaining, on each occasion, the prior written consent of Landlord in accordance with Section 6.4 below. A transfer shall include any transfer of Tenant's interest in this Lease by operation of law, merger or consolidation of Tenant into any other firm or corporation, and the transfer or sale of a controlling interest in Tenant, whether by sale of its capital stock or otherwise or any sale of a substantial part of Tenant's assets. As used in this Lease, the term "Permitted Transfer" means: (1) a sublease to any subsidiary in which Tenant owns substantially all voting stock and control or to any parent owning substantially all voting stock and control of Tenant, (2) any assignment incident to the sale of substantially all of Tenant's assets or its stock, or (3) a statutory merger, or to any corporation resulting from the consolidation, of Tenant with any other entity where in either case of clause (2) or (3) the person succeeding to Tenant's interest immediately thereafter has a net worth equal to or in excess of that of Tenant as of the Commencement Date. Any transfer shall be subject to this Lease, all of the provisions of which shall be conditions to such transfer and be binding on any transferee. No transferee shall have any right further to transfer its interest in the Premises except back to Tenant, and nothing herein shall impose any obligation on Landlord to consider any request for a further transfer. 6.2 Intentionally Omitted. 6.3 Right of Termination or Recapture. Except for Permitted Transfers, if Tenant proposes a transfer of the entire Premises or of more than fifty percent of the rentable floor area of the Premises, in Tenant's request for consent under Section 6.4 (the "Tenant Request") Tenant shall offer to Landlord in writing the right to terminate this Lease as to the area in question as of the date specified in the offer. If Landlord shall elect in writing to accept the offer to terminate within thirty days after receipt of such offer ("Landlord's Termination Acceptance"), this Lease shall so terminate as to the area in question as of the date specified in such offer, and all of the provisions of this Lease governing termination shall apply, unless Tenant, within thirty days from its receipt of Landlord's Termination Acceptance, provides Landlord with a written notice in which Tenant unconditionally revokes the Tenant Request. If Landlord does not timely issue a Landlord Termination Acceptance, Tenant shall then comply with the provisions of this Article applicable to a transfer. 21 6.4 Procedures. (a) Tenant's request for consent under this Article VI shall set forth the details of the proposed transfer (and at least ten days prior to any Permitted Transfer Tenant shall deliver to Landlord the details of the proposed transfer), including: (i) the name, business and financial condition of the prospective transferee, together with a reasonably detailed description of the manner in which the prospective transferee will use the Premises; (ii) a true and complete copy of the proposed instrument containing all of the terms and conditions of such transfer, (iii) a written agreement of the assignee, subtenant or licensee, in form reasonably approved by Landlord, agreeing with Landlord to perform and observe all of the terms, covenants, and conditions of this Lease and agreeing that there are no obligations from Landlord to such transferee whatsoever, and (iv) any other information Landlord reasonably requests. Subject to the foregoing provisions of this Article VI, Landlord's consent to a proposed transfer of all or part of the Premises shall not be unreasonably withheld or delayed. Tenant hereby acknowledges that the creditworthiness and experience of Tenant was a material inducement to Landlord in connection with the consummation of this Lease, and accordingly, in determining whether to approve a proposed transfer, Landlord may take into account the financial capacity of such proposed transferee and the experience of such party in operating similarly situated properties. Tenant shall pay to Landlord, as Additional Rent, Landlord's reasonable attorneys' fees in reviewing any transfer requiring Landlord's consent, whether or not Landlord consents, in an amount not to exceed $5,000. (b) With respect to any request for Landlord's approval of a Transfer, Landlord must respond to a request from Tenant within ten (10) business days after Landlord's receipt of the items specified in Section 6.4(a)(i)-(iv) above or Landlord's right to approve the request is deemed waived, if the request from Tenant complies with the following requirements (the "Special Notice Provisions"): (1) The request must be in writing, and copies of the request must be sent to both Landlord and Landlord's counsel in accordance with the notice provisions of Section 10.1 below; and (2) The request must contain a blank sheet on the top of it with only the following language appearing in the middle of the sheet: LANDLORD MUST RESPOND TO THIS REQUEST WITHIN 10 BUSINESS DAYS FROM THE DATE OF LANDLORD'S RECEIPT OF THIS NOTICE OR LANDLORD'S RIGHT TO CONSENT TO OR APPROVE THIS REQUEST WILL BE DEEMED WAIVED. In the event Tenant fails to comply with the Special Notice Provisions, (i) Landlord shall not be required to respond within the specific period of time, (ii) Landlord's right to consent to or approve the request will not be deemed waived if Landlord fails to respond within the specific period of time, and (iii) Landlord shall not be deemed to have consented to or approved the request if Landlord fails to respond with the specific period of time. If the proposed Transfer would require the consent of Landlord's lender, Landlord's response shall state that any approval given by Landlord is conditioned upon the approval of the proposed Transfer by Landlord's lender. (c) Notwithstanding the foregoing provisions of this Article VI, Tenant may enter into subleases without the Landlord's prior consent provided that each of the following conditions is satisfied: (i) there is no then existing Event of Default by Tenant and no uncured notice of any facts or circumstances has been given to Tenant that, if not cured within an applicable cure period, will become an Event of Default; (ii) the cumulative total of the Premises subject to subleases does not exceed 50,000 square feet; (iii) the aggregate amount of space subject to subleases does not exceed 25% of the total rentable space at the Premises; (iv) at least ten (10) days before executing any such sublease, Tenant shall 22 deliver to Landlord the information described in Section 6.4(a)(i)-(iv) together with a certification by Tenant that the conditions set forth in this Section 6.4(c)(i)-(iii) are satisfied with respect to the prospective sublease; (v) Landlord shall determine, in its reasonable business judgment, that the manner in which the prospective subtenant will use the Premises will not materially and adversely affect the condition or safety of the Premises; and (vi) Tenant shall provide Landlord with a fully executed copy of such sublease within ten (10) days of its execution. 6.5 Profits. Except for Permitted Transfers and whether or not Landlord's consent is required, if the consideration, rent, or other charges payable to Tenant under such transfer exceed the rent and other charges to be paid hereunder and Tenant's Transfer Expenses (pro rated based (a) on floor area in the case of a subletting, license or other occupancy of less than the entire area of the Premises and (b) over the remaining Term), then Tenant shall pay to Landlord, as Additional Rent, fifty percent of the amount of such excess when and as received. Tenant's Transfer Expenses shall mean Tenant's reasonable and necessary payments to third parties in connection with such a transfer on account of brokerage, legal and fit-up costs. Without limiting the generality of the foregoing, any lump-sum payment or series of payments (including for the purchase or use of so-called leasehold improvements but excluding any Permitted Transfers as referred to in Section 6.1 above) on account of any transfer shall be deemed to be in excess of rent and other charges in its or their entirety. 6.6 No Release. Notwithstanding any transfer and whether or not the same is a Permitted Transfer or is consented to, Tenant's (and any guarantor's) liability to Landlord shall remain direct and primary. Any transferee of all or substantially all of Tenant's interest in the Premises, including any such transferee by virtue of a Permitted Transfer, shall be deemed to have agreed directly with Landlord to be jointly and severally liable with Tenant for the performance of all of Tenant's covenants under this Lease; and such assignee shall upon request execute and deliver such instruments as Landlord reasonably requests in confirmation thereof (and agrees that its failure to do so shall be a default). Tenant hereby irrevocably authorizes Landlord to collect rent and other charges from any transferee (and upon notice any transferee shall pay directly to Landlord) and apply the net amount collected to the rent and other charges reserved under this Lease. No transfer shall be deemed a waiver of the provisions of this Section, or the acceptance of the transferee as a tenant, or a release of Tenant or any guarantor from direct and primary liability for the performance of all of the covenants of this Lease. The consent by Landlord to any transfer shall not relieve Tenant or any transferee from the obligation of obtaining the express consent of Landlord to any modification of such transfer or a further transfer by Tenant or such transferee. Notwithstanding anything to the contrary in the documents effecting the transfer, Landlord's consent shall not alter in any manner whatsoever the terms of this Lease, to which any transfer at all times shall be subject and subordinate. The breach by Tenant or any transferee of any covenant in this Article shall be an Event of Default for which there is no cure period. Failure by Landlord to consent to a proposed transfer shall never cause a termination of this Lease or subject Landlord to any damages beyond Tenant's direct costs of establishing its entitlement to such consent. ARTICLE VII ----------- Insurance; Casualty; Taking --------------------------- 7.1 Insurance. (a) Tenant shall maintain, or cause to be maintained, at its sole expense, the insurance for the Premises specified on Exhibit F hereto (or such greater amount or additional insurance as Landlord's mortgagee may from time to time request during the Term). If: (A) Tenant fails to perform timely its obligations under this Section 7.1, or (B) insurance escrows are required by Landlord's mortgagee, Landlord may require, among its other rights and remedies, that the insurance premiums be 23 paid by Tenant to Landlord in monthly installments on the first day of each month in amounts reasonably estimated from time to time by Landlord to provide for the full payment of Tenant's obligation with respect to insurance thirty (30) days prior to the date the same are due. Unless such funds are held by Landlord's mortgagee, they shall be deposited into an interest-bearing account held by Landlord and Landlord will apply the escrowed funds (including the interest thereon) to the payment of the premiums as they become due or release the funds to Tenant for such payment. (b) Certificates of insurance shall be delivered to Landlord prior to the commencement date of the Term and annually thereafter at least thirty (30) days prior to the expiration date of the old policy. Tenant shall have the right to provide insurance coverage which it is obligated to carry pursuant to the terms hereof in a blanket policy, provided such blanket policy expressly affords coverage to the Premises and to Landlord and Landlord's mortgagee as required by this Lease. Each policy of insurance shall provide notification to Landlord and Landlord's mortgagee at least thirty (30) days prior to any cancellation or modification to reduce the insurance coverage. Tenant shall provide Landlord with a copy of any such policy, promptly after request. Each policy of insurance shall state that any loss shall be payable in accordance with the policy terms notwithstanding any act or neglect of Tenant or Landlord. Each policy of insurance shall include an endorsement waiving the insurer's rights of subrogation against Landlord. Without limiting any other provisions of this Lease, Tenant hereby waives any rights of recovery against Landlord for injury or loss due to hazards covered by such insurance. The amount and coverage of any insurance required to be carried by Tenant hereunder shall not limit Tenant's liability to Landlord for its obligations to Landlord under this Lease. (c)(i) Provided that there is no monetary or other material default by Tenant under this Lease, insurance claims by reason of damage to or destruction of any portion of the Premises shall be adjusted by Tenant; provided, however, that no settlement on account of any loss or damage in excess of $100,000 shall be made with any insurers without the prior written consent of Landlord (which consent shall not be unreasonably withheld or delayed) and Landlord's mortgagee, and provided further that, with respect to any loss or damage giving rise to any Landlord repair obligation under Section 5.18, Landlord shall have the right at its option to settle on account of such loss and adjust any such claim. Tenant shall, promptly after such damage or destruction, advise Landlord and Landlord's mortgagee of such occurrence and consult with Landlord and Landlord's mortgagee throughout the process of adjusting any such claim, and both Landlord and Landlord's mortgagee shall be fully advised as to all matters on a current basis. Landlord shall not be required to prosecute any claim against, or to contest any settlement proposed by, an insurer. Tenant may, at its expense, prosecute any such claim or contest any such settlement in the name of Landlord, Tenant or both, except to the extent Landlord has elected to settle losses and adjust claims as set forth above, and Landlord will join therein at Tenant's written request upon the receipt by Landlord of an indemnity from Tenant against all costs, liabilities and expenses in connection therewith. (c)(ii) Subject to the provisions of Section 7.2, and except to the extent Landlord has elected to settle losses and adjust claims as set forth above, proceeds from the property insurance policy shall be placed by Landlord or Landlord's mortgagee with a third-party institutional depository (such as a title insurance company) reasonably acceptable to Landlord, Tenant and Landlord's mortgagee and made available by such institutional depository to Tenant and/or Landlord, as appropriate, for the cost of repair or restoration, but only against certificates of Tenant delivered to Landlord or Landlord's mortgagee from time to time as such work or repair progresses, each such certificate describing the work or repair for which Tenant is requesting payment and the cost incurred by Tenant in connection therewith and stating that Tenant has not theretofore received payment for such work and has sufficient funds remaining to complete the work free of liens or claims. (Notwithstanding the foregoing, but subject to the consent of Landlord's mortgagee, and so long as Landlord has no repair obligations under Section 5.18, proceeds in a total amount of less than $100,000 shall be made directly available to Tenant for such repair or 24 restoration without the need for a third-party institutional depository.) At the request of Landlord or Landlord's mortgagee, such certificates will be accompanied by appropriate evidence with respect to the completion of such work or repair to date (including an architect's or engineer's certificate), the amount of funds required to complete the work, payment for labor and materials to date and/or the absence of liens or encumbrances arising from the work, and compliance with the requirements of Section 5.1. Prior to the release of any such proceeds, and at any time thereafter upon notice from Landlord, Tenant shall provide Landlord with reasonable evidence of the availability of such additional sums (beyond any insurance proceeds) as may be required, in Landlord's reasonable estimation, to complete the work. Subject to the provisions of Section 7.2, any proceeds remaining after Tenant has repaired the Premises pursuant to Section 7.2 shall be delivered to Tenant. No payment shall be made to Tenant pursuant to this Section 7.1(c) if there shall exist an Event of Default under the terms of this Lease. Notwithstanding the foregoing, excess insurance proceeds shall not be delivered to Tenant if Landlord has had repair obligations under Section 5.18. Until completion of the repair, if and so long as an Event of Default exists, business interruption insurance proceeds shall be paid to Landlord (or Landlord's mortgagee) to the extent of Base Rent and Additional Rent (to the extent the same is payable to Landlord, not to a third party), when due and payable. The balance, if any, of such proceeds shall be paid to Tenant or as Tenant may direct. If there is no Event of Default, then business interruption insurance shall be payable to Tenant. (d) In the event Tenant does not purchase the insurance required by this Lease or keep the same in full force and effect, Landlord may, but shall not be obligated, to purchase the necessary insurance and pay the premium. Tenant shall repay to Landlord, as Additional Rent, the amount so paid promptly upon demand. In addition, Landlord may recover from Tenant and Tenant agrees to pay, as Additional Rent, any and all expenses (including reasonable attorneys' fees) and damages that Landlord may sustain by reason of the failure of Tenant to obtain and maintain such insurance. (e) Landlord or Landlord's mortgagee shall not be limited in the proof of any damages which Landlord or Landlord's mortgagee may claim against Tenant arising out of or by reason of Tenant's failure to provide and keep in force insurance, as provided above, to the amount of the insurance premium or premiums not paid or incurred by Tenant and which would have been payable under such insurance; but Landlord and Landlord's mortgagee shall also be entitled to recover as damages for such breach, the uninsured amount of any loss, and costs and expenses of suit suffered or incurred by reason of or damage to, or destruction of the Premises, occurring during any period when the Tenant shall have failed or neglected to obtain the insurance required to be carried by Tenant hereunder. Tenant shall indemnify and hold harmless Landlord and Landlord's mortgagee in the manner set forth in Section 5.6 for any liability incurred by Landlord or Landlord's mortgagee arising out of any deductibles for insurance required to be carried by Tenant hereunder. (f) Tenant shall obtain insurance for all Tenant Property for its full replacement cost. In addition, during the performance of any Tenant Work, Tenant shall also maintain insurance as provided in the Tenant Work Insurance Requirements attached in Exhibit D. (g) Landlord shall not be required to maintain any insurance under this Lease. To the extent that Landlord, in its sole discretion and (except as provided in Section 7.1(d)) at its sole cost and expense, elects to maintain any insurance for its own account, such insurance shall not be contributory and shall be excess over any insurance maintained by Tenant. 7.2 Damage or Destruction of Premises. (a) Except as otherwise expressly provided in Section 7.2(b) below, if all or a part of the Premises shall be damaged or destroyed by casualty, and if the 25 estimated cost of rebuilding, replacing and repairing the same shall be or exceed $100,000, or in any case giving rise to Landlord's obligation to repair under Section 5.18, Tenant shall promptly notify Landlord thereof; and (whether or not such estimated cost shall be or exceed $100,000) Tenant shall, with reasonable promptness and diligence whether or not any insurance proceeds are available or adequate for such purpose, except to the extent Landlord's mortgagee does not make insurance proceeds available for such purpose, and regardless of the dollar amount or cause of such damage or destruction, rebuild, replace and repair any damage or destruction to the Premises, at its expense, in conformity with the requirements of Section 5.1, and subject to Section 5.18, in such manner as to restore the same to the same condition, as nearly as possible, as existed prior to such casualty and there shall be no abatement of Base Rent or Additional Rent. Notwithstanding the foregoing, if (i) a part of the Premises shall be damaged or destroyed by casualty, (ii) such casualty was not caused, in whole or in part, by the intentional act or gross negligence of Tenant or Tenant's employees, agents, invitees, affiliates or contractors, (iii) Tenant's obligation to rebuild, replace and repair is excused under this Section 7.2(a) because Landlord's mortgagee does not make insurance proceeds available therefor but instead applies the same toward the obligations of Landlord under its loan, and (iv) such unavailability of insurance proceeds results in the permanent loss of rentable floor area of any building, then Annual Base Rent shall be proportionally abated in a manner reasonably acceptable to Landlord and Tenant. If the conditions described in the preceding sentence are met, and if Landlord has elected in its sole discretion not to pay for or perform any repairs, then the actual, third-party costs paid for by Tenant shall be taken into account in the determination of the equitable abatement of rent under the preceding sentence, but only to the extent such costs were necessary to render the Premises safe and legally occupiable. Notwithstanding anything herein to the contrary, if there shall have been an Event of Default under the terms of this Lease and if Landlord has terminated the term of this Lease pursuant to Article VIII, Landlord, in the exercise of its sole and absolute discretion, shall have the right to settle claims relating to any insurance proceeds from any casualty and (if Landlord has terminated the term of this Lease pursuant to Article VIII) to receive the same and to apply same toward payment of any indebtedness owed to Landlord's mortgagee instead of allowing such proceeds to be used by Tenant for the rebuilding or restoration of the damaged portion of the Premises. (b) Notwithstanding the provisions of Section 7.2(a), if a Major Casualty (defined below) occurs, Tenant and Landlord may, by written notice to the other within sixty (60) days of the occurrence of such Major Casualty, terminate this Lease effective as of the first day of the calendar month that is not less than thirty (30) days nor more than sixty (60) days following the date of such notice of termination (the "Casualty Termination Date"). If this Lease is so terminated, (i) then, notwithstanding anything to the contrary in this Lease, Landlord shall have the exclusive right to deal with the applicable insurance companies and to settle all claims, (ii) all insurance proceeds (other than any proceeds attributable solely to any personal property of Tenant that Tenant is required or allowed to remove from the Premises upon the termination of this Lease) shall be paid to Landlord or Landlord's mortgagee; and (iii) on the Casualty Termination Date, Tenant shall pay to Landlord all Annual Base Rent and Additional Rent accrued through and including the Casualty Termination Date and all other amounts then accrued or due and payable by Tenant under this Lease. As used in this Lease, the term "Major Casualty" means a casualty that: (1) is not caused, in whole or in part, by the intentional act or gross negligence of Tenant or Tenant's employees, agents, invitees, affiliates or contractors; (2) causes more than 50% of the Premises to be untenantable; and (3) in the written opinion of a third party engineer reasonably acceptable to Landlord, cannot reasonably be expected to be restored to substantially the same condition that they were in before such casualty before the date (the "Outside Restoration Date") that is twelve months from the date of such casualty. In the event that (A) there is a casualty that would be a Major Casualty but for the fact that the estimated completion date for restoration established under subsection (3) above is on or before the Outside Completion Date, (B) in accordance with Section 5.18(c), Landlord elects to undertake the restoration itself rather than require that Tenant undertake such restoration, and (C) the restoration is 26 not substantially completed by the Outside Restoration Date, Tenant may, by written notice to Landlord within ten days from the Outside Restoration Date, terminate this Lease effective as of the first day of the calendar month that is not less than thirty (30) days nor more than sixty (60) days following the Outside Restoration Date; provided, however, that notwithstanding the foregoing provision, Tenant shall have no right to so terminate this Lease if the failure to complete the restoration by the Outside Restoration Date results in whole or in part from the acts or omissions of Tenant or from any other cause beyond Landlord's control or if Landlord otherwise is using commercially reasonable efforts to complete the restoration as soon as reasonably practicable. 7.3 Eminent Domain. (a) Tenant hereby irrevocably assigns to Landlord any award or payment to which Tenant may be or become entitled with respect to the taking of the Premises or any part thereof, by condemnation or other eminent domain proceedings pursuant to any law, general or special, or by reason of the temporary taking of the use or occupancy of the Premises or any part thereof, by any governmental authority, civil or military, whether the same shall be paid or payable in respect of Tenant's leasehold interest hereunder or otherwise. Tenant shall have no claim against Landlord for the value of the unexpired lease term or otherwise. Nothing herein shall be deemed to assign, waive, release, or limit Tenant's right to seek a separate award from the condemning authority specifically for its costs to relocate all or part of its business operations to new premises and for personal property and equipment belonging to Tenant, as and to the extent such amounts are recoverable under Massachusetts law, provided that any such award for relocation costs shall not reduce the award otherwise payable to Landlord for the Premises. Any award for Tenant's relocation costs shall not be deemed part of the "Net Award" for purposes of this Section. (b) Except as otherwise expressly provided for in Section 7.3(f), in the event of any taking of the Premises or any part thereof, this Lease shall be and remain unaffected thereby and rent shall not abate; provided, however, that if any portion of the rentable floor area of any building is permanently taken and restoration is not possible, Annual Base Rent shall be proportionally abated in a manner reasonably acceptable to Landlord and Tenant. (c) If during the Term the Premises or a portion of the Premises shall be taken by condemnation or other eminent domain proceedings, or the use or occupancy of the Premises or any part thereof shall be taken by any governmental authority; then, except as otherwise expressly provided for in Section 7.3(f), this Lease shall continue in full effect without abatement or reduction of Base Rent, Additional Rent or other sums payable by Tenant hereunder notwithstanding such taking. Tenant shall, except to the extent Landlord has a repair obligation under Section 5.18, and except to the extent that Landlord's mortgagee does not permit the use of any Net Award (as defined in Section 7.3(d)) therefor, promptly after any such taking ceases, at its expense, repair to the extent reasonably possible any damage caused thereby in conformity with the requirements of Section 5.1 so that, thereafter, the Premises shall be, as nearly as possible, in a condition as good as the condition thereof immediately prior to such taking. Subject to the consent of Landlord's mortgagee, in the event of any taking, Landlord shall make the Net Award (as defined in Section 7.3(d)) available to Tenant to make such repair or, if such Net Award shall be in excess of $100,000, shall place the Net Award with a third-party institutional depository (such as a title insurance company) reasonably acceptable to Landlord, Tenant and Landlord's mortgagee and such institutional depository shall make the same available to Tenant, only as such work or repair progresses as requisitioned by Tenant in accordance with good construction management practices reasonably acceptable to Landlord and acceptable to Landlord's mortgagee. Except for any damages for disruption of Tenant's business, Landlord reserves to itself, and Tenant releases and assigns to Landlord, all rights to damages accruing on account of any taking or by reason of any act of any public authority for which damages are payable. Tenant agrees to execute such further instruments of assignment as may be reasonably requested by Landlord, and to turn over to Landlord any damages that may be recovered in 27 any proceeding or otherwise; and Tenant irrevocably appoints Landlord as its attorney-in-fact with full power of substitution so to execute and deliver in Tenant's name, place and stead all such further instruments if Tenant shall fail to do so after ten (10) days notice. Subject to the consent of Landlord's mortgagee, any Net Award remaining after repairs have been made by Tenant, shall be delivered to Tenant; but only to the extent that the aggregate amount of such Net Award so remaining and all amounts theretofore paid to Tenant pursuant to this sentence do not exceed $50,000. If such amounts exceed $50,000, the excess may be retained by Landlord and applied in reduction of the principal amount of the indebtedness to any Landlord's mortgagee then outstanding at Landlord's sole option. If Landlord retains any such amount the Base Rent payable on or after the second month occurring after such retention shall be reduced equitably but in no event shall the Base Rent be reduced lower than the monthly debt payments due to any Landlord's mortgagee. Notwithstanding the foregoing, no excess amount of Net Award shall be payable to Tenant if Landlord has had a repair obligation under Section 5.18. In the event of such temporary requisition, Tenant shall be entitled to receive the entire Net Award payable by reason of such temporary requisition or portion of such temporary requisition occurring during the Term hereof, less any out-of- pocket necessary and reasonable costs incurred by Landlord in connection therewith. Landlord and Tenant shall not be obligated to make repairs under Section 5.18 and this Section 7.3(c), respectively, if the amount of the Net Award, in the case of Tenant, or the amount retained by Landlord under Section 7.3(d) net of Landlord's cost of collecting such amounts, in the case of Landlord shall exceed the cost of repairs to be made by Landlord or Tenant, as the case may be. Notwithstanding anything herein to the contrary, no payments shall be made to Tenant pursuant to this Section 7.3(c) if any Event of Default shall exist under this Lease. (d) For the purposes of this Lease the term "Net Award" shall mean: (i) all amounts payable as a result of any condemnation or other eminent domain proceeding, less all out-of-pocket necessary and reasonable expenses for such proceeding paid by Landlord in the collection of such amounts plus (ii) all amounts payable pursuant to any agreement with any condemning authority (which agreement shall be deemed to be a taking) which has been made in settlement of or under threat of any condemnation or other eminent domain proceeding affecting the Premises, less all out-of-pocket necessary and reasonable expenses incurred by Landlord as a result thereof in the collection of such amounts; provided, however, that the term "Net Award" shall not include any amounts described in Section 7.3(d)(i) or (ii) required by Landlord to satisfy any repair obligation under Section 5.18. (e) Any minor condemnation or taking of the Premises for the construction, widening, or maintenance of streets or highways shall not be considered a condemnation or taking for purposes of this Section 7.3 so long as the Premises shall not be materially adversely affected, ingress and egress for the remainder of the Premises shall be adequate for the business of Tenant and the provisions of any documents evidencing loans given by Landlord's mortgagee relating thereto shall be complied with. Tenant agrees that it will notify Landlord of any such condemnation. (f) Notwithstanding the provisions of Section 7.3(b)-(c), if a Major Taking (defined below) occurs, Tenant and Landlord may, by written notice to the other within sixty (60) days of the occurrence of such Major Taking, terminate this Lease effective as of the first day of the calendar month that is not less than thirty (30) days nor more than sixty (60) days following the date of such notice of termination (the "Taking Termination Date"). If this Lease is so terminated, (i) then, notwithstanding anything to the contrary in this Lease, the Net Award shall be paid to Landlord or Landlord's mortgagee; and (ii) on the Taking Termination Date, Tenant shall pay to Landlord all Annual Base Rent and Additional Rent accrued through and including the Taking Termination Date and all other amounts then accrued or due and payable by Tenant under this Lease. As used in this Lease, the term "Major Taking" means a taking that : (a) renders more than 50% of the Premises untenantable or (b) eliminates a sufficient number of parking spaces at the Premises such that (1) the loss of parking renders Tenant's operations at 28 the Premises legally prohibited, (2) replacement parking that would render Tenant's operations at the Premises legally permitted cannot be supplied, and (3) despite its reasonable efforts, Tenant is unable to obtain a waiver or approval from the appropriate governmental authority that would render Tenant's operations at the Premises legally permitted. ARTICLE VIII ------------ Default ------- 8.1 Events of Default. Any of the following shall constitute an "Event of Default" under this Lease: (i) if Tenant fails to pay Annual Base Rent, Additional Rent or any other sum when due and such default continues for five days after notice, or if more than two default notices are properly given in any twelve-month period, (ii) if Tenant vacates substantially all of the Premises, (iii) if Tenant (or any transferee of Tenant) makes any transfer of the Premises in violation of this Lease, (iv) if a petition is filed by Tenant (or any transferee or guarantor) for insolvency or for appointment of a receiver, trustee or assignee or for adjudication, reorganization or arrangement under any bankruptcy act, or if any similar petition is filed against Tenant (or any transferee or guarantor) and such petition filed against is not dismissed within thirty days thereafter, (v) if any representation or warranty made by Tenant is untrue, false or misleading in any material respect when made, (vi) if Tenant (or any transferor or guarantor) shall make a general assignment for the benefit of its creditors or admit in writing its inability to pay its debts as they become due, (vii) if any event occurs that, under the terms of this Lease, is an automatic Event of Default; (viii) Tenant or any guarantor shall dissolve or liquidate; (ix) if Tenant fails to perform any other covenant or condition hereunder including, without limitation, the obligations set forth in the second-to-last paragraph of Section 5.10 hereof, and such default continues longer than any period expressly provided for the correction thereof (and if no period is expressly provided then for 30 days after notice is given, provided, however, that such 30-day period shall be reasonably extended in the case of any non-monetary default if the matter complained of can be cured but the cure cannot be completed within such period and Tenant begins promptly and thereafter diligently completes the cure; but if such matters cannot be cured then there will be no cure period and in no event shall such cure period exceed 180 days after the initial notice to Tenant); or (x) a default occurs by the tenant under the Cranston Lease and such default is not cured within any applicable notice and cure period, then, and in any such case, Landlord and its agents lawfully may, in addition to any remedies for any preceding breach, immediately or at any time thereafter without demand or notice and with or without process of law, enter upon any part of the Premises in the name of the whole or mail or deliver a notice of termination of the Term of this Lease addressed to Tenant at the Premises or any other address herein, and thereby terminate the Term and repossess the Premises as of Landlord's former estate. At Landlord's election such notice of termination may be included in any notice of default. Upon such entry or mailing the Term shall terminate, all executory rights of Tenant and all obligations of Landlord will immediately cease, and Landlord may expel Tenant and all persons claiming under Tenant and remove their effects without any trespass and without prejudice to any remedies for arrears of rent or prior breach; and Tenant waives all statutory and equitable rights to its leasehold (including rights in the nature of further cure or redemption, if any). If any payment of Annual Base Rent, Additional Rent, or other sum is not paid when due, Landlord may at its option and in addition to all other remedies hereunder impose an administrative late charge on Tenant equal to 3% of the amount in question, which late charge will be due on demand as Additional Rent. If Landlord engages attorneys in connection with any failure to perform by Tenant hereunder, Tenant shall reimburse Landlord for the fees of such attorneys on demand as Additional Rent. Without implying that other provisions do not survive, the provisions of this Article shall survive the Term or earlier termination of this Lease. Landlord shall have the right, in its absolute discretion, to delete Subsection 8.1(x) from this Lease by giving written notice of such deletion to Tenant. If Landlord gives such written notice to 29 Tenant, Subsection 8.1(x) above shall thereupon automatically, and without need for any further amendment or confirmation, be deemed deleted from this Lease and shall have no further force or effect. 8.2 Remedies for Default. 8.2.1 Reletting Expenses Damages. If the Term is terminated for default, the Tenant covenants, as an additional cumulative obligation after such termination, to pay all of Landlord's reasonable costs, including reasonable attorneys fees, related to Tenant's default and in collecting amounts due and all reasonable expenses in connection with reletting, including tenant inducements to new tenants, brokerage commissions, fees for legal services, expenses of preparing the Premises for reletting and the like together with an administrative charge of 10% of all the foregoing costs ("Reletting Expenses"). It is agreed that Landlord may (i) relet the Premises or part or parts thereof for a term or terms that may be equal to, less than or exceed the period that would otherwise have constituted the balance of the Term, and may grant such tenant inducements, including free rent, as Landlord in its sole discretion considers advisable, and (ii) make such alterations to the Premises as Landlord in its sole discretion considers advisable, and no failure to relet or to collect rent under any reletting shall operate to reduce Tenant's liability. Any obligation to relet imposed by law will be subject to Landlord's reasonable objectives of leasing the Premises to a creditworthy Tenant with financial capacity at least equal to that of Tenant at the Commencement Date and of developing its property in a harmonious manner with appropriate mixes of tenants, uses, floor areas, terms and the like. Landlord's Reletting Expenses together with all other sums provided for whether incurred prior to or after such termination will be due upon demand. 8.2.2 Termination Damages. If the Term of this Lease is terminated for default, unless and until Landlord elects lump sum liquidated damages described in the next paragraph, Tenant covenants, as an additional, cumulative obligation after any such termination, to pay punctually to Landlord all the sums and perform all of its obligations in the same manner as if the Term had not been terminated. In calculating such amounts Tenant will be credited with the net proceeds of any rent then actually received by Landlord from a reletting of the Premises after deducting all sums to be paid by Tenant under Section 8.2.1 that have not then been paid by Tenant, provided that, although it shall be entitled to such credit, Tenant shall never be entitled to receive any portion of the re-letting proceeds, even if the same exceed the rent originally due hereunder. 8.2.3 Lump Sum Liquidated Damages. If this Lease is terminated for default, Tenant covenants, as an obligation after termination that is an additional, cumulative obligation to the obligations in the foregoing paragraphs, to pay forthwith to Landlord at Landlord's election made by written notice at any time after termination, as liquidated damages a single lump sum payment equal to the sum of (i) all sums to be paid by Tenant and not then paid at the time of such election, plus either, as Landlord elects, (ii) the excess of the present value of all of the rent reserved for the residue of the Term over the present value of the aggregate fair market rent and Additional Rent payable (if less than the rent payable hereunder) on account of the Premises during such period, which fair market rent shall be reduced by reasonable projections of vacancies and by Landlord's Reletting Expenses described above to the extent not theretofore paid to Landlord, or (iii) an amount equal to the sum of all of the rent and other sums due under the Lease with respect to the twelve (12)-month period next following the date of termination. (The Federal Reserve discount rate (or equivalent) shall be used in calculating such present values under clause (ii), and in the event the parties are unable to agree on such fair market rent, the matter shall be submitted, upon the demand of either party, to the office of the American Arbitration Association (or successor) in Boston, Massachusetts, with a request for arbitration in accordance with the rules of the Association by a single arbitrator who shall be a licensed real estate broker with at least 10 years experience in the leasing 30 of 1,000,000 or more square feet of floor area of commercial buildings similar in character and location to the Premises, whose decision shall be conclusive and binding on the parties.) 8.3 Remedies Cumulative; Jury Waiver; Late Performance. The remedies to which Landlord may resort under this Lease, and all other rights and remedies of Landlord are cumulative, and any two or more may be exercised at the same time. Nothing in this Lease shall limit the right of Landlord to prove and obtain in proceedings for bankruptcy or insolvency an amount equal to the maximum allowed by any statute or rule of law in effect at the time; and Tenant agrees that the fair value for occupancy of all or any part of the Premises at all times shall never be less than the Annual Base Rent and all Additional Rent payable from time to time. Tenant shall also indemnify and hold Landlord harmless in the manner provided in Section 5.6 if Landlord shall become or be made a party to any claim or action (a) instituted by Tenant against any third party, or by any third party against Tenant, or by or against any person claiming through Tenant; (b) for foreclosure of any lien for labor or material furnished to or for Tenant or such other person; (c) otherwise arising out of or resulting from any act or transaction of Tenant or such other person; or (d) necessary to protect Landlord's interest under this Lease in a bankruptcy proceeding, or other proceeding under Title 11 of the United States Code, as amended. LANDLORD AND TENANT WAIVE TRIAL BY JURY IN ANY ACTION TO WHICH THEY ARE PARTIES, and further agree that any action arising out of this Lease (except an action for possession by Landlord, which may be brought in whatever manner or place provided by law) shall be brought in the Trial Court, Superior Court Department, in the county where the Premises are located. Any sum due from Tenant under this Lease shall bear interest from the date due at the rate of one and one-half (1 1/2%) percent for each month (or ratable portion thereof) the same remains unpaid, but never more than the maximum rate allowed by law. 8.4 Waivers of Default; Accord and Satisfaction. No consent by Landlord or Tenant to any act or omission that otherwise would be a default shall be construed to permit other similar acts or omissions. Neither party's failure to seek redress for violation or to insist upon the strict performance of any covenant, nor the receipt by Landlord of rent with knowledge of any breach of covenant, shall be deemed a consent to or waiver of such breach. No breach of covenant shall be implied to have been waived unless such is in writing, signed by the party benefiting from such covenant and delivered to the other party; and no acceptance by Landlord of a lesser sum than the Annual Base Rent, Additional Rent or any other sum due shall be deemed to be other than on account of the earliest installment of such rent or other sum due. Nor shall any endorsement or statement on any check or in any letter accompanying any check or payment be deemed 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 right or remedy. The delivery of keys (or any similar act) to Landlord shall not operate as a termination of the Term or an acceptance or surrender of the Premises. The acceptance by Landlord of any rent following the giving of any default and/or termination notice shall not be deemed a waiver of such notice. 8.5 Landlord's Curing. If Tenant fails to perform any covenant within any applicable cure period, then Landlord at its option may (without waiving any right or remedy for Tenant's non-performance) at any time thereafter perform the covenant for the account of Tenant. Tenant shall reimburse Landlord's cost (including reasonable attorneys' fees) of so performing, together with an administrative charge equal to 10% of such cost on demand as Additional Rent. Notwithstanding any other provision concerning cure periods, Landlord may cure any non-performance for the account of Tenant after such notice to Tenant, if any, as is reasonable under the circumstances if curing prior to the expiration of the applicable cure period is reasonably necessary to prevent likely damage to the Premises or possible injury to persons, or to protect Landlord's interest in the Premises. 31 8.6 Security Deposit. On the execution of this Lease, Tenant shall deliver to Landlord as security for the performance of the obligations of Tenant hereunder, a letter of credit (as renewed, replaced, and/or increased pursuant to this Lease, and all proceeds thereof, the "Letter of Credit") in the initial amount specified therefor in Section 1.1, subject to adjustment as set forth below, in accordance with this Section (as renewed, replaced, and/or increased pursuant to this Lease, and all proceeds thereof, the "Security Deposit"). Tenant's failure to timely deliver the Security Deposit to Landlord shall constitute a default under this Lease, without any notice or cure period under Article VIII. The Letter of Credit (i) shall be irrevocable and shall be issued by a commercial bank reasonably acceptable to Landlord that has an office in Boston, Massachusetts, (ii) shall require only the presentation to the issuer of a certificate of the holder of the Letter of Credit stating that either a default has occurred under this Lease after the expiration of any applicable notice and cure period (or that Tenant has failed to timely pay rent or is otherwise in default under the Lease and transmittal of a default notice is barred by applicable law) or that Tenant has become the subject of a bankruptcy, insolvency or similar proceeding, (iii) shall be payable to Landlord or its successors in interest as the Landlord and shall be freely transferable without cost to any such successor or any lender holding a collateral assignment of Landlord's interest in the Lease, (iv) shall be for an initial term of not less than one year and contain a provision that such term shall be automatically renewed for successive one- year periods unless the issuer shall, at least 45 days prior to the scheduled expiration date, give Landlord written notice of such nonrenewal, and (v) shall otherwise be in form and substance reasonably acceptable to Landlord. Notwithstanding the foregoing, the term of the Letter of Credit for the final period shall be for a term ending not earlier than the date sixty (60) days after the last day of the Term or, if applicable, any Extension Term. Landlord shall be entitled to draw upon the Security Deposit for its full amount (i) if Tenant shall be in default under the Lease, after the expiration of any applicable notice or cure period (or if Tenant has failed to timely pay rent or is otherwise in default under the Lease and transmittal of a default notice is barred by applicable law), or (ii) in the case of the Letter of Credit if, not less than 30 days before the scheduled expiration of the Letter of Credit, Tenant has not delivered to Landlord a new Letter of Credit in accordance with this Section (which failure shall be deemed a default without notice or cure period). All amounts so drawn shall be the exclusive property of Landlord and Landlord may, but shall not be obligated to, apply the amount so drawn to the extent necessary to cure Tenant's default under the Lease. The Security Deposit may be commingled with other funds of Landlord and shall not constitute an asset of Tenant, and no fiduciary relationship shall be created with respect to such deposit, nor shall Landlord be liable to pay Tenant interest thereon. If Tenant shall fail to perform any of its obligations under this Lease, Landlord may, but shall not be obliged to, apply the Security Deposit to the extent necessary to cure the default. After any such application by Landlord of the Security Deposit, Tenant shall reinstate the Letter of Credit to the amount originally required to be maintained hereunder, upon demand. If Landlord has drawn on the Letter of Credit under Section 8.6(ii), and to the extent Landlord has not applied amounts to cure Tenant defaults, then after acceptance of a replacement Letter of Credit, Landlord shall restore to Tenant the remaining amount of such funds. Within sixty (60) days after the expiration or sooner termination of the Term, and provided that no default exists under this Lease, the Letter of Credit, to the extent not applied, shall be returned to the Tenant, without interest. In the event of a sale of the Premises or lease, conveyance or transfer of the Premises, Landlord shall have the right to transfer the Security Deposit to the transferee and Landlord shall thereupon be released by Tenant from all liability for the return of such Security Deposit; and subject to Article IX, Tenant agrees to look to the transferee solely for the return of said Security Deposit. The provisions hereof shall apply to every transfer or assignment made of the Security Deposit to such a transferee. 32 Tenant further covenants that it will not assign or encumber or attempt to assign or encumber the Letter of Credit or the monies deposited herein as security, and that neither Landlord nor its successors or assigns shall be bound by any assignment, encumbrance, attempted assignment or attempted encumbrance. Tenant will enter into such agreements as Landlord's lender may request with respect to the assignment of the Security Deposit to such lender. In connection with any transfer of the Premises, Tenant shall cooperate with Landlord in the assignment of the Letter of Credit to the transferee and, if requested by the transferee, Tenant shall, within ten (10) business days from such request, cause a substitute Letter of Credit to be issued to the transferee that complies with the requirements of this Section. If for any reason that certain lease dated on or about the date hereof from Taurus Cranston LLC to Poly-Flex Circuits, Inc. concerning certain property located at 28 Kenny Drive, Cranston, Rhode Island (the "Cranston Lease") terminates, Tenant shall, simultaneously with such termination, increase the Security Deposit under this Lease by Two Hundred and Fifty Thousand Dollars ($250,000). Tenant represents and warrants to Landlord that: (i) as of the date of this Lease, Tenant has not less than $1,800,000 of immediate and unrestricted availability under a credit facility (the "Credit Facility") between Tenant and Silicon Valley Bank ("SVB"); and (ii) Tenant expects that, on or before July 31, 2003, the immediate and unrestricted availability under the Credit Facility will increase to at least $3,000,000. No later than August 8, 2003, Tenant shall provide Landlord with a written certification from SVB (the "SVB Certification") setting forth the immediate and unrestricted availability under the Credit Facility as of the date of such certification (such amount, the "Available Amount"). If Tenant fails to deliver the SVB Certification by August 8, 2003, the Available Amount shall be deemed to be zero. If, by August 8, 2003, Tenant has not provided Landlord with a SVB Certification demonstrating that the Available Amount is at least $3,000,000, Tenant shall, no later than August 15, 2003, increase the Security Deposit by the amount by which $3,000,000 exceeds the Available Amount. Notwithstanding anything to the contrary in this Lease, Tenant's failure to increase the Security Deposit as and when required above shall constitute an immediate Event of Default by the Tenant under this Lease without any requirement for further notice from Landlord and without Tenant having the benefit of any additional cure period. The amount of the Security Deposit required under Section 1.1 shall be increased as set forth above. Such increase shall be effectuated by the delivery to Landlord of a substitute Letter of Credit in the increased amount that otherwise complies with the requirements of this Section. 33 ARTICLE IX ---------- Protection of Lenders --------------------- 9.1 Subordination and Superiority of Lease. Tenant agrees that this Lease and the rights of Tenant hereunder will be subject and subordinate to any lien of the holder of any existing or future mortgage, and to the rights of any lessor under any ground or improvements lease of the Premises (all mortgages and ground or improvements leases of any priority are collectively referred to in this Lease as "mortgage," and the holder(s) or lessor(s) thereof from time to time as "mortgagee"), and to all advances and interest thereunder and all modifications, renewals, extensions and consolidations thereof; provided, however, that with respect to future liens of any mortgage hereafter granted the mortgagee executes and delivers to Tenant an agreement (in the form of Exhibit G or in such other form as such mortgagee may request) in which the mortgagee agrees that such mortgagee shall not disturb Tenant in its possession of the Premises upon Tenant's attornment to such mortgagee as Landlord and performance of its Lease covenants (both of which conditions Tenant agrees with all mortgagees to perform). Tenant agrees that any present or future mortgagee may at its option unilaterally elect to subordinate, in whole or in part and by instrument in form and substance satisfactory to such mortgagee alone, the lien of its mortgagee (or the priority of its ground lease) to some or all provisions of this Lease. Tenant and Lender's mortgagee are executing simultaneously with the execution of this Lease the Subordination, Nondisturbance and Attornment Agreement in the form attached as Exhibit G. Tenant agrees that this Lease shall survive the merger of estates of ground (or improvements) lessor and lessee. Until a mortgagee (either superior or subordinate to this Lease) forecloses Landlord's equity of redemption (or terminates in the case of a ground or improvements lease) no mortgagee shall be liable for failure to perform any of Landlord's obligations (and such mortgagee shall thereafter be liable only after it succeeds to and holds Landlord's interest and then only as limited herein). No mortgagee shall be bound by any payment of rent more than one month in advance. Tenant shall, if requested by Landlord or any mortgagee, give notice of any alleged non-performance on the part of Landlord to any such mortgagee provided that an address for such mortgagee has been designated pursuant to Section 10.1, and Tenant agrees that such mortgagee shall have a separate, consecutive reasonable cure period of no less than 30 days (to be reasonably extended in the same manner Landlord's cure period is to be extended) following Landlord's cure period during which such mortgagee may, but need not, cure any non-performance by Landlord. The agreements in this Lease with respect to the rights and powers of a mortgagee constitute a continuing offer to any person that may be accepted by taking a mortgage (or entering into a ground or improvements lease) of the Premises. 9.2 Rent Assignment. If from time to time Landlord assigns this Lease or the rents payable hereunder to any person, whether such assignment is conditional in nature or otherwise, such assignment shall not be deemed an assumption by the assignee of any obligations of Landlord; but the assignee shall be responsible only for non-performance of Landlord's obligations that occur after it succeeds to and only while it holds Landlord's interest in the Premises. Tenant shall pay rent directly to Landlord's mortgagee, or to any other party entitled to collect rent due hereunder, upon written direction from Landlord. 9.3 Other Instruments. The provisions of this Article shall be self-operative; nevertheless, Tenant agrees to execute, acknowledge and deliver any subordination, attornment or priority agreements or other instruments conforming to the provisions of this Lease (and being otherwise commercially reasonable) from time to time requested by Landlord or any mortgagee, and further agrees that its failure to do so within ten days after written request shall be a default for which this Lease may be terminated without further notice. Without limitation, where Tenant in this Lease indemnifies or otherwise covenants for the benefit of mortgagees, such agreements are for the benefit of mortgagees as third party 34 beneficiaries; and at the request of Landlord, Tenant from time to time will confirm such matters directly with such mortgagee. ARTICLE X --------- Miscellaneous Provisions ------------------------ 10.1 Notice. All notices, consents, approvals and the like shall be in writing and shall be delivered in hand by any courier service providing receipts, by a nationally recognized overnight courier providing receipts, or mailed by certified mail addressed to Landlord or Tenant as set forth below. If requested, Tenant shall deliver copies of all notices in like manner to Landlord's mortgagees and other persons having a relationship to the Premises at such address within the United States as designated from time to time by Landlord or such mortgagee. Any notice so addressed shall be deemed duly given on the second business day following the day of mailing if so mailed by registered or certified mail, return receipt requested, whether or not accepted, or if by hand or by overnight courier upon actual receipt by any person reasonably appearing to be an agent or employee working in the executive offices of the addressee. If to Tenant: Parlex Corporation One Parlex Place Methuen, MA 01844 Attention: Jonathan Kosheff with a copy to: Kutchin & Rufo, P.C. 175 Federal Street Boston, Massachusetts 02110 Attention: Edward D. Kutchin, Esq. If to Landlord: Taurus Methuen LLC c/o Taurus New England Investments Corp. 118 Milk Street Boston, MA 02109 Attention: Scott Tully with a copy to: Piper Rudnick LLP One International Place Boston, MA 02110 Attention: John L. Sullivan, Esq. Any address or name specified above may be changed by notice given to the addressee by the other party in accordance with this Section 10.1. The inability to deliver notice because of a changed address of 35 which no notice was given as provided above, or because of rejection or other refusal to accept any notice, shall be deemed to be the receipt of the notice as of the date of such inability to deliver or rejection or refusal to accept. Any notice to be given by any party hereto may be given by the counsel for such party. 10.2 Landlord's Default. Landlord shall use due diligence in performing its covenants under this Lease. In no event shall Landlord be in default unless notice thereof has been given to Landlord (and all mortgagees of which Tenant has notice) and Landlord (or any such mortgagees at its sole discretion) fails to perform within 30 days (provided, however, that such 30 day period shall be reasonably extended if such performance begins within such period and thereafter is diligently pursued, or if such mortgagee notifies Tenant within such period that it intends to cure on behalf of Landlord and thereafter begins and diligently pursues curing with reasonable promptness). 10.3 Limitation of Landlord's Liability. Tenant agrees that Landlord shall be liable only for breaches of its covenants occurring while it is owner of the Premises (provided, however, that if Landlord from time to time is lessee of the ground or improvements constituting the Premises, then Landlord's period of ownership of the Premises shall be deemed to mean only that period while Landlord holds such leasehold interest). Tenant (and each person acting under Tenant) agrees to look solely to Landlord's interest from time to time in the Premises for satisfaction of any claim against Landlord. No trustee, beneficiary, partner, member, manager, agent or employee of Landlord (or of any mortgagee or any ground or improvements lessor) shall ever be personally or individually liable; nor shall it or they ever be answerable or liable in any equitable judicial proceeding or order beyond the extent of their interest in the Premises. Any lien obtained to enforce any judgment against Landlord shall be subject and subordinate to any mortgage encumbering the Premises. In no event shall Landlord (or any such persons) ever be liable to Tenant for indirect or consequential damages. 10.4 Excusable Delay. If either party is delayed in performing (other than paying Annual Base Rent, Additional Rent or any other charge, which may never be delayed) by causes beyond such party's reasonable control, including war, civil commotion, acts or regulations of government, moratoria and the like, weather, fire, casualty, theft, labor difficulties, or the unavailability of labor, materials, equipment or utilities from customary sources upon customary terms, or by acts, neglects or delays of the other party (or persons acting under such other party), then such delay shall not be counted in determining the time during which such performance is to be completed. 10.5 Applicable Law and Construction. This Lease may be executed in counterparts, shall be construed as a sealed instrument, and shall be governed exclusively by the provisions hereof and by the laws of the Commonwealth of Massachusetts. Time is of the essence of all obligations of Tenant and Landlord under this Lease. The covenants of Landlord and Tenant are independent, and such covenants shall be construed as such in accordance with the laws of the Commonwealth of Massachusetts. If any provisions shall to any extent be invalid, the remainder shall not be affected. Other than contemporaneous instruments executed and delivered of even date, if any, this Lease contains all of the agreements between Landlord and Tenant relating in any way to the Premises and supersedes all prior agreements and dealings between them. There are no oral agreements between Landlord and Tenant relating to this Lease or the Premises. Except as otherwise provided in the last sentence of Section 8.1, this Lease may be amended only by instrument in writing executed and delivered by both Landlord and Tenant. The provisions of this Lease shall bind Landlord and Tenant and their respective successors and assigns, and shall inure to the benefit of Landlord and its successors and assigns and of Tenant and its permitted successors and assigns. Where the phrases "persons acting under" Landlord or Tenant or "persons claiming through" Landlord or Tenant or similar phrases are used, the persons included shall be assignees, sublessees, licensees or other transferees or successors of Landlord or Tenant as well as 36 invitees or independent contractors of Landlord or Tenant, and all of the respective employees, servants, contractors, agents and invitees of Landlord, Tenant and any of the foregoing. The term "including" and "include" shall not be restrictive and shall be interpreted as if followed by the words "without limitation." The titles are for convenience only and shall not be considered a part of the Lease. If Tenant is granted any extension or other option, to be effective the exercise (and notice thereof) shall be unconditional; and if Tenant purports to condition the exercise of any option or to vary its terms in any manner, then the option granted shall be void and the purported exercise shall be ineffective. The enumeration of specific examples of a general provision shall not be construed as a limitation of the general provision. Unless a party's approval or consent is required by the express terms of this Lease not to be unreasonably withheld, such approval or consent may be withheld in the party's sole discretion. The submission of a form of this Lease or any summary of its terms shall not constitute an offer by Landlord to Tenant; but a leasehold shall only be created and the parties bound when this Lease is executed and delivered by both Landlord and Tenant and approved by the holder of any mortgage of the Premises having the right to approve this Lease. Nothing herein shall be construed as creating the relationship between Landlord and Tenant of principal and agent, or of partners or joint venturers or any relationship other than landlord and tenant. This Lease and all consents, notices, approvals and all other related documents may be reproduced by any party by any electronic means or by facsimile, photographic, microfilm, microfiche or other reproduction process and the originals may be destroyed; and each party agrees that any reproductions shall be as admissible in evidence in any judicial or administrative proceeding as the original itself (whether or not the original is in existence and whether or not reproduction was made in the regular course of business), and that any further reproduction of such reproduction shall likewise be admissible. If any payment in the nature of interest provided for in this Lease shall exceed the maximum interest permitted under controlling law, as established by final judgment of a court, then such interest shall instead be at the maximum permitted interest rate as established by such judgment. As used in this Lease, the term "business day" shall mean any day excluding a Saturday, Sunday and any other day on which (1) there is no scheduled trading on the New York Stock Exchange, or (2) banks in Boston, Massachusetts are authorized by law or executive action to be closed for normal banking business. 10.6 Estoppel Certificate. Within twenty (20) days of either party's request, the other agrees to execute, acknowledge and deliver a statement in writing certifying whether this Lease is in full effect (or if there has been any amendment whether the same is in full effect as amended and stating the amendment or amendments), the Commencement Date, the amount of and the dates to which the Annual Base Rent (and Additional Rent and all other charges) have been paid and, as of its best knowledge and belief, any other information concerning performance, construction, tenancy, possession or other matters of reasonable interest to prospective lenders or purchasers. Both parties agree that any such statement may be relied upon by any person to whom the same is delivered. Tenant acknowledges that prompt execution and delivery of such statements, and of instruments referred to in Section 9.3, in connection with any proposed financings or sales constitute essential requirements of Landlord's financings or sales; and any failure by Tenant to perform under this Section within the time provided will be a default for which the Lease may be terminated following notice if the default is not cured within ten days. Tenant will indemnify Landlord in the manner elsewhere provided in this Lease against all loss (expressly including consequential damages in the nature of increased financing costs, forfeited financing fees and attorneys' fees) directly or indirectly resulting from Tenant's failure to comply herewith. 10.7 Notice of Lease. Neither party shall record this Lease, but each party will, upon request of the other, execute a recordable notice of lease in form reasonably approved by Landlord and which notice shall contain the provisions of this Section), and upon termination of the Term for whatever reason a like notice of termination of lease. Tenant appoints Landlord as its attorney-in-fact (which appointment shall survive termination of the Term) with full power of substitution following any termination, to 37 execute, acknowledge and deliver a notice of termination of lease in Tenant's name if Tenant fails so to do within one week of any request. 10.8 Brokers. Each party warrants and represents to the other that it has not dealt with any broker in connection with this Lease or the Premises except for the Broker, if any, listed in Section 1.1, whose commission will be paid by Tenant pursuant to a separate agreement; and each agrees to indemnify and save the other harmless in the manner elsewhere provided in this Lease from any breach of this warranty and representation, which will survive the termination of the Term. 10.9 Tenant and Landlord as Business Entities. (a) Tenant warrants and represents that (i) Tenant is duly organized, validly existing and in good standing under the laws of the jurisdiction in which such entity was organized; (ii) Tenant has the authority to own its property and to carry on its business as contemplated under this Lease; (iii) Tenant is in compliance with all laws and orders of public authorities applicable to Tenant; (iv) Tenant has duly executed and delivered this Lease; (v) the execution, delivery and performance by Tenant of this Lease (w) are within the powers of Tenant, (x) have been duly authorized by all requisite action, and (y) will not violate any provision of law or any order of any court or agency of government, or any agreement or other instrument to which Tenant is a party or by which it or any of its property is bound, or (z) will not result in the imposition of any lien or charge on any of Tenant's property, except by the provisions of this Lease; and (vi) the Lease is a valid and binding obligation of Tenant in accordance with its terms. Tenant agrees that breach of the foregoing warranty and representation shall at Landlord's election be a default under this Lease for which there shall be no cure. This warranty and representation shall survive the termination of the Term. Simultaneously with the execution of the Lease, Tenant shall deliver to Landlord (y) a certificate of legal existence and good standing and (z) a certified copy of a resolution of Tenant's directors, manager, or general partner authorizing the execution of this Lease or other evidence of such authority reasonably acceptable to Landlord. (b) Landlord warrants and represents that (i) Landlord is duly organized, validly existing and in good standing under the laws of the jurisdiction in which such entity was organized; (ii) Landlord has the authority to own the Premises; (iii) Landlord has duly executed and delivered this Lease; (iv) the execution, delivery and performance by Landlord of this Lease (x) are within the powers of Landlord, (y) have been duly authorized by all requisite action, and (z) will not violate any provision of law or any order of any court or agency of government, or any agreement or other instrument to which Landlord is a party or by which it or any of its property is bound; (v) the Lease is a valid and binding obligation of Landlord in accordance with its terms; and (vi) as of the date of this Lease, Ben Butcher or Scott Tully manages the day to day operations of Landlord. As long as any Property Reserve Payments paid by Tenant are being held pursuant to the Property Reserve Escrow Agreement, Landlord will own no assets other than the Property (and property ancillary thereto) and will incur no indebtedness other than the Loan (or any new mortgage loan obtained to refinance the Loan) or other indebtedness reasonably related to Landlord's ownership and operation of the Property. Without limiting the generality of the foregoing, in no event will Landlord guarantee the obligations of any other person or entity nor allow the Premises to serve as security for any indebtedness not related directly and solely to the Property. 10.10 Reasonable Cooperation in Refinancing and Sale. Tenant agrees to cooperate with Landlord in all reasonable respects in connection with Landlord's sale, refinancing and/or any of Landlord's efforts to effectuate a secondary market transaction relating to a loan which is secured by the Premises and this Lease. In connection with the foregoing, Tenant shall, (i) provide financial information relating to Tenant and/or the Premises which is reasonably required by the prospective purchaser, lender and/or the rating agencies involved in any such secondary market transaction, (ii) permit site inspections 38 and other similar due diligence investigation of the Premises (at mutually agreeable times and provided that the same shall be conducted so as to minimize interruption of Tenant's conduct of business at the Premises), and (iii) provide updated certificates of insurance naming purchaser, Landlord's Lender as a "loss payee" and/or additional named insured as required by this Lease. 10.11 Deposit Delivery. At the election of Landlord, this Lease shall not be effective unless the Deposit has delivered to Landlord. ARTICLE XI ---------- Fair Market Value Purchase Option Landlord grants to Tenant an option to purchase the Premises (the "Purchase Option") upon each and all of the following terms and conditions: 11.1 Term of Option and Exercise. The term of this Purchase Option shall commence upon the first day of the sixth (6th) Lease Year and shall end on the earlier of the termination of this Lease or 5:00 p.m. Eastern Standard Time on the last day of the twelfth (12th) Lease Year (the "Purchase Option Period"). Subject to the following terms and conditions, Tenant may exercise this Purchase Option by delivering to Landlord written notice of such exercise (the "Option Notice) at any time during the Purchase Option Period. The Purchase Option shall, at Landlord's election in its sole discretion, be void, of no further force or effect and deemed deleted from this Lease if there is a default by Tenant under this Lease that continues beyond any applicable notice and cure periods. In addition, the Purchase Option shall be void, at Landlord's election, if Tenant is in monetary or other material default at the time Tenant elects to exercise such option or at any time between such exercise and the Closing Date (defined below). 11.2 Purchase Price. The purchase price which Tenant agrees to pay for Premises upon the exercise of this Purchase Option (the "Purchase Price") shall be the fair market value of the Premises as of date of the Option Notice determined as follows: (a) Landlord and Tenant, each acting in its absolute discretion, shall endeavor to agree in writing upon the fair market value of the Premises or failing such agreement, on the identity of a single Qualified Appraiser (defined below) to determine the fair market value of the Premises. If the parties so agree in writing on the fair market value of the Premises, such value (the "Agreed Value") shall be the fair market value of the Premises. If the parties cannot so agree on the fair market value of the Premises but do agree on the identity of a single Qualified Appraiser, the fair market value of the Premises shall be as set forth in the written appraisal of such Qualified Appraiser. (b) If Landlord and Tenant, each acting in its absolute discretion, do not agree in writing on such fair market value or appraiser within ten (10) business days from the date of the Option Notice, then either Landlord or Tenant, by notice to the other (an "Appraisal Notice"), may designate and appoint a Qualified Appraiser (the "First Appraiser"). Within ten (10) days from its receipt of the Appraisal Notice, the other party, by notice to the party that designated the First Appraiser, shall appoint another Qualified Appraiser (the "Second Appraiser"). In the event that such other party fails to designate the Second Appraiser within such ten (10) day period, and if such failure continues for more than ten (10) days after notice of such failure from the party that designated the First Appraiser, (i) such failure shall be deemed for all purposes to constitute acceptance of the First Appraiser's appraisal for the determination of the fair market value of the Premises, (ii) the First Appraiser shall, within thirty (30) days after the end of such ten (10) day period, submit to Landlord and Tenant its written appraisal of the 39 fair market value of the Premises, and (iii) such value shall constitute the fair market value of the Premises for purposes of this Section 11.2. (c) If a First Appraiser and a Second Appraiser are timely designated as provided above, they shall select a third Qualified Appraiser (the "Third Appraiser") within ten (10) days after the appointment of the Second Appraiser. If the First and Second Appraisers are unable to agree upon the appointment of a Third Appraiser within the required ten (10) day period, either Landlord or Tenant may, upon written notice to the other, request that such appointment be made by the then President of the American Arbitration Association or his or her designee for Boston, Massachusetts. Within thirty (30) days after selection of the Third Appraiser, each of the three Qualified Appraisers shall submit to Landlord and Tenant a written appraisal of the fair market value of the Premises, and the fair market value of the Premises shall be the average of the two numerically closest values (or, if the values are equidistant, the average of all three values) determined by the three Qualified Appraisers; provided, however, that if the Qualified Appraiser designated by either party fails to submit its appraisal within the required thirty (30) day period, and if such failure continues for more than ten (10) days after notice of such failure from the other party, the fair market value of the Premises shall be the numerical average of the appraisals that were timely submitted. (d) In the event that any Qualified Appraiser appointed hereunder resigns, refuses or is unable to perform his or her obligations hereunder for reasons unrelated to the acts or omissions of the appointing party, then the party or the Qualified Appraisers appointing such appraiser, as the case may be, shall have the right unilaterally to appoint a substitute Qualified Appraiser and the deadline for the production of such Qualified Appraiser's appraisal shall be subject to an extension of twenty (20) days. (e) If Landlord and Tenant agree on and appoint a single Qualified Appraiser, the fees and expenses of such single Qualified Appraiser shall be shared equally by Landlord and Tenant. If Landlord and Tenant do not so agree on and appoint a single Qualified Appraiser, the fees and expenses of any Third Qualified Appraiser shall be shared equally by Landlord and Tenant and the fees and expenses of any other Qualified Appraiser shall be borne by the party designating such Qualified Appraiser. All appraisals made hereunder shall consist of one value, and not a range of values, and shall be on a "free and clear" and "highest and best use" basis and otherwise in compliance with the then current Uniform Standards of Professional Appraisal Practice as promulgated by the Appraisal Standards Board of the Appraisal Foundation (or any successor organization)(or, if no such standards are then promulgated, with generally prevailing standards for commercial real estate appraisals). (f) The term "Qualified Appraiser" means an appraiser who is a member of the Appraisal Institute (or any successor association or body of comparable standing if such Institute is not then in existence) and who has held his or her certificate as an M.A.I. or its equivalent for a period of not fewer than 10 years, and has been actively engaged in the appraisal of commercial real estate similar to the Premises in the greater Boston area for a period of not less than 10 years immediately preceding his or her appointment under this Agreement. (g) Landlord and Tenant acknowledge that neither has any reason to believe that the fair market value of the Premises during the Option Period will ever be less than Twelve Million Dollars ($12,000,000). In light of this fact, and notwithstanding anything to the contrary in this Lease, Tenant agrees that the Purchase Price shall never be less than Twelve Million Dollars ($12,000,000). 40 11.3 Deposit. Within four (4) business days after the date of the Option Notice, Tenant shall: (i) deliver to the Boston office of a nationally recognized title insurance company with an office in Boston, Massachusetts (the "Title Company") a deposit in the amount of two hundred thousand dollars ($200,000) by certified check or by wire transfer of immediately available funds (the "Deposit"), and (ii) shall provide evidence to Landlord as to the identity of such Title Company and the making of such Deposit, failing which at the election of Landlord the Option Notice shall be null and void, Tenant shall be deemed to have irrevocably waived its Purchase Option and this Article XI shall be of no further force or effect. If the Purchase Option closes, the Deposit (together with all interest accrued thereon) shall be credited towards the Purchase Price (defined below). If the Purchase Option fails to close for any reason other than Landlord's default, such failure shall constitute an Event of Default by Tenant, the Deposit shall be promptly delivered to Landlord as liquidated damages for Tenant's failure to close on the purchase, the Purchase Option shall be deemed irrevocably waived, and this Article XI shall be null and void and of no further force or effect. Tenant and Landlord acknowledge that the damages to Landlord in the event of a failure of Tenant to acquire the premises after exercising the Purchase Option would be difficult or impossible to determine, that the amount of the Deposit represents the parties' best and most accurate estimate of the damages that would be suffered by Landlord if the transaction should fail to close and that such estimate is reasonable under the circumstances existing as of the date of this Lease and under the circumstances that Landlord and Tenant reasonably anticipate would exist at the time of such breach. Landlord's right to so retain the Deposit is in addition to its rights on account of an Event of Default under the Lease. 11.4 Title. Title to the Premises shall be conveyed to Tenant on the Closing Date subject to all matters of record, all mechanics' and materialmen's liens, and all Taxes and Impositions; provided, however, that if any new material and adverse matters first appear on record after the date of the Option Notice which Seller elects not to remove as of the Closing Date, and provided that such matters do not result from the actions of Tenant or its agents, employees, invitees or affiliates, Tenant shall have the option of revoking the Option Notice and receiving the Deposit (together with all interest accrued thereon). 11.5 Closing. If Landlord and Tenant agree in writing on the fair market value of the Premises as provided for in Section 11.2(a) above (i.e., the matter is not submitted to any appraisers and fair market value is the Agreed Value), then the closing for the Purchase Option ( the "Closing Date") shall be held on the date that is forty five (45) days from the date on which the Agreed Value is agreed upon in writing by Landlord and Tenant; otherwise, the Closing Date shall be held on the date that is twenty (20) days from the date on which the fair market value of the Premises is established by the appraisal process described above. On the Closing Date: (a) All rent shall be adjusted as of 12:01 a.m. on the Closing Date; (b) Landlord shall deliver to the Title Company: (i) a Massachusetts quitclaim deed, conveying its interest in the Premises in accordance with Section 11.4 above; and (ii) such other documents as may be reasonably necessary to effectuate the transfer, terminate this Lease, or evidence Landlord's authority with respect thereto. Tenant shall accept the Premises in its as is condition, with all faults, and without any representation or warranty by Landlord, express or implied; 41 (c) Tenant shall deliver to the Title Company (i) the Purchase Price, less the Deposit and any credit for Annual Base Rent pursuant to subsection (a) hereof and (ii) such other documents as may be reasonably necessary to effectuate the transfer, terminate this Lease, or evidence Tenant's authority with respect thereto. Landlord shall pay at the Closing all Deed Stamp Excise Taxes payable in connection with the conveyance of the Premises. Tenant shall pay the costs of recording the Deed. Each party shall pay its own counsel fees. Any other expenses of the sale shall be paid by Landlord or Tenant in accordance with customary practice for commercial real estate sales in the greater Boston area; and (d) The Title Company shall be authorized to record the transfer documents and disburse the proceeds in accordance with a duly executed closing statement reasonably approved in writing by the parties. 11.6 Option Benefit. This Purchase Option is personal to the original Tenant named herein (and any transferee resulting from a Permitted Transfer under Section 6.1) and otherwise may not be assigned to or exercised by any other party. Any attempted assignment in violation of this Section 11.6 shall be null and void and of no force or effect. 11.7 Subordination. The Purchase Option is subject and subordinate to any third party financing of the Premises. Although the foregoing subordination is self operative, Tenant agrees, within ten (10) days from written request, to execute and deliver an agreement in favor of such lender, on such lender's customary form, confirming such subordination. 11.8 No Brokers. Tenant represents and warrants to Landlord that no broker's fee or commission shall be due to Cushman & Wakefield of Massachusetts, Inc. or anyone else acting by, thorough or under Tenant with respect to the granting or exercise of, or the closing under, Purchase Option, and Tenant shall indemnify, defend and hold Landlord harmless from all costs, claims, liability and expense (including reasonable attorneys' fees) resulting from or relating to any such claim or liability. Without limiting any of Tenant's other obligations under this Lease, the foregoing indemnification shall survive the termination or expiration of this Lease. 42 ARTICLE XII ----------- Index of Defined Terms ---------------------- The definitions for the following terms are set forth in the Section of the Lease indicated below. Certain other defined terms are set forth in Section 1.1. "business day" Section 10.5 "Construction Documents": Section 5.1.2 "hazardous materials": Section 5.10 "hazardous materials activities": Section 5.10 "Holdover Rate": Section 5.13 "Indemnitees": Section 5.6 "laws": Section 5.4 "Lease Year": Exhibit B "Loan Release Amounts" Section 5.17 "mortgage": Section 9.1 "mortgagee": Section 9.1 "Net Award" Section 7.3(d) "Permitted Exceptions" Exhibit C "Purchase Option" Section 11 "rent" Section 3.2 "Taxes and Impositions": Section 5.5 "Tenant's Architect": Section 5.1.2 "Tenant's Contractor": Section 5.1.3 "Tenant Property": Section 5.9 "Tenant Work": Section 5.1.1 "Title Documents" Section 4.1 "transfer" Section 6.1 43 Executed under seal as of the date first written above. TENANT: LANDLORD: Parlex Corporation, Taurus Methuen LLC, a Massachusetts corporation a Delaware limited liability company By: Taurus Cranston/Methuen Limited By: /s/ Peter J. Murphy Partnership, a Massachusetts limited Its President partnership, its sole member and manager By: /s/ Jonathan R. Kosheff By: Taurus-New England XXIV Limited Treasurer Partnership, a Massachusetts limited partnership, its sole general partner By: Taurus Cranston/Methuen LLC, a Massachusetts limited liability company, its sole general partner By: /s/ Peter Merrigan Name: Peter Merrigan Title: Executive Director 44 Exhibit A --------- Land ---- PARCEL I: - --------- LOT 5, as shown on the map entitled "PLAN OF LAND IN METHUEN, MASSACHUSETTS", Dana F. Perkins & Sons, Inc., C.E., dated May 3, 1970, recorded June 26, 1970, in the North Essex County Registry of Deeds as Plan #6224 and bounded as follows: WESTERLY: by Milk Street a distance of 350 feet; NORTHERLY: by Lot 4 of said Plan a distance of 349.12 feet; EASTERLY: by Lot 3 of said Plan a distance of 193.45 feet; NORTHERLY: again still by said Lot 3 a distance of 200.36 feet; EASTERLY: by Lot 1 shown on Plan recorded in Essex North District Registry of Deeds as Plan #5902 a distance of 151.16 feet; and SOUTHERLY: by Lot 6 of said first mentioned Plan a distance of 647.52 feet. Containing 3.83 acres, more or less. PARCEL II: - ---------- The land in Methuen, Essex County, Massachusetts situated on the easterly side of Milk Street and being shown as Lot 6 on a "Plan of land in Methuen, Mass.", August 24, 1970, Dana F. Perkins & Sons, C.E., which plan is recorded in Essex North District Registry of Deeds as plan #6258 and thus bounded: WESTERLY: by said Milk Street, 250 feet; NORTHERLY: by Lot 5 on said plan, 647.52 feet; EASTERLY: by other land of Gilbert G. Campbell, Inc., 246.17 feet; and SOUTHERLY: by other land of Gilbert G. Campbell, Inc., 717.75 feet. Containing 3.84 acres, more or less. PARCEL III: - ----------- The land in said Methuen situation on the Easterly side of Milk Street and being shown as Lot 9 on a "Plan of Land in Methuen, Massachusetts; owner: Gilbert G. Campbell, Inc.", July 8, 1971, Dana F. Perkins, Inc., C.E.'s, which plan is recorded in Essex North District Registry of Deeds as Plan #6464 and thus bounded: WESTERLY: by said Milk Street, 300.57 feet; NORTHERLY: by Lot 10 on said plan, 249.25 feet; WESTERLY: 140 feet; NORTHERLY: 15 feet; WESTERLY: again, 176.73 feet, all by Lot 7 on said plan; and SOUTHERLY: by other land formerly of grantor, 349.12 feet. Containing 2.08 acres, more or less. 45 Exhibit B --------- Annual Base Rent ---------------- Annual Base Rent shall be as set forth below. "Lease Year" shall mean the twelve-month period following the Commencement Date and each successive twelve-month period during the Term (provided that, if the Commencement Date is not the first day of a calendar month, the first "Lease Year" shall mean the last twelve-month period plus the partial month at the end of the Term). Lease Year Annual Monthly ---------- ------ ------- 1,2 $1,050,000 $ 87,500 3,4 $1,125,000 $ 93,750 5,6 $1,200,000 $100,000 7,8 $1,275,000 $106,250 9,10 $1,350,000 $112,500 11-15 $1,400,000 $116,667 46 Exhibit C --------- Permitted Exceptions -------------------- 1. Any state of facts that an accurate survey or physical inspection thereof might show; 2. All laws, including without limitation zoning regulations, restrictions, rules and ordinances, and building restrictions, and all other statutes, laws, and regulations now in effect or hereafter adopted by any governmental authority having jurisdiction; 3. The rights of any tenants, subtenants, and any other parties in possession of, or claiming rights of possession to, the Premises as of the Commencement Date; 4. Title Documents; 5. Any facts, rights, interest, or claims which are not shown by the public records, but which could be ascertained by an inspection of said land or by making inquiry of persons in possession thereof. 6. Survey entitled "Parlex Corporation 145 Milk Street, Methuen, Massachusetts" dated March 13, 2003 by Vanasse Hangen Brustlin, Inc. (project number 08477). 7. Any lien, or rights to a lien, for services, labor or material heretofore or hereafter furnished, imposed by law and not shown by the public records. 8. Liens for municipal taxes and assessments as may be shown as due and payable on a current Certificate of Municipal Liens and liens for such municipal taxes and assessments as become due and payable hereafter. 9. Sewer line easements set forth in Deed from Gilbert Campbell, Inc. to Tinkham Industrial & Development Corporation dated June 26, 1970, and recorded in Book 1154, Page 730 and as shown on plan recorded as Plan No. 6224. 10. Sewer easement 30 feet in width referred to in deed from Gilbert Campbell, Inc. to Parlex Corporation recorded in Book 1525, Page 209 and shown on Plan No. 6258. 11. Sewer line easement granted by Parlex Corporation to the Town of Methuen dated October 28, 1982 and recorded in Book 1618, Page 339 and shown on plan recorded as Plan No. 8767. 12. Sewer easement 30 feet in width referred to in deed from Gilbert Campbell, Inc. to Parlex Corporation recorded in Book 2041, Page 172 and shown on Plan No. 6464. 13. The matters shown on plan recorded as Plan No. 8767 dated September 30, 1981. 14. The matters shown on plan recorded as Plan No. 13210 dated October 9, 1997. 47 Exhibit D --------- Tenant Work Insurance Requirements ---------------------------------- 1. Tenant shall purchase or shall cause each Tenant's Contractor to purchase, in a company or companies against which the Landlord has no reasonable objection, such insurance as will protect him from claims set forth below that may arise out of or result from the contractor's operations on the Premises. 1.1 claims under workers' or workmen's compensation, disability benefit and other similar employee benefit acts; 1.2 claims for damages because of bodily injury, occupational sickness or disease, or death of his employees; 1.3 claims for damages because of bodily injury, sickness or disease, or death of any person other than his employees; 1.4 claims for damages insured by personal injury liability coverage that are sustained (1) by any person as a result of an offense directly or indirectly related to the employment of such person by the Contractor, or (2) by any other person; 1.5 claims for damages, other than the Tenant Work itself, because of injury to or destruction of tangible property, including loss of use resulting therefrom; 1.6 claims for damages because of bodily injury or death of any person or property damage arising out of the ownership, maintenance or use of any motor vehicle; and 1.7 claims for contractual liability (both oral and written) under this undertaking with Tenant. 2. The insurance required by Section 1 of this Schedule shall include all major divisions of coverage, and shall be on a comprehensive general basis. Such insurance shall be written for not less than any limits of liability required by law or those set forth below, whichever is greater. 2.1 Workmen's Compensation - as required by law. 2.2 Public Liability - Single Limit (Combined) Per Occurrence. Bodily & Personal Injury $1,000,000 Property Damage $1,000,000 Occurrence/Aggregate. 2.3 Automobile Liability - Single Limit (Combined) Per Occurrence. Bodily Injury $1,000,000 Property Damage $1,000,000 per Occurrence 2.4 Independent Contractors - $1,000,000 Per Occurrence. 2.5 Products and Completed operations - $1,000,000 Per Occurrence, covering liability for claims made within applicable statutes of limitations following issuance of final Certificate of Payment. 48 2.6 Broad Form Blanket Contractual Liability (both oral and written) - $1,000,000 Per Occurrence. 2.7 Excess Liability Umbrella covering all above items $5,000,000 per Occurrence. 49 Exhibit E --------- Financial Reporting ------------------- Tenant shall keep adequate books and records of account in accordance with generally accepted accounting principles or in accordance with other methods of accounting acceptable to Landlord in its sole discretion, consistently applied ("Approved Accounting Method") and shall furnish to Landlord the following, which shall be prepared, dated and certified by Borrower's chief financial officer as true, correct and complete in the form required by Landlord, unless otherwise specified below: (A) Within 120 days after the end of each fiscal year for Tenant, a detailed, analytical financial report prepared in accordance with the Approved Accounting Method, including, without limitation, a balance sheet, income and expense statements, and a statement of change in financial position covering the full and complete operations of the Tenant, all prepared by an independent accountant reasonably acceptable to Landlord (Tenant's financial reports must be audited); (B) Promptly after filing and in no event later than one hundred twenty (120) days after the end of each fiscal year for Tenant (or, if Tenant obtains an extension of its filing date, within thirty (30) days from the date such returns are filed), a copy of such Tenant's signed federal income tax return for such fiscal year; (C) Within 30 days of Landlord's request, a detailed budget in a format and with content reasonably acceptable to Landlord, to include, without limitation, a comparison showing corresponding information for Tenant's preceding fiscal year; (D) Within thirty (30) days after the end of each fiscal quarter of Tenant, the reports described in Section (A) and (C) above, which may be internally prepared by Tenant; (E) In connection with a bona fide proposed sale or financing of the Premises to a third party or a direct or indirect equity investment in Landlord, Tenant will provide audited annual balance sheets, income statements, and statements of cash flow of Tenant for each of Tenant's last three full fiscal years, delivered within thirty (30) days after such request by Landlord; and (F) Such other financial statements, and such other information and reports as may, from time to time, be reasonably required by Landlord and as may be reasonably prepared by or available to Tenant; provided, however, that as long as there is no then existing Event of Default by Tenant and no uncured notice of any facts or circumstances has been given to Tenant that, if not cured within an applicable cure period, will become an Event of Default, Landlord shall not be entitled to request additional information under this paragraph (F) except to the extent such information is requested by Landlord's lender or third party investor. 50 Exhibit F --------- Minimum Insurance Requirements ------------------------------ (i) Property insurance insuring the building and Improvements for perils covered by the causes of loss - special form (all risk) and in addition, flood and/or earthquake (if applicable). Coverage shall include boiler and machinery insurance on a comprehensive basis. Such insurance shall be written on a replacement cost basis with an agreed value equal to the full insurable replacement value of the foregoing. The policy shall name Landlord additional named insured and loss payee and Landlord's mortgagee as additional insureds and loss payees. (ii) Commercial general liability insurance naming Landlord as additional named insured and Landlord's mortgagee as additional insureds against any and all claims as are customarily covered under a standard policy form routinely accepted by Landlord's mortgagee, for bodily injury and property damage occurring in or about the Premises arising out of Tenant's use and occupancy of the Premises. Such insurance shall have a combined single limit of no less than One Million Dollars ($1,000,000) per occurrence with a Two Million Dollar ($2,000,000) aggregate limit and excess umbrella liability insurance in the amount of at least Ten Million Dollars ($10,000,000). Such liability insurance shall be primary and not contributing to any insurance available to Landlord and Landlord's insurance shall be in excess thereto. In no event shall the limits of such insurance be considered as limiting the liability of Tenant under this Lease. No deductible shall apply to this coverage. (iii) Workers' compensation insurance in accordance with statutory law and employers' liability insurance with a limits of not less than $100,000 each accident, $500,000 disease - policy limit, $100,000 disease - each employee. (iv) Builders risk insurance insuring perils covered by the causes of loss - special form (all risk) shall be purchased for the value of the alteration and/or additions made to the Premises when the work is not insured under Tenant's property insurance policy. (v) Business interruption insurance in an amount at least equal to one year's gross rents, naming Landlord and Landlord's mortgagee as loss payees. (vi) Such other insurance which may, from time to time, be reasonably required by Landlord's mortgagee in each case so long as such other insurance is customarily required by the institutional investors or lenders to be carried on similar properties in the Greater Boston, Massachusetts metropolitan area or similar areas. The policies required to be maintained by Tenant shall be with companies having an A.M. Best rating of A-/VII or higher or such higher rating as may be a acceptable to the Securities Valuation Office of the National Association of Insurance Commissioners. Insurers shall be licensed to do business in the state in which the Premises are located and domiciled in the United States. Any deductible amounts under any insurance policies required hereunder shall not exceed $50,000 (except that, provided that so long as Tenant's net worth shall be $50 million or more, the general liability deductible may be as high as $250,000 and the workmen's compensation deductible for the Tenant originally named herein may be as high as $500,000). 51 Exhibit G --------- Subordination, Non-Disturbance and Attornment Agreement Form ------------------------------------------------------------ THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT ("Agreement") is entered into as of , 200 (the "Effective Date") by and between (together with its successors and assigns, the "Mortgagee"), and , a (hereinafter, collectively the "Tenant"), with reference to the following facts: A. , a , whose address is (the "Landlord") owns fee simple title or a leasehold interest in the real property described in Exhibit "A" attached hereto (the "Property"). B. Mortgagee [has made] [intends to make] a loan to Landlord in the original principal amount of Dollars ($ ) (the "Loan"). C. To secure the Loan, Landlord [has encumbered] [intends to encumber] [all] [a certain portion of] the Property by entering into that certain Mortgage [to be] dated , in favor of Mortgagee (as amended, increased, renewed, extended, spread, consolidated, severed, restated, or otherwise changed from time to time, the "Mortgage") to be recorded in the [Recorder of Deeds' Office] in and for the County of , State of . D. Pursuant to the Lease effective , (the "Lease"), Landlord demised to Tenant [all] [a portion] of the Property consisting of the following (the "Leased Premises"): . E. Tenant and Mortgagee desire to agree upon the relative priorities of their interests in the Property and their rights and obligations if certain events occur. NOW, THEREFORE, for good and sufficient consideration, Tenant and Mortgagee agree: 1. Definitions. The following terms shall have the following meanings for purposes of this Agreement. (a) Foreclosure Event. A "Foreclosure Event" means: (i) foreclosure under the Mortgage; (ii) any other exercise by Mortgagee of rights and remedies (whether under the Mortgage or under applicable law, including bankruptcy law) as holder of the Loan and/or the Mortgage, as a result of which a Successor Landlord becomes owner of the Property; or (iii) delivery by Landlord to Mortgagee (or its designee or nominee) of a deed or other conveyance of Landlord's interest in the Property in lieu of any of the foregoing. (b) Former Landlord. A "Former Landlord" means Landlord and any other party that was landlord under the Lease at any time before the occurrence of any attornment under this Agreement. (c) Offset Right. An "Offset Right" means any right or alleged right of Tenant to any offset, defense (other than one arising from actual payment and performance, which payment and performance would bind a Successor Landlord pursuant to this Agreement), claim, counterclaim, reduction, deduction, or abatement against Tenant's payment of Rent or performance of Tenant's 52 other obligations under the Lease, arising (whether under the Lease or under applicable law) from Landlord's breach or default under the Lease. (d) Rent. The "Rent" means any fixed rent, base rent or additional rent under the Lease. (e) Successor Landlord. A "Successor Landlord" means any party that becomes owner of the Property as the result of a Foreclosure Event. (f) Termination Right. A "Termination Right" means any right of Tenant to cancel or terminate the Lease or to claim a partial or total eviction arising (whether under the Lease or under applicable law) from Landlord's breach or default under the Lease. (g) Other Capitalized Terms. If any capitalized term is used in this Agreement and no separate definition is contained in this Agreement, then such term shall have the same respective definition as set forth in the Lease. 2. Subordination. The Lease, as the same may hereafter be modified, amended or extended, shall be, and shall at all times remain, subject and subordinate to the terms conditions and provisions of the Mortgage, the lien imposed by the Mortgage, and all advances made under the Mortgage. 3. Nondisturbance, Recognition and Attornment. (a) No Exercise of Mortgage Remedies Against Tenant. So long as the Tenant is not in default under this Agreement or under the Lease beyond any applicable grace or cure periods (an "Event of Default"), Mortgagee (i) shall not terminate or disturb Tenant's possession of the Leased Premises under the Lease, except in accordance with the terms of the Lease and this Agreement and (ii) shall not name or join Tenant as a defendant in any exercise of Mortgagee's rights and remedies arising upon a default under the Mortgage unless applicable law requires Tenant to be made a party thereto as a condition to proceeding against Landlord or prosecuting such rights and remedies. In the latter case, Mortgagee may join Tenant as a defendant in such action only for such purpose and not to terminate the Lease or otherwise adversely affect Tenant's rights under the Lease or this Agreement in such action. (b) Recognition and Attornment. Upon Successor Landlord taking title to the Property (i) Successor Landlord shall be bound to Tenant under all the terms and conditions of the Lease (except as provided in this Agreement); (ii) Tenant shall recognize and attorn to Successor Landlord as Tenant's direct landlord under the Lease as affected by this Agreement; and (iii) the Lease shall continue in full force and effect as a direct lease, in accordance with its terms (except as provided in this Agreement), between Successor Landlord and Tenant. Tenant hereby acknowledges notice that pursuant to the Mortgage and assignment of rents, leases and profits, Landlord has granted to the Mortgagee an absolute, present assignment of the Lease and Rents which provides that Tenant continue making payments of Rents and other amounts owed by Tenant under the Lease to the Landlord and to recognize the rights of Landlord under the Lease until notified otherwise in writing by the Mortgagee. After receipt of such notice from Mortgagee, the Tenant shall thereafter make all such payments directly to the Mortgagee or as the Mortgagee may otherwise direct, without any further inquiry on the part of the Tenant. Landlord consents to the foregoing and waives any right, claim or demand which Landlord may have against Tenant by reason of such payments to Mortgagee or as Mortgagee directs. 53 (c) Further Documentation. The provisions of this Article 3 shall be effective and self-operative without any need for Successor Landlord or Tenant to execute any further documents. Tenant and Successor Landlord shall, however, confirm the provisions of this Article 3 in writing upon request by either of them within ten (10) days of such request. 4. Protection of Successor Landlord. Notwithstanding anything to the contrary in the Lease or the Mortgage, Successor Landlord shall not be liable for or bound by any of the following matters: (a) Claims Against Former Landlord. Any Offset Right that Tenant may have against any Former Landlord relating to any event or occurrence before the date of attornment, including any claim for damages of any kind whatsoever as the result of any breach by Former Landlord that occurred before the date of attornment. The foregoing shall not limit either (i) Tenant's right to exercise against Successor Landlord any Offset Right otherwise available to Tenant because of events occurring after the date of attornment or (ii) Successor Landlord's obligation to correct any conditions that existed as of the date of attornment and violate Successor Landlord's obligations as landlord under the Lease. (b) Prepayments. Any payment of Rent that Tenant may have made to Former Landlord more than thirty (30) days before the date such Rent was first due and payable under the Lease with respect to any period after the date of attornment other than, and only to the extent that, the Lease expressly required such a prepayment. (d) Payment; Security Deposit; Work. Any obligation: (i) to pay Tenant any sum(s) that any Former Landlord owed to Tenant unless such sums, if any, shall have been actually delivered to Mortgagee by way of an assumption of escrow accounts or otherwise; (ii) with respect to any security deposited with Former Landlord, unless such security was actually delivered to Mortgagee; (iii) to commence or complete any initial construction of improvements in the Leased Premises or any expansion or rehabilitation of existing improvements thereon; (iv) to reconstruct or repair improvements following a fire, casualty or condemnation; or (v) arising from representations and warranties related to Former Landlord. (e) Modification, Amendment or Waiver. Any modification or amendment of the Lease, or any waiver of the terms of the Lease, made without Mortgagee's written consent. (f) Surrender, Etc. Any consensual or negotiated surrender, cancellation, or termination of the Lease, in whole or in part, agreed upon between Landlord and Tenant, unless effected unilaterally by Tenant pursuant to the express terms of the Lease. 5. Exculpation of Successor Landlord. Notwithstanding anything to the contrary in this Agreement or the Lease, Successor Landlord's obligations and liability under the Lease shall never extend beyond Successor Landlord's (or its successors' or assigns') interest, if any, in the Leased Premises from time to time, including insurance and condemnation proceeds, security deposits, escrows, Successor Landlord's interest in the Lease, and the proceeds from any sale, lease or other disposition of the Property (or any portion thereof) by Successor Landlord (collectively, the "Successor Landlord's Interest"). Tenant shall look exclusively to Successor Landlord's Interest (or that of its successors and assigns) for payment or discharge of any obligations of Successor Landlord under the Lease as affected by this Agreement. If Tenant obtains any money judgment against Successor Landlord with respect to the Lease or the relationship between Successor Landlord and Tenant, then Tenant shall look solely to Successor Landlord's Interest (or that of its successors and assigns) to collect such judgment. Tenant shall not collect or attempt to collect any such judgment out of any other assets of Successor Landlord. 54 6. Mortgagee's Right to Cure. Notwithstanding anything to the contrary in the Lease or this Agreement, before exercising any Offset Right or Termination Right: 7. Notice to Mortgagee. Tenant shall provide Mortgagee with notice of the breach or default by Landlord giving rise to same (the "Default Notice") and, thereafter, the opportunity to cure such breach or default as provided for below. 8. Mortgagee's Cure Period. After Mortgagee receives a Default Notice, Mortgagee shall have a period of thirty (30) days beyond the time available to Landlord under the Lease in which to cure the breach or default by Landlord. Mortgagee shall have no obligation to cure (and shall have no liability or obligation for not curing) any breach or default by Landlord, except to the extent that Mortgagee agrees or undertakes otherwise in writing. In addition, as to any breach or default by Landlord the cure of which requires possession and control of the Property, provided that Mortgagee undertakes by written notice to Tenant to exercise reasonable efforts to cure or cause to be cured by a receiver such breach or default within the period permitted by this paragraph, Mortgagee's cure period shall continue for such additional time (the "Extended Cure Period") as Mortgagee may reasonably require to either: (i) obtain possession and control of the Property with due diligence and thereafter cure the breach or default with reasonable diligence and continuity; or (ii) obtain the appointment of a receiver and give such receiver a reasonable period of time in which to cure the default. 9. Miscellaneous. (a) Notices. Any notice or request given or demand made under this Agreement by one party to the other shall be in writing, and may be given or be served by hand delivered personal service, or by depositing the same with a reliable overnight courier service or by deposit in the United States mail, postpaid, registered or certified mail, and addressed to the party to be notified, with return receipt requested or by telefax transmission, with the original machine- generated transmit confirmation report as evidence of transmission. Notice deposited in the mail in the manner hereinabove described shall be effective from and after the expiration of three (3) days after it is so deposited; however, delivery by overnight courier service shall be deemed effective on the next succeeding business day after it is so deposited and notice by personal service or telefax transmission shall be deemed effective when delivered to its addressee or within two (2) hours after its transmission unless given after 3:00 p.m. on a business day, in which case it shall be deemed effective at 9:00 a.m. on the next business day. For purposes of notice, the addresses and telefax number of the parties shall, until changed as herein provided, be as follows: If to the Mortgagee, at: ------------------------ If to the Tenant, at: --------------------- --------------------- --------------------- --------------------- Attn: --------------------- Telecopy No.: ( ) 55 (b) Successors and Assigns. This Agreement shall bind and benefit the parties, their successors and assigns, any Successor Landlord, and its successors and assigns. If Mortgagee assigns the Mortgage, then upon delivery to Tenant of written notice thereof accompanied by the assignee's written assumption of all obligations under this Agreement, all liability of the assignor shall terminate. (c) Entire Agreement. This Agreement constitutes the entire agreement between Mortgagee and Tenant regarding the subordination of the Lease to the Mortgage and the rights and obligations of Tenant and Mortgagee as to the subject matter of this Agreement. (d) Interaction with Lease and with Mortgage. If this Agreement conflicts with the Lease, then this Agreement shall govern as between the parties and any Successor Landlord, including upon any attornment pursuant to this Agreement. This Agreement supersedes, and constitutes full compliance with, any provisions in the Lease that provide for subordination of the Lease to, or for delivery of nondisturbance agreements by the holder of, the Mortgage. (e) Mortgagee's Rights and Obligations. Except as expressly provided for in this Agreement, Mortgagee shall have no obligations to Tenant with respect to the Lease. If an attornment occurs pursuant to this Agreement, then all rights and obligations of Mortgagee under this Agreement shall terminate, without thereby affecting in any way the rights and obligations of Successor Landlord provided for in this Agreement. (f) Interpretation; Governing Law. The interpretation, validity and enforcement of this Agreement shall be governed by and construed under the internal laws of the State in which the Leased Premises are located, excluding such State's principles of conflict of laws. (g) Amendments. This Agreement may be amended, discharged or terminated, or any of its provisions waived, only by a written instrument executed by the party to be charged. (h) Due Authorization. Tenant represents to Mortgagee that it has full authority to enter into this Agreement, which has been duly authorized by all necessary actions. Mortgagee represents to Tenant that it has full authority to enter into this Agreement, which has been duly authorized by all necessary actions. (i) Execution. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. [THIS SPACE INTENTIONALLY LEFT BLANK] 56 IN WITNESS WHEREOF, the Mortgagee and Tenant have caused this Agreement to be executed as of the date first above written. MORTGAGEE: ---------- TENANT: ------- ------------------------ a ---------------------- By:--------------------- Name: Title: 57 LANDLORD'S CONSENT ------------------ Landlord consents and agrees to the foregoing Agreement, which was entered into at Landlord's request. The foregoing Agreement shall not alter, waive or diminish any of Landlord's obligations under the Mortgage or the Lease. The above Agreement discharges any obligations of Mortgagee under the Mortgage and related loan documents to enter into a nondisturbance agreement with Tenant. Landlord is not a party to the above Agreement. LANDLORD: --------- ------------------------ By:--------------------- Name: Title: Dated: , --------- ----- 58 MORTGAGEE'S ACKNOWLEDGMENT -------------------------- STATE OF ) ------------------- ) ss. COUNTY OF ) ------------------ On the day of in the year before me, the undersigned, a Notary Public in and for said state, personally appeared , proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument. ----------------------------- Signature of Notary Public 59 TENANT'S ACKNOWLEDGMENT ----------------------- STATE OF ) ------------------- ) ss. COUNTY OF ) ------------------ On the day of in the year before me, the undersigned, a Notary Public in and for said state, personally appeared , proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument. ----------------------------- Signature of Notary Public 60 LIST OF EXHIBITS ---------------- If any exhibit is not attached hereto at the time of execution of this Agreement, it may thereafter be attached by written agreement of the parties, evidenced by initialing said exhibit. Exhibit "A" - Legal Description of the Land 61 Exhibit H --------- Capital Expenditure Items ------------------------- See the attached letter dated April 23, 2003 from David Holloway of Taurus Investment Holdings, LLC to Jon Kosheff of Parlex Corporation 62 TAURUS INVESTMENT HOLDINGS, LLC 118 MILK STREET, BOSTON, MA 02109 TEL: 617.357.4440 FAX: 617.357.4446 www.tiholdings.com April 23, 2003 Mr. Jon Kosheff CFO Parlex Corporation One Parlex Place Methuen, MA 01844 RE: 2003 Capital Improvements - Methuen, MA and Cranston, RI Dear Jon: The purpose of this letter is to enumerate the required capital improvements to be completed by Parlex during 2003 at the above two facilities. Parlex will contractually commit to the completion of these items and the expenditures of these amounts. These repairs and associated costs are derived from the EBI Property Condition Reports and our experience in operating buildings of this nature. Methuen - ------- Groundwater Infiltration Repair $ 7,500 Roof Repairs/Drainage $ 15,000 Full Depth Asphalt Repairs $ 15,000 New Asphalt Overlay $ 35,000 HVAC Replacement $ 44,688 Total - Methuen $117,185 Cranston - -------- Parking Lot Repairs $ 20,000 Total - Cranston $ 20,000 Grand Total $137,185 These items are to be completed to our reasonable satisfaction. Any unspent funds will be contributed by Parlex to the Security Deposit for the respective facilities. Sincerely, /s/ David Holloway David Holloway Vice President BOSTON DALLAS MUNICH ORLANDO TORONTO WASHINGTON DC Exhibit I --------- Lower Gravel Parking Lot ------------------------ See the attached plan 63 EX-10 12 park210h.txt EXHIBIT 10.HH Exhibit 10.HH LEASE OF 28 KENNEY DRIVE, CRANSTON, RHODE ISLAND BY TAURUS CRANSTON LLC, AS LANDLORD TO POLY-FLEX CIRCUITS, INC. TABLE OF CONTENTS Page ARTICLE I - Fundamental Lease Provisions 4 1.1 Reference Subjects 4 ARTICLE II - Premises and Term 5 2.1 Premises 5 2.2 Existing Conditions; "As-Is" 6 2.3 Term 6 ARTICLE III - Rent 6 3.1 Annual Base Rent 6 3.2 Additional Rent 7 3.3 Method of Payment 7 ARTICLE IV - Net Lease, True Lease 7 4.1 Net Lease 7 4.2 Non-Terminability; No Offset or Abatement 8 4.3 True Lease 9 4.4 Quiet Enjoyment 9 ARTICLE V - Tenant's Covenants 9 5.1 Tenant Work 9 5.1.1 General 9 5.1.2 Construction Documents 9 5.1.3 Performance 10 5.1.4 Payment 11 5.2 Utilities and Services 11 5.3 Maintenance and Repairs 11 5.4 Use and Compliance with Law 13 5.5 Taxes and Impositions 13 5.6 Indemnity 15 5.7 Landlord's Entry Right 15 5.8 Signs 16 5.9 Personal Property 16 5.10 Damage and Hazardous Materials 16 5.11 Liens 18 5.12 Condition on Expiration 18 5.13 Holding Over 18 5.15 Financial Reporting 19 ARTICLE VI - Assignment and Subletting 20 6.1 Landlord's Consent Required 21 6.2 Intentionally Omitted 21 6.3 Right of Termination or Recapture 21 6.4 Procedures 21 6.5 Profits 22 6.6 No Release 23 ARTICLE VII - Insurance, Casualty, Taking 23 7.1 Insurance 23 7.2 Damage or Destruction of Premises 25 7.3 Eminent Domain 26 ARTICLE VIII - Default 28 8.1 Events of Default 28 8.2 Remedies for Default 29 8.2.1 Reletting Expenses Damages 29 8.2.2 Termination Damages 30 8.2.3 Lump Sum Liquidated Damages 30 8.3 Remedies Cumulative; Jury Waiver; Late Performance 30 8.4 Waivers of Default; Accord and Satisfaction 31 8.5 Landlord's Curing 31 8.6 Security Deposit 31 ARTICLE IX - Protection of Lenders 33 9.1 Subordination and Superiority of Lease 33 9.2 Rent Assignment 34 9.3 Other Instruments 34 ARTICLE X - Miscellaneous Provisions 34 ii 10.1 Notice 34 10.2 Landlord's Default 35 10.3 Limitation of Landlord's Liability 35 10.4 Excusable Delay 36 10.5 Applicable Law and Construction 36 10.6 Estoppel Certificate 37 10.7 Notice of Lease 37 10.8 Brokers 37 10.9 Tenant and Landlord as Business Entity 37 ARTICLE XI - Purchase Option 38 11.1 Term of Option and Exercise 38 ARTICLE XII - Index of Defined Terms 39 EXHIBITS - -------- Exhibit A - Land Exhibit B - Annual Base Rent Exhibit C - Permitted Exceptions Exhibit D - Tenant Work Insurance Requirements Exhibit E - Reporting Requirements Exhibit F - Minimum Insurance Requirements Exhibit G - Subordination, Non-Disturbance and Attornment Agreement Form Exhibit H - Capital Expenditure Items iii LEASE ARTICLE I --------- Fundamental Lease Provisions ---------------------------- 1.1 Reference Subjects Each reference in this Lease to any of the following subjects shall incorporate the following information. Other terms are defined throughout this Lease and are indexed in the last Article. DATE OF LEASE EXECUTION: As of June __, 2003 PROPERTY: The land known and numbered as 28 Kenney Drive, Cranston, Rhode Island, more particularly described in Exhibit A. PREMISES: The Property, including all buildings, structures, and all improvements thereon. LANDLORD: Taurus Cranston LLC ORIGINAL ADDRESS OF LANDLORD: c/o Taurus New England Investment Corp., 118 Milk Street, Boston, Massachusetts 02109, Attn: Mr. Scott R. Tully TENANT: Poly-Flex Circuits, Inc., a duly organized Rhode Island corporation ORIGINAL ADDRESS OF TENANT: 28 Kenney Drive, Cranston, Rhode Island, Attention: Dennis Carvaho, President TERM: The term of this Lease shall commence on the Commencement Date and end on the Expiration Date COMMENCEMENT DATE: The Date of Lease Execution. (See Section 2.3) LEASE YEAR: Each Lease Year shall consist of twelve (12) calendar months beginning with the Commencement Date, except that if the Commencement Date is not the first day of a calendar month, then Lease Year 1 shall include the partial month at the beginning of the Term in addition to the following twelve (12) calendar months, and the Annual Base Rent for Lease Year 1 shall be proportionately increased. EXPIRATION DATE: The last day of the fifth (5th) Lease Year, unless extended pursuant to the provisions of Section 2.3.1 or earlier terminated pursuant to the provisions of Article 11 4 ANNUAL BASE RENT: The amounts set forth on Exhibit B. (See Article III.) PERMITTED USES: (i) Office, warehouse, distribution and manufacturing; and (ii) such other lawful uses as may be reasonably approved in writing by Landlord. (See Section 5.4) SECURITY DEPOSIT: $250,000 GUARANTOR: Parlex Corporation, a Massachusetts Corporation TENANT WORK THRESHOLD AMOUNT: $250,000 (See Section 5.1.1) BROKERS: Cushman & Wakefield of Massachusetts, Inc. (See Section 11.8) EXHIBITS A Land B Annual Base Rent C Permitted Exceptions D Tenant Work Insurance Requirements E Reporting Requirements F Minimum Insurance Requirements G Subordination, Non-Disturbance and Recognition Agreement Form H Capital Expenditure Items ARTICLE II ---------- Premises and Term ----------------- 2.1 Premises. Landlord leases the Premises to Tenant and Tenant leases the Premises from Landlord, subject to matters of record and matters referred to below. (a) Title and Condition. The Premises are demised and leased subject to (i) the existing state of the title as of the Commencement Date, including without limitation the Permitted Exceptions set forth on Exhibit C hereto and that certain Environmental Land Usage Restriction dated April 9, 2003, granted by Tenant (the "Usage Restriction"), a copy of which is recorded at Book 2112, Page 260 of the Cranston, Rhode Island land records, and (ii) the "as is" condition of the buildings, structures, and other improvements located thereon, as of the Commencement Date, without representation or warranty by Landlord. Tenant covenants to comply with each and every term and condition of the Usage Restriction, including but not limited to the preparation and filing, at its sole cost and expense, of any annual compliance reports required thereby. (b) Reservations. Landlord reserves the right from time to time to grant and relocate easements, to alter and diminish the shape and size of the Land and to alter driveways, walkways, parking areas, and utilities serving the Premises, all of which may be done by Landlord so long as the same do not adversely interfere with Tenant's use of the Land and improvements constituting the Premises. 5 (c) No Merger. There shall be no merger of this Lease or the leasehold estate hereby created with the fee estate in the Premises or any part thereof by reason of the same person acquiring or holding, directly or indirectly, this Lease or the leasehold estate hereby created or any interest in this Lease or in such leasehold estate as well as the fee estate in the Premises or any portion thereof. 2.2 Existing Conditions; "As-Is. Tenant acknowledges that Tenant or its affiliates owned and occupied the Premises prior to the Commencement Date and that it has inspected the Premises and accepts the same in the condition they are in on the Commencement Date, it being expressly agreed that Landlord shall have no obligation, liability, or risk whatsoever with respect to the Premises or their condition. Landlord shall have no obligation to provide any tenant improvement allowance or to perform any work or improvements in the Premises, except as expressly set forth in Section 5.18. Tenant further acknowledges that neither Landlord nor any person acting under Landlord has made or implied any representations or warranties concerning this Lease, the Premises, or their condition or suitability for Tenant's use. To the extent permitted by applicable law, Tenant waives any right or remedy otherwise accruing to Tenant on account of the condition or suitability of the Premises, or title to the Premises, and Tenant agrees that it takes the Premises "as-is," with all faults and without any such representation or warranty, including any implied warranties. 2.3 Term. The Term of the Lease shall commence at 12:01 a.m. on the Commencement Date and end at 12:00 midnight on the Expiration Date set forth in Section 1.1. 2.3.1 Extension Option. Subject to the terms and conditions below, Tenant shall have the option to extend the Term for two (2) additional five (5) year extension terms (each an "Extension Term") by notice given to Landlord at least one (1) year before the then applicable Expiration Date (any such notice, "Tenant's Option Exercise Notice"). Tenant's election shall be exercised, and Annual Base Rent for the Extension Term determined, as set forth below. If Tenant fails timely to exercise its option for any Extension Term, Tenant shall have no further extension rights hereunder. Tenant's option so to extend the Term shall be void, at Landlord's election, if Tenant is in monetary or other material default at the time Tenant elects to extend the Term or at the time the Term would expire but for such extension. The extension of the Term shall be applicable to the entire Premises and Tenant shall have no right to extend the Term for only a portion of the Premises. During the Extension Term, all provisions of this Lease shall apply except that Tenant shall have no further option to extend the Term after the last Extension Term. For each Lease Year during each Extension Term, Tenant shall pay Annual Base Rent equal to One Hundred Two and One-Half Percent (102.5%) of the Annual Base Rent for the immediately preceding Lease Year. ARTICLE III ----------- Rent ---- 3.1 Annual Base Rent. Commencing on the Commencement Date and by the first day of each subsequent calendar month during the Term, Tenant shall pay to Landlord the Annual Base Rent set forth in Section 1.1, together with any and all Additional Rent due to Landlord in accordance with this Lease, all as set forth in this Article III. 6 3.2 Additional Rent. All taxes, costs, expenses, charges, amounts and other sums that Tenant assumes, agrees or is required to pay pursuant to this Lease (other than Annual Base Rent), together with every fine, penalty, interest and cost that may be added for non-payment or late payment thereof, shall constitute additional rent ("Additional Rent"). All Additional Rent shall be paid directly by Tenant to the party to whom such Additional Rent is due. If Tenant shall fail to pay any such Additional Rent or any other sum due hereunder when the same shall become due, Landlord shall have all rights, powers and remedies with respect thereto as are provided herein or by law in the case of non-payment of any Annual Base Rent and shall, except as expressly provided herein, have the right, but not the obligation, to pay the same on behalf of Tenant pursuant to Section 8.5. The term "rent" shall mean Annual Base Rent and Additional Rent. 3.3 Method of Payment. Tenant agrees to pay the Annual Base Rent to Landlord in advance in equal monthly installments by the first day of each calendar month during the Term. Tenant shall make a ratable payment of Annual Base Rent and Additional Rent (to the extent applicable) for any period of less than a month at the beginning or end of the Term. Unless Landlord and Tenant otherwise agree in writing, all payments of Annual Base Rent, and all payments of Additional Rent and other sums due and payable to Landlord, shall be paid by wire transfer of immediately available funds in accordance with such wire instructions as Landlord may from time to time provide, without demand (except as otherwise expressly set forth in Section 8.1(i) of this Lease), set-off or other deduction. ARTICLE IV ---------- Net Lease; True Lease --------------------- 4.1 Net Lease. This Lease is an absolutely triple net lease to Landlord. It is the intent of the parties hereto that the Annual Base Rent payable under this Lease shall be an absolutely net return to Landlord and that Tenant shall pay all costs and expenses relating to the Premises as set forth in this Lease, except as expressly set forth in Section 5.18, and the business carried on therein. Without limiting the generality of the preceding sentence, Tenant shall at its sole cost and expense be responsible for payment of all real estate taxes, all electricity, gas, water, sewer, telephone, refuse disposal, and other charges for utilities and services supplied to the Premises, all costs (except as expressly set forth in Section 5.18) of cleaning, maintaining, repairing, and replacing the Premises (including all costs of cleaning, maintaining, repairing, and replacing the roof, windows, walls, foundation, floors, and structural elements, mechanical, electrical and plumbing systems, HVAC systems, and the sidewalks, parking areas, and other exterior areas), all amounts payable from time to time by the owner of the Premises under any Title Documents (defined below), a property management fee equal to 1.75% of the rent due under this Lease (which may be paid to Landlord or an affiliate of Landlord) and all costs of insurance. Any amount or obligation herein relating to the Premises that is not expressly declared to be that of Landlord shall be deemed to be an obligation of Tenant to be performed by Tenant at Tenant's expense and Tenant shall indemnify Landlord against, and hold Landlord harmless from, the same in the manner provided in Section 5.6, and Tenant's liability for the payment of any of the same which shall become payable after the Term is hereby expressly provided to survive the Term. Annual Base Rent, Additional Rent, and all other sums payable hereunder by Tenant, shall be paid without notice or demand, and without set off, counterclaim, recoupment, abatement, suspension, deduction, or defense (other than payment) whatsoever, so that this Lease shall yield net to Landlord the Annual Base Rent under all circumstances and conditions whether now or hereinafter existing and whether or not within the contemplation of the parties. As used herein, the term "Title Documents" means any and all easements, covenants, conditions, and restrictions, industrial park association agreements, and other agreements, encumbrances, and restrictions of record affecting all or part of the Premises, as the same may now exist, or as the same may 7 hereafter be created or amended without materially expanding the obligations of Tenant without Tenant's approval (which approval shall not be unreasonably withheld), but excluding any mortgage; provided that any future ground lease shall be a Title Document if reasonably approved by Tenant as aforesaid (and does not require Tenant to pay any ground rent or additional charges) and the parties thereto enter into a subordination, nondisturbance, and recognition agreement that complies with the provision of Section 9.1. 4.2 Non-Terminability; No Offset or Abatement. Tenant's obligation to pay rent shall not be discharged or otherwise affected by any law or regulation now or hereafter applicable to the Premises, or any other restriction on Tenant's use, or any casualty or taking (except as otherwise expressly provided for in Section 7.2(b) and Section 7.3(f)), or any failure by Landlord to perform any obligation or other occurrence, event or circumstance; and Tenant waives all rights now or hereafter existing to quit or surrender this Lease or the Premises or any part thereof (including, without limitation, any rights under Rhode Island General Laws, Section 34-18.1-8), or to assert any defense in the nature of constructive eviction to any action seeking to recover rent. Without limiting the generality of the foregoing, this Lease shall not terminate, nor shall Tenant have any right to terminate this Lease, nor shall Tenant be entitled to any set-off or abatement of rent, nor shall the obligations of Tenant under this Lease be affected, by reason of (i) any damage to or destruction of all or any part of the Premises from whatever cause (except as otherwise expressly provided for in Section 7.2(b)); (ii) the taking of the Premises or any portion thereof by condemnation, requisition, or otherwise (except as otherwise expressly provided for in Section 7.3(f)); (iii) the prohibition, limitation, cessation, restriction or prevention of Tenant's use, occupancy or enjoyment of all or any part of the Premises, or any interference with such use, occupancy or enjoyment, or any insufficiency of condition, design, operation or fitness for use, occupancy or enjoyment of the Premises or any portion thereof or any failure of the Premises to comply with applicable laws; (iv) any eviction by paramount title or otherwise; (v) any default on the part of Landlord under this Lease, or under any other agreement to which Landlord and Tenant (or their respective affiliates) may be parties; (vi) any interruption of utilities or services to the Premises, (vii) any litigation, claim, or other proceeding affecting the use or occupancy of the Premises, whether arising before or after the Commencement Date (Tenant agreeing to be solely responsible for defending, and to indemnify and hold harmless Landlord from and against, any and all claims, liabilities, damages, or expenses, including reasonable attorneys' fees, arising from such matters), (viii) the impossibility or illegality of performance by Landlord, Tenant or both, (ix) any action of any governmental authority (including changes in laws), or (x) any other cause whether similar or dissimilar to the foregoing. The preceding sentence shall apply to the maximum extent now or hereafter permitted by law, it being acknowledged and agreed that Tenant or its affiliate is the former owner of the Premises, that Landlord would not have agreed to purchase the Premises absent Tenant's agreement to enter into this Lease, and that the provisions of this Article IV reflect the parties' express agreement as to the allocation of certain risks relating to the Premises and its use and are a material part of the economic inducements for Landlord to enter into this Lease. It is the intention of the parties hereto that the obligations of Tenant hereunder shall be separate and independent covenants and agreements, that the Annual Base Rent, the Additional Rent, and all other sums payable by Tenant hereunder shall continue to be payable in all events, and that the obligations of Tenant hereunder shall continue unaffected, unless the requirement to pay or perform the same shall have been terminated pursuant to an express provision of this Lease. Notwithstanding anything to the contrary contained above, in the event that Tenant does bring a separate and independent action against Landlord, any judgment in favor of Tenant shall not abate Annual Base Rent or Additional Rent or terminate the Tenant's obligations hereunder. 4.3 True Lease. Landlord and Tenant agree that the parties intend this Lease to constitute a lease and not a financing arrangement, joint venture or any other type of relationship other than that of landlord and tenant. Each party shall reflect the transaction represented hereby in all applicable books, records and reports (including income tax filings) in a manner consistent with "true lease" treatment 8 rather than "financing" treatment, subject to future modifications of accounting or tax rules or guidelines and subject to contrary determinations or positions by governmental agencies or the like. 4.4 Quiet Enjoyment. Upon performing all covenants of this Lease, Tenant may peaceably and quietly enjoy the Premises during the Term free from any claim by Landlord or persons claiming under Landlord, subject always to the terms of this Lease, provisions of law, and matters of record to which this Lease is or may become subordinate. Except as otherwise expressly provided herein, this covenant of quiet enjoyment is in lieu of any other covenant of quiet enjoyment, express or implied. ARTICLE V --------- Tenant's Covenants ------------------ Tenant agrees during the Term and such further time as Tenant (or any person acting under it) occupies any part of the Premises to perform the following, all at Tenant's cost. 5.1 Tenant Work 5.1.1 General . As used in this Lease, the term "Tenant Work" shall mean all work, including demolition, improvements, additions and alterations, in or to the Premises. Without limitation, Tenant Work includes any apertures in the walls, partitions, ceilings or floors and all attached carpeting, all signs visible from the exterior of the Premises, and any change in the exterior appearance of the Premises. All Tenant Work shall be subject to Landlord's prior written approval, not to be unreasonably withheld, conditioned or delayed, and shall be arranged and paid for by Tenant all as provided herein; provided that any interior, non- structural Tenant Work (including any series of related Tenant Work projects) that costs less than the Tenant Work Threshold Amount and does not affect any mechanical, electrical, plumbing, or telecommunications systems of the Premises (collectively, the "Building Systems") shall not require Landlord's prior approval if Tenant delivers the Construction Documents for such work to Landlord at least five (5) business days' prior to commencing such work and such work does not require the approval of Landlord's mortgagee. Whether or not Landlord's approval is required, Tenant shall neither propose nor effect any Tenant Work that would in Landlord's reasonable judgment (i) adversely affect any structural component of the Premises, (ii) is incompatible with the Building Systems, (iii) affects the exterior appearance of the Premises or areas around the Building or other property than the Premises, (iv) diminishes the value of the Premises, or (v) requires any unusual expense to readapt the Premises. Title to all additions, alterations, improvements and replacements made to the Premises, including all Tenant Work, shall vest in Landlord and remain part of the realty subject to this Lease, except to the extent provided in Section 5.12, without any obligation to pay any compensation therefor to Tenant. 5.1.2 Construction Documents. No Tenant Work shall be effected except in accordance with complete, coordinated construction drawings and specifications ("Construction Documents"). For interior cosmetic Tenant Work that does not require Landlord's approval under Section 5.1.1, the "Construction Documents" may constitute only sketches accompanied by a reasonably detailed description of the Tenant Work. Before commencing any Tenant Work requiring Landlord's approval under Section 5.1.1, Tenant shall obtain Landlord's prior written approval of the Construction Documents for such work, which approval shall not be unreasonably withheld. Landlord shall use reasonable efforts to respond to Tenant's submission of Construction Documents within 5 business days, or within such longer period as is required in order for Landlord to obtain any approval needed from Landlord's mortgagee. The Construction Documents shall be prepared by an architect ("Tenant's Architect") experienced in the construction of improvements in and to comparable buildings in the area where the Premises are located and, if such 9 work will exceed the Tenant Work Threshold Amount or involve matters other than interior, non-structural alterations, the identity of such Architect shall be subject to Landlord's approval in advance, such approval not to be unreasonably withheld. Tenant shall be solely responsible for the liabilities associated with and expenses of all architectural and engineering services relating to Tenant Work and for the adequacy, accuracy, and completeness of the Construction Documents even if approved by Landlord (and even if Tenant's Architect has been otherwise engaged by Landlord in connection with the Premises). The Construction Documents shall set forth in detail the requirements for construction of the Tenant Work and shall show all work necessary to complete the Tenant Work including all cutting, fitting, and patching and all connections to the Building Systems. Submission of the Construction Documents to Landlord for approval shall be deemed a warranty that all Tenant Work described in the Construction Documents (i) complies with all applicable laws, regulations, building codes, and high design standards, (ii) does not materially and adversely affect any structural component of the Premises (including exterior walls, exterior windows, core walls, roofs or floor slabs), (iii) is compatible with and does not materially and adversely affect the Building Systems, (iv) does not affect any property other than the Premises, (v) conforms to floor loading limits, (vi) and with respect to all materials, equipment and special designs, processes or products, does not infringe on any patent or other proprietary rights of others. Landlord's approval of Construction Documents shall only signify Landlord's consent to the Tenant Work shown and shall not result in any responsibility of Landlord concerning compliance of the Tenant Work with laws, regulations, or codes, or coordination or compatibility with any component or system of the Premises, or the feasibility of constructing the Tenant Work without damage or harm to the Premises, all of which shall be the sole responsibility of Tenant. Within thirty (30) days after substantial completion of any Tenant Work, whether or not the same costs less than the Tenant Work Threshold Amount or otherwise requires Landlord's approval, Tenant shall furnish to Landlord "as built" plans showing the Tenant Work and adjoining portions of the Premises. Tenant's construction contract(s) for Tenant Work shall provide that any and all warranties thereunder shall inure to the benefit of Landlord (and its successors and assigns) as well as Tenant, and Tenant shall furnish Landlord with copies of such warranties promptly after the completion of Tenant Work. To the extent Landlord's approval is required hereunder (but not otherwise), Tenant shall pay to Landlord, within ten (10) days after Landlord's demand therefor, the reasonable direct third-party costs and expenses of reviewing Construction Documents incurred by Landlord, not to exceed $3,000. 5.1.3 Performance. The identity of any person or entity (including any employee or agent of Tenant) performing any Tenant Work ("Tenant's Contractor") shall, if the cost of such work in any instance is in excess of the Tenant Work Threshold Amount or involves any work other than interior, nonstructural alterations, be approved in advance by Landlord, such approval not to be unreasonably withheld or delayed. Once any Tenant's Contractor has been approved, then the same Contractor may thereafter be used by Tenant for the same type of work until Landlord notifies Tenant that such Tenant's Contractor is no longer approved. Tenant shall procure at Tenant's expense all necessary permits and licenses before undertaking any Tenant Work. Tenant shall perform all Tenant Work at Tenant's risk in compliance with all applicable laws and in a good and workmanlike manner employing new materials of good quality and producing a result at least equal in quality to the other parts of the Premises. When any Tenant Work is in progress, Tenant shall cause to be maintained insurance as described in the Tenant Work Insurance Schedule attached as Exhibit D and such other insurance as may be reasonably required by Landlord covering any additional hazards due to such Work, and, if the cost of such Work exceeds the Tenant Work Threshold Amount also such bonds or other assurances as Landlord may reasonably require that the work will be satisfactorily completed and the costs thereof timely paid, in each case for the benefit of Landlord. If the Tenant Work in any instance requires Landlord's approval hereunder, Tenant shall reimburse Landlord's reasonable costs of inspecting installation of the Tenant Work not to exceed $1,000 per inspection. At all times while performing Tenant Work, Tenant shall require any Tenant's Contractor to comply with all applicable laws, regulations, permits and Landlord's rules and regulations 10 relating to such work, including use of loading areas, elevators and lobbies. Each Tenant's Contractor shall work on the Premises without causing labor disharmony, coordination difficulties, or delay to or impairing of any guaranties, warranties or the work of any other contractor. Each Tenant's Contractor shall, by entry into the Premises, be deemed to have agreed to indemnify and hold the Indemnitees (as defined in Section 5.6) harmless from any claim, loss or expense arising in whole or in part out of any act or neglect committed by or under such person while on or about the Premises to the same extent as Tenant has so agreed in this Lease, the indemnities of Tenant and Tenant's Contractor being joint and several. 5.1.4 Payment. Tenant shall pay the entire cost of all Tenant Work and shall keep the Premises, free of liens for labor or materials relating to such Tenant Work. If any such lien or notice of contract is filed that is claimed to be attributable to Tenant or persons acting under Tenant, then Tenant shall promptly (and always within thirty (30) days) discharge or record a bond (in form and substance reasonably acceptable to Landlord and Landlord's title insurer and acceptable to Landlord's mortgagee from time to time) over the same; provided, however, that Tenant shall not be entitled to bond over the same in any circumstance in which the failure to pay and discharge such lien could cause a default under any loan secured by the Premises. 5.2 Utilities and Services. Tenant shall arrange, provide and pay directly (and assume all risk of service interruptions) for all water, sewer, steam, oil, gas, telecommunications, electricity and other energy or utility services that serve the Premises and deposits or bonds in connection therewith. It is understood and agreed that Landlord shall be under no obligation whatsoever to furnish any utilities or services (including snow removal, cleaning or security) to the Premises, and in no event shall Landlord be liable for (or suffer any reduction in any rent on account of) any interruption or failure in the supply of the same. 5.3 Maintenance and Repairs. (a) Tenant shall, in a commercially reasonable manner, manage, maintain, repair, replace, clean, secure, protect, defend and keep in good condition, repair and appearance and in compliance with all governmental requirements and laws the Premises and all improvements and appurtenances and all utilities, facilities, installations and equipment used in connection therewith, except as expressly provided in Section 5.18, including the structural elements of all walls, roof decks, floor slabs and foundations, all floor coverings, roof waterproofing and membranes, glass, windows, doors, partitions, exterior lighting, elevators, electrical, telecommunications, plumbing, heating, ventilating and other building systems, pipes, drains, water and sewage systems and other fixtures or equipment serving the Premises. Without limitation, Tenant shall provide all cleaning, painting, janitorial services, security, rubbish disposal, periodic exterior waterproofing treatments to the Premises, window caulking, maintenance of all gas, water, electric, telecommunications and other utility lines from surrounding ways to the Premises, and shall repair and maintain the grounds and landscaping, roads, parking areas (including periodic resurfacing), and walkways appurtenant to the Premises, and shall provide landscaping and snowplowing services thereto, keeping the Premises and all improvements and appurtenances in at least as good condition as on the Commencement Date, reasonable wear and tear excepted, except as expressly provided in Section 5.18. Tenant shall not injure, overload, deface, or commit waste in the Premises nor use or permit any use of the Premises that is improper or offensive or that constitutes a nuisance. Except as expressly provided in Section 5.18, Tenant shall make promptly all structural and nonstructural, foreseen and unforeseen, ordinary and extraordinary changes and repairs of every kind that may be required to be made to keep and maintain the Premises in good condition, repair, and appearance, reasonable wear and tear excepted. Tenant shall keep the Premises orderly and free and clear of rubbish. Tenant shall keep the Premises equipped with fire extinguishers and other safety appliances as are required by applicable laws and the insurance required to be carried by Tenant hereunder and as otherwise reasonably appropriate for Tenant's use. Tenant covenants to perform or 11 observe all terms, covenants or conditions of any Title Documents or any maintenance agreement to which it may at any time be a party or to which the Premises may be subject and Landlord shall have no obligations whatsoever thereunder. Tenant shall, at its expense, use reasonable efforts to enforce compliance with any provisions of any Title Documents or maintenance agreement having a material effect on the value or use of the Premises by any other person subject to such agreement. Landlord shall not be required to maintain, repair or rebuild, or to make any alterations, replacements, or renewals of any nature to the Premises, or any part thereof, whether ordinary or extraordinary, structural or nonstructural, foreseen or not foreseen to maintain the Premises or any part thereof in any way, except as expressly provided in Section 5.18. Tenant hereby expressly waives the right to make repairs at the expense of Landlord that may be provided for in any law. To the maximum extent permitted by law, Tenant assumes all risk of damage or injury to any person or property located in, on, or about the Premises and Landlord shall not be liable for any loss or damage to person or property resulting from any accident, theft, vandalism, or other occurrence on the Premises. Tenant shall, in all events, make all repairs, replacements and perform maintenance and other work for which it is responsible hereunder promptly, in a good, proper and workmanlike manner at its sole cost and expense. (b) If Landlord believes that Tenant has failed to comply with its maintenance, repair and related obligations under this Lease, Landlord may send a notice thereof to the Tenant (the "Property Condition Notice"). Promptly following the issuance of any Property Condition Notice, Landlord and Tenant will meet and attempt to agree in writing upon a mutually acceptable plan of action by the Tenant to address the matters set forth in the Property Condition Notice. If, for any reason, Landlord and Tenant have not agreed in writing on a plan of action within thirty (30) days from the date of the Property Condition Notice, Landlord shall be entitled to send Tenant a notice (the "Landlord Notice") naming a third-party engineering firm (such third-party engineering firm, the "Landlord's Designated Consultant") to investigate the matters described in the Property Condition Notice. Tenant may, within twenty (20) days from the date of the Landlord Notice, provide Landlord with written notice (the "Tenant Notice") stating that Tenant disapproves of Landlord's Designated Consultant and naming another proposed third-party engineering firm (such third-party engineering firm, the "Tenant's Designated Consultant") to investigate the matters described in the Property Condition. If Tenant fails to send a Tenant Notice to Landlord within twenty (20) days following the Landlord Notice, and if the Landlord Notice contained the following words at the top of the notice, "TENANT MUST RESPOND TO THIS REQUEST WITHIN 20 DAYS FROM THE DATE OF THIS LANDLORD NOTICE OR TENANT SHALL BE DEEMED TO HAVE APPROVED AND AGREED TO THE LANDLORD NOTICE," then Tenant shall be deemed to have agreed to the use of Landlord's Designated Consultant and Landlord's Designated Consultant shall promptly issue a written report to Landlord and Tenant (the "Property Condition Report") setting forth the results of its investigation and outlining the steps, if any, that should be taken by Tenant in order to address those matters. If Tenant issues a Tenant Notice to Landlord within twenty (20) days following the Landlord Notice, the Landlord's Designated Consultant and the Tenant's Designated Consultant shall, within ten (10) days from the Tenant Notice, send a written notice to Landlord and Tenant designating a third-party engineering firm (which shall not be either the Landlord's Designated Consultant nor the Tenant's Designated Consultant) to issue the Property Condition Report. Promptly following the issuance of the Property Condition Report, Tenant shall commence the work described in the Property Condition Report and shall complete the same as soon as reasonably practicable in a good and workmanlike manner and in compliance with all applicable laws. If the Landlord's Designated Consultant and the Tenant's Designated Consultant fail to name a third party engineering firm within ten (10) days from the date of the Tenant Notice, either Landlord or Tenant may apply to the Boston office of the American Arbitration Association for appointment of a single arbitrator to select such third party engineering firm. Any such arbitration shall be conducted in accordance with the Fast-Track Commercial Arbitration Rules and the decision of the arbitrator shall be binding on Landlord and Tenant. The third party costs of all engineering firms engaged under this Section 5.3(b), as well as costs payable 12 to any arbitration association or arbiter, shall be borne equally by Landlord and Tenant. If at any time the American Arbitration Association shall cease to provide arbitration services for commercial disputes in the Greater Boston area, the arbitrator shall be appointed by any successor organization providing substantially the same services and, in the absence of any such successor organization, by a court of competent jurisdiction. 5.4 Use and Compliance with Law. Tenant shall occupy the Premises continuously only for the Permitted Uses, and only as and to the extent permitted under present and future laws, ordinances and bylaws and all regulations, land use restrictions, soil management plans and the like thereunder (including those regulating the production, use, and disposal of hazardous materials, occupational health and safety laws, and access to persons with disabilities) and all permits, orders and other governmental approvals ("laws") applicable from time to time to the Premises or Tenant or both, foreseen or unforeseen, and whether or not the same necessitate structural or other extraordinary changes or improvements to the Premises or interfere with Tenant's use. Tenant shall, at its expense, except as expressly provided in Section 5.18, comply with all changes required in order to obtain the insurance required by it to be carried and with the provisions of all Title Documents and any contracts, agreements, instruments, and restrictions to which Tenant is or hereafter becomes a party or by which Tenant is or becomes bound affecting the Premises or any part thereof or the ownership, occupancy, or use thereof. Tenant shall not initiate or acquiesce in any change in any zoning or other law or regulation or land use restriction affecting the Premises without the prior consent of Landlord. Tenant shall procure all appropriate approvals, licenses and permits relating to the Premises or its occupancy, in each case promptly giving Landlord true and complete copies of the same and all applications therefor. Tenant shall, in any event, in the manner provided in Section 5.6 indemnify and save Landlord harmless on account of Tenant's failure so to comply with the obligations of this Section. It is intended that Tenant bear the sole risk of all present and future laws affecting the Premises and appurtenances, and Landlord shall not be liable for (nor suffer any reduction in any rent on account of) the enforcement of laws. Anything herein to the contrary notwithstanding, Tenant shall not use or permit the use of the Premises or any part thereof for any unlawful or illegal purposes or in violation of any certificate of occupancy or Title Documents, or for any extra-hazardous purpose or in such manner as to create or constitute a nuisance of any kind. 5.5 Taxes and Impositions. Tenant shall pay or discharge all Taxes and Impositions, for each fiscal period wholly included in the Term (and a ratable amount for the partial fiscal years included in the Term at the beginning and the end of the Term). As used in this Lease, the term "Taxes and Impositions" means: (a) all taxes, assessments, betterments, excises, levies, user fees, water and sewer rents and charges, and all other governmental charges and fees of any kind or nature, or impositions or agreed payments in lieu thereof or voluntary payments made in connection with the provision of governmental services or improvements of benefit to the Premises (including any so- called linkage, impact or voluntary betterment payments), and all penalties and interest thereon (if due to Tenant's failure to make timely payments), assessed or imposed against (i) the Premises or any portion of the Premises (including any personal property taxes levied on such property or on fixtures or equipment or other personal property used in connection therewith), (ii) any Annual Base Rent and Additional Rent reserved or payable hereunder (other than a federal or state income tax of general application), and (iii) this Lease or the leasehold estate hereby created, or which arise in respect of the operation, possession, occupancy or use of the Premises, ordinary and extraordinary, whether or not the same shall have been within the express contemplation of the parties hereto, other than a federal or state income tax of general application; (b) all sales (including those imposed on lease rentals), value added, ad valorem, single business, gross receipts, use and similar taxes at any time levied, assessed or payable on account of the leasing, operation, possession or use of the Premises by Tenant; (c) any transfer, recording, stamp and real property gain taxes incurred upon the sale, 13 transfer, foreclosure or other disposition of any interest in the Premises by Tenant; (d) all claims and demands of mechanics, laborers, materialmen and others which, if unpaid, might create a lien on the Premises; (e) all charges of utilities, communications and similar services serving the Premises; (f) charges with respect to police protection, fire protection, street and highway maintenance, construction and lighting, sanitation and water supply, if any; and (g) fines, penalties and other similar or like governmental charges applicable to the foregoing and any interest or costs with respect thereto. If during the Term the present system of ad valorem taxation of property shall be changed so that, in lieu of or in addition to the whole or any part of such ad valorem tax there shall be assessed, levied or imposed on such property or Premises or on Landlord any kind or nature of federal, state, county, municipal or other governmental capital levy, income, sales, franchise, excise or similar tax, assessment, levy, charge or fee (as distinct from the federal and state income tax in effect on the Date of Lease Execution) measured by or based in whole or in part upon Premises valuation, mortgage valuation, rents, services or any other incidents, benefits or measures of real property or real property operations, then any and all of such taxes, assessments, levies, charges and fees shall be included within the term of Taxes and Impositions. In no event shall the provisions of this paragraph obligate Tenant to pay any federal or state income tax of general application due from Landlord. Tenant shall pay any Taxes and Impositions directly to the appropriate governmental authority at least ten (10) days before the same are due, and by such time Tenant shall provide Landlord (and if requested also any Landlord's mortgagee) evidence of such payment. (If any tax bill is sent to Landlord, then Landlord shall promptly deliver such tax bill to Tenant. If such tax bill is not so delivered, then Tenant shall not be deemed to have failed to perform timely its obligations so long as Tenant pays such Taxes and Impositions within fifteen (15) days after receipt of such bill). If: (A) Tenant fails to perform timely its obligations under this Section 5.5 (if such failure continues for more than ten (10) days after notice from Landlord of such failure, or if such failure occurs two (2) times within any twelve (12) month period), or (B) tax escrows are required by Landlord's mortgagee, Landlord may require, among its other rights and remedies, that the Taxes and Impositions be paid to Landlord in monthly installments on the first day of each month in amounts reasonably estimated from time to time by Landlord to provide for the full payment of Tenant's obligation with respect to the Taxes and Impositions thirty (30) days prior to the date the same are due. Unless such funds are held by Landlord's mortgagee, they shall be deposited into an interest-bearing account held by Landlord and Landlord will apply the escrowed funds (including the interest thereon) to the payment of the Taxes and Impositions as they become due or release the funds to Tenant for such payment. Tenant shall furnish to Landlord true, correct, and complete copies of all bills relating to any Taxes and Impositions within ten (10) days after Tenant's receipt thereof. Tenant shall have the right to seek, at its own cost, to reduce, maintain the existing level of, or resist increases in (collectively, "abatements") Taxes and Impositions for any fiscal tax period wholly or partially within the Term for which Tenant has paid. If Tenant fails to notify Landlord that it intends to prosecute an abatement at least twenty (20) days prior to the date abatements may be filed without loss of rights, then Landlord shall have such right. (If Tenant does prosecute an abatement, it will not thereafter compromise or terminate such prosecution without giving Landlord at least twenty (20) days' prior notice and opportunity to assume such prosecution.) If Landlord elects to prosecute any abatement not prosecuted by Tenant, Landlord shall notify Tenant and Tenant shall, within ten (10) days, elect by notice to Landlord whether Tenant desires to receive the benefits of such abatement proceeding. (Tenant's failure timely to make such election shall be deemed an election not to receive the benefits of such abatement). If Tenant elects to receive the benefits of the abatement proceeding prosecuted by Landlord, Tenant shall pay to Landlord as Additional Rent Landlord's reasonable costs (including fees of attorneys, appraisers and other consultants) incurred in seeking such abatement whether or not successful and whether or not such efforts involve filing actual abatement applications or initiation of other formal proceedings; and in such case Landlord shall pay to Tenant the net proceeds received from any abatement 14 allocable to Taxes and Impositions that Tenant has theretofore paid. If Tenant elects (or is deemed to elect) not to receive the benefits of any abatement proceeding prosecuted by Landlord, Taxes and Impositions shall not include Landlord's costs in prosecuting such abatement; but Landlord shall be entitled to retain the entire proceeds of such abatement even if allocable to Taxes and Impositions that Tenant has theretofore paid. Both Landlord and Tenant shall reasonably cooperate with the moving party in prosecuting any abatement. 5.6 Indemnity. Subject only to those rights expressly reserved to Landlord under this Lease, Tenant shall have exclusive control of the Premises and all areas pertaining thereto including all appurtenances, improvements, utilities, water bodies, grounds, sidewalks, walkways, driveways and parking facilities on the Land, and Tenant shall bear the sole risk of all related tort liabilities. To the maximum extent permitted by applicable law, Tenant shall indemnify, save harmless and defend Landlord, its beneficiaries and affiliates, all Landlord's mortgagees, any ground lessors, and the officers, directors, stockholders, members, managers, trustees, partners, agents, and employees of any of the foregoing and any other persons reasonably designated by Landlord from time to time as having a relationship to the Premises ("Indemnitees") from all liability, claim, damage, cost or loss (including reasonable fees of legal counsel of the Indemnitees' choice) arising in whole or in part out of, or in any manner connected with (i) any injury (including death), loss, theft or damage to any person or property while on or about the Premises, except to the extent caused directly by Landlord's gross negligence or willful misconduct, or (ii) any condition of the Premises, except to the extent caused directly by Landlord's gross negligence or willful misconduct, or the possession and use thereof or any activity permitted or suffered thereon (including hazardous materials or hazardous materials activities), or (iii) any breach of any covenant, representation or certification by Tenant or persons acting under Tenant, and the consequences of any such breach (including for failure to timely pay Taxes and Impositions and third party claims), or (iv) any liability imputed to any Indemnitees because of Landlord's ownership of the Premises, or (v) any act or omission anywhere by Tenant or persons acting under Tenant, in each case paying the same to Landlord on demand as Additional Rent. Without implying that other covenants do not survive, the covenants of this Section shall survive the Term. 5.7 Landlord's Entry Right. Landlord and persons acting under Landlord may upon such notice and in such manner as is reasonable under the circumstance enter the Premises during business hours but in no event less than 24 hours notice (and in case of emergency, at any time and without prior notice) to exercise of any rights reserved to Landlord, or to inspect the Premises (including testing or sampling with respect to hazardous materials), or to take measurements of the Premises, or to secure or protect the Premises, or to remove any improvements, alterations or additions made without any required consent hereunder; and similarly at any time may show the Premises to prospective purchasers and lenders, and may show the Premises to prospective tenants and during the last two years of the Term may keep affixed in suitable places notices for letting as long as it does not materially interfere with Tenant's use of the Premises and its business operations. Except in case of emergency, Landlord shall be subject in entering the Premises to reasonable security conditions, if any, set forth in a notice by Tenant to Landlord. 5.8 Signs. Subject to providing Landlord with plans and specifications therefor in advance, to any approval rights of Landlord's mortgagee, and to complying with all applicable laws, Tenant may erect signs on the Premises identifying Tenant. At the end or earlier termination of the Term, Tenant will remove all signs (whether existing at the Commencement Date or later erected) and repair any damage of such removal. 5.9 Personal Property. Tenant shall be solely responsible for paying all personal property taxes assessed on all furnishings, trade fixtures, equipment, inventory, or other personal property of Tenant or any person holding under Tenant on the Premises ("Tenant Property") or any personal property 15 of any other person at the Premises. Tenant shall use reasonable efforts to have Tenant Property taxed separately from the Premises. All Tenant Property at the Premises shall be at the sole risk of Tenant. To the maximum extent permitted by applicable law, Landlord shall not be liable for any loss or damage to person or property resulting from any accident, theft, vandalism or other occurrence on the Premises, including damage resulting from water, wind, ice, steam, explosion, fire, smoke, chemicals, the rising of water or leaking or bursting of pipes or sprinklers, defect, structural or non-structural failure, or any other cause. 5.10 Damage and Hazardous Materials. Tenant shall not itself, or permit or suffer persons to, either with or without negligence, injure, overload, deface, damage or otherwise harm the Premises or any part or component thereof; commit any nuisance; permit the existence, emission, discharge, release or other escape of any oil or petroleum products, asbestos, polychlorinated biphenyls or any biologically or chemically active or other hazardous or toxic materials, substances or wastes whether in solid, liquid or gaseous state, whether existing or released prior to or after the Commencement Date (collectively, "hazardous materials," but excluding common office products such as copy machine toner and the like that are used in compliance with applicable laws) so as to impregnate, impair or in any manner affect, even temporarily, any element or part of the Premises or the property or person of others, or allow the storage, generation, disposal or use of such (collectively "hazardous materials activities") in any manner not sanctioned by law or by the highest standards prevailing in the industry for the storage and use of such materials; nor shall Tenant permit to be brought onto the Premises any such materials except to use in the ordinary course of Tenant's business; permit any noise or odors to emanate beyond the Premises; or permit any waste whatsoever to the Premises. Landlord may inspect the Premises from time to time as long as it does not materially interfere with Tenant's use of the Premises and its business operations, and Tenant will cooperate with such inspections. Tenant shall, promptly following Landlord's written request, provide Landlord with true and complete copies of any filings or reports submitted by Tenant to any governmental agency relating to hazardous materials or hazardous materials activities. If required by Landlord's mortgagee or governmental agency or if Landlord has a good faith reason to believe a release may have occurred or a threat of release exists on or about the Premises or hazardous materials activities do not conform to all laws, then Landlord may, but need not, perform appropriate testing in a commercially reasonable manner and the reasonable costs thereof shall be reimbursed to Landlord by Tenant upon demand as additional rent. Notwithstanding the foregoing, Landlord shall notify Tenant if such testing is required by Landlord's mortgagee or by a governmental agency and, except in the case of an emergency or to the extent contrary to applicable laws or Landlord's obligations under loan documents, Landlord shall use good faith efforts to provide Tenant with a reasonable opportunity to provide information relevant to Landlord's mortgagee or the governmental agency's determination whether such testing is necessary, so long as no waiver of any Landlord rights or other material liability or cost to Landlord may result, Tenant indemnifies Landlord in connection therewith in the manner provided in Section 5.6, and Landlord's mortgagee and governmental agency confirm in writing that no such testing is necessary. Without limitation, hazardous materials shall include all substances described in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. 9601 et seq.; in the Resource Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq.; in the Hazardous Materials Transportation Act; and all other federal, state and local laws, rules, regulations, and ordinances governing similar matters as they may be enacted and amended from time to time. In addition, Tenant shall execute affidavits, representations and the like from time to time at Landlord's request concerning Tenant's best knowledge and belief regarding the presence or absence of hazardous materials on the Premises or Landlord's property. Without limiting the foregoing, if any hazardous material is ever found to be present in, on, at, under or about the Premises (except as permitted as set forth above), whether caused or permitted by Tenant or persons acting under Tenant, then Tenant shall promptly take all actions at its sole expense as are necessary to return the Premises to the condition existing prior to the introduction of any such hazardous materials. In all events, and without limitation, 16 Tenant shall indemnify Indemnitees in the manner elsewhere provided in this Lease with respect to hazardous materials and hazardous materials activities whether or not consented to by Landlord or otherwise lawful (and for these purposes, the loss indemnified shall include any costs of investigation or remediation, any claim of personal injury or property damage to any person and any claimed decrease in value of or adverse impact on marketability to the Premises or any part of Landlord's property including the Premises). Tenant's indemnifications in the preceding sentence shall not extend to hazardous materials that Tenant conclusively demonstrates were first brought to the Premises by parties other than Tenant (or anyone acting by, through or under Tenant) after the expiration or earlier termination of the Term, vacating of the Premises and removal of all of Tenant's property from the Premises. Without implying that other covenants do not survive, the covenants of this Section shall survive the Term. Tenant shall from time to time at reasonable intervals upon Landlord's request confirm all of the foregoing covenants directly to Landlord's mortgagee, and in that connection shall execute and deliver to such Landlord's mortgagee hazardous materials indemnities in such form and substance as such lenders then require of borrowers. If Tenant or any person acting under Tenant has used hazardous materials or conducted hazardous materials activities on the Premises, then not less than six (6) months prior to vacating the Premises at the expiration or earlier termination of the Term, Tenant at its sole cost shall provide Landlord with an environmental report by a qualified third party environmental assessment firm reasonably approved by Landlord, which report shall include such testing as the third party environmental assessment firm deems prudent under the circumstances. Tenant shall take such action as may be necessary in order to allow the third party environmental assessment firm to conclude in such report either that the Premises are free from any hazardous materials, or that hazardous materials are present in compliance with all applicable laws (and in such case such report shall identify the hazardous materials and contain recommendations for removing or remediating the hazardous materials). At the expiration or earlier termination of the Term, Tenant shall cause the Premises to be free of any material amounts of hazardous materials. Nothing herein contained shall be construed to limit or impair Tenant's obligation regardless of the results of any such report. It is the intent of the parties that Tenant, and not Landlord, assume all of the risks and liabilities of hazardous materials released on, at, or under the Premises before or after the Commencement Date or coming onto the Premises from any source whatsoever during the Term; provided that Tenant shall have no liability to Landlord for hazardous materials that migrate onto the Property from an adjacent property after the Commencement Date if Tenant conclusively proves that such hazardous materials so migrated onto the Premises after the Commencement Date from a source outside of the Premises for which Tenant bears no responsibility. Landlord, which purchased the Premises from Tenant, shall have no liability to Tenant for any hazardous materials (if any) released or existing on, at, or under the Premises prior to the Commencement Date. 5.11 Liens. Tenant shall not, directly or indirectly, create or permit to be created or to remain, and shall promptly discharge by bonding or otherwise, any lien on Landlord's fee interest in the Premises, the Annual Base Rent and/or Additional Rent, other than the mortgage(s) held by Landlord's mortgagee (and any assignment of leases or rents collateral thereto), the Permitted Exceptions in existence on the Commencement Date and any mortgage, lien, encumbrance or other charge created by or resulting from any act or omission by Landlord or those claiming by, through or under Landlord other than Tenant. Nothing contained in this Lease shall be construed as constituting the consent or request of Landlord, express or implied, to or for the performance by any contractor, laborer, materialman, or vendor of any labor or services or for the furnishing of any materials for any construction, alteration, addition, repair or demolition of or to the Premises or any part thereof. Notice is hereby given that Landlord will not be liable for any labor, services or materials furnished or to be furnished to Tenant, or to anyone holding an 17 interest in the Premises or any part thereof through or under Tenant, and that no mechanic's or other liens for any such labor, services or materials shall attach to or affect the fee interest of Landlord in and to the Premises. 5.12 Condition on Expiration. At the expiration or earlier termination of the Term, Tenant (and all persons claiming through Tenant) shall without the necessity of notice vacate and surrender the Premises broom-clean and in good and tenantable condition reasonable wear and tear excepted. As part of such delivery, Tenant shall also provide all keys (or lock combinations, codes or electronic passes) to the Premises; remove all signs regardless of date of installation wherever located and all Tenant Work except for any items of such Work that Landlord in its sole discretion may direct Tenant to surrender; remove all Tenant Property and other personal property whether or not bolted or otherwise attached; and remove all of Tenant's signs wherever located. If requested in writing, Landlord shall advise Tenant at the time of Landlord's approval of Tenant Work (or for Tenant Work not requiring Landlord's approval, within thirty (30) days of Tenant's written request) whether Landlord requires removal of such Tenant Work at the expiration or earlier termination of the Term. Tenant shall repair all damage that results from such removal and restore the Premises substantially to a fully functional and tenantable condition (including the filling of all floor and wall holes, the removal of all disconnected wiring back to junction boxes, the replacement of all damaged ceiling tiles and the repair of any damage caused by the removal of any bolted or anchored equipment). Any property not so removed shall be deemed abandoned, shall (if Landlord so elects) become the property of Landlord, and may be disposed of in such manner as Landlord shall see fit; and Tenant shall pay the cost of removal and disposal to Landlord upon demand. Notwithstanding anything to the contrary contained herein, upon expiration or earlier termination of this Lease, all fixtures regardless of date of installation that are integral to the operation of the Premises and are not "trade fixtures" of Tenant, including the heating, ventilation and air conditioning systems, shall remain on the Premises and be the property of Landlord; provided, however, that at Landlord's election, Tenant shall, at its expense and in compliance with all applicable laws, remove any piping, venting systems and other similar equipment or fixtures not representing standard HVAC and potable water equipment or fixtures. Without implying that other covenants do not survive, the covenants of this Section shall survive the Term. 5.13 Holding Over. If Tenant (or anyone claiming through Tenant) shall remain in occupancy of the Premises or any part thereof after the expiration or early termination of the Term without a written agreement therefor executed and delivered by Landlord, then without limiting Landlord's other rights and remedies the person remaining in possession shall be deemed a tenant at sufferance, and Tenant shall thereafter pay monthly rent (pro rated for such portion of any partial month as Tenant shall remain in possession) at a rate equal to the Holdover Rate (defined below) times the greater of (a) fair market rent, or (b) the amount payable as Annual Base Rent for the twelve-month period immediately preceding such expiration or termination, and in either case with all Additional Rent also payable as provided in this Lease. The Holdover Rate shall be 110% for the first month of holding over, 120% for the second month of holding over, 130% for the third month of holding over and 150% for each month thereafter. After Landlord's acceptance of the full amount of such rent for the first month of such holding over, the person remaining in possession shall be deemed a tenant at will at such rent and otherwise subject to all of the provisions of this Lease. Notwithstanding the foregoing, if Landlord desires to regain possession of the Premises promptly after the termination or expiration hereof and prior to acceptance of rent for any period thereafter, Landlord may, at its option, forthwith re-enter and take possession of the Premises or any part thereof without process or by any legal process in force in the state where the Property is located. In any case, Tenant shall remain liable to Landlord for all damages, including consequential damages, resulting from any failure by Tenant to vacate the Premises or any portion thereof when required hereunder. 5.14 Intentionally Omitted. 18 5.15 Financial Reporting. Tenant shall provide Landlord with accurate and complete copies of each Form 10Q and Form 10K filed with the Securities and Exchange Commission for Parlex Corporation ("Parlex") simultaneously with the filing thereof. If at any time (i) Parlex's stock is not listed on the NYSE or the NASDAQ or (ii) Tenant's financial statements are no longer consolidated with those of Parlex, Tenant shall provide Landlord with the reports set forth on Exhibit E. 5.16 Capital Expenditures. Tenant shall make third party expenditures (in calendar year 2003) in the amount of Twenty-Thousand dollars ($20,000.00) on the Capital Expenditure items set forth in Exhibit H hereto (the "Capital Expenditure Items"). On or before 5 p.m. on December 30, 2003, Tenant shall deliver to Landlord a statement certified by Tenant's third party consultant as to which Capital Expenditure Items have been completed and the actual costs thereof. 5.17 Intentionally Omitted. 5.18 Landlord Repair. (a) Beginning in Lease Year 11, subject to Article VII, and except for damage caused by any act or omission of Tenant, or Tenant's employees, agents, contractors or invitees, Landlord shall be responsible for the reasonable repair (and if and as necessary, the replacement) of the foundations, exterior walls, structural walls and roof of the Premises in the manner set forth in Section 5.18(c). Landlord shall not be obligated to repair and replace other portions of the Premises, including glass, windows, doors, parking lots, loading bays, Building Systems or the surfaces of walls, whether interior or exterior (all of which responsibility shall be Tenant's), or to repair or maintain any part of the Tenant Work performed by Tenant under Section 5.1, or for any repair or replacement arising from any overburdening of the Premises by Tenant, any failure by the Tenant to care for, inspect and maintain the Premises and Building Systems in accordance with this Lease and otherwise in a commercially reasonable manner or any other act or omission of Tenant or its agents, contractors or invitees. Tenant shall promptly report in writing to Landlord any defective condition known to it that Tenant believes Landlord is required to repair. (b) Beginning in Lease Year 11, subject to Article VII, if a legal requirement first effective after the commencement of Lease Year 11 shall render the Premises to be in material violation of law (other than a violation arising from any work performed by or for Tenant at the Premises, Tenant's layout or manner of use or business or otherwise arising from the acts or omissions of Tenant or Tenant's employees, agents, contractors or invitees) and requires a capital expenditure to cure such violation of law, then (i) Tenant shall so notify Landlord in a written report describing the nature and causes of such failure or violation, the alternative corrective measures, and the Tenant's recommendation for replacement or correction of such violation, and (ii) Landlord shall repair the affected item in the manner set forth in Section 5.18(c). Notwithstanding anything to the contrary in this paragraph, (A) subject to Section 7.2(b) in the case of a casualty, Tenant shall be solely responsible for the cost to repair, replace or upgrade any alterations, additions, improvements, repairs, or replacements that are performed by or on behalf of Tenant in the Premises; and (B) Landlord shall have no responsibility for any capital expenditures under this paragraph until such time as the aggregate amount spent by Tenant from and after the commencement of Lease Year 11 on capital expenditures under this paragraph, exclusive of expenditures arising from any work performed by or for Tenant at the Premises, Tenant's layout or manner of use or business or otherwise arising from the acts or omissions of Tenant or Tenant's employees, agents, contractors or invitees, equals or exceeds $250,000. 19 (c) In the event that Landlord has a repair obligation under Section 5.18(a) or Section 5.18(b), and Landlord receives written notice from Tenant thereof as required by Section 5.18(a) and Section 5.18(b), then Landlord at its election may (i) repair the affected item if Landlord determines that such repairs can be effected; and/or (ii) replace all or parts of such items (or in the case of a violation requiring a capital expenditure under Section 5.18(b), install such capital item); or (iii) require that Tenant perform such work in accordance with Section 5.1. In any case under clauses (i), (ii) and (iii) in the preceding sentence, the costs of such work shall be allocated and paid as follows. If Landlord elects to perform any work or replacements required under this Section 5.18, then, prior to the commencement of such work or replacement, Tenant shall pay to Landlord Tenant's Share (defined below) thereof; provided, however, that Landlord may elect to give Tenant the option to pay Tenant's Share during the balance of the Term through a monthly payment equal to the monthly amount necessary to amortize Tenant's Share, with interest at a rate equal to 1% over the prime rate of interest published in the Wall Street Journal, in equal monthly installments over the remainder of the Term (with such monthly payments being due on the first day of each month). If Landlord elects to have Tenant perform such work or replacement, then Landlord's Share (defined below) shall be paid within thirty (30) days after Landlord receives reasonably acceptable evidence that the work has been completed and paid in full, after deducting any amounts due and owing Landlord by Tenant. For the purposes of this Section 5.18, the term "Tenant's Share" shall mean the portion of the cost of any such work or replacement, amortized over the useful life of such items determined by Landlord in accordance with generally accepted accounting principles, allocable to the remainder of the Term. The term "Landlord's Share" shall mean the portion of the cost of any such work or replacement, amortized over the useful life of such items, allocable to the period between the date the Term of this Lease is scheduled to expire and the date that represents the end of the useful life of such items determined by Landlord in accordance with generally accepted accounting principles. Landlord shall reasonably determine the amortization of such costs in accordance with generally accepted accounting principles and the calculation of Tenant's Share and Landlord's Share. If any item of repair or replacement is necessary due to casualty or condemnation, Landlord shall not be obligated to make repairs or restoration in excess of the proceeds of insurance or eminent domain award recovered net of Landlord's reasonable costs of collection. To the extent Landlord has any repair obligations under Section 5.18, the performance of any such work shall take priority over any Tenant Work in Landlord's reasonable judgment. ARTICLE VI ---------- Assignment and Subletting ------------------------- 6.1 Landlord's Consent Required. Except for Permitted Transfers, Tenant shall not assign this Lease, or sublet or license the Premises or any portion thereof, or advertise the Premises for assignment or subletting or permit the occupancy of all or any portion of the Premises by any person other than Tenant (each of the foregoing actions are collectively referred to as a "transfer") without obtaining, on each occasion, the prior written consent of Landlord in accordance with Section 6.4 below. A transfer shall include any transfer of Tenant's interest in this Lease by operation of law, merger or consolidation of Tenant into any other firm or corporation, and the transfer or sale of a controlling interest in Tenant, whether by sale of its capital stock or otherwise or any sale of a substantial part of Tenant's assets. As used in this Lease, the term "Permitted Transfer" means: (1) a sublease to any subsidiary in which Tenant owns substantially all voting stock and control or to any parent owning substantially all voting stock and control of Tenant, (2) any assignment incident to the sale of substantially all of Tenant's assets or its stock, or (3) a statutory merger, or to any corporation resulting from the consolidation, of Tenant with any other entity where in either case of clause (2) or (3) the person succeeding to Tenant's interest immediately thereafter has a net worth equal to or in excess of that of Tenant as of the Commencement 20 Date. Any transfer shall be subject to this Lease, all of the provisions of which shall be conditions to such transfer and be binding on any transferee. No transferee shall have any right further to transfer its interest in the Premises except back to Tenant, and nothing herein shall impose any obligation on Landlord to consider any request for a further transfer. 6.2 Intentionally Omitted. 6.3 Right of Termination or Recapture. Except for Permitted Transfers, if Tenant proposes a transfer of the entire Premises or of more than fifty percent of the rentable floor area of the Premises, in Tenant's request for consent under Section 6.4 (the "Tenant Request") Tenant shall offer to Landlord in writing the right to terminate this Lease as to the area in question as of the date specified in the offer. If Landlord shall elect in writing to accept the offer to terminate within thirty days after receipt of such offer ("Landlord's Termination Acceptance"), this Lease shall so terminate as to the area in question as of the date specified in such offer, and all of the provisions of this Lease governing termination shall apply, unless Tenant, within thirty days from its receipt of Landlord's Termination Acceptance, provides Landlord with a written notice in which Tenant unconditionally revokes the Tenant Request. If Landlord does not timely issue a Landlord Termination Acceptance, Tenant shall then comply with the provisions of this Article applicable to a transfer. 6.4 Procedures. (a) Tenant's request for consent under this Article VI shall set forth the details of the proposed transfer (and at least ten days prior to any Permitted Transfer Tenant shall deliver to Landlord the details of the proposed transfer), including: (i) the name, business and financial condition of the prospective transferee, together with a reasonably detailed description of the manner in which the prospective transferee will use the Premises; (ii) a true and complete copy of the proposed instrument containing all of the terms and conditions of such transfer, (iii) a written agreement of the assignee, subtenant or licensee, in form reasonably approved by Landlord, agreeing with Landlord to perform and observe all of the terms, covenants, and conditions of this Lease and agreeing that there are no obligations from Landlord to such transferee whatsoever, and (iv) any other information Landlord reasonably requests. Subject to the foregoing provisions of this Article VI, Landlord's consent to a proposed transfer of all or part of the Premises shall not be unreasonably withheld or delayed. Tenant hereby acknowledges that the creditworthiness and experience of Tenant was a material inducement to Landlord in connection with the consummation of this Lease, and accordingly, in determining whether to approve a proposed transfer, Landlord may take into account the financial capacity of such proposed transferee and the experience of such party in operating similarly situated properties. Tenant shall pay to Landlord, as Additional Rent, Landlord's reasonable attorneys' fees in reviewing any transfer requiring Landlord's consent, whether or not Landlord consents, in an amount not to exceed $5,000. (b) With respect to any request for Landlord's approval of a Transfer, Landlord must respond to a request from Tenant within ten (10) business days after Landlord's receipt of the items specified in Section 6.4(a)(i)-(iv) above or Landlord's right to approve the request is deemed waived, if the request from Tenant complies with the following requirements (the "Special Notice Provisions"): (1) The request must be in writing, and copies of the request must be sent to both Landlord and Landlord's counsel in accordance with the notice provisions of Section 10.1 below; and (2) The request must contain a blank sheet on the top of it with only the following language appearing in the middle of the sheet: LANDLORD MUST RESPOND TO THIS REQUEST WITHIN 10 BUSINESS DAYS FROM THE DATE OF LANDLORD'S RECEIPT OF THIS NOTICE OR LANDLORD'S RIGHT TO CONSENT TO OR APPROVE THIS REQUEST WILL BE DEEMED WAIVED. 21 In the event Tenant fails to comply with the Special Notice Provisions, (i) Landlord shall not be required to respond within the specific period of time, (ii) Landlord's right to consent to or approve the request will not be deemed waived if Landlord fails to respond within the specific period of time, and (iii) Landlord shall not be deemed to have consented to or approved the request if Landlord fails to respond with the specific period of time. If the proposed Transfer would require the consent of Landlord's lender, Landlord's response shall state that any approval given by Landlord is conditioned upon the approval of the proposed Transfer by Landlord's lender. (c) Notwithstanding the foregoing provisions of this Article VI, Tenant may enter into subleases without the Landlord's prior consent provided that each of the following conditions is satisfied: (i) there is no then existing Event of Default by Tenant and no uncured notice of any facts or circumstances has been given to Tenant that, if not cured within an applicable cure period, will become an Event of Default; (ii) the cumulative total of the Premises subject to subleases does not exceed 15,000 square feet; (iii) the aggregate amount of space subject to subleases does not exceed 25% of the total rentable space at the Premises; (iv) at least ten (10) days before executing any such sublease, Tenant shall deliver to Landlord the information described in Section 6.4(a)(i)- (iv) together with a certification by Tenant that the conditions set forth in this Section 6.4(c)(i)-(iii) are satisfied with respect to the prospective sublease; (v) Landlord shall determine, in its reasonable business judgment, that the manner in which the prospective subtenant will use the Premises will not materially and adversely affect the condition or safety of the Premises; and (vi) Tenant shall provide Landlord with a fully executed copy of such sublease within ten (10) days of its execution. 6.5 Profits. Except for Permitted Transfers and whether or not Landlord's consent is required, if the consideration, rent, or other charges payable to Tenant under such transfer exceed the rent and other charges to be paid hereunder and Tenant's Transfer Expenses (pro rated based (a) on floor area in the case of a subletting, license or other occupancy of less than the entire area of the Premises and (b) over the remaining Term), then Tenant shall pay to Landlord, as Additional Rent, fifty percent of the amount of such excess when and as received. Tenant's Transfer Expenses shall mean Tenant's reasonable and necessary payments to third parties in connection with such a transfer on account of brokerage, legal and fit-up costs. Without limiting the generality of the foregoing, any lump-sum payment or series of payments (including for the purchase or use of so-called leasehold improvements but excluding any Permitted Transfers as referred to in Section 6.1 above) on account of any transfer shall be deemed to be in excess of rent and other charges in its or their entirety. 6.6 No Release. Notwithstanding any transfer and whether or not the same is a Permitted Transfer or is consented to, Tenant's (and any guarantor's) liability to Landlord shall remain direct and primary. Any transferee of all or substantially all of Tenant's interest in the Premises, including any such transferee by virtue of a Permitted Transfer, shall be deemed to have agreed directly with Landlord to be jointly and severally liable with Tenant for the performance of all of Tenant's covenants under this Lease; and such assignee shall upon request execute and deliver such instruments as Landlord reasonably requests in confirmation thereof (and agrees that its failure to do so shall be a default). Tenant hereby irrevocably authorizes Landlord to collect rent and other charges from any transferee (and upon notice any transferee shall pay directly to Landlord) and apply the net amount collected to the rent and other charges reserved under this Lease. No transfer shall be deemed a waiver of the provisions of this Section, or the acceptance of the transferee as a tenant, or a release of Tenant or any guarantor from direct and primary liability for the performance of all of the covenants of this Lease. The consent by Landlord to any transfer shall not relieve Tenant or any transferee from the obligation of obtaining the express consent of Landlord to any modification of such transfer or a further transfer by Tenant or such transferee. Notwithstanding anything to the contrary in the documents effecting the transfer, Landlord's consent shall 22 not alter in any manner whatsoever the terms of this Lease, to which any transfer at all times shall be subject and subordinate. The breach by Tenant or any transferee of any covenant in this Article shall be an Event of Default for which there is no cure period. Failure by Landlord to consent to a proposed transfer shall never cause a termination of this Lease or subject Landlord to any damages beyond Tenant's direct costs of establishing its entitlement to such consent. ARTICLE VII ----------- Insurance; Casualty; Taking --------------------------- 7.1 Insurance. (a) Tenant shall maintain, or cause to be maintained, at its sole expense, the insurance for the Premises specified on Exhibit F hereto (or such greater amount or additional insurance as Landlord's mortgagee may from time to time request during the Term). If: (A) Tenant fails to perform timely its obligations under this Section 7.1, or (B) insurance escrows are required by Landlord's mortgagee, Landlord may require, among its other rights and remedies, that the insurance premiums be paid by Tenant to Landlord in monthly installments on the first day of each month in amounts reasonably estimated from time to time by Landlord to provide for the full payment of Tenant's obligation with respect to insurance thirty (30) days prior to the date the same are due. Unless such funds are held by Landlord's mortgagee, they shall be deposited into an interest-bearing account held by Landlord and Landlord will apply the escrowed funds (including the interest thereon) to the payment of the premiums as they become due or release the funds to Tenant for such payment. (b) Certificates of insurance shall be delivered to Landlord prior to the commencement date of the Term and annually thereafter at least thirty (30) days prior to the expiration date of the old policy. Tenant shall have the right to provide insurance coverage which it is obligated to carry pursuant to the terms hereof in a blanket policy, provided such blanket policy expressly affords coverage to the Premises and to Landlord and Landlord's mortgagee as required by this Lease. Each policy of insurance shall provide notification to Landlord and Landlord's mortgagee at least thirty (30) days prior to any cancellation or modification to reduce the insurance coverage. Tenant shall provide Landlord with a copy of any such policy, promptly after request. Each policy of insurance shall state that any loss shall be payable in accordance with the policy terms notwithstanding any act or neglect of Tenant or Landlord. Each policy of insurance shall include an endorsement waiving the insurer's rights of subrogation against Landlord. Without limiting any other provisions of this Lease, Tenant hereby waives any rights of recovery against Landlord for injury or loss due to hazards covered by such insurance. The amount and coverage of any insurance required to be carried by Tenant hereunder shall not limit Tenant's liability to Landlord for its obligations to Landlord under this Lease. (c) (i) Provided that there is no monetary or other material default by Tenant under this Lease, insurance claims by reason of damage to or destruction of any portion of the Premises shall be adjusted by Tenant; provided, however, that no settlement on account of any loss or damage in excess of $50,000 shall be made with any insurers without the prior written consent of Landlord (which consent shall not be unreasonably withheld or delayed) and Landlord's mortgagee, and provided further that, with respect to any loss or damage giving rise to any Landlord repair obligation under Section 5.18, Landlord shall have the right at its option to settle on account of such loss and adjust any such claim. Tenant shall, promptly after such damage or destruction, advise Landlord and Landlord's mortgagee of such occurrence and consult with Landlord and Landlord's mortgagee throughout the process of adjusting any such claim, and both Landlord and Landlord's mortgagee shall be fully advised as to all matters on a current basis. Landlord shall not be required to prosecute any claim against, or to contest any settlement proposed by, an insurer. Tenant may, at its expense, prosecute any such claim or contest any such settlement in the 23 name of Landlord, Tenant or both, except to the extent Landlord has elected to settle losses and adjust claims as set forth above, and Landlord will join therein at Tenant's written request upon the receipt by Landlord of an indemnity from Tenant against all costs, liabilities and expenses in connection therewith. (c) (ii) Subject to the provisions of Section 7.2, and except to the extent Landlord has elected to settle losses and adjust claims as set forth above, proceeds from the property insurance policy shall be placed by Landlord or Landlord's mortgagee with a third-party institutional depository (such as a title insurance company) reasonably acceptable to Landlord, Tenant and Landlord's mortgagee and made available by such institutional depository to Tenant and/or Landlord, as appropriate, for the cost of repair or restoration, but only against certificates of Tenant delivered to Landlord or Landlord's mortgagee from time to time as such work or repair progresses, each such certificate describing the work or repair for which Tenant is requesting payment and the cost incurred by Tenant in connection therewith and stating that Tenant has not theretofore received payment for such work and has sufficient funds remaining to complete the work free of liens or claims. (Notwithstanding the foregoing, but subject to the consent of Landlord's mortgagee, and so long as Landlord has no repair obligations under Section 5.18, proceeds in a total amount of less than $50,000 shall be made directly available to Tenant for such repair or restoration without the need for a third-party institutional depository.) At the request of Landlord or Landlord's mortgagee, such certificates will be accompanied by appropriate evidence with respect to the completion of such work or repair to date (including an architect's or engineer's certificate), the amount of funds required to complete the work, payment for labor and materials to date and/or the absence of liens or encumbrances arising from the work, and compliance with the requirements of Section 5.1. Prior to the release of any such proceeds, and at any time thereafter upon notice from Landlord, Tenant shall provide Landlord with reasonable evidence of the availability of such additional sums (beyond any insurance proceeds) as may be required, in Landlord's reasonable estimation, to complete the work. Subject to the provisions of Section 7.2, any proceeds remaining after Tenant has repaired the Premises pursuant to Section 7.2 shall be delivered to Tenant. No payment shall be made to Tenant pursuant to this Section 7.1(c) if there shall exist an Event of Default under the terms of this Lease. Notwithstanding the foregoing, excess insurance proceeds shall not be delivered to Tenant if Landlord has had repair obligations under Section 5.18. Until completion of the repair, if and so long as an Event of Default exists, business interruption insurance proceeds shall be paid to Landlord (or Landlord's mortgagee) to the extent of Base Rent and Additional Rent (to the extent the same is payable to Landlord, not to a third party), when due and payable. The balance, if any, of such proceeds shall be paid to Tenant or as Tenant may direct. If there is no Event of Default, then business interruption insurance shall be payable to Tenant. (d) In the event Tenant does not purchase the insurance required by this Lease or keep the same in full force and effect, Landlord may, but shall not be obligated, to purchase the necessary insurance and pay the premium. Tenant shall repay to Landlord, as Additional Rent, the amount so paid promptly upon demand. In addition, Landlord may recover from Tenant and Tenant agrees to pay, as Additional Rent, any and all expenses (including reasonable attorneys' fees) and damages that Landlord may sustain by reason of the failure of Tenant to obtain and maintain such insurance. (e) Landlord or Landlord's mortgagee shall not be limited in the proof of any damages which Landlord or Landlord's mortgagee may claim against Tenant arising out of or by reason of Tenant's failure to provide and keep in force insurance, as provided above, to the amount of the insurance premium or premiums not paid or incurred by Tenant and which would have been payable under such insurance; but Landlord and Landlord's mortgagee shall also be entitled to recover as damages for such breach, the uninsured amount of any loss, and costs and expenses of suit suffered or incurred by reason of or damage to, or destruction of the Premises, occurring during any period when the Tenant shall have failed or 24 neglected to obtain the insurance required to be carried by Tenant hereunder. Tenant shall indemnify and hold harmless Landlord and Landlord's mortgagee in the manner set forth in Section 5.6 for any liability incurred by Landlord or Landlord's mortgagee arising out of any deductibles for insurance required to be carried by Tenant hereunder. (f) Tenant shall obtain insurance for all Tenant Property for its full replacement cost. In addition, during the performance of any Tenant Work, Tenant shall also maintain insurance as provided in the Tenant Work Insurance Requirements attached in Exhibit D. (g) Landlord shall not be required to maintain any insurance under this Lease. To the extent that Landlord, in its sole discretion and (except as provided in Section 7.1(d)) at its sole cost and expense, elects to maintain any insurance for its own account, such insurance shall not be contributory and shall be excess over any insurance maintained by Tenant. 7.2 Damage or Destruction of Premises. (a) Except as otherwise expressly provided in Section 7.2(b) below, if all or a part of the Premises shall be damaged or destroyed by casualty, and if the estimated cost of rebuilding, replacing and repairing the same shall be or exceed $50,000, or in any case giving rise to Landlord's obligation to repair under Section 5.18, Tenant shall promptly notify Landlord thereof; and (whether or not such estimated cost shall be or exceed $50,000) Tenant shall, with reasonable promptness and diligence whether or not any insurance proceeds are available or adequate for such purpose, except to the extent Landlord's mortgagee does not make insurance proceeds available for such purpose, and regardless of the dollar amount or cause of such damage or destruction, rebuild, replace and repair any damage or destruction to the Premises, at its expense, in conformity with the requirements of Section 5.1, and subject to Section 5.18, in such manner as to restore the same to the same condition, as nearly as possible, as existed prior to such casualty and there shall be no abatement of Base Rent or Additional Rent. Notwithstanding the foregoing, if (i) a part of the Premises shall be damaged or destroyed by casualty, (ii) such casualty was not caused, in whole or in part, by the intentional act or gross negligence of Tenant or Tenant's employees, agents, invitees, affiliates or contractors, (iii) Tenant's obligation to rebuild, replace and repair is excused under this Section 7.2(a) because Landlord's mortgagee does not make insurance proceeds available therefor but instead applies the same toward the obligations of Landlord under its loan, and (iv) such unavailability of insurance proceeds results in the permanent loss of rentable floor area of any building, then Annual Base Rent shall be proportionally abated in a manner reasonably acceptable to Landlord and Tenant. If the conditions described in the preceding sentence are met, and if Landlord has elected in its sole discretion not to pay for or perform any repairs, then the actual, third-party costs paid for by Tenant shall be taken into account in the determination of the equitable abatement of rent under the preceding sentence, but only to the extent such costs were necessary to render the Premises safe and legally occupiable. Notwithstanding anything herein to the contrary, if there shall have been an Event of Default under the terms of this Lease and if Landlord has terminated the term of this Lease pursuant to Article VIII, Landlord, in the exercise of its sole and absolute discretion, shall have the right to settle claims relating to any insurance proceeds from any casualty and (if Landlord has terminated the term of this Lease pursuant to Article VIII) to receive the same and to apply same toward payment of any indebtedness owed to Landlord's mortgagee instead of allowing such proceeds to be used by Tenant for the rebuilding or restoration of the damaged portion of the Premises. (b) Notwithstanding the provisions of Section 7.2(a), if a Major Casualty (defined below) occurs, Tenant and Landlord may, by written notice to the other within sixty (60) days of the occurrence of such Major Casualty, terminate this Lease effective as of the first day of the calendar month that is not less than thirty (30) days nor more than sixty (60) days following the date of such notice of termination (the "Casualty Termination Date"). If this Lease is so terminated, (i) then, notwithstanding anything to 25 the contrary in this Lease, Landlord shall have the exclusive right to deal with the applicable insurance companies and to settle all claims, (ii) all insurance proceeds (other than any proceeds attributable solely to any personal property of Tenant that Tenant is required or allowed to remove from the Premises upon the termination of this Lease) shall be paid to Landlord or Landlord's mortgagee; and (iii) on the Casualty Termination Date, Tenant shall pay to Landlord all Annual Base Rent and Additional Rent accrued through and including the Casualty Termination Date and all other amounts then accrued or due and payable by Tenant under this Lease. As used in this Lease, the term "Major Casualty" means a casualty that: (1) is not caused, in whole or in part, by the intentional act or gross negligence of Tenant or Tenant's employees, agents, invitees, affiliates or contractors; (2) causes more than 50% of the Premises to be untenantable; and (3) in the written opinion of a third party engineer reasonably acceptable to Landlord, cannot reasonably be expected to be restored to substantially the same condition that they were in before such casualty before the date (the "Outside Restoration Date") that is twelve months from the date of such casualty. In the event that (A) there is a casualty that would be a Major Casualty but for the fact that the estimated completion date for restoration established under subsection (3) above is on or before the Outside Completion Date, (B) in accordance with Section 5.18(c), Landlord elects to undertake the restoration itself rather than require that Tenant undertake such restoration, and (C) the restoration is not substantially completed by the Outside Restoration Date, Tenant may, by written notice to Landlord within ten days from the Outside Restoration Date, terminate this Lease effective as of the first day of the calendar month that is not less than thirty (30) days nor more than sixty (60) days following the Outside Restoration Date; provided, however, that notwithstanding the foregoing provision, Tenant shall have no right to so terminate this Lease if the failure to complete the restoration by the Outside Restoration Date results in whole or in part from the acts or omissions of Tenant or from any other cause beyond Landlord's control or if Landlord otherwise is using commercially reasonable efforts to complete the restoration as soon as reasonably practicable. 7.3 Eminent Domain. (a) Tenant hereby irrevocably assigns to Landlord any award or payment to which Tenant may be or become entitled with respect to the taking of the Premises or any part thereof, by condemnation or other eminent domain proceedings pursuant to any law, general or special, or by reason of the temporary taking of the use or occupancy of the Premises or any part thereof, by any governmental authority, civil or military, whether the same shall be paid or payable in respect of Tenant's leasehold interest hereunder or otherwise. Tenant shall have no claim against Landlord for the value of the unexpired lease term or otherwise. Nothing herein shall be deemed to assign, waive, release, or limit Tenant's right to seek a separate award from the condemning authority specifically for its costs to relocate all or part of its business operations to new premises and for personal property and equipment belonging to Tenant, as and to the extent such amounts are recoverable under Rhode Island law, provided that any such award for relocation costs shall not reduce the award otherwise payable to Landlord for the Premises. Any award for Tenant's relocation costs shall not be deemed part of the "Net Award" for purposes of this Section. (b) Except as otherwise expressly provided for in Section 7.3(f), in the event of any taking of the Premises or any part thereof, this Lease shall be and remain unaffected thereby and rent shall not abate; provided, however, that if any portion of the rentable floor area of any building is permanently taken and restoration is not possible, Annual Base Rent shall be proportionally abated in a manner reasonably acceptable to Landlord and Tenant. (c) If during the Term the Premises or a portion of the Premises shall be taken by condemnation or other eminent domain proceedings, or the use or occupancy of the Premises or any part thereof shall be taken by any governmental authority; then, except as otherwise expressly provided for in Section 7.3(f), this Lease shall continue in full effect without abatement or reduction of Base Rent, Additional Rent or other sums payable by Tenant hereunder notwithstanding such taking. Tenant shall, 26 except to the extent Landlord has a repair obligation under Section 5.18, and except to the extent that Landlord's mortgagee does not permit the use of any Net Award (as defined in Section 7.3(d)) therefor, promptly after any such taking ceases, at its expense, repair to the extent reasonably possible any damage caused thereby in conformity with the requirements of Section 5.1 so that, thereafter, the Premises shall be, as nearly as possible, in a condition as good as the condition thereof immediately prior to such taking. Subject to the consent of Landlord's mortgagee, in the event of any taking, Landlord shall make the Net Award (as defined in Section 7.3(d)) available to Tenant to make such repair or, if such Net Award shall be in excess of $50,000, shall place the Net Award with a third-party institutional depository (such as a title insurance company) reasonably acceptable to Landlord, Tenant and Landlord's mortgagee and such institutional depository shall make the same available to Tenant, only as such work or repair progresses as requisitioned by Tenant in accordance with good construction management practices reasonably acceptable to Landlord and acceptable to Landlord's mortgagee. Except for any damages for disruption of Tenant's business, Landlord reserves to itself, and Tenant releases and assigns to Landlord, all rights to damages accruing on account of any taking or by reason of any act of any public authority for which damages are payable. Tenant agrees to execute such further instruments of assignment as may be reasonably requested by Landlord, and to turn over to Landlord any damages that may be recovered in any proceeding or otherwise; and Tenant irrevocably appoints Landlord as its attorney-in-fact with full power of substitution so to execute and deliver in Tenant's name, place and stead all such further instruments if Tenant shall fail to do so after ten (10) days notice. Subject to the consent of Landlord's mortgagee, any Net Award remaining after repairs have been made by Tenant, shall be delivered to Tenant; but only to the extent that the aggregate amount of such Net Award so remaining and all amounts theretofore paid to Tenant pursuant to this sentence do not exceed $25,000. If such amounts exceed $25,000, the excess may be retained by Landlord and applied in reduction of the principal amount of the indebtedness to any Landlord's mortgagee then outstanding at Landlord's sole option. If Landlord retains any such amount the Base Rent payable on or after the second month occurring after such retention shall be reduced equitably but in no event shall the Base Rent be reduced lower than the monthly debt payments due to any Landlord's mortgagee. Notwithstanding the foregoing, no excess amount of Net Award shall be payable to Tenant if Landlord has had a repair obligation under Section 5.18. In the event of such temporary requisition, Tenant shall be entitled to receive the entire Net Award payable by reason of such temporary requisition or portion of such temporary requisition occurring during the Term hereof, less any out-of-pocket necessary and reasonable costs incurred by Landlord in connection therewith. Landlord and Tenant shall not be obligated to make repairs under Section 5.18 and this Section 7.3(c), respectively, if the amount of the Net Award, in the case of Tenant, or the amount retained by Landlord under Section 7.3(d) net of Landlord's cost of collecting such amounts, in the case of Landlord shall exceed the cost of repairs to be made by Landlord or Tenant, as the case may be. Notwithstanding anything herein to the contrary, no payments shall be made to Tenant pursuant to this Section 7.3(c) if any Event of Default shall exist under this Lease. (d) For the purposes of this Lease the term "Net Award" shall mean: (i) all amounts payable as a result of any condemnation or other eminent domain proceeding, less all out-of-pocket necessary and reasonable expenses for such proceeding paid by Landlord in the collection of such amounts plus (ii) all amounts payable pursuant to any agreement with any condemning authority (which agreement shall be deemed to be a taking) which has been made in settlement of or under threat of any condemnation or other eminent domain proceeding affecting the Premises, less all out-of-pocket necessary and reasonable expenses incurred by Landlord as a result thereof in the collection of such amounts; provided, however, that the term "Net Award" shall not include any amounts described in Section 7.3(d)(i) or (ii) required by Landlord to satisfy any repair obligation under Section 5.18. (e) Any minor condemnation or taking of the Premises for the construction, widening, or maintenance of streets or highways shall not be considered a condemnation or taking for 27 purposes of this Section 7.3 so long as the Premises shall not be materially adversely affected, ingress and egress for the remainder of the Premises shall be adequate for the business of Tenant and the provisions of any documents evidencing loans given by Landlord's mortgagee relating thereto shall be complied with. Tenant agrees that it will notify Landlord of any such condemnation. (f) Notwithstanding the provisions of Section 7.3(b)-(c), if a Major Taking (defined below) occurs, Tenant and Landlord may, by written notice to the other within sixty (60) days of the occurrence of such Major Taking, terminate this Lease effective as of the first day of the calendar month that is not less than thirty (30) days nor more than sixty (60) days following the date of such notice of termination (the "Taking Termination Date"). If this Lease is so terminated, (i) then, notwithstanding anything to the contrary in this Lease, the Net Award shall be paid to Landlord or Landlord's mortgagee; and (ii) on the Taking Termination Date, Tenant shall pay to Landlord all Annual Base Rent and Additional Rent accrued through and including the Taking Termination Date and all other amounts then accrued or due and payable by Tenant under this Lease. As used in this Lease, the term "Major Taking" means a taking that : (a) renders more than 50% of the Premises untenantable or (b) eliminates a sufficient number of parking spaces at the Premises such that (1) the loss of parking renders Tenant's operations at the Premises legally prohibited, (2) replacement parking that would render Tenant's operations at the Premises legally permitted cannot be supplied, and (3) despite its reasonable efforts, Tenant is unable to obtain a waiver or approval from the appropriate governmental authority that would render Tenant's operations at the Premises legally permitted. ARTICLE VIII ------------ Default ------- 8.1 Events of Default. Any of the following shall constitute an "Event of Default" under this Lease: (i) if Tenant fails to pay Annual Base Rent, Additional Rent or any other sum when due and such default continues for five days after notice, or if more than two default notices are properly given in any twelve-month period, (ii) if Tenant vacates substantially all of the Premises, (iii) if Tenant (or any transferee of Tenant) makes any transfer of the Premises in violation of this Lease, (iv) if a petition is filed by Tenant (or any transferee or guarantor) for insolvency or for appointment of a receiver, trustee or assignee or for adjudication, reorganization or arrangement under any bankruptcy act, or if any similar petition is filed against Tenant (or any transferee or guarantor) and such petition filed against is not dismissed within thirty days thereafter, (v) if any representation or warranty made by Tenant is untrue, false or misleading in any material respect when made, (vi) if Tenant (or any transferor or guarantor) shall make a general assignment for the benefit of its creditors or admit in writing its inability to pay its debts as they become due, (vii) if any event occurs that, under the terms of this Lease, is an automatic Event of Default; (viii) Tenant or any guarantor shall dissolve or liquidate; (ix) if Tenant fails to perform any other covenant or condition hereunder and such default continues longer than any period expressly provided for the correction thereof (and if no period is expressly provided then for 30 days after notice is given, provided, however, that such 30-day period shall be reasonably extended in the case of any non-monetary default if the matter complained of can be cured but the cure cannot be completed within such period and Tenant begins promptly and thereafter diligently completes the cure; but if such matters cannot be cured then there will be no cure period and in no event shall such cure period exceed 180 days after the initial notice to Tenant); or (x) a default occurs by the tenant under the Methuen Lease and such default is not cured within any applicable notice and cure period, then, and in any such case, Landlord and its agents lawfully may, in addition to any remedies for any preceding breach, immediately or at any time thereafter without demand or notice and with or without process of law, enter upon any part of the Premises in the name of the whole or mail or deliver a notice of termination of the Term of this Lease addressed to Tenant 28 at the Premises or any other address herein, and thereby terminate the Term and repossess the Premises as of Landlord's former estate. At Landlord's election such notice of termination may be included in any notice of default. Upon such entry or mailing the Term shall terminate, all executory rights of Tenant and all obligations of Landlord will immediately cease, and Landlord may expel Tenant and all persons claiming under Tenant and remove their effects without any trespass and without prejudice to any remedies for arrears of rent or prior breach; and Tenant waives all statutory and equitable rights to its leasehold (including rights in the nature of further cure or redemption, if any). If any payment of Annual Base Rent, Additional Rent, or other sum is not paid when due, Landlord may at its option and in addition to all other remedies hereunder impose an administrative late charge on Tenant equal to 3% of the amount in question, which late charge will be due on demand as Additional Rent. If Landlord engages attorneys in connection with any failure to perform by Tenant hereunder, Tenant shall reimburse Landlord for the fees of such attorneys on demand as Additional Rent. Without implying that other provisions do not survive, the provisions of this Article shall survive the Term or earlier termination of this Lease. Landlord shall have the right, in its absolute discretion, to delete Subsection 8.1(x) from this Lease by giving written notice of such deletion to Tenant. If Landlord gives such written notice to Tenant, Subsection 8.1(x) above shall thereupon automatically, and without need for any further amendment or confirmation, be deemed deleted from this Lease and shall have no further force or effect. 8.2 Remedies for Default 8.2.1 Reletting Expenses Damages If the Term is terminated for default, the Tenant covenants, as an additional cumulative obligation after such termination, to pay all of Landlord's reasonable costs, including reasonable attorneys fees, related to Tenant's default and in collecting amounts due and all reasonable expenses in connection with reletting, including tenant inducements to new tenants, brokerage commissions, fees for legal services, expenses of preparing the Premises for reletting and the like together with an administrative charge of 10% of all the foregoing costs ("Reletting Expenses"). It is agreed that Landlord may (i) relet the Premises or part or parts thereof for a term or terms that may be equal to, less than or exceed the period that would otherwise have constituted the balance of the Term, and may grant such tenant inducements, including free rent, as Landlord in its sole discretion considers advisable, and (ii) make such alterations to the Premises as Landlord in its sole discretion considers advisable, and no failure to relet or to collect rent under any reletting shall operate to reduce Tenant's liability. Any obligation to relet imposed by law will be subject to Landlord's reasonable objectives of leasing the Premises to a creditworthy Tenant with financial capacity at least equal to that of Tenant at the Commencement Date and of developing its property in a harmonious manner with appropriate mixes of tenants, uses, floor areas, terms and the like. Landlord's Reletting Expenses together with all other sums provided for whether incurred prior to or after such termination will be due upon demand. 8.2.2 Termination Damages If the Term of this Lease is terminated for default, unless and until Landlord elects lump sum liquidated damages described in the next paragraph, Tenant covenants, as an additional, cumulative obligation after any such termination, to pay punctually to Landlord all the sums and perform all of its obligations in the same manner as if the Term had not been terminated. In calculating such amounts Tenant will be credited with the net proceeds of any rent then actually received by Landlord from a reletting of the Premises after deducting all sums to be paid by Tenant under Section 8.2.1 that have not then been paid by Tenant, provided that, although it shall be entitled to such credit, Tenant shall never be entitled to receive any portion of the re-letting proceeds, even if the same exceed the rent originally due hereunder. 8.2.3 Lump Sum Liquidated Damages. If this Lease is terminated for default, Tenant covenants, as an obligation after termination that is an additional, cumulative obligation to the obligations in the foregoing paragraphs, to pay forthwith to Landlord at Landlord's election made by written notice at 29 any time after termination, as liquidated damages a single lump sum payment equal to the sum of (i) all sums to be paid by Tenant and not then paid at the time of such election, plus either, as Landlord elects, (ii) the excess of the present value of all of the rent reserved for the residue of the Term over the present value of the aggregate fair market rent and Additional Rent payable (if less than the rent payable hereunder) on account of the Premises during such period, which fair market rent shall be reduced by reasonable projections of vacancies and by Landlord's Reletting Expenses described above to the extent not theretofore paid to Landlord, or (iii) an amount equal to the sum of all of the rent and other sums due under the Lease with respect to the twelve (12)-month period next following the date of termination. (The Federal Reserve discount rate (or equivalent) shall be used in calculating such present values under clause (ii), and in the event the parties are unable to agree on such fair market rent, the matter shall be submitted, upon the demand of either party, to the office of the American Arbitration Association (or successor) in Boston, Massachusetts, with a request for arbitration in accordance with the rules of the Association by a single arbitrator who shall be a licensed real estate broker with at least 10 years experience in the leasing of 1,000,000 or more square feet of floor area of commercial buildings similar in character and location to the Premises, whose decision shall be conclusive and binding on the parties.) 8.3 Remedies Cumulative; Jury Waiver; Late Performance. The remedies to which Landlord may resort under this Lease, and all other rights and remedies of Landlord are cumulative, and any two or more may be exercised at the same time. Nothing in this Lease shall limit the right of Landlord to prove and obtain in proceedings for bankruptcy or insolvency an amount equal to the maximum allowed by any statute or rule of law in effect at the time; and Tenant agrees that the fair value for occupancy of all or any part of the Premises at all times shall never be less than the Annual Base Rent and all Additional Rent payable from time to time. Tenant shall also indemnify and hold Landlord harmless in the manner provided in Section 5.6 if Landlord shall become or be made a party to any claim or action (a) instituted by Tenant against any third party, or by any third party against Tenant, or by or against any person claiming through Tenant; (b) for foreclosure of any lien for labor or material furnished to or for Tenant or such other person; (c) otherwise arising out of or resulting from any act or transaction of Tenant or such other person; or (d) necessary to protect Landlord's interest under this Lease in a bankruptcy proceeding, or other proceeding under Title 11 of the United States Code, as amended. LANDLORD AND TENANT WAIVE TRIAL BY JURY IN ANY ACTION TO WHICH THEY ARE PARTIES, and further agree that any action arising out of this Lease (except an action for possession by Landlord, which may be brought in whatever manner or place provided by law) shall be brought in the Trial Court, Superior Court Department, in the county where the Premises are located. Any sum due from Tenant under this Lease shall bear interest from the date due at the rate of one and one-half (1 1/2%) percent for each month (or ratable portion thereof) the same remains unpaid, but never more than the maximum rate allowed by law. 8.4 Waivers of Default; Accord and Satisfaction. No consent by Landlord or Tenant to any act or omission that otherwise would be a default shall be construed to permit other similar acts or omissions. Neither party's failure to seek redress for violation or to insist upon the strict performance of any covenant, nor the receipt by Landlord of rent with knowledge of any breach of covenant, shall be deemed a consent to or waiver of such breach. No breach of covenant shall be implied to have been waived unless such is in writing, signed by the party benefiting from such covenant and delivered to the other party; and no acceptance by Landlord of a lesser sum than the Annual Base Rent, Additional Rent or any other sum due shall be deemed to be other than on account of the earliest installment of such rent or other sum due. Nor shall any endorsement or statement on any check or in any letter accompanying any check or payment be deemed 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 right or remedy. The delivery of keys (or any similar act) to Landlord shall not operate as a termination of the Term or an acceptance or surrender of the Premises. The acceptance by Landlord of 30 any rent following the giving of any default and/or termination notice shall not be deemed a waiver of such notice. 8.5 Landlord's Curing If Tenant fails to perform any covenant within any applicable cure period, then Landlord at its option may (without waiving any right or remedy for Tenant's non-performance) at any time thereafter perform the covenant for the account of Tenant. Tenant shall reimburse Landlord's cost (including reasonable attorneys' fees) of so performing, together with an administrative charge equal to 10% of such cost on demand as Additional Rent. Notwithstanding any other provision concerning cure periods, Landlord may cure any non-performance for the account of Tenant after such notice to Tenant, if any, as is reasonable under the circumstances if curing prior to the expiration of the applicable cure period is reasonably necessary to prevent likely damage to the Premises or possible injury to persons, or to protect Landlord's interest in the Premises. 8.6 Security Deposit On the execution of this Lease, Tenant shall deliver to Landlord as security for the performance of the obligations of Tenant hereunder, a letter of credit (as renewed, replaced, and/or increased pursuant to this Lease, and all proceeds thereof, the "Letter of Credit") in the initial amount specified therefor in Section 1.1, subject to adjustment as set forth below, in accordance with this Section (as renewed, replaced, and/or increased pursuant to this Lease, and all proceeds thereof, the "Security Deposit"). Tenant's failure to timely deliver the Security Deposit to Landlord shall constitute a default under this Lease, without any notice or cure period under Article VIII. The Letter of Credit (i) shall be irrevocable and shall be issued by a commercial bank reasonably acceptable to Landlord that has an office in Boston, Massachusetts, (ii) shall require only the presentation to the issuer of a certificate of the holder of the Letter of Credit stating that either a default has occurred under this Lease after the expiration of any applicable notice and cure period (or that Tenant has failed to timely pay rent or is otherwise in default under the Lease and transmittal of a default notice is barred by applicable law) or that Tenant has become the subject of a bankruptcy, insolvency or similar proceeding, (iii) shall be payable to Landlord or its successors in interest as the Landlord and shall be freely transferable without cost to any such successor or any lender holding a collateral assignment of Landlord's interest in the Lease, (iv) shall be for an initial term of not less than one year and contain a provision that such term shall be automatically renewed for successive one- year periods unless the issuer shall, at least 45 days prior to the scheduled expiration date, give Landlord written notice of such nonrenewal, and (v) shall otherwise be in form and substance reasonably acceptable to Landlord. Notwithstanding the foregoing, the term of the Letter of Credit for the final period shall be for a term ending not earlier than the date sixty (60) days after the last day of the Term or, if applicable, any Extension Term. Landlord shall be entitled to draw upon the Security Deposit for its full amount (a) if Tenant shall be in default under the Lease, after the expiration of any applicable notice or cure period (or if Tenant has failed to timely pay rent or is otherwise in default under the Lease and transmittal of a default notice is barred by applicable law), or (b) in the case of the Letter of Credit if, not less than 30 days before the scheduled expiration of the Letter of Credit, Tenant has not delivered to Landlord a new Letter of Credit in accordance with this Section (which failure shall be deemed a default without notice or cure period). All amounts so drawn shall be the exclusive property of Landlord and Landlord may, but shall not be obligated to, apply the amount so drawn to the extent necessary to cure Tenant's default under the Lease. The Security Deposit may be commingled with other funds of Landlord and shall not constitute an asset of Tenant, and no fiduciary relationship shall be created with respect to such deposit, nor shall Landlord be liable to pay Tenant interest thereon. If Tenant shall fail to perform any of its obligations under this Lease, Landlord may, but shall not be obliged to, apply the Security Deposit to the extent 31 necessary to cure the default. After any such application by Landlord of the Security Deposit, Tenant shall reinstate the Letter of Credit to the amount originally required to be maintained hereunder, upon demand. If Landlord has drawn on the Letter of Credit under Section 8.6(b), and to the extent Landlord has not applied amounts to cure Tenant defaults, then after acceptance of a replacement Letter of Credit, Landlord shall restore to Tenant the remaining amount of such funds. Within sixty (60) days after the expiration or sooner termination of the Term, and provided that no default exists under this Lease, the Letter of Credit, to the extent not applied, shall be returned to the Tenant, without interest. In the event of a sale of the Premises or lease, conveyance or transfer of the Premises, Landlord shall have the right to transfer the Security Deposit to the transferee and Landlord shall thereupon be released by Tenant from all liability for the return of such Security Deposit; and subject to Article IX, Tenant agrees to look to the transferee solely for the return of said Security Deposit. The provisions hereof shall apply to every transfer or assignment made of the Security Deposit to such a transferee. Tenant further covenants that it will not assign or encumber or attempt to assign or encumber the Letter of Credit or the monies deposited herein as security, and that neither Landlord nor its successors or assigns shall be bound by any assignment, encumbrance, attempted assignment or attempted encumbrance. Tenant will enter into such agreements as Landlord's lender may request with respect to the assignment of the Security Deposit to such lender. In connection with any transfer of the Premises, Tenant shall cooperate with Landlord in the assignment of the Letter of Credit to the transferee and, if requested by the transferee, Tenant shall, within ten (10) business days from such request, cause a substitute Letter of Credit to be issued to the transferee that complies with the requirements of this Section. The amount of the Security Deposit required under Section 1.1 shall be increased as set forth in Section 5.16 hereof and may be reduced as hereinafter set forth. Such increase (or reduction) shall be effectuated by the delivery to Landlord of a substitute Letter of Credit in the increased amount that otherwise complies with the requirements of this Section. The amount of the Security Deposit may be reduced by Fifty Thousand Dollars ($50,000) as of the first day of each of the thirteenth (13th), twenty-fifth (25th), and thirty-seventh (37th) months after the Commencement Date if, and only if, Tenant is not in monetary or other material default and Parlex accomplishes the following milestones (as calculated in accordance with Generally Accepted Accounting Principles and certified by Parlex's outside auditors): (a) Parlex shall have gross revenues for each fiscal year beginning in fiscal year 2003 on a consolidated basis of at least One Hundred Million Dollars ($100,000,000) and Parlex's earnings before taxes shall not be less than $1.00; (b) The current ratio of Parlex's current assets to its current liabilities, determined on a consolidated basis, shall be not less than 1.05 to 1; (c) Parlex's current debt to equity ratio shall not be greater than 0.5:1; (d) No monetary or other material defaults shall exist under any of Parlex's or Tenant's then current loan agreements with its lending institutions and Tenant and Parlex each shall certify the same to Landlord; and (e) Tenant continues to be a wholly owned subsidiary of Parlex. ARTICLE IX ---------- 32 Protection of Lenders --------------------- 9.1 Subordination and Superiority of Lease Tenant agrees that this Lease and the rights of Tenant hereunder will be subject and subordinate to any lien of the holder of any existing or future mortgage, and to the rights of any lessor under any ground or improvements lease of the Premises (all mortgages and ground or improvements leases of any priority are collectively referred to in this Lease as "mortgage," and the holder(s) or lessor(s) thereof from time to time as "mortgagee"), and to all advances and interest thereunder and all modifications, renewals, extensions and consolidations thereof; provided, however, that with respect to future liens of any mortgage hereafter granted the mortgagee executes and delivers to Tenant an agreement (in the form of Exhibit G or in such other form as such mortgagee may request) in which the mortgagee agrees that such mortgagee shall not disturb Tenant in its possession of the Premises upon Tenant's attornment to such mortgagee as Landlord and performance of its Lease covenants (both of which conditions Tenant agrees with all mortgagees to perform). Tenant agrees that any present or future mortgagee may at its option unilaterally elect to subordinate, in whole or in part and by instrument in form and substance satisfactory to such mortgagee alone, the lien of its mortgagee (or the priority of its ground lease) to some or all provisions of this Lease. Tenant and Lender's mortgagee are executing simultaneously with the execution of this Lease the Subordination, Nondisturbance and Attornment Agreement in the form attached as Exhibit G. Tenant agrees that this Lease shall survive the merger of estates of ground (or improvements) lessor and lessee. Until a mortgagee (either superior or subordinate to this Lease) forecloses Landlord's equity of redemption (or terminates in the case of a ground or improvements lease) no mortgagee shall be liable for failure to perform any of Landlord's obligations (and such mortgagee shall thereafter be liable only after it succeeds to and holds Landlord's interest and then only as limited herein). No mortgagee shall be bound by any payment of rent more than one month in advance. Tenant shall, if requested by Landlord or any mortgagee, give notice of any alleged non-performance on the part of Landlord to any such mortgagee provided that an address for such mortgagee has been designated pursuant to Section 10.1, and Tenant agrees that such mortgagee shall have a separate, consecutive reasonable cure period of no less than 30 days (to be reasonably extended in the same manner Landlord's cure period is to be extended) following Landlord's cure period during which such mortgagee may, but need not, cure any non-performance by Landlord. The agreements in this Lease with respect to the rights and powers of a mortgagee constitute a continuing offer to any person that may be accepted by taking a mortgage (or entering into a ground or improvements lease) of the Premises. 9.2 Rent Assignment If from time to time Landlord assigns this Lease or the rents payable hereunder to any person, whether such assignment is conditional in nature or otherwise, such assignment shall not be deemed an assumption by the assignee of any obligations of Landlord; but the assignee shall be responsible only for non-performance of Landlord's obligations that occur after it succeeds to and only while it holds Landlord's interest in the Premises. Tenant shall pay rent directly to Landlord's mortgagee, or to any other party entitled to collect rent due hereunder, upon written direction from Landlord. 9.3 Other Instruments The provisions of this Article shall be self-operative; nevertheless, Tenant agrees to execute, acknowledge and deliver any subordination, attornment or priority agreements or other instruments conforming to the provisions of this Lease (and being otherwise commercially reasonable) from time to time requested by Landlord or any mortgagee, and further agrees that its failure to do so within ten days after written request shall be a default for which this Lease may be terminated without further notice. Without limitation, where Tenant in this Lease indemnifies or otherwise covenants for the benefit of mortgagees, such agreements are for the benefit of mortgagees as third party 33 beneficiaries; and at the request of Landlord, Tenant from time to time will confirm such matters directly with such mortgagee. ARTICLE X --------- Miscellaneous Provisions ------------------------ 10.1 Notice. All notices, consents, approvals and the like shall be in writing and shall be delivered in hand by any courier service providing receipts, by a nationally recognized overnight courier providing receipts, or mailed by certified mail addressed to Landlord or Tenant as set forth below. If requested, Tenant shall deliver copies of all notices in like manner to Landlord's mortgagees and other persons having a relationship to the Premises at such address within the United States as designated from time to time by Landlord or such mortgagee. Any notice so addressed shall be deemed duly given on the second business day following the day of mailing if so mailed by registered or certified mail, return receipt requested, whether or not accepted, or if by hand or by overnight courier upon actual receipt by any person reasonably appearing to be an agent or employee working in the executive offices of the addressee. If to Tenant: Poly-Flex Circuits, Inc. c/o Parlex Corporation One Parlex Place Methuen, MA 01844 Attention: Jonathan Kosheff with a copy to: Kutchin & Rufo, P.C. 175 Federal Street Boston, Massachusetts 02110 Attention: Edward D. Kutchin, Esq. If to Landlord: Taurus Cranston, LLC c/o Taurus New England Investments Corp. 118 Milk Street Boston, MA 02109 Attention: Scott Tully with a copy to: Piper Rudnick LLP One International Place Boston, MA 02110 Attention: John L. Sullivan, Esq. 34 Any address or name specified above may be changed by notice given to the addressee by the other party in accordance with this Section 10.1. The inability to deliver notice because of a changed address of which no notice was given as provided above, or because of rejection or other refusal to accept any notice, shall be deemed to be the receipt of the notice as of the date of such inability to deliver or rejection or refusal to accept. Any notice to be given by any party hereto may be given by the counsel for such party. 10.2 Landlord's Default. Landlord shall use due diligence in performing its covenants under this Lease. In no event shall Landlord be in default unless notice thereof has been given to Landlord (and all mortgagees of which Tenant has notice) and Landlord (or any such mortgagees at its sole discretion) fails to perform within 30 days (provided, however, that such 30 day period shall be reasonably extended if such performance begins within such period and thereafter is diligently pursued, or if such mortgagee notifies Tenant within such period that it intends to cure on behalf of Landlord and thereafter begins and diligently pursues curing with reasonable promptness). 10.3 Limitation of Landlord's Liability. Tenant agrees that Landlord shall be liable only for breaches of its covenants occurring while it is owner of the Premises (provided, however, that if Landlord from time to time is lessee of the ground or improvements constituting the Premises, then Landlord's period of ownership of the Premises shall be deemed to mean only that period while Landlord holds such leasehold interest). Tenant (and each person acting under Tenant) agrees to look solely to Landlord's interest from time to time in the Premises for satisfaction of any claim against Landlord. No trustee, beneficiary, partner, member, manager, agent or employee of Landlord (or of any mortgagee or any ground or improvements lessor) shall ever be personally or individually liable; nor shall it or they ever be answerable or liable in any equitable judicial proceeding or order beyond the extent of their interest in the Premises. Any lien obtained to enforce any judgment against Landlord shall be subject and subordinate to any mortgage encumbering the Premises. In no event shall Landlord (or any such persons) ever be liable to Tenant for indirect or consequential damages. 10.4 Excusable Delay. If either party is delayed in performing (other than paying Annual Base Rent, Additional Rent or any other charge, which may never be delayed) by causes beyond such party's reasonable control, including war, civil commotion, acts or regulations of government, moratoria and the like, weather, fire, casualty, theft, labor difficulties, or the unavailability of labor, materials, equipment or utilities from customary sources upon customary terms, or by acts, neglects or delays of the other party (or persons acting under such other party), then such delay shall not be counted in determining the time during which such performance is to be completed. 10.5 Applicable Law and Construction This Lease may be executed in counterparts, shall be construed as a sealed instrument, and shall be governed exclusively by the provisions hereof and by the laws of the State of Rhode Island. Time is of the essence of all obligations of Tenant and Landlord under this Lease. The covenants of Landlord and Tenant are independent, and such covenants shall be construed as such in accordance with the laws of the State of Rhode Island. If any provisions shall to any extent be invalid, the remainder shall not be affected. Other than contemporaneous instruments executed and delivered of even date, if any, this Lease contains all of the agreements between Landlord and Tenant relating in any way to the Premises and supersedes all prior agreements and dealings between them. There are no oral agreements between Landlord and Tenant relating to this Lease or the Premises. Except as otherwise provided in the last sentence of Section 8.1, this Lease may be amended only by instrument in writing executed and delivered by both Landlord and Tenant. The provisions of this Lease shall bind Landlord and Tenant and their respective successors and assigns, and shall inure to the benefit of Landlord and its successors and assigns and of Tenant and its permitted successors and assigns. Where the phrases "persons acting under" Landlord or Tenant or "persons claiming through" Landlord or Tenant 35 or similar phrases are used, the persons included shall be assignees, sublessees, licensees or other transferees or successors of Landlord or Tenant as well as invitees or independent contractors of Landlord or Tenant, and all of the respective employees, servants, contractors, agents and invitees of Landlord, Tenant and any of the foregoing. The term "including" and "include" shall not be restrictive and shall be interpreted as if followed by the words "without limitation." The titles are for convenience only and shall not be considered a part of the Lease. If Tenant is granted any extension or other option, to be effective the exercise (and notice thereof) shall be unconditional; and if Tenant purports to condition the exercise of any option or to vary its terms in any manner, then the option granted shall be void and the purported exercise shall be ineffective. The enumeration of specific examples of a general provision shall not be construed as a limitation of the general provision. Unless a party's approval or consent is required by the express terms of this Lease not to be unreasonably withheld, such approval or consent may be withheld in the party's sole discretion. The submission of a form of this Lease or any summary of its terms shall not constitute an offer by Landlord to Tenant; but a leasehold shall only be created and the parties bound when this Lease is executed and delivered by both Landlord and Tenant and approved by the holder of any mortgage of the Premises having the right to approve this Lease. Nothing herein shall be construed as creating the relationship between Landlord and Tenant of principal and agent, or of partners or joint venturers or any relationship other than landlord and tenant. This Lease and all consents, notices, approvals and all other related documents may be reproduced by any party by any electronic means or by facsimile, photographic, microfilm, microfiche or other reproduction process and the originals may be destroyed; and each party agrees that any reproductions shall be as admissible in evidence in any judicial or administrative proceeding as the original itself (whether or not the original is in existence and whether or not reproduction was made in the regular course of business), and that any further reproduction of such reproduction shall likewise be admissible. If any payment in the nature of interest provided for in this Lease shall exceed the maximum interest permitted under controlling law, as established by final judgment of a court, then such interest shall instead be at the maximum permitted interest rate as established by such judgment. As used in this Lease, the term "business day" shall mean any day excluding a Saturday, Sunday and any other day on which (1) there is no scheduled trading on the New York Stock Exchange, or (2) banks in Boston, Massachusetts are authorized by law or executive action to be closed for normal banking business. 10.6 Estoppel Certificate. Within twenty (20) days of either party's request, the other agrees to execute, acknowledge and deliver a statement in writing certifying whether this Lease is in full effect (or if there has been any amendment whether the same is in full effect as amended and stating the amendment or amendments), the Commencement Date, the amount of and the dates to which the Annual Base Rent (and Additional Rent and all other charges) have been paid and, as of its best knowledge and belief, any other information concerning performance, construction, tenancy, possession or other matters of reasonable interest to prospective lenders or purchasers. Both parties agree that any such statement may be relied upon by any person to whom the same is delivered. Tenant acknowledges that prompt execution and delivery of such statements, and of instruments referred to in Section 9.3, in connection with any proposed financings or sales constitute essential requirements of Landlord's financings or sales; and any failure by Tenant to perform under this Section within the time provided will be a default for which the Lease may be terminated following notice if the default is not cured within ten days. Tenant will indemnify Landlord in the manner elsewhere provided in this Lease against all loss (expressly including consequential damages in the nature of increased financing costs, forfeited financing fees and attorneys' fees) directly or indirectly resulting from Tenant's failure to comply herewith. 10.7 Notice of Lease. Neither party shall record this Lease, but each party will, upon request of the other, execute a recordable notice of lease in form reasonably approved by Landlord and which notice shall contain the provisions of this Section), and upon termination of the Term for whatever reason a like notice of termination of lease. Tenant appoints Landlord as its attorney-in-fact (which appointment 36 shall survive termination of the Term) with full power of substitution following any termination, to execute, acknowledge and deliver a notice of termination of lease in Tenant's name if Tenant fails so to do within one week of any request. 10.8 Brokers. Each party warrants and represents to the other that it has not dealt with any broker in connection with this Lease or the Premises except for the Broker, if any, listed in Section 1.1, whose commission will be paid by Tenant pursuant to a separate agreement; and each agrees to indemnify and save the other harmless in the manner elsewhere provided in this Lease from any breach of this warranty and representation, which will survive the termination of the Term. 10.9 Tenant and Landlord as Business Entities (a) Tenant warrants and represents that (i) Tenant is duly organized, validly existing and in good standing under the laws of the jurisdiction in which such entity was organized; (ii) Tenant has the authority to own its property and to carry on its business as contemplated under this Lease; (iii) Tenant is in compliance with all laws and orders of public authorities applicable to Tenant; (iv) Tenant has duly executed and delivered this Lease; (v) the execution, delivery and performance by Tenant of this Lease (w) are within the powers of Tenant, (x) have been duly authorized by all requisite action, and (y) will not violate any provision of law or any order of any court or agency of government, or any agreement or other instrument to which Tenant is a party or by which it or any of its property is bound, or (z) will not result in the imposition of any lien or charge on any of Tenant's property, except by the provisions of this Lease; and (vi) the Lease is a valid and binding obligation of Tenant in accordance with its terms. Tenant agrees that breach of the foregoing warranty and representation shall at Landlord's election be a default under this Lease for which there shall be no cure. This warranty and representation shall survive the termination of the Term. Simultaneously with the execution of the Lease, Tenant shall deliver to Landlord (y) a certificate of legal existence and good standing and (z) a certified copy of a resolution of Tenant's directors, manager, or general partner authorizing the execution of this Lease or other evidence of such authority reasonably acceptable to Landlord. (b) Landlord warrants and represents that (i) Landlord is duly organized, validly existing and in good standing under the laws of the jurisdiction in which such entity was organized; (ii) Landlord has the authority to own the Premises; (iii) Landlord has duly executed and delivered this Lease; (iv) the execution, delivery and performance by Landlord of this Lease (x) are within the powers of Landlord, (y) have been duly authorized by all requisite action, and (z) will not violate any provision of law or any order of any court or agency of government, or any agreement or other instrument to which Landlord is a party or by which it or any of its property is bound; (v) the Lease is a valid and binding obligation of Landlord in accordance with its terms; and (vi) as of the date of this Lease, Ben Butcher or Scott Tully manages the day to day operations of Landlord. Landlord will own no assets other than the Property (and property ancillary thereto) and will incur no indebtedness other than the Loan (or any new mortgage loan obtained to refinance the Loan), other indebtedness reasonably related to Landlord's ownership and operation of the Property or indebtedness to Tenant. Without limiting the generality of the foregoing, in no event will Landlord guarantee the obligations of any other person or entity nor allow the Premises to serve as security for any indebtedness not related directly and solely to the Property. 10.10 Reasonable Cooperation in Refinancing and Sale. Tenant agrees to cooperate with Landlord in all reasonable respects in connection with Landlord's sale, refinancing and/or any of Landlord's efforts to effectuate a secondary market transaction relating to a loan which is secured by the Premises and this Lease. In connection with the foregoing, Tenant shall, (i) provide accurate and complete copies of each Form 10Q and Form 10K filed with the Securities and Exchange Commission for Parlex and, if at any time (a) Parlex's stock is not listed on the NYSE or the NASDAQ or (b) Tenant's 37 financial statements are no longer consolidated with those of Parlex, Tenant shall provide Landlord with financial information relating to Tenant and/or the Premises which is reasonably required by the prospective purchaser, lender and/or the rating agencies involved in any such secondary market transaction, (ii) permit site inspections and other similar due diligence investigation of the Premises (at mutually agreeable times and provided that the same shall be conducted so as to minimize interruption of Tenant's conduct of business at the Premises), and (iii) provide updated certificates of insurance naming purchaser, Landlord's Lender as a "loss payee" and/or additional named insured as required by this Lease. 10.11 Security Deposit Delivery. At the election of Landlord, this Lease shall not be effective unless the Security Deposit has delivered to Landlord. ARTICLE XI ---------- Early Termination Option ------------------------ Landlord grants to Tenant a one-time option to terminate this Lease prior to the expiration hereof (the "Termination Option") upon each and all of the following terms and conditions: 11.1 Exercise. The Termination Option may be exercised by Tenant on or before the last day of the third (3rd) month of the second (2nd) Lease Year by delivering to Landlord written notice of such exercise (the "Termination Notice") together with immediately available federal funds in the amount Three Hundred Fifty-Two Thousand Six Hundred Sixty Dollars and Fifty Cents ($352,660.50) (the "Termination Payment"). The Termination Option shall, at Landlord's election in its sole discretion, be void, of no further force or effect and deemed deleted from this Lease if (i) there is a default by Tenant under this Lease that continues beyond any applicable notice and cure periods, (ii) Tenant fails to timely deliver the Termination Notice, or (iii) Tenant fails to deliver the Termination Payment simultaneously with the Termination Notice. 11.2 Termination Date. If Tenant timely delivers the Termination Notice and otherwise complies with the requirements of Section 11.1 above, this Lease shall terminate as of the last day of the third (3rd) Lease Year (the "Termination Date"), as if the Lease had then expired and Tenant shall vacate and surrender the Property to Landlord as set forth in Section 5.12 of this Lease. ARTICLE XII ----------- Index of Defined Terms ---------------------- The definitions for the following terms are set forth in the Section of the Lease indicated below. Certain other defined terms are set forth in Section 1.1. "abatements" Section 5.5 "business day" Section 10.5 "Capital Expenditure Items" Section 5.16 "Casualty Termination Date" Section 7.2(b) "Construction Documents": Section 5.1.2 38 "hazardous materials": Section 5.10 "hazardous materials activities": Section 5.10 "Holdover Rate": Section 5.13 "Indemnitees": Section 5.6 "Landlord Notice" Section 5.3(b) "Landlord's Designated Consultant: Section 5.3(b) "Landlord's Share" Section 5.18(c) "Landlord's Termination Acceptance" Section 6.3 "late charge" Section 8.1 "laws": Section 5.4 "Lease Year": Exhibit B "Loan Release Amounts" Section 5.17 "Major Casualty" 7.2(b) "Major Taking" Section 7.3(f) "mortgage": Section 9.1 "mortgagee": Section 9.1 "Net Award" Section 7.3(d) "Outside Restoration Date" Section 7.2(b) "Parlex" Section 5.15 "Permitted Exceptions" Exhibit C "Permitted Transfer" Section 6.1 "Property Condition Notice" Section 5.3(b) "Property Condition Report" Section 5.3(b) "reletting expenses" Section 8.2.1 "rent" Section 3.2 "Special Notice Provisions" Section 6.4(b) "Taking Termination Date" Section 7.3(f) "Taxes and Impositions": Section 5.5 "Tenant Notice" Section 5.3(b) "Tenant Property": Section 5.9 "Tenant Work": Section 5.1.1 "Tenant's Architect": Section 5.1.2 "Tenant's Contractor": Section 5.1.3 39 "Tenant's Designated Consultant" Section 5.3(b) "Tenant's Request" Section 6.3 "Tenant's Share" Section 5.18(c) "Termination Date" Section 11.2 "Termination Notice" Section 11.1 "Termination Option" Article XI "Termination Payment" Section 11.1 "Title Documents" Section 4.1 "transfer" Section 6.1 40 Executed under seal as of the date first written above. TENANT: LANDLORD: Poly-Flex Circuits, Inc., a duly Taurus Cranston, LLC, a Delaware organized Rhode Island corporation limited liability company By: Taurus Cranston/Methuen Limited By: /s/ Dennis Carvalho Partnership, a Massachusetts ---------------------------- limited partnership, its Its President sole member and manager By: /s/ Peter J. Murphy By: Taurus-New England XXIV ---------------------------- Limited Partnership, a Its Treasurer Massachusetts limited partnership, its sole general partner By: Taurus Cranston/ Methuen LLC, a Massachusetts limited liability company, its sole general partner By: /s/ Peter Merrigan --------------------- Name: Peter Merrigan Title: Executive Director GUARANTOR: PARLEX CORPORATION, a duly organized Massachusetts Corporation By: /s/ Peter J. Murphy ---------------------------- Its President By: /s/ Jonathan R. Kosheff ---------------------------- Its Treasurer 41 Exhibit A Land ---- That certain tract or parcel of land, with any buildings or improvements thereon, situated on the northeasterly side of Kenney Drive in the City of Cranston, County of Providence and State of Rhode Island and bounded and described as follows: Beginning at point in the northeasterly line of said Kenney Drive 354.02 feet northwesterly from a granite bound in the ground 30 feet northeasterly of baseline station 30+81.83 on said Kenney Drive as measured along the northeasterly line of said Kenney Drive; thence running northeasterly bounding southwesterly on said Kenney Drive three hundred thirty seven and 13/100 (337.13) feet to a corner; thence turning an interior angle of 85 degrees-38'-23" and running northeasterly bounding northwesterly on land now or formerly of Diversified Containers, Inc. five hundred fifty two and 29/100 (552.29) feet to a corner; thence turning an interior angle of 91 degrees-58'-20" and running southeasterly bounding northeasterly on land of the State of Rhode Island (Department of Corrections) two hundred ninety five and 42/100 (295.42) feet to a corner; thence turning an interior angle of 92 degrees-23'-17" and running southwesterly bounding southeasterly on land now or formerly of MM Realty Associates II five hundred thirty eight and 39/100 (538.39) feet to the point of beginning. Containing 172,283 square feet or 3.9551 acres of land, more or less. Said last course forming an interior angle of 90 degrees-00'-00" with said first course. Subject to an easement, twenty (20) feet in width, from said Kenney Drive to said land of the State of Rhode Island (Department of Corrections) and bounded and described as follows: Beginning at a point in the northeasterly line of said Kenney Drive at the most westerly corner of the parcel herein above described; thence running northeasterly bounding northwesterly on land now or formerly of Diversified Containers, Inc. five hundred fifty two and 29/100 (552.29) feet to a corner; thence turning an interior angle of 91 degrees-58'-20" and running southeasterly bounding northeasterly on said land of the State of Rhode Island (Department of Corrections) twenty and 01/100 (20.01) feet to a corner; thence turning an interior angle of 88 degrees-01'-40" and running southwesterly bounding southeasterly on the remaining portion of the above described parcel five hundred fifty one and 46/100 (551.46) feet to a corner; thence turning an interior angle of 94 degrees-21'-37" and running northwesterly bounding southwesterly on said Kenney Drive twenty and 06/100 (20.06) feet to the point of beginning and containing 11,038 square feet or 0.2534 acres of land, more or less. 42 Exhibit B Annual Base Rent ---------------- Annual Base Rent shall be as set forth below. "Lease Year" shall mean the twelve-month period following the Commencement Date and each successive twelve-month period during the Term (provided that, if the Commencement Date is not the first day of a calendar month, the first "Lease Year" shall mean the last twelve-month period plus the partial month at the end of the Term). Lease Year Annual Monthly ---------------------------------------------- 1 $436,640 $36,364 2 $447,556 $37,296 3 $458,745 $38,229 4 $470,214 $39,185 5 $481,969 $40,164 43 Exhibit C Permitted Exceptions -------------------- 1. Any state of facts that an accurate survey or physical inspection thereof might show; 2. All laws, including without limitation zoning regulations, restrictions, rules and ordinances, and building restrictions, and all other statutes, laws, and regulations now in effect or hereafter adopted by any governmental authority having jurisdiction; 3. The rights of any tenants, subtenants, and any other parties in possession of, or claiming rights of possession to, the Premises as of the Commencement Date; 4. Title Documents; 5. Any facts, rights, interest, or claims which are not shown by the public records, but which could be ascertained by an inspection of said land or by making inquiry of persons in possession thereof. 6. Survey entitled "Taurus Investments Poly-Flex Circuits, Inc., 28 Kenney Drive, Cranston, Rhode Island, ALTA/ACSM Land Title Survey; Property Line & Existing Conditions Plan, Assessor's Plat 13 Lot 48", dated March 17, 2003, as revised through May 9, 2003, by Richard H. Nudenberg, Professional Land Surveyor, of Vanasse Hangen Brustlin, Inc., 530 Broadway, Providence, Rhode Island 02909. 7. Any lien, or rights to a lien, for services, labor or material heretofore or hereafter furnished, imposed by law and not shown by the public records. 8. Liens for municipal taxes and assessments as may be shown as due and payable on a current Certificate of Municipal Liens and liens for such municipal taxes and assessments as become due and payable hereafter. 9. All matters disclosed in Stewart Title Guaranty Company Commitment for Title Insurance No. C-9912-2429214 (File No. 03-07-0051) revised as of March 20, 2003, and Policy No. 0-9993-Proforma issued in connection therewith. 44 Exhibit D Tenant Work Insurance Requirements ---------------------------------- 1. Tenant shall purchase or shall cause each Tenant's Contractor to purchase, in a company or companies against which the Landlord has no reasonable objection, such insurance as will protect him from claims set forth below that may arise out of or result from the contractor's operations on the Premises. 1.1 claims under workers' or workmen's compensation, disability benefit and other similar employee benefit acts; 1.2 claims for damages because of bodily injury, occupational sickness or disease, or death of his employees; 1.3 claims for damages because of bodily injury, sickness or disease, or death of any person other than his employees; 1.4 claims for damages insured by personal injury liability coverage that are sustained (1) by any person as a result of an offense directly or indirectly related to the employment of such person by the Contractor, or (2) by any other person; 1.5 claims for damages, other than the Tenant Work itself, because of injury to or destruction of tangible property, including loss of use resulting therefrom; 1.6 claims for damages because of bodily injury or death of any person or property damage arising out of the ownership, maintenance or use of any motor vehicle; and 1.7 claims for contractual liability (both oral and written) under this undertaking with Tenant. 2. The insurance required by Section 1 of this Schedule shall include all major divisions of coverage, and shall be on a comprehensive general basis. Such insurance shall be written for not less than any limits of liability required by law or those set forth below, whichever is greater. 2.1 Workmen's Compensation - as required by law. 2.2 Public Liability - Single Limit (Combined) Per Occurrence. Bodily & Personal Injury $1,000,000 Property Damage $1,000,000 Occurrence/Aggregate. 2.3 Automobile Liability - Single Limit (Combined) Per Occurrence. Bodily Injury $1,000,000 Property Damage $1,000,000 per Occurrence 2.4 Independent Contractors - $1,000,000 Per Occurrence. 2.5 Products and Completed operations - $1,000,000 Per Occurrence, covering liability for claims made within applicable statutes of limitations following issuance of final Certificate of Payment. 45 2.6 Broad Form Blanket Contractual Liability (both oral and written) - $1,000,000 Per Occurrence. 2.7 Excess Liability Umbrella covering all above items $5,000,000 per Occurrence. 46 Exhibit E Financial Reporting ------------------- Tenant shall keep adequate books and records of account in accordance with generally accepted accounting principles or in accordance with other methods of accounting acceptable to Landlord in its sole discretion, consistently applied ("Approved Accounting Method") and shall furnish to Landlord the following, which shall be prepared, dated and certified by Borrower's chief financial officer as true, correct and complete in the form required by Landlord, unless otherwise specified below: (A) Within 120 days after the end of each fiscal year for Tenant, a detailed, analytical financial report prepared in accordance with the Approved Accounting Method, including, without limitation, a balance sheet, income and expense statements, and a statement of change in financial position covering the full and complete operations of the Tenant, all prepared by an independent accountant reasonably acceptable to Landlord (Tenant's financial reports must be audited); (B) Promptly after filing and in no event later than one hundred twenty (120) days after the end of each fiscal year for Tenant (or, if Tenant obtains an extension of its filing date, within thirty (30) days from the date such returns are filed), a copy of such Tenant's signed federal income tax return for such fiscal year; (C) Within 30 days of Landlord's request, a detailed budget in a format and with content reasonably acceptable to Landlord, to include, without limitation, a comparison showing corresponding information for Tenant's preceding fiscal year; (D) Within thirty (30) days after the end of each fiscal quarter of Tenant, the reports described in Section (A) and (C) above, which may be internally prepared by Tenant; (E) In connection with a bona fide proposed sale or financing of the Premises to a third party or a direct or indirect equity investment in Landlord, Tenant will provide audited annual balance sheets, income statements, and statements of cash flow of Tenant for each of Tenant's last three full fiscal years, delivered within thirty (30) days after such request by Landlord; and (F) Such other financial statements, and such other information and reports as may, from time to time, be reasonably required by Landlord and as may be reasonably prepared by or available to Tenant; provided, however, that as long as there is no then existing Event of Default by Tenant and no uncured notice of any facts or circumstances has been given to Tenant that, if not cured within an applicable cure period, will become an Event of Default, Landlord shall not be entitled to request additional information under this paragraph (F) except to the extent such information is requested by Landlord's lender or third party investor. 47 Exhibit F Minimum Insurance Requirements ------------------------------ (i) Property insurance insuring the building and Improvements for perils covered by the causes of loss - special form (all risk) and in addition, flood and/or earthquake (if applicable). Coverage shall include boiler and machinery insurance on a comprehensive basis. Such insurance shall be written on a replacement cost basis with an agreed value equal to the full insurable replacement value of the foregoing. The policy shall name Landlord additional named insured and loss payee and Landlord's mortgagee as additional insureds and loss payees. (ii) Commercial general liability insurance naming Landlord as additional named insured and Landlord's mortgagee as additional insureds against any and all claims as are customarily covered under a standard policy form routinely accepted by Landlord's mortgagee, for bodily injury and property damage occurring in or about the Premises arising out of Tenant's use and occupancy of the Premises. Such insurance shall have a combined single limit of no less than One Million Dollars ($1,000,000) per occurrence with a Two Million Dollar ($2,000,000) aggregate limit and excess umbrella liability insurance in the amount of at least Ten Million Dollars ($10,000,000). Such liability insurance shall be primary and not contributing to any insurance available to Landlord and Landlord's insurance shall be in excess thereto. In no event shall the limits of such insurance be considered as limiting the liability of Tenant under this Lease. No deductible shall apply to this coverage. (iii) Workers' compensation insurance in accordance with statutory law and employers' liability insurance with a limits of not less than $100,000 each accident, $500,000 disease - policy limit, $100,000 disease - each employee. (iv) Builders risk insurance insuring perils covered by the causes of loss - special form (all risk) shall be purchased for the value of the alteration and/or additions made to the Premises when the work is not insured under Tenant's property insurance policy. (v) Business interruption insurance in an amount at least equal to one year's gross rents, naming Landlord and Landlord's mortgagee as loss payees. (vi) Such other insurance which may, from time to time, be reasonably required by Landlord's mortgagee in each case so long as such other insurance is customarily required by the institutional investors or lenders to be carried on similar properties in the Greater Providence, Rhode Island metropolitan area or similar areas. The policies required to be maintained by Tenant shall be with companies having an A.M. Best rating of A-/VII or higher or such higher rating as may be a acceptable to the Securities Valuation Office of the National Association of Insurance Commissioners. Insurers shall be licensed to do business in the state in which the Premises are located and domiciled in the United States. Any deductible amounts under any insurance policies required hereunder shall not exceed $50,000 (except that, provided that so long as Tenant's net worth shall be $50 million or more, the general liability deductible may be as high as $250,000 and the workmen's compensation deductible for the Tenant originally named herein may be as high as $500,000). 48 Exhibit G Subordination, Non-Disturbance and Attornment Agreement Form ------------------------------------------------------------ THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT ("Agreement") is entered into as of ________________, 200_ (the "Effective Date") by and between __________________________________________ (together with its successors and assigns, the "Mortgagee"), and ___________________________, a __________________ (hereinafter, collectively the "Tenant"), with reference to the following facts: A. _______________________, a ___________________, whose address is ______________________________ (the "Landlord") owns fee simple title or a leasehold interest in the real property described in Exhibit "A" attached hereto (the "Property"). B. Mortgagee [has made] [intends to make] a loan to Landlord in the original principal amount of ______________________ Dollars ($______________) (the "Loan"). C. To secure the Loan, Landlord [has encumbered] [intends to encumber] [all] [a certain portion of] the Property by entering into that certain Mortgage [to be] dated _____________, ___ in favor of Mortgagee (as amended, increased, renewed, extended, spread, consolidated, severed, restated, or otherwise changed from time to time, the "Mortgage") to be recorded in the [Recorder of Deeds' Office] in and for the County of ______________, State of ________________. D. Pursuant to the Lease effective ______________, (the "Lease"), Landlord demised to Tenant [all] [a portion] of the Property consisting of the following (the "Leased Premises"): ______________________________________________. E. Tenant and Mortgagee desire to agree upon the relative priorities of their interests in the Property and their rights and obligations if certain events occur. NOW, THEREFORE, for good and sufficient consideration, Tenant and Mortgagee agree: 1. Definitions. The following terms shall have the following meanings for purposes of this Agreement. (a) Foreclosure Event. A "Foreclosure Event" means: (i) foreclosure under the Mortgage; (ii) any other exercise by Mortgagee of rights and remedies (whether under the Mortgage or under applicable law, including bankruptcy law) as holder of the Loan and/or the Mortgage, as a result of which a Successor Landlord becomes owner of the Property; or (iii) delivery by Landlord to Mortgagee (or its designee or nominee) of a deed or other conveyance of Landlord's interest in the Property in lieu of any of the foregoing. (b) Former Landlord. A "Former Landlord" means Landlord and any other party that was landlord under the Lease at any time before the occurrence of any attornment under this Agreement. (c) Offset Right. An "Offset Right" means any right or alleged right of Tenant to any offset, defense (other than one arising from actual payment and performance, which payment and performance would bind a Successor Landlord pursuant to this Agreement), claim, counterclaim, reduction, deduction, or abatement against Tenant's payment of Rent or performance of Tenant's 49 other obligations under the Lease, arising (whether under the Lease or under applicable law) from Landlord's breach or default under the Lease. (d) Rent. The "Rent" means any fixed rent, base rent or additional rent under the Lease. (e) Successor Landlord. A "Successor Landlord" means any party that becomes owner of the Property as the result of a Foreclosure Event. (f) Termination Right. A "Termination Right" means any right of Tenant to cancel or terminate the Lease or to claim a partial or total eviction arising (whether under the Lease or under applicable law) from Landlord's breach or default under the Lease. (g) Other Capitalized Terms. If any capitalized term is used in this Agreement and no separate definition is contained in this Agreement, then such term shall have the same respective definition as set forth in the Lease. 2. Subordination. The Lease, as the same may hereafter be modified, amended or extended, shall be, and shall at all times remain, subject and subordinate to the terms conditions and provisions of the Mortgage, the lien imposed by the Mortgage, and all advances made under the Mortgage. 3. Nondisturbance, Recognition and Attornment. (a) No Exercise of Mortgage Remedies Against Tenant. So long as the Tenant is not in default under this Agreement or under the Lease beyond any applicable grace or cure periods (an "Event of Default"), Mortgagee (i) shall not terminate or disturb Tenant's possession of the Leased Premises under the Lease, except in accordance with the terms of the Lease and this Agreement and (ii) shall not name or join Tenant as a defendant in any exercise of Mortgagee's rights and remedies arising upon a default under the Mortgage unless applicable law requires Tenant to be made a party thereto as a condition to proceeding against Landlord or prosecuting such rights and remedies. In the latter case, Mortgagee may join Tenant as a defendant in such action only for such purpose and not to terminate the Lease or otherwise adversely affect Tenant's rights under the Lease or this Agreement in such action. (b) Recognition and Attornment. Upon Successor Landlord taking title to the Property (i) Successor Landlord shall be bound to Tenant under all the terms and conditions of the Lease (except as provided in this Agreement); (ii) Tenant shall recognize and attorn to Successor Landlord as Tenant's direct landlord under the Lease as affected by this Agreement; and (iii) the Lease shall continue in full force and effect as a direct lease, in accordance with its terms (except as provided in this Agreement), between Successor Landlord and Tenant. Tenant hereby acknowledges notice that pursuant to the Mortgage and assignment of rents, leases and profits, Landlord has granted to the Mortgagee an absolute, present assignment of the Lease and Rents which provides that Tenant continue making payments of Rents and other amounts owed by Tenant under the Lease to the Landlord and to recognize the rights of Landlord under the Lease until notified otherwise in writing by the Mortgagee. After receipt of such notice from Mortgagee, the Tenant shall thereafter make all such payments directly to the Mortgagee or as the Mortgagee may otherwise direct, without any further inquiry on the part of the Tenant. Landlord consents to the foregoing and waives any right, claim or demand which Landlord may have against Tenant by reason of such payments to Mortgagee or as Mortgagee directs. 50 (c) Further Documentation. The provisions of this Article 3 shall be effective and self-operative without any need for Successor Landlord or Tenant to execute any further documents. Tenant and Successor Landlord shall, however, confirm the provisions of this Article 3 in writing upon request by either of them within ten (10) days of such request. 4. Protection of Successor Landlord. Notwithstanding anything to the contrary in the Lease or the Mortgage, Successor Landlord shall not be liable for or bound by any of the following matters: (a) Claims Against Former Landlord. Any Offset Right that Tenant may have against any Former Landlord relating to any event or occurrence before the date of attornment, including any claim for damages of any kind whatsoever as the result of any breach by Former Landlord that occurred before the date of attornment. The foregoing shall not limit either (i) Tenant's right to exercise against Successor Landlord any Offset Right otherwise available to Tenant because of events occurring after the date of attornment or (ii) Successor Landlord's obligation to correct any conditions that existed as of the date of attornment and violate Successor Landlord's obligations as landlord under the Lease. (b) Prepayments. Any payment of Rent that Tenant may have made to Former Landlord more than thirty (30) days before the date such Rent was first due and payable under the Lease with respect to any period after the date of attornment other than, and only to the extent that, the Lease expressly required such a prepayment. (d) Payment; Security Deposit; Work. Any obligation: (i) to pay Tenant any sum(s) that any Former Landlord owed to Tenant unless such sums, if any, shall have been actually delivered to Mortgagee by way of an assumption of escrow accounts or otherwise; (ii) with respect to any security deposited with Former Landlord, unless such security was actually delivered to Mortgagee; (iii) to commence or complete any initial construction of improvements in the Leased Premises or any expansion or rehabilitation of existing improvements thereon; (iv) to reconstruct or repair improvements following a fire, casualty or condemnation; or (v) arising from representations and warranties related to Former Landlord. (e) Modification, Amendment or Waiver. Any modification or amendment of the Lease, or any waiver of the terms of the Lease, made without Mortgagee's written consent. (f) Surrender, Etc. Any consensual or negotiated surrender, cancellation, or termination of the Lease, in whole or in part, agreed upon between Landlord and Tenant, unless effected unilaterally by Tenant pursuant to the express terms of the Lease. 5. Exculpation of Successor Landlord. Notwithstanding anything to the contrary in this Agreement or the Lease, Successor Landlord's obligations and liability under the Lease shall never extend beyond Successor Landlord's (or its successors' or assigns') interest, if any, in the Leased Premises from time to time, including insurance and condemnation proceeds, security deposits, escrows, Successor Landlord's interest in the Lease, and the proceeds from any sale, lease or other disposition of the Property (or any portion thereof) by Successor Landlord (collectively, the "Successor Landlord's Interest"). Tenant shall look exclusively to Successor Landlord's Interest (or that of its successors and assigns) for payment or discharge of any obligations of Successor Landlord under the Lease as affected by this Agreement. If Tenant obtains any money judgment against Successor Landlord with respect to the Lease or the relationship between Successor Landlord and Tenant, then Tenant shall look solely to Successor Landlord's Interest (or that of its successors and assigns) to collect such judgment. Tenant shall not collect or attempt to collect any such judgment out of any other assets of Successor Landlord. 51 6. Mortgagee's Right to Cure. Notwithstanding anything to the contrary in the Lease or this Agreement, before exercising any Offset Right or Termination Right: 7. Notice to Mortgagee. Tenant shall provide Mortgagee with notice of the breach or default by Landlord giving rise to same (the "Default Notice") and, thereafter, the opportunity to cure such breach or default as provided for below. 8. Mortgagee's Cure Period. After Mortgagee receives a Default Notice, Mortgagee shall have a period of thirty (30) days beyond the time available to Landlord under the Lease in which to cure the breach or default by Landlord. Mortgagee shall have no obligation to cure (and shall have no liability or obligation for not curing) any breach or default by Landlord, except to the extent that Mortgagee agrees or undertakes otherwise in writing. In addition, as to any breach or default by Landlord the cure of which requires possession and control of the Property, provided that Mortgagee undertakes by written notice to Tenant to exercise reasonable efforts to cure or cause to be cured by a receiver such breach or default within the period permitted by this paragraph, Mortgagee's cure period shall continue for such additional time (the "Extended Cure Period") as Mortgagee may reasonably require to either: (i) obtain possession and control of the Property with due diligence and thereafter cure the breach or default with reasonable diligence and continuity; or (ii) obtain the appointment of a receiver and give such receiver a reasonable period of time in which to cure the default. 9. Miscellaneous. (a) Notices. Any notice or request given or demand made under this Agreement by one party to the other shall be in writing, and may be given or be served by hand delivered personal service, or by depositing the same with a reliable overnight courier service or by deposit in the United States mail, postpaid, registered or certified mail, and addressed to the party to be notified, with return receipt requested or by telefax transmission, with the original machine- generated transmit confirmation report as evidence of transmission. Notice deposited in the mail in the manner hereinabove described shall be effective from and after the expiration of three (3) days after it is so deposited; however, delivery by overnight courier service shall be deemed effective on the next succeeding business day after it is so deposited and notice by personal service or telefax transmission shall be deemed effective when delivered to its addressee or within two (2) hours after its transmission unless given after 3:00 p.m. on a business day, in which case it shall be deemed effective at 9:00 a.m. on the next business day. For purposes of notice, the addresses and telefax number of the parties shall, until changed as herein provided, be as follows: If to the Mortgagee, at: If to the Tenant, at: Attn: Telecopy No.: (___) 52 (b) Successors and Assigns. This Agreement shall bind and benefit the parties, their successors and assigns, any Successor Landlord, and its successors and assigns. If Mortgagee assigns the Mortgage, then upon delivery to Tenant of written notice thereof accompanied by the assignee's written assumption of all obligations under this Agreement, all liability of the assignor shall terminate. (c) Entire Agreement. This Agreement constitutes the entire agreement between Mortgagee and Tenant regarding the subordination of the Lease to the Mortgage and the rights and obligations of Tenant and Mortgagee as to the subject matter of this Agreement. (d) Interaction with Lease and with Mortgage. If this Agreement conflicts with the Lease, then this Agreement shall govern as between the parties and any Successor Landlord, including upon any attornment pursuant to this Agreement. This Agreement supersedes, and constitutes full compliance with, any provisions in the Lease that provide for subordination of the Lease to, or for delivery of nondisturbance agreements by the holder of, the Mortgage. (e) Mortgagee's Rights and Obligations. Except as expressly provided for in this Agreement, Mortgagee shall have no obligations to Tenant with respect to the Lease. If an attornment occurs pursuant to this Agreement, then all rights and obligations of Mortgagee under this Agreement shall terminate, without thereby affecting in any way the rights and obligations of Successor Landlord provided for in this Agreement. (f) Interpretation; Governing Law. The interpretation, validity and enforcement of this Agreement shall be governed by and construed under the internal laws of the State in which the Leased Premises are located, excluding such State's principles of conflict of laws. (g) Amendments. This Agreement may be amended, discharged or terminated, or any of its provisions waived, only by a written instrument executed by the party to be charged. (h) Due Authorization. Tenant represents to Mortgagee that it has full authority to enter into this Agreement, which has been duly authorized by all necessary actions. Mortgagee represents to Tenant that it has full authority to enter into this Agreement, which has been duly authorized by all necessary actions. (i) Execution. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. [THIS SPACE INTENTIONALLY LEFT BLANK] 53 IN WITNESS WHEREOF, the Mortgagee and Tenant have caused this Agreement to be executed as of the date first above written. MORTGAGEE: TENANT: ____________________________ a __________________________ By:_________________________ Name: Title: 54 LANDLORD'S CONSENT ------------------ Landlord consents and agrees to the foregoing Agreement, which was entered into at Landlord's request. The foregoing Agreement shall not alter, waive or diminish any of Landlord's obligations under the Mortgage or the Lease. The above Agreement discharges any obligations of Mortgagee under the Mortgage and related loan documents to enter into a nondisturbance agreement with Tenant. Landlord is not a party to the above Agreement. LANDLORD: _____________________________ By:__________________________ Name: Title: Dated: __________________, ____ 55 MORTGAGEE'S ACKNOWLEDGMENT -------------------------- STATE OF ____________ ) ) ss. COUNTY OF ___________ ) On the ___ day of _______ in the year _______ before me, the undersigned, a Notary Public in and for said state, personally appeared ________________________, proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument. ____________________________________ Signature of Notary Public 56 TENANT'S ACKNOWLEDGMENT ----------------------- STATE OF ____________ ) ) ss. COUNTY OF ___________ ) On the ___ day of _______ in the year _______ before me, the undersigned, a Notary Public in and for said state, personally appeared ________________________, proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument. ____________________________________ Signature of Notary Public 57 LIST OF EXHIBITS ---------------- If any exhibit is not attached hereto at the time of execution of this Agreement, it may thereafter be attached by written agreement of the parties, evidenced by initialing said exhibit. Exhibit "A" - Legal Description of the Land 58 Capital Expenditure Items See the attached letter dated April 23, 2003 from David Holloway of Taurus Investment Holdings, LLC to Jon Kosheff of Parlex Corporation 59 TAURUS INVESTMENT HOLDINGS, LLC 118 MILK STREET, BOSTON, MA 02109 TEL: 617.357.4440 FAX: 617.357.4446 www.tiholdings.com April 23, 2003 Mr. Jon Kosheff CFO Parlex Corporation One Parlex Place Methuen, MA 01844 RE: 2003 Capital Improvements - Methuen, MA and Cranston, RI Dear Jon: The purpose of this letter is to enumerate the required capital improvements to be completed by Parlex during 2003 at the above two facilities. Parlex will contractually commit to the completion of these items and the expenditures of these amounts. These repairs and associated costs are derived from the EBI Property Condition Reports and our experience in operating buildings of this nature. Methuen - ------- Groundwater Infiltration Repair $ 7,500 Roof Repairs/Drainage $ 15,000 Full Depth Asphalt Repairs $ 15,000 New Asphalt Overlay $ 35,000 HVAC Replacement $ 44,688 Total - Methuen $117,185 Cranston - -------- Parking Lot Repairs $ 20,000 Total - Cranston $ 20,000 Grand Total $137,185 These items are to be completed to our reasonable satisfaction. Any unspent funds will be contributed by Parlex to the Security Deposit for the respective facilities. Sincerely, /s/ David Holloway David Holloway Vice President BOSTON DALLAS MUNICH ORLANDO TORONTO WASHINGTON DC EX-10 13 park210i.txt EXHIBIT 10.II EXHIBIT 10.II Silicon Valley Bank Loan and Security Agreement Borrower: PARLEX CORPORATION, a Massachusetts corporation Address: One Parlex Place Methuen, Massachusetts 01844 Borrower: PARLEX DYNAFLEX CORPORATION, a California corporation Address: One Parlex Place Methuen, Massachusetts 01844 Borrower: POLY-FLEX CIRCUITS, INC., a Rhode Island corporation Address: 28 Kenney Drive Cranston, Rhode Island 02920 Date: June 11, 2003 THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between SILICON VALLEY BANK, a California-chartered bank, with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production office located at One Newton Executive Park, Suite 200, 2221 Washington Street, Newton, Massachusetts 02462 ("Silicon") and the borrowers named above (jointly and severally, individually and collectively, "Borrower"), with offices located at the above address ("Borrower's Address"). The Schedule to this Agreement (the "Schedule") shall for all purposes be deemed to be part of this Agreement, and the same are integral parts of this Agreement. (Definitions of certain terms used in this Agreement are set forth in Section 8 below.) 1. LOANS. 1.1 Loans. Silicon will make loans to Borrower (the "Loans") up to the amounts (the "Credit Limit") shown on the Schedule, provided no Default or Event of Default has occurred and is continuing, and subject to deduction of any Reserves for accrued interest and such other Reserves as Silicon deems proper from time to time. Amounts borrowed may be repaid and reborrowed during the term of this Agreement. 1.2 Interest. All Loans and all other monetary Obligations shall bear interest at the rate shown on the Schedule, except where expressly set forth to the contrary in this Agreement. Interest shall be payable monthly, on the last day of the month. Interest may, in Silicon's discretion after the occurrence of a Default, be charged to Borrower's loan account, and the same shall thereafter bear interest at the same rate as the other Loans. Silicon may also, in its discretion, charge interest to Borrower's Deposit Accounts maintained with Silicon. 1.3 Overadvances. If at any time or for any reason the total of all outstanding Loans and all other Obligations exceeds the Credit Limit (an "Overadvance"), Borrower shall immediately pay the amount of the excess to Silicon, without notice or demand. Without limiting Borrower's obligation to repay to Silicon on demand the amount of any Overadvance, Borrower agrees to pay Silicon interest on the outstanding amount of any Overadvance, on demand, at a rate equal to the interest rate which would otherwise be applicable to the Overadvance, plus an additional two percent (2%) per annum. Silicon Valley Bank Schedule to Loan and Security Agreement 1.4 Fees. Borrower shall pay Silicon the fees shown on the Schedule, which are in addition to all interest and other sums payable to Silicon and are not refundable. 1.5 Letters of Credit. In addition to Section 1.6 and Section 1.7, at the request of Borrower, Silicon shall, provided no Default or Event of Default has then occurred and is continuing, issue or arrange for the issuance of letters of credit for the account of Borrower, in each case in form and substance satisfactory to Silicon in its sole discretion (collectively, "Letters of Credit"). The aggregate face amount of all outstanding Letters of Credit from time to time (plus all Silicon exposure under any foreign exchange contracts and Cash Management Services) shall not exceed the amount shown on the Schedule (the "Letter of Credit Sublimit"), and shall be reserved against Loans which would otherwise be available hereunder. Borrower shall pay all bank charges (including charges of Silicon) for the issuance of Letters of Credit, together with such additional fee as Silicon's letter of credit department shall charge in connection with the issuance of the Letters of Credit. Any payment by Silicon under or in connection with a Letter of Credit shall constitute a Loan hereunder on the date such payment is made. Each Letter of Credit shall have an expiry date no later than thirty days prior to the Maturity Date. Borrower hereby agrees to indemnify, save, and hold Silicon harmless from any loss, cost, expense, or liability, including payments made by Silicon, expenses, and reasonable attorneys' fees incurred by Silicon arising out of or in connection with any Letters of Credit. Borrower agrees to be bound by the regulations and reasonable interpretations of the issuer of any Letters of Credit guarantied by Silicon and opened for Borrower's account or by Silicon's interpretations of any Letter of Credit issued by Silicon for Borrower's account, and Borrower understands and agrees that Silicon shall not be liable for any error, negligence, or mistake, whether of omission or commission, in following Borrower's instructions or those contained in the Letters of Credit or any modifications, amendments, or supplements thereto. Borrower understands that Letters of Credit may require Silicon to indemnify the issuing bank for certain costs or liabilities arising out of claims by Borrower against such issuing bank. Borrower hereby agrees to indemnify and hold Silicon harmless with respect to any loss, cost, expense, or liability incurred by Silicon under any Letter of Credit as a result of Silicon's indemnification of any such issuing bank. The provisions of this Loan Agreement, as it pertains to Letters of Credit, and any other present or future documents or agreements between Borrower and Silicon relating to Letters of Credit are cumulative. 1.6 Foreign Exchange Sublimit. In addition to Section 1.5 and Section 1.7, Borrower may use up to the amount set forth on the Schedule in connection with foreign exchange forward contracts with Silicon under which Borrower commits to purchase from or sell to Silicon a set amount of foreign currency more than one business day after the contract date (the "FX Contract"). Silicon shall subtract up to a maximum of 10% of the amount of each outstanding FX Contract from the foreign exchange sublimit (the "FX Reserve"). Silicon may terminate the FX Contracts if an Event of Default occurs. 1.7 Cash Management Services Sublimit. In addition to Section 1.5 and Section 1.6 above, Borrower may also use up to the amount set forth on the Schedule for Cash Management Services. Such aggregate amounts utilized under the Cash Management Services Sublimit shall at all times reduce the amount otherwise available for Loans, letters of credit, foreign exchange contracts or other credit accommodations hereunder. Any amounts Silicon pays on behalf of Borrower or any amounts that are not paid by Borrower for any Cash Management Services will be treated as Loans hereunder and will accrue interest at the interest rate applicable to Loans. 1.8 Designation of Agent. Each Borrower hereby designates Parlex Corporation, a Massachusetts corporation (the "Agent") as the agent of that Borrower to discharge the duties and responsibilities of the Agent as provided herein. 1.9 Operation of Agreement. (a) Except as otherwise permitted by Silicon, loans hereunder shall be requested solely by the Agent as agent for each Borrower. 2 Silicon Valley Bank Schedule to Loan and Security Agreement (b) Any Loan which may be made by Silicon under this Agreement and which is directed to the Agent is received by the Agent in trust for that Borrower who is intended to receive such Loan. The Agent shall distribute the proceeds of any such Loan solely to that Borrower. Each Borrower shall be directly indebted to Silicon for each Loan distributed to any Borrower by the Agent, together with all accrued interest thereon, as if that amount had been advanced directly by Silicon to a Borrower (whether or not the subject Loan was based upon the accounts and/or inventory or other assets of the Borrower which actually received such distribution), in addition to which each Borrower shall be liable to Silicon for all Obligations under this Agreement, whether or not the proceeds of the Loan are distributed to any particular Borrower. (c) Silicon shall have no responsibility to inquire as to the distribution of Loans made by Silicon through the Agent as described herein. 1.10 Loans Directly to Borrower. (a) If, for any reason, and at any time during the term of this Agreement, (i) any Borrower, including the Agent, as agent for each Borrower, shall be unable to, or prohibited from carrying out the terms and conditions of this Agreement (as determined by Silicon in Silicon's sole and absolute discretion); or (ii) Silicon deems it inexpedient (in Silicon's sole and absolute discretion) to continue making Loans to or for the account of any particular Borrower, or to channel such loans and Loans through the Agent, then Silicon may make Loans directly to such Borrower as Silicon determines to be expedient, which Loans may be made without regard to the procedures otherwise included in this Article 1. (b) In the event that Silicon determines to forgo the procedures included herein pursuant to which Loans are to be channeled through the Agent, then Silicon may designate one or more Borrower to fulfill the financial and other reporting requirements otherwise imposed herein upon the Agent. (c) Each Borrower shall remain liable to Silicon for the payment and performance of all Obligations (which payment and performance shall continue to be secured by all Collateral) notwithstanding any determination by Silicon to cease making Loans to or for the benefit of any Borrower. 1.11 Continuation of Authority of Agent. The authority of the Agent to request Loans on behalf of, and to bind, each Borrower, shall continue unless and until Silicon acts as provided in Section 1.10, above, or Silicon actually receives: (a) written notice of: (i) the termination of such authority, and (ii) the subsequent appointment of a successor Agent, which notice is executed by the respective Presidents of each Borrower (other than the President of the Agent being replaced) then eligible for borrowing under this Agreement; and (b) written notice from the successor Agent (i) accepting such appointment; (ii) acknowledging that the removal and appointment has been effected by the respective Presidents of each Borrower eligible for borrowing under the within Agreement; and (iii) acknowledging that from and after the date of appointment, the newly appointed Agent shall be bound by the terms hereof, and that as used herein, the term "Agent" shall mean and include the newly appointed Agent. 1.12 Indemnification. With the exception of any claim in which final judgment has been rendered against Silicon by a court of competent jurisdiction in which Silicon has been found to have acted in a grossly negligent manner and/or in bad faith, the Agent and each Borrower respectively shall indemnify, defend, and save and hold Silicon harmless from and against any liabilities, claims, demands, expenses, or losses made against or suffered by Silicon on 3 Silicon Valley Bank Schedule to Loan and Security Agreement account of, or arising out of, this Agreement, Silicon's reliance upon Loan requests made by the Agent, or any other action taken by Silicon hereunder or under any of Silicon's various agreements with the Agent and/or any Borrower and/or any other Person arising under this Agreement. 1.13 Sale/Leaseback. In addition to any other conditions precedent set forth in this Agreement, Silicon will not make any Loans hereunder or provide any other financial accommodations to, or for the benefit of, Borrower unless and until Borrower enters into a sale/leaseback transaction with respect to certain real property owned by Borrower located at One Parlex Place, Methuen, Massachusetts and 28 Kenney Drive, Cranston, Rhode Island (the" Sale/Leaseback Transaction"). The Sale/Leaseback Transaction shall be on terms reasonably acceptable to Silicon and shall provide Borrower cash proceeds of at least $8,000,000. Borrower shall also use its best efforts to cause such purchaser/lessor of the real property to enter into an agreement with Silicon in accordance with Section 3.4 hereof. 2. SECURITY INTEREST. 2.1 Security Interest. To secure the payment and performance of all of the Obligations when due, and the performance of each of the Borrower's duties under this Agreement and all documents executed in connection herewith, Borrower hereby grants to Silicon a continuing security interest in all of Borrower's interest in the following, whether now owned or hereafter acquired, and wherever located: All Inventory, Equipment, Payment Intangibles, Letter-of-Credit Rights, Supporting Obligations, Receivables, and General Intangibles, including, without limitation, all of Borrower's Intellectual Property, all of Borrower's Deposit Accounts, and all money, and all property now or at any time in the future in Silicon's possession (including claims and credit balances), and all proceeds (including proceeds of any insurance policies, proceeds of proceeds and claims against third parties), all products and all books and records related to any of the foregoing (all of the foregoing, together with all other property in which Silicon may now or in the future be granted a lien or security interest, is referred to herein, collectively, as the "Collateral"). The security interest granted herein shall be a first priority security interest in the Collateral. After the occurrence of a Default, Silicon may place a "hold" on any Deposit Account pledged as collateral. Borrower is not a party to, nor is bound by, any material license or other material agreement with respect to which the Borrower is the licensee that prohibits or otherwise restricts Borrower from granting a security interest in Borrower's interest in such license or agreement or any other property. Without prior consent from Silicon, Borrower shall not enter into, or become bound by, any such license or agreement which is reasonably likely to have a material impact on Silicon's business or financial condition. Borrower shall take such steps as Silicon reasonably requests to obtain the consent of, or waiver by, any Person whose consent or waiver is necessary for all such licenses or contract rights to be deemed "Collateral" and for Silicon to have a security interest in it that might otherwise be restricted or prohibited by law or by the terms of any such license or agreement, whether now existing or entered into in the future. If Borrower shall at any time, acquire a commercial tort claim with a reasonable value, in Borrower's good faith estimation, or $10,000 or more, Borrower shall promptly notify Silicon in a writing signed by Borrower of the brief details thereof and grant to Silicon in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Silicon. 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER. In order to induce Silicon to enter into this Agreement and to make Loans, Borrower represents and warrants to Silicon as follows, and Borrower covenants that the following representations will continue to be true, and that Borrower will at all times comply with all of the following covenants: 3.1 Corporate Existence and Authority. Borrower, if a corporation, is and will continue to be, duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. Borrower is and will continue to be qualified and licensed to do business in all jurisdictions in which any failure to do so would have a material adverse 4 Silicon Valley Bank Schedule to Loan and Security Agreement effect on Borrower. The execution, delivery and performance by Borrower of this Agreement, and all other documents contemplated hereby (i) have been duly and validly authorized, (ii) are enforceable against Borrower in accordance with their terms (except as enforcement may be limited by equitable principles and by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to creditors' rights generally), (iii) do not violate Borrower's articles or certificate of incorporation, Borrower's by-laws, or any law or any material agreement or instrument which is binding upon Borrower or its property, and (iv) do not constitute grounds for acceleration of any material indebtedness or obligation under any material agreement or instrument which is binding upon Borrower or its property. 3.2 Name; Trade Names and Styles. The name of Borrower set forth in the heading to this Agreement is its correct name. Listed on the Schedule are all prior names of Borrower and all of Borrower's present and prior trade names. Borrower shall give Silicon 30 days' prior written notice before changing its name or doing business under any other name. Borrower has complied, and will in the future comply, with all laws relating to the conduct of business under a fictitious business name. 3.3 Place of Business; Location of Collateral. The address set forth in the heading to this Agreement is Borrower's chief executive office. In addition, Borrower has places of business at the locations set forth on the Schedule. Collateral is only located at Borrower's chief executive office or the locations set forth in the Schedule. Borrower will give Silicon at least 30 days prior written notice before opening any additional place of business, changing its chief executive office, changing its state of formation or moving any of the Collateral to a location other than Borrower's Address or one of the locations set forth on the Schedule. 3.4 Title to Collateral; Permitted Liens. Borrower is now, and will at all times in the future be, the sole owner of all the Collateral, except for items of Equipment which are leased by Borrower. The Collateral now is and will remain free and clear of any and all liens, charges, security interests, encumbrances and adverse claims, except for Permitted Liens. Silicon now has, and will continue to have, a first-priority perfected and enforceable security interest in all of the Collateral, subject only to the Permitted Liens, provided that Silicon files (and continues) such financing statements as may be necessary, and Borrower will at all times defend Silicon and the Collateral against all claims of others. None of the Collateral now is or will be affixed to any real property in such a manner, or with such intent, as to become a fixture. Borrower is not and will not become a lessee under any real property lease pursuant to which the lessor may obtain any rights in any of the Collateral and no such lease now prohibits, restrains, impairs or will prohibit, restrain or impair Borrower's right to remove any Collateral from the leased premises. Whenever any Collateral is located upon premises in which any third party has an interest (whether as owner, mortgagee, beneficiary under a deed of trust, lien or otherwise), Borrower shall, whenever requested by Silicon, use its best efforts to cause such third party to execute and deliver to Silicon, in form acceptable to Silicon, such waivers and subordinations as Silicon shall specify, so as to ensure that Silicon's rights in the Collateral are, and will continue to be, superior to the rights of any such third party. Borrower will keep in full force and effect, and will comply with all the terms of, any lease of real property where any of the Collateral now or in the future may be located. All of Borrower's subsidiaries' assets are now and will hereafter remain free and clear of any and all liens, charges, security interests, encumbrances and adverse claims, other than Permitted Liens. 3.5 Maintenance of Collateral. Borrower will maintain the Collateral in good working condition, and Borrower will not use the Collateral for any unlawful purpose. Borrower will immediately advise Silicon in writing of any material loss or damage to the Collateral. 3.6 Books and Records. Borrower has maintained and will maintain at Borrower's address complete and accurate books and records, comprising an accounting system in accordance with generally accepted accounting principles. 5 Silicon Valley Bank Schedule to Loan and Security Agreement 3.7 Financial Condition, Statements and Reports. All financial statements now or in the future delivered to Silicon have been, and will be, prepared in conformity with generally accepted accounting principles and now and in the future will be true and correct in all material respects, at the times and for the periods therein stated. Between the last date covered by any such statement provided to Silicon and the date hereof, there has been no material adverse change in the financial condition or business of Borrower. Borrower is now and will continue to be solvent. 3.8 Tax Returns and Payments; Pension Contributions. Borrower has timely filed, and will timely file, all tax returns and reports required by foreign, federal, state and local law, and Borrower has timely paid, and will timely pay, all foreign, federal, state and local taxes, assessments, deposits and contributions now or in the future owed by Borrower. Borrower may, however, defer payment of any contested taxes, provided that Borrower (i) in good faith contests Borrower's obligation to pay the taxes by appropriate proceedings promptly and diligently instituted and conducted, (ii) notifies Silicon in writing of the commencement of, and any material development in, any proceedings relating to an amount in controversy of not less than $25,000, and (iii) posts bonds or takes any other steps required to keep the contested taxes from becoming a lien upon any of the Collateral. Borrower is unaware of any claims or adjustments proposed for any of Borrower's prior tax years which could result in additional taxes becoming due and payable by Borrower. Borrower has paid, and shall continue to pay all amounts necessary to fund all present and future pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not and will not withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any such plan which could result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency. Borrower shall, at all times, utilize the services of an outside payroll service providing for the automatic deposit of all payroll taxes payable by Borrower. 3.9 Compliance with Law. Borrower has complied, and will comply, in all material respects, with all provisions of all foreign, federal, state and local laws and regulations relating to Borrower, including, but not limited to, those relating to Borrower's ownership of real or personal property, the conduct and licensing of Borrower's business, and all environmental matters. 3.10 Litigation. Except as disclosed in the Schedule, there is no claim, suit, litigation, proceeding or investigation pending or (to best of Borrower's knowledge) threatened by or against or affecting Borrower in any court or before any governmental agency (or any basis therefor known to Borrower) which may result, either separately or in the aggregate, in any material adverse change in the financial condition or business of Borrower, or in any material impairment in the ability of Borrower to carry on its business in substantially the same manner as it is now being conducted. Borrower will promptly inform Silicon in writing of any claim, proceeding, litigation or investigation in the future threatened or instituted by or against Borrower involving any single claim of $100,000 or more, or involving $250,000 or more in the aggregate. 3.11 Use of Proceeds. All proceeds of all Loans shall be used solely for working capital purposes. Borrower is not purchasing or carrying any "margin stock" (as defined in Regulation U of the Board of Governors of the Federal Reserve System) and no part of the proceeds of any Loan will be used to purchase or carry any "margin stock" or to extend credit to others for the purpose of purchasing or carrying any "margin stock." 3.12 Indebtedness. Except as shown on the Schedule hereto, Borrower shall not create, incur, assume, or be liable for any indebtedness for money borrowed, or permit any of Borrower's subsidiaries to do so. Notwithstanding the foregoing, Borrower's subsidiaries, Parlex (Shanghai) Circuit Co., Ltd. and Parlex (Shanghai) Interconnect Products Co., Ltd., may incur indebtedness (provided such indebtedness is not guaranteed by any Borrower except as set forth in Section 5.5(ix)) of not more than US$8,000,000 in the aggregate. 4. RECEIVABLES. 6 Silicon Valley Bank Schedule to Loan and Security Agreement 4.1 Representations Relating to Receivables. Borrower represents and warrants to Silicon as follows: Each Receivable with respect to which Loans are requested by Borrower shall, on the date each Loan is requested and made, (i) represent an undisputed bona fide existing unconditional obligation of the Account Debtor created by the sale, delivery, and acceptance of goods or the rendition of services in the ordinary course of Borrower's business, and (ii) meet the Minimum Eligibility Requirements set forth in Section 8 below. 4.2 Representations Relating to Documents and Legal Compliance. Borrower represents and warrants to Silicon as follows: All statements made and all unpaid balances appearing in all invoices, instruments and other documents evidencing the Receivables are and shall be true and correct and all such invoices, instruments and other documents and all of Borrower's books and records are and shall be genuine and in all respects what they purport to be, and all signatories and endorsers have the capacity to contract. All sales and other transactions underlying or giving rise to each Receivable shall fully comply with all applicable laws and governmental rules and regulations. All signatures and endorsements on all documents, instruments, and agreements relating to all Receivables are and shall be genuine, and all such documents, instruments and agreements are and shall be legally enforceable in accordance with their terms. 4.3 Schedules and Documents Relating to Receivables. Borrower shall deliver to Silicon transaction reports and loan requests, schedules and assignments of all Receivables, and schedules of collections, all on Silicon's standard forms; provided, however, that Borrower's failure to execute and deliver the same shall not affect or limit Silicon's security interest and other rights in all of Borrower's Receivables, nor shall Silicon's failure to advance or lend against a specific Receivable affect or limit Silicon's security interest and other rights therein. In the event Borrower has elected to be on "non-borrowing reporting status" (see Section 6 of the Schedule), Borrower shall furnish Silicon with a Loan request at least thirty (30) days prior to the requested funding date. Otherwise, Loan requests received after 12:00 Noon will not be considered by Silicon until the next Business Day. Upon five (5) days prior written notice, Borrower shall furnish Silicon with copies (or, at Silicon's request after the occurrence of an Event of Default, originals) of all contracts, orders, invoices, and other similar documents, and all original shipping instructions, delivery receipts, bills of lading, and other evidence of delivery, for any goods the sale or disposition of which gave rise to such Receivables, and Borrower warrants the genuineness of all of the foregoing. Borrower shall also furnish to Silicon an aged accounts receivable trial balance in such form and at such intervals as Silicon shall reasonably request. In addition, Borrower shall deliver to Silicon the originals of all instruments, chattel paper, security agreements, guarantees and other documents and property evidencing or securing any Receivables, immediately upon receipt thereof and in the same form as received, with all necessary indorsements, all of which shall be with recourse. Borrower shall also provide Silicon with copies of all credit memos within two days after the date issued. 4.4 Collection of Receivables. Borrower shall cause the Account Debtors to remit all Receivables to Silicon and Silicon shall hold all payments on, and proceeds of, Receivables in a lockbox account, or such other "blocked account" as Silicon may specify, pursuant to a blocked account agreement in such form as Silicon may specify. All such payments on, and proceeds of, Receivables shall be applied to the Obligations in such order as Silicon shall determine. Silicon or its designee may, at any time, notify Account Debtors that the Receivables have been assigned to Silicon. 4.5. Remittance of Proceeds. All proceeds arising from the disposition of any Collateral shall be delivered, in kind, by Borrower to Silicon in the original form in which received by Borrower not later than the following Business Day after receipt by Borrower, to be applied to the Obligations in such order as Silicon shall determine; provided that, if no Default or Event of Default has occurred, Borrower shall not be obligated to remit to Silicon the proceeds of the sale of worn out or obsolete equipment disposed of by Borrower in good faith in an arm's length transaction for an aggregate purchase price of $100,000 or less (for all such transactions in any fiscal year). Borrower agrees that it will not commingle proceeds of Collateral with any of Borrower's other funds or property, but will hold such proceeds separate and apart from such other funds and property and in an express trust for Silicon. Nothing in this Section 4.5 limits the restrictions on disposition of Collateral set forth elsewhere in this Agreement. 7 Silicon Valley Bank Schedule to Loan and Security Agreement 4.6 Disputes. Borrower shall notify Silicon promptly of all disputes or claims relating to Receivables relating to an amount in controversy of not less than $50,000. Borrower shall not forgive (completely or partially), compromise or settle any Receivable for less than payment in full, or agree to do any of the foregoing, except that Borrower may do so, provided that: (i) Borrower does so in good faith, in a commercially reasonable manner, in the ordinary course of business, and in arm's length transactions, which are reported to Silicon on the regular reports provided to Silicon; (ii) no Default or Event of Default has occurred and is continuing; and (iii) taking into account all such discounts settlements and forgiveness, the total outstanding Loans will not exceed the Credit Limit. Silicon may, at any time after the occurrence of an Event of Default and the expiration of any cure or grace periods relating thereto, settle or adjust disputes or claims directly with Account Debtors for amounts and upon terms which Silicon considers advisable in its reasonable credit judgment and, in all cases, Silicon shall credit Borrower's Loan account with only the net amounts received by Silicon in payment of any Receivables. 4.7 Returns. Provided no Event of Default has occurred and is continuing, if any Account Debtor returns any Inventory to Borrower with a value in excess of $75,000 in the ordinary course of its business, Borrower shall promptly determine the reason for such return and promptly issue a credit memorandum to the Account Debtor in the appropriate amount (sending a copy to Silicon, if requested). In the event any attempted return occurs after the occurrence of any Event of Default and the expiration of any cure or grace periods relating thereto, Borrower shall (i) hold the returned Inventory in trust for Silicon, (ii) segregate all returned Inventory from all of Borrower's other property, (iii) conspicuously label the returned Inventory as Silicon's property, and (iv) immediately notify Silicon of the return of any Inventory, specifying the reason for such return, the location and condition of the returned Inventory, and on Silicon's request deliver such returned Inventory to Silicon. 4.8 Verification. Silicon may, from time to time, verify directly with the respective Account Debtors the validity, amount and other matters relating to the Receivables, by means of mail, telephone or otherwise, either in the name of Borrower or Silicon or such other name as Silicon may choose. 4.9 No Liability. Silicon shall not under any circumstances be responsible or liable for any shortage or discrepancy in, damage to, or loss or destruction of, any goods, the sale or other disposition of which gives rise to a Receivable, or for any error, act, omission, or delay of any kind occurring in the settlement, failure to settle, collection or failure to collect any Receivable, or for settling any Receivable in good faith for less than the full amount thereof, nor shall Silicon be deemed to be responsible for any of Borrower's obligations under any contract or agreement giving rise to a Receivable. Nothing herein shall, however, relieve Silicon from liability for its own gross negligence or willful misconduct. 5. ADDITIONAL DUTIES OF THE BORROWER. 5.1 Financial and Other Covenants. Borrower shall at all times comply with the financial and other covenants set forth in the Schedule. 5.2 Insurance. Borrower shall, at all times insure all of the tangible personal property Collateral and carry such other business insurance, with insurers reasonably acceptable to Silicon, in such form and amounts as Silicon may reasonably require, and Borrower shall provide evidence of such insurance to Silicon, so that Silicon is satisfied that such insurance is, at all times, in full force and effect. All such insurance policies shall name Silicon as an additional loss payee, and shall contain a lenders loss payee endorsement in form reasonably acceptable to Silicon. Upon receipt of the proceeds of any such insurance, Silicon shall apply such proceeds in reduction of the Obligations as Silicon shall determine in its sole discretion, except that, provided no Default or Event of Default has occurred and is continuing, Silicon shall release to Borrower insurance proceeds with respect to any loss totaling less than $250,000, which shall be utilized by Borrower for the repair or replacement of the items with respect to which the insurance proceeds were paid. Silicon may require reasonable assurance that the insurance proceeds so released will be so used. If Borrower fails to 8 Silicon Valley Bank Schedule to Loan and Security Agreement provide or pay for any insurance, Silicon may, but is not obligated to, obtain the same at Borrower's expense. Borrower shall promptly deliver to Silicon copies of all reports made to insurance companies. 5.3 Reports. Borrower, at its expense, shall provide Silicon with the written reports set forth in the Schedule, and such other written reports with respect to Borrower (including budgets, sales projections, operating plans and other financial documentation), as Silicon shall from time to time reasonably specify. 5.4 Access to Collateral, Books and Records. At reasonable times, and on one Business Day's notice, Silicon, or its agents, shall have the right to inspect the Collateral, and the right to audit and copy Borrower's books and records. Silicon shall keep such information confidential in accordance with Section 9.20 hereof. The foregoing inspections and audits shall be at Borrower's expense and the charge therefor shall be $750 per person per day (or such higher amount as shall represent Silicon's then current standard charge for the same), plus reasonable out of pocket expenses. Borrower will not enter into any agreement with any accounting firm, service bureau or third party to store Borrower's books or records at any location other than Borrower's Address, without prior notice to Silicon. Borrower waives the benefit of any accountant-client privilege or other evidentiary privilege precluding or limiting the disclosure, divulgence or delivery of any of its books and records (except that Borrower does not waive any attorney-client privilege). 5.5 Negative Covenants. Except as may be permitted in the Schedule, Borrower shall not, without Silicon's prior written consent which shall not be unreasonably withheld, do any of the following: (i) merge or consolidate with another corporation or entity; (ii) acquire any assets, except in the ordinary course of business, provided, however, that the Borrower may invest in (a) direct obligations of the United States of America having a maturity of one year or less from the date of investment; (b) investment grade bonds; (c) any other such security for the purpose of obtaining 10-K's and other financial reports, provided that such investment does not exceed One Thousand ($1,000.00) Dollars; (d) the Parlex Shanghai joint venture, Parlex Dynaflex Corporation and in Parlex Asia Pacific Limited in an amount not to exceed $1,000,000 in the aggregate during the term of this Agreement. (iii) enter into any other transaction outside the ordinary course of business; (iv) sell or transfer any Collateral, except for (a) the sale of finished Inventory in the ordinary course of Borrower's business, (b) for the sale of obsolete or unneeded Equipment in the ordinary course of business, or (c) the sale of any other assets, provided that the net book value thereof does not exceed $100,000 in any fiscal year; (v) store any Inventory or other Collateral with any warehouseman or other third party; (vi) sell any Inventory on a sale-or-return, guaranteed sale, consignment, or other contingent basis; (vii) make any loans of any money or other assets, provided, however; that (a) the Borrower may make advances to its affiliates, including its officers and directors, with respect to expenses incurred by such affiliates, which expenses are reimbursable by the Borrower and directly related to the conduct of the Borrower's business; and (b) the Borrower may make loans to Parlex Shanghai in an amount not to exceed $1,000,000 outstanding at any time during the term of this Agreement. 9 Silicon Valley Bank Schedule to Loan and Security Agreement (viii) incur any debts outside the ordinary course of business; (ix) guarantee or otherwise become liable with respect to the obligations of another party or entity (excepting any guarantee for the indebtedness of Parlex (Shanghai) Interconnect Products Co., Inc. in an amount not to exceed $5,000,000 in the aggregate); (x) pay or declare any dividends on Borrower's stock (except for dividends payable solely in stock of Borrower), unless specifically consented to by Silicon in writing; (xi) redeem, retire, purchase or otherwise acquire, directly or indirectly, any of Borrower's stock; (xii) make any change in Borrower's capital structure which would have a material adverse effect on Borrower or on the prospect of repayment of the Obligations; or (xiii) dissolve or elect to dissolve. Transactions permitted by the foregoing provisions of this Section 5.5 are only permitted if no Default or Event of Default would occur as a result of such transaction. Notwithstanding the foregoing, Borrower shall be permitted to enter into the Sale/Leaseback Transaction. 5.6 Litigation Cooperation. Should any third-party suit or proceeding be instituted by or against Silicon with respect to any Collateral or in any manner relating to Borrower, Borrower shall, without expense to Silicon, make available Borrower and its officers, employees and agents and Borrower's books and records, to the extent that Silicon may deem them reasonably necessary in order to prosecute or defend any such suit or proceeding. 5.7 Further Assurances. Borrower agrees, at its expense, on request by Silicon, to execute all documents and take all actions, as Silicon may deem reasonably necessary in order to perfect and maintain Silicon's perfected security interest in the Collateral, and in order to fully consummate the transactions contemplated by this Agreement. 6. TERM. 6.1 Maturity Date. This Agreement shall continue in effect until the maturity date set forth on the Schedule (the "Maturity Date"); provided that the Maturity Date may be extended upon written agreement of the parties hereto. 6.2 Payment of Obligations. On the Maturity Date or on any earlier effective date of termination, Borrower shall pay and perform in full all Obligations, whether evidenced by installment notes or otherwise, and whether or not all or any part of such Obligations are otherwise then due and payable. Without limiting the generality of the foregoing, if on the Maturity Date, or on any earlier effective date of termination, there are any outstanding Letters of Credit issued by Silicon or issued by another institution based upon an application, guarantee, indemnity or similar agreement on the part of Silicon, then on such date Borrower shall provide to Silicon cash collateral in an amount equal to the face amount of all such Letters of Credit plus all interest, fees and cost due or to become due in connection therewith, to secure all of the Obligations relating to said Letters of Credit, pursuant to Silicon's then standard form cash pledge agreement. Notwithstanding any termination of this Agreement, all of Silicon's security interests in all of the Collateral and all of the terms and provisions of this Agreement shall continue in full force and effect until all Obligations have been paid and performed in full; provided that, without limiting the fact that Loans are subject to the discretion of Silicon, Silicon may, in its sole discretion, refuse to make any further Loans after termination. No termination shall in any way affect or impair any right or remedy of Silicon, nor shall any such termination relieve Borrower of any Obligation to Silicon, until all of the Obligations have been paid and performed in full. Upon payment and performance in full of all the Obligations, 10 Silicon Valley Bank Schedule to Loan and Security Agreement Silicon shall promptly deliver to Borrower termination statements, requests for reconveyances and such other documents as may be required to fully terminate Silicon's security interests. 7. EVENTS OF DEFAULT AND REMEDIES. 7.1 Events of Default. The occurrence of any of the following events shall constitute an "Event of Default" under this Agreement, and Borrower shall give Silicon immediate written notice thereof: (i) any warranty, representation, statement, report or certificate made or delivered to Silicon by Borrower or any of Borrower's officers, employees or agents, now or in the future, shall be untrue or misleading in a material respect as of the time when made, delivered or certified; or (ii) Borrower shall fail to pay when due any Loan or any interest thereon or any other monetary Obligation; or (iii) the total Loans and other Obligations outstanding at any time shall exceed the Credit Limit for one (1) or more days after receipt of notice therefor; or (iv) Borrower shall fail to comply with any of the financial covenants set forth in the Schedule or shall fail to perform any other non-monetary Obligation which by its nature cannot be cured; or (v) Borrower shall fail to perform any other non- monetary Obligation, which failure is not cured within ten (10) Business Days after notice hereof is provided to Borrower; or (vi) any levy, assessment, attachment, seizure, lien or encumbrance (other than a Permitted Lien) is made on all or any part of the Collateral which is not cured or bonded over within twenty (20) days after the occurrence of the same, or immediately upon the service of process upon Silicon seeking to attach by trustee, mesne or other process, any of Borrower's funds on deposit with, or assets of the Borrower in the possession of, Silicon; or (vii) any default or event of default occurs under any obligation secured by a Permitted Lien, which is not cured within any applicable cure period or waived in writing by the holder of the Permitted Lien; or (viii) Borrower breaches any material contract or obligation, which has or may reasonably be expected to have a material adverse effect on Borrower's business or financial condition; or (ix) dissolution, termination of existence, insolvency or business failure of Borrower; or appointment of a receiver, trustee or custodian, for all or any part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding by Borrower under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect; or (x) the commencement of any proceeding against Borrower or any guarantor of any of the Obligations under any reorganization, bankruptcy, insolvency, arrangement, 11 Silicon Valley Bank Schedule to Loan and Security Agreement readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect, which is not cured by the dismissal thereof within 45 days after the date commenced; or (xi) revocation or termination of, or limitation or denial of liability upon, any guaranty of the Obligations or any attempt to do any of the foregoing, or commencement of proceedings by any guarantor of any of the Obligations under any bankruptcy or insolvency law; or (xii) revocation or termination of, or limitation or denial of liability upon, any pledge of any certificate of deposit, securities or other property or asset of any kind pledged by any third party to secure any or all of the Obligations, or any attempt to do any of the foregoing, or commencement of proceedings by or against any such third party under any bankruptcy or insolvency law; or (xiii) Borrower defaults under any agreement evidencing any indebtedness in excess of $100,000 to any third party; or (xiv) Borrower makes any payment on account of any indebtedness or obligation which has been subordinated to the Obligations other than as permitted in the applicable subordination agreement, or (xv) there shall be a change in the record or beneficial ownership of outstanding shares of stock of Borrower, in one or more transactions, compared to the ownership of outstanding shares of stock of Borrower in effect on the date hereof, which results in a change of voting control of Borrower, without prior written consent of Silicon; or (xvi) Borrower shall generally not pay its debts as they become due, or Borrower shall conceal, remove or transfer any part of its property, with intent to hinder, delay or defraud its creditors, or make or suffer any transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or (xvii) there shall be (a) a material impairment in the perfection or priority of Silicon's security interest in the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations or condition (financial or otherwise) of the Borrower; (ci) a material impairment of the prospect of repayment of any portion of the Obligations; or (d) Silicon determines, based upon information available to it and in its reasonable judgment, that there is substantial likelihood that Borrower shall fail to comply with one or more of the financial covenants in Section 5.1 during the next succeeding financial reporting period; or (xviii) Borrower shall breach any term of the IP Security Agreement or the Warrant. 7.2 Remedies. Upon the occurrence of any Event of Default (after the expiration of any cure or grace period relating thereto), and at any time thereafter until and unless such Event of Default is cured, Silicon, at its option, and without notice or demand of any kind (all of which are hereby expressly waived by Borrower), may do any one or more of the following: (i) cease making Loans or otherwise extending credit to Borrower under this Agreement or any other document or agreement; 12 Silicon Valley Bank Schedule to Loan and Security Agreement (ii) accelerate and declare all or any part of the Obligations to be immediately due, payable, and performable, notwithstanding any deferred or installment payments allowed by any instrument evidencing or relating to any Obligation; (iii) take possession of any or all of the Collateral wherever it may be found, and for that purpose Borrower hereby authorizes Silicon without judicial process to enter onto any of Borrower's premises without interference to search for, take possession of, keep, store, or remove any of the Collateral, and remain on the premises or cause a custodian to remain on the premises in exclusive control thereof, without charge for so long as Silicon deems it reasonably necessary in order to complete the enforcement of its rights under this Agreement or any other agreement; provided, however, that should Silicon seek to take possession of any of the Collateral by Court process, Borrower hereby irrevocably waives: (a) any bond and any surety or security relating thereto required by any statute, court rule or otherwise as an incident to such possession; (b) any demand for possession prior to the commencement of any suit or action to recover possession thereof; and (c) any requirement that Silicon retain possession of, and not dispose of, any such Collateral until after trial or final judgment; (iv) require Borrower to assemble any or all of the Collateral and make it available to Silicon at places designated by Silicon which are reasonably convenient to Silicon and Borrower, and to remove the Collateral to such locations as Silicon may deem advisable; (v) complete the processing, manufacturing or repair of any Collateral prior to a disposition thereof and, for such purpose and for the purpose of removal, Silicon shall have the right to use Borrower's premises, vehicles, hoists, lifts, cranes, equipment and all other property without charge; (vi) sell, lease or otherwise dispose of any of the Collateral, in its condition at the time Silicon obtains possession of it or after further manufacturing, processing or repair, at one or more public and/or private sales, in lots or in bulk, for cash, exchange or other property, or on credit, and to adjourn any such sale from time to time without notice other than oral announcement at the time scheduled for sale. Silicon shall have the right to conduct such disposition on Borrower's premises without charge, for such time or times as Silicon deems reasonable, or on Silicon's premises, or elsewhere and the Collateral need not be located at the place of disposition. Silicon may directly or through any affiliated company purchase or lease any Collateral at any such public disposition, and if permissible under applicable law, at any private disposition. Any sale or other disposition of Collateral shall not relieve Borrower of any liability Borrower may have if any Collateral is defective as to title or physical condition or otherwise at the time of sale; (vii) demand payment of, and collect any Receivables and General Intangibles comprising Collateral and, in connection therewith, Borrower irrevocably authorizes Silicon to endorse or sign Borrower's name on all collections, receipts, instruments and other documents, to take possession of and open mail addressed to Borrower and remove therefrom payments made with respect to any item of the Collateral or proceeds thereof, and, in Silicon's sole discretion, to grant extensions of time to pay, compromise claims and settle Receivables and the like for less than face value; 13 Silicon Valley Bank Schedule to Loan and Security Agreement (viii) offset against any sums in any of Borrower's general, special or other Deposit Accounts with Silicon; and (ix) demand and receive possession of any of Borrower's federal and state income tax returns and the books and records utilized in the preparation thereof or referring thereto. All reasonable attorneys' fees, expenses, costs, liabilities and obligations incurred by Silicon with respect to the foregoing shall be added to and become part of the Obligations, shall be due on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations. Without limiting any of Silicon's rights and remedies, from and after the occurrence of any Event of Default, the interest rate applicable to the Obligations shall be increased by an additional two percent (2%) per annum. 7.3 Standards for Determining Commercial Reasonableness. Borrower and Silicon agree that a sale or other disposition (collectively, "sale") of any Collateral which complies with the following standards will conclusively be deemed to be commercially reasonable: (i) Notice of the sale is given to Borrower at least seven days prior to the sale, and, in the case of a public sale, notice of the sale is published at least seven days before the sale in a newspaper of general circulation in the county where the sale is to be conducted; (ii) Notice of the sale describes the collateral in general, non-specific terms; (iii) The sale is conducted at a place designated by Silicon, with or without the Collateral being present; (iv) The sale commences at any time between 8:00 a.m. and 6:00 p.m Boston, Massachusetts time; (v) Payment of the purchase price in cash or by cashier's check or wire transfer is required; (vi) With respect to any sale of any of the Collateral, Silicon may (but is not obligated to) direct any prospective purchaser to ascertain directly from Borrower any and all information concerning the same. Silicon shall be free to employ other methods of noticing and selling the Collateral, in its discretion, if they are commercially reasonable. 7.4 Power of Attorney. Upon the occurrence of any Event of Default and after expiration of any cure or grace periods relating thereto, without limiting Silicon's other rights and remedies, Borrower grants to Silicon an irrevocable power of attorney coupled with an interest, authorizing and permitting Silicon (acting through any of its employees, attorneys or agents) at any time, at its option, but without obligation, with or without notice to Borrower, and at Borrower's expense, to do any or all of the following, in Borrower's name or otherwise, but Silicon agrees to exercise the following powers in a commercially reasonable manner: (i) execute on behalf of Borrower any documents that Silicon may, in its sole discretion, deem advisable in order to perfect and maintain Silicon's security interest in the Collateral, or in order to exercise a right of Borrower or Silicon, or in order to fully consummate all the transactions contemplated under this Agreement, and all other present and future agreements; (ii) execute on behalf of Borrower any document exercising, transferring or assigning any option to purchase, sell or otherwise dispose of or to lease (as lessor or lessee) any real or personal property which is part of the Collateral; (iii) execute on behalf of Borrower, any invoices relating to any Receivable, any draft against any Account Debtor and any notice to any Account Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of mechanic's, materialman's or other lien, or assignment or satisfaction of mechanic's, materialman's or other lien; (iv) take control in any manner of any cash or non-cash items of payment or proceeds of Collateral; endorse the name of Borrower upon any instruments, or documents, evidence of payment or Collateral that may come into Silicon's possession; 14 Silicon Valley Bank Schedule to Loan and Security Agreement (v) endorse all checks and other forms of remittances received by Silicon; (vi) pay, contest or settle any lien, charge, encumbrance, security interest and adverse claim in or to any of the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; (vii) grant extensions of time to pay, compromise claims and settle Receivables and General Intangibles for less than face value and execute all releases and other documents in connection therewith; (viii) pay any sums required on account of Borrower's taxes or to secure the release of any liens therefor, or both; (ix) settle and adjust, and give releases of, any insurance claim that relates to any of the Collateral and obtain payment therefor; (x) instruct any third party having custody or control of any books or records belonging to, or relating to, Borrower to give Silicon the same rights of access and other rights with respect thereto as Silicon has under this Agreement; and (xi) take any action or pay any sum required of Borrower pursuant to this Agreement and any other present or future agreements. Any and all reasonable sums paid and any and all reasonable costs, expenses, liabilities, obligations and attorneys' fees incurred by Silicon with respect to the foregoing shall be added to and become part of the Obligations, shall be payable on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations. In no event shall Silicon's rights under the foregoing power of attorney or any of Silicon's other rights under this Agreement be deemed to indicate that Silicon is in control of the business, management or properties of Borrower. Notwithstanding the foregoing, in the event such Event of Default is cured or remedied, such power of attorney granted shall hereby expire. 7.5 Application of Proceeds. All proceeds realized as the result of any sale of the Collateral upon an Event of Default and following the expiration of any grace or cure periods relating thereto shall be applied by Silicon first to the reasonable costs, expenses, liabilities, obligations and attorneys' fees incurred by Silicon in the exercise of its rights under this Agreement, second to the interest due upon any of the Obligations, and third to the principal of the Obligations, in such order as Silicon shall determine in its sole discretion. Any surplus shall be paid to Borrower or other Persons legally entitled thereto; Borrower shall remain liable to Silicon for any deficiency. If, Silicon, in its sole discretion, directly or indirectly enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Silicon shall have the option, exercisable at any time, in its sole discretion, of either reducing the Obligations by the principal amount of purchase price or deferring the reduction of the Obligations until the actual receipt by Silicon of the cash therefor. 7.6 Remedies Cumulative. In addition to the rights and remedies set forth in this Agreement, Silicon shall have all the other rights and remedies accorded a secured party under the Massachusetts Uniform Commercial Code and under all other applicable laws, and under any other instrument or agreement now or in the future entered into between Silicon and Borrower, and all of such rights and remedies are cumulative and none is exclusive. Exercise or partial exercise by Silicon of one or more of its rights or remedies shall not be deemed an election, nor bar Silicon from subsequent exercise 15 Silicon Valley Bank Schedule to Loan and Security Agreement or partial exercise of any other rights or remedies. The failure or delay of Silicon to exercise any rights or remedies shall not operate as a waiver thereof, but all rights and remedies shall continue in full force and effect until all of the Obligations have been fully paid and performed. 8. DEFINITIONS. As used in this Agreement, the following terms have the following meanings: "Account Debtor" means the obligor on a Receivable. "Affiliate" means, with respect to any Person, a relative, partner, shareholder, director, officer, or employee of such Person, or any parent or subsidiary of such Person, or any Person controlling, controlled by or under common control with such Person. "Business Day" means any day which is neither a Saturday or a Sunday nor a legal holiday on which banks are authorized or required to be closed in Boston, Massachusetts. "Cash Management Services" means Silicon's cash management services, direct deposit of payroll, business credit card, and check cashing services as may be further identified in the various cash management services agreements related to such Cash Management Services. "Code" means the Uniform Commercial Code as adopted and in effect in the Commonwealth of Massachusetts from time to time. "Collateral" has the meaning set forth in Section 2.1 above. "Credit Limit" has the meaning set forth in Section 1.1 above. "Default" means any event which with notice or passage of time or both, would constitute an Event of Default. "Deferred Revenue" is all amounts received in advance of performance under contracts and not yet recognized as revenue. "Deposit Account" has the meaning set forth in Section 9-102 of the Code. "Eligible Receivables" means Receivables arising in the ordinary course of Borrower's business from the sale of goods or rendition of services in which Silicon has a first priority perfected lien, which Silicon, in its good faith business judgment, shall deem eligible for borrowing, based on such considerations as Silicon may from time to time deem appropriate. Without limiting the fact that the determination of which Receivables are eligible for borrowing is a matter of Silicon's good faith business judgment, the following (the "Minimum Eligibility Requirements") are the minimum requirements for a Receivable to be an Eligible Receivable, and: (i) the Receivable must not be outstanding for more than 90 days from its invoice date, (ii) the Receivable must not represent milestone or progress billings, be due under a fulfillment or requirements contract with the Account Debtor or represent Deferred Revenue, 16 Silicon Valley Bank Schedule to Loan and Security Agreement (iii) the Receivable must not be subject to any contingencies (including Receivables arising from sales on consignment, guaranteed sale or other terms pursuant to which payment by the Account Debtor may be conditional, except as may otherwise be acceptable to Silicon in its discretion), (iv) the Receivable must not be owing from an Account Debtor with whom the Borrower has any dispute (whether or not relating to the particular Receivable, but only to the extent of the amount in dispute), (v) the Receivable must not be owing from an Affiliate of Borrower, (vi) the Receivable must not be owing from an Account Debtor which is subject to any insolvency or bankruptcy proceeding, or whose financial condition is not acceptable to Silicon in its good faith business judgment, or which, fails or goes out of a material portion of its business, (vii) the Receivable must not be owing from the United States or any department, agency or instrumentality thereof (unless there has been compliance with the United States Assignment of Claims Act), (viii) the Receivable must not be owing from an Account Debtor located outside the United States (unless (a) pre-approved by Silicon in its discretion in writing, (b) foreign credit insurance (satisfactory to Silicon in all respects) is obtained for such Receivable listing the Bank as an additional insured and such other endorsements as Silicon may reasonably require, or (c) backed by a letter of credit issued by a financial institution reasonably satisfactory to Silicon, or FCIA insured reasonably satisfactory to Silicon), and (ix) the Receivable must not be owing from an Account Debtor to whom Borrower is or may be liable for goods purchased from such Account Debtor or otherwise. Receivables owing from one Account Debtor will not be deemed Eligible Receivables to the extent they exceed 25% of the total Receivables outstanding. In addition, if more than 50% of the Receivables owing from an Account Debtor are outstanding more than 90 days from their invoice date (without regard to unapplied credits) or are otherwise not eligible Receivables, then all Receivables owing from that Account Debtor will be deemed ineligible for borrowing. Silicon may, from time to time, in its discretion, revise the Minimum Eligibility Requirements, upon written notice to the Borrower. "Equipment" means all of Borrower's present and hereafter acquired machinery, molds, machine tools, motors, furniture, equipment, furnishings, fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and other tangible personal property (other than Inventory) of every kind and description used in Borrower's operations or owned by Borrower and any interest in any of the foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions or improvements to any of the foregoing, wherever located. "Event of Default" means any of the events set forth in Section 7.1 of this Agreement. "General Intangibles" means all general intangibles of Borrower, whether now owned or hereafter created or acquired by Borrower, including, without limitation, all choses in action, rights to payment for credit extended, amounts due to Borrower, credit memoranda in favor of Borrower, warranty claims, causes of action, corporate or other business 17 Silicon Valley Bank Schedule to Loan and Security Agreement records, deposits, Deposit Accounts, inventions, designs, drawings, blueprints, patents, patent applications, trademarks and the goodwill of the business symbolized thereby, names, trade names, trade secrets, goodwill, copyrights, registrations, licenses, franchises, customer lists, security and other deposits, rights in all litigation presently or hereafter pending for any cause or claim (whether in contract, tort or otherwise), and all judgments now or hereafter arising therefrom, all claims of Borrower against Silicon, rights to purchase or sell real or personal property, rights as a licensor or licensee of any kind, royalties, telephone numbers, proprietary information, purchase orders, and all insurance policies and claims (including without limitation life insurance, key man insurance, credit insurance, liability insurance, property insurance and other insurance), tax refunds and claims, computer programs, discs, tapes and tape files, claims under guaranties, security interests or other security held by or granted to Borrower, all rights to indemnification and all other intangible property of every kind and nature (other than Receivables). "Inventory" means all of Borrower's now owned and hereafter acquired goods, merchandise or other personal property, wherever located, to be furnished under any contract of service or held for sale or lease (including without limitation all raw materials, work in process, finished goods and goods in transit), and all materials and supplies of every kind, nature and description which are or might be used or consumed in Borrower's business or used in connection with the manufacture, packing, shipping, advertising, selling or finishing of such goods, merchandise or other personal property, and all warehouse receipts, documents of title and other documents representing any of the foregoing. "Letter-of-Credit Rights" means all letter-of-credit rights including, without limitation, "letter-of-credit rights" as defined in the Code and also any right to payment or performance under a letter of credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance. "Obligations" means all present and future Loans, advances, debts, liabilities, obligations, guaranties, covenants, duties and indebtedness at any time owing by Borrower to Silicon, whether evidenced by this Agreement or any note or other instrument or document, including, without limitation, the Borrower's obligations pursuant to the IP Security Agreement and the Warrant, whether arising from an extension of credit, opening of a letter of credit, banker's acceptance, foreign exchange contracts, loan, Cash Management Services, guaranty, indemnification or otherwise, whether direct or indirect (including, without limitation, those acquired by assignment and any participation by Silicon in Borrower's debts owing to others), absolute or contingent, due or to become due, including, without limitation, all interest, charges, expenses, fees, attorney's fees, expert witness fees, audit fees, letter of credit fees, collateral monitoring fees, closing fees, facility fees, termination fees, minimum interest charges and any other sums chargeable to Borrower under this Agreement or under any other present or future instrument or agreement between Borrower and Silicon. "Payment Intangibles" means all payment intangibles including, without limitation, "payment intangibles" as defined in the Code and also any general intangible under which the Account Debtor's primary obligation is a monetary obligation. "Permitted Liens" means the following: (i) purchase money security interests in, or leases of, specific items of Equipment existing on the date hereof and described on the Schedule; (ii) for future purchase money financing, purchase money security interests in, or leases of, specific items of Equipment in an amount not to exceed $1,000,000 in the aggregate for each calendar year; (iii) liens for taxes not yet payable; 18 Silicon Valley Bank Schedule to Loan and Security Agreement (iv) additional security interests and liens consented to in writing by Silicon, which consent shall not be unreasonably withheld; (v) security interests being terminated substantially concurrently with this Agreement; (vi) liens of materialmen, mechanics, warehousemen, carriers, or other similar liens arising in the ordinary course of business and securing obligations which are not delinquent; (vii) liens arising out of pledges or deposits under workmen's compensation, unemployment insurance, old age pension, social security, retirement benefits or other similar legislation; (viii) liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by liens of the type described above in clauses (i) or (ii) above, provided that any extension, renewal or replacement lien is limited to the property encumbered by the existing lien and the principal amount of the indebtedness being extended, renewed or refinanced does not increase; (ix) liens in favor of customs and revenue authorities which secure payment of customs duties in connection with the importation of goods; and (x) liens arising hereunder. Silicon will have the right to require, as a condition to its consent under subsection (iv) above, that the holder of the additional security interest or lien sign an intercreditor agreement on Silicon's then standard form, acknowledge that the security interest is subordinate to the security interest in favor of Silicon, and agree not to take any action to enforce its subordinate security interest so long as any Obligations remain outstanding, and that Borrower agree that any uncured default in any obligation secured by the subordinate security interest shall also constitute an Event of Default under this Agreement. "Person" means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, government, or any agency or political division thereof, or any other entity. "Receivables" means all of Borrower's now owned and hereafter acquired accounts (whether or not earned by performance), accounts receivable, health-care insurance receivables, rights to payment, letters of credit, contract rights, chattel paper, instruments, securities, securities accounts, investment property, documents and all other forms of obligations at any time owing to Borrower, all guaranties and other security therefor, all merchandise returned to or repossessed by Borrower, and all rights of stoppage in transit and all other rights or remedies of an unpaid vendor, lienor or secured party. "Reserves" means, as of any date of determination, such amounts as Silicon may from time to time establish and revise in good faith reducing the amount of Loans, Letters of Credit and other financial accommodations which would otherwise be available to Borrower under the lending formula(s) provided in the Schedule: (a) to reflect events, conditions, contingencies or risks which, as determined by Silicon in good faith, do or may affect (i) the Collateral or any other property which is security for the Obligations or its value (including without limitation any increase in delinquencies of Receivables), (ii) the assets, business or prospects of Borrower or any Guarantor, or (iii) the security interests and other rights of Silicon in the Collateral (including the enforceability, perfection and priority thereof); or (b) to reflect Silicon's good faith belief that any collateral report or financial information furnished by or on behalf of Borrower or any guarantor to Silicon is or may have been incomplete, inaccurate or misleading in any material respect; 19 Silicon Valley Bank Schedule to Loan and Security Agreement or (c) in respect of any state of facts which Silicon determines in good faith constitutes an Event of Default or may, with notice or passage of time or both, constitute an Event of Default. "Supporting Obligations" means all supporting obligations including, without limitation, "supporting obligations" as defined in the Code and also any letter-of-credit right or secondary obligation which supports the payment or performance of an account, chattel paper, a document, a general intangible, an instrument, or investment property. "Warrant" means that certain Warrant to Purchase Stock of even date herewith granted by Parlex Corporation to Silicon. Other Terms. All accounting terms used in this Agreement, unless otherwise indicated, shall have the meanings given to such terms in accordance with generally accepted accounting principles, consistently applied. All other terms contained in this Agreement, unless otherwise indicated, shall have the meanings provided by the Code, to the extent such terms are defined therein. 9. GENERAL PROVISIONS. 9.1 Interest Computation. In computing interest on the Obligations, all checks, wire transfers and other items of payment received by Silicon (including proceeds of Receivables and payment of the Obligations in full) shall be deemed applied by Silicon on account of the Obligations two Business Days after receipt by Silicon of immediately available funds, and, for purposes of the foregoing, any such funds received after 12:00 Noon on any day shall be deemed received on the next Business Day. Silicon shall not, however, be required to credit Borrower's account for the amount of any item of payment which is unsatisfactory to Silicon in its commercially reasonable business judgment and Silicon may charge Borrower's loan account for the amount of any item of payment which is returned to Silicon unpaid. 9.2 Application of Payments. All payments with respect to the Obligations may be applied, and in Silicon's commercially reasonable business judgment reversed and re-applied, to the Obligations, in such order and manner as Silicon shall determine in its sole discretion. 9.3 Charges to Accounts. Silicon may, in its discretion, require that Borrower pay monetary Obligations in cash to Silicon, or charge them to Borrower's Loan account, in which event they will bear interest at the same rate applicable to the Loans. Silicon may also, in its discretion, charge any monetary Obligations to Borrower's Deposit Accounts maintained with Silicon. 9.4 Monthly Accountings. Silicon shall provide Borrower monthly with an account of advances, charges, expenses and payments made pursuant to this Agreement. Absent manifest error, such account shall be deemed correct, accurate and binding on Borrower and an account stated (except for reverses and reapplications of payments made and corrections of errors discovered by Silicon), unless Borrower notifies Silicon in writing to the contrary within forty-five (45) days after each account is rendered, describing the nature of any alleged errors or omissions. 9.5 Notices. All notices to be given under this Agreement shall be in writing and shall be given either personally or by reputable private delivery service or by regular first-class mail, or certified mail return receipt requested, addressed to Silicon or Borrower at the addresses shown in the heading to this Agreement, or at any other address designated in writing by one party to the other party. Notices to Silicon shall be directed to the Commercial Finance Division, to the attention of the Division Manager or the Division Credit Manager. All notices shall be deemed to have been given upon delivery in the case of notices personally delivered, or at the expiration of one Business Day following delivery to the private delivery service, or two Business Days following the deposit thereof in the United States mail, 20 Silicon Valley Bank Schedule to Loan and Security Agreement with postage prepaid. In addition, Silicon shall endeavor to provide a copy of any notice given to Borrower to Edward D. Kutchin, Esq., Kutchin & Rufo, P. C., 175 Federal Street, Boston, MA 02110. 9.6 Severability. Should any provision of this Agreement be held by any court of competent jurisdiction to be void or unenforceable, such defect shall not affect the remainder of this Agreement, which shall continue in full force and effect. 9.7 Integration. This Agreement and such other written agreements, documents and instruments as may be executed in connection herewith are the final, entire and complete agreement between Borrower and Silicon and supersede all prior and contemporaneous negotiations and oral representations and agreements, all of which are merged and integrated in this Agreement. There are no oral understandings, representations or agreements between the parties which are not set forth in this Agreement or in other written agreements signed by the parties in connection herewith. 9.8 Waivers. The failure of Silicon at any time or times to require Borrower to strictly comply with any of the provisions of this Agreement or any other present or future agreement between Borrower and Silicon shall not waive or diminish any right of Silicon later to demand and receive strict compliance therewith. Any waiver of any default shall not waive or affect any other default, whether prior or subsequent, and whether or not similar. None of the provisions of this Agreement or any other agreement now or in the future executed by Borrower and delivered to Silicon shall be deemed to have been waived by any act or knowledge of Silicon or its agents or employees, but only by a specific written waiver signed by an authorized officer of Silicon and delivered to Borrower. Borrower waives demand, protest, notice of protest and notice of default or dishonor, notice of payment and nonpayment, release, compromise, settlement, extension or renewal of any commercial paper, instrument, account, General Intangible, document or guaranty at any time held by Silicon on which Borrower is or may in any way be liable, and notice of any action taken by Silicon, unless expressly required by this Agreement. 9.9 No Liability for Ordinary Negligence. Neither Silicon, nor any of its directors, officers, employees, agents, attorneys or any other Person affiliated with or representing Silicon shall be liable for any claims, demands, losses or damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower or any other party through the ordinary negligence of Silicon, or any of its directors, officers, employees, agents, attorneys or any other Person affiliated with or representing Silicon, but nothing herein shall relieve Silicon from liability for its own gross negligence or willful misconduct. 9.10 Amendment. The terms and provisions of this Agreement may not be waived or amended, except in a writing executed by Borrower and a duly authorized officer of Silicon. 9.11 Time of Essence. Time is of the essence in the performance by Borrower of each and every obligation under this Agreement. 9.12 Attorneys Fees and Costs. Borrower shall reimburse Silicon for all reasonable attorneys' fees and all filing, recording, search, title insurance, appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to, or in connection with, or relating to this Agreement (whether or not a lawsuit is filed), including, but not limited to, any reasonable attorneys' fees and costs Silicon incurs in order to do the following: prepare and negotiate this Agreement and the documents relating to this Agreement; obtain legal advice in connection with this Agreement or Borrower; enforce, or seek to enforce, any of its rights; prosecute actions against, or defend actions by, Account Debtors; commence, intervene in, or defend any action or proceeding; initiate any complaint to be relieved of the automatic stay in bankruptcy; file or prosecute any probate claim, bankruptcy claim, third-party claim, or other claim; examine, audit, copy, and inspect any of the Collateral or any of Borrower's books and records; protect, obtain possession of, lease, dispose of, or otherwise enforce Silicon's security interest in, the Collateral; and otherwise represent Silicon in any litigation 21 Silicon Valley Bank Schedule to Loan and Security Agreement relating to Borrower. In satisfying Borrower's obligation hereunder to reimburse Silicon for attorneys fees, Borrower may, for convenience, issue checks directly to Silicon's attorneys, Riemer & Braunstein, LLP, but Borrower acknowledges and agrees that Riemer & Braunstein, LLP is representing only Silicon and not Borrower in connection with this Agreement. If either Silicon or Borrower files any lawsuit against the other predicated on a breach of this Agreement, Silicon, if the prevailing party, shall be entitled to recover its reasonable costs and attorneys' fees, including (but not limited to) reasonable attorneys' fees and costs incurred in the enforcement of, execution upon or defense of any order, decree, award or judgment. All attorneys' fees and costs to which Silicon may be entitled pursuant to this Section 9.12 shall immediately become part of Borrower's Obligations, shall be due on demand fifteen (15) days after receipt by Borrower of written notice therefor, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations if not paid within fifteen (15) days of receipt of written notice therefor. 9.13 Benefit of Agreement. The provisions of this Agreement shall be binding upon and inure to the benefit of the respective successors, assigns, heirs, beneficiaries and representatives of Borrower and Silicon; provided, however, that Borrower may not assign or transfer any of its rights under this Agreement without the prior written consent of Silicon, and any prohibited assignment shall be void. No consent by Silicon to any assignment shall release Borrower from its liability for the Obligations. 9.14 Joint and Several Liability. If Borrower consists of more than one Person, their liability shall be joint and several, and the compromise of any claim with, or the release of, any Borrower shall not constitute a compromise with, or a release of, any other Borrower. 9.15 Limitation of Actions. Any claim or cause of action by Borrower against Silicon, its directors, officers, employees, agents, accountants or attorneys, based upon, arising from, or relating to this Loan Agreement, or any other present or future document or agreement, or any other transaction contemplated hereby or thereby or relating hereto or thereto, or any other matter, cause or thing whatsoever, occurred, done, omitted or suffered to be done by Silicon, its directors, officers, employees, agents, accountants or attorneys, shall be barred unless asserted by Borrower by the commencement of an action or proceeding in a court of competent jurisdiction by the filing of a complaint within the earlier to occur of (i) one year after the discovery by Borrower of or (ii) two years after the occurrence of, the first act, occurrence or omission upon which such claim or cause of action, or any part thereof, is based, and the service of a summons and complaint on an officer of Silicon, or on any other person authorized to accept service on behalf of Silicon, within thirty (30) days thereafter. Borrower agrees that such period is a reasonable and sufficient time for Borrower to investigate and act upon any such claim or cause of action. The period provided herein shall not be waived, tolled, or extended except by the written consent of Silicon in its sole discretion. This provision shall survive any termination of this Loan Agreement or any other present or future agreement. 9.16 Right of Set-Off. Borrower and any guarantor hereby grant to Silicon a lien, security interest, and right of setoff as security for all Obligations to Silicon, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping, or control of Silicon or any entity under the control of Silicon Valley Bank or in transit to any of them. At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Silicon may set off the same or any part thereof and apply the same to any liability or obligation of Borrower and any guarantor then due and regardless of the adequacy of any other collateral securing the loan. ANY AND ALL RIGHTS TO REQUIRE SILICON TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE LOAN, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS, OR OTHER PROPERTY OF THE BORROWER OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY, AND IRREVOCABLY WAIVED. 9.17 Section Headings; Construction. Section headings are only used in this Agreement for convenience. Borrower and Silicon acknowledge that the headings may not describe completely the subject matter of the applicable section, and the headings shall not be used in any manner to construe, limit, define or interpret any term or provision 22 Silicon Valley Bank Schedule to Loan and Security Agreement of this Agreement. The term "including", whenever used in this Agreement, shall mean "including (but not limited to)". This Agreement has been fully reviewed and negotiated between the parties and no uncertainty or ambiguity in any term or provision of this Agreement shall be construed strictly against Silicon or Borrower under any rule of construction or otherwise. 9.18 Governing Law; Jurisdiction; Venue. This Agreement and all acts and transactions hereunder and all rights and obligations of Silicon and Borrower shall be governed by the laws of the Commonwealth of Massachusetts. As a material part of the consideration to Silicon to enter into this Agreement, Borrower (i) agrees that all actions and proceedings relating directly or indirectly to this Agreement shall, at Silicon's option, be litigated in state or federal courts located within Massachusetts; (ii) consents to the jurisdiction and venue of any such court and consents to service of process in any such action or proceeding by personal delivery or any other method permitted by law; and (iii) waives any and all rights Borrower may have to object to the jurisdiction of any such court, or to transfer or change the venue of any such action or proceeding, provided, however, that if for any reason Silicon cannot avail itself of such courts in the Commonwealth of Massachusetts, Borrower accepts jurisdiction of the courts and venue in Santa Clara, California. 9.19 Mutual Waiver of Jury Trial. Borrower and Silicon each hereby waive the right to trial by jury in any action or proceeding based upon, arising out of, or in any way relating to, this Agreement or any other present or future instrument or agreement between Silicon and Borrower, or any conduct, acts or omissions of Silicon or Borrower or any of their directors, officers, employees, agents, attorneys or any other persons affiliated with Silicon or Borrower, in all of the foregoing cases, whether sounding in contract or tort or otherwise. 9.20 Confidentiality. In handling any confidential information, Silicon shall exercise the same degree of care that it exercises for its own proprietary information, but disclosure of information may be made: (i) to Silicon's subsidiaries or affiliates in connection with their present or prospective business relations with Borrower; (ii) to prospective transferees or purchasers of any interest in the Loans; (iii) as required by law, regulation, subpoena, or other order; (iv) as required in connection with Silicon's examination or audit; and (v) as reasonably appropriate in exercising Silicon's remedies under this Agreement. Confidential information does not include information that either: (a) is in the public domain or in Silicon's possession when disclosed to Silicon, or becomes part of the public domain after disclosure to Silicon (through no act or omission of Silicon); or (b) is disclosed to Silicon by a third party, which third party is not under any non-disclosure obligation. 23 Silicon Valley Bank Schedule to Loan and Security Agreement IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as a sealed instrument under the laws of the Commonwealth of Massachusetts as of the date first above written. Borrower: PARLEX CORPORATION By: /s/ Peter J. Murphy - ----------------------- Name: Peter J. Murphy Title: President PARLEX DYNAFLEX CORPORATION By: /s/ Peter J. Murphy - ----------------------- Name: Peter J. Murphy Title: President POLY-FLEX CIRCUITS, INC. By: /s/ Peter J. Murphy - ----------------------- Name: Peter J. Murphy Title: Treasurer Silicon: SILICON VALLEY BANK, d/b/a SILICON VALLEY EAST By: /s/ David Rodriguez - ----------------------- Name: David Rodriguez Title: Vice President 24 Silicon Valley Bank Schedule to Loan and Security Agreement Borrower: PARLEX CORPORATION, a Massachusetts corporation Address: One Parlex Place Methuen, Massachusetts 01844 Borrower: PARLEX DYNAFLEX CORPORATION, a California corporation Address: One Parlex Place Methuen, Massachusetts 01844 Borrower: POLY-FLEX CIRCUITS, INC., a Rhode Island corporation Address: 28 Kenney Drive Cranston, Rhode Island 02920 Date: June 11, 2003 This Schedule forms an integral part of the Loan and Security Agreement between Silicon Valley Bank and the above-borrower of even date. ======================================================================= 1. Credit Limit (Section 1.1): An amount not to exceed the lesser of (A) or (B), below: (A) (i) $10,000,000.00 (the "Maximum Credit Limit"); minus (ii) the aggregate amounts of all Loans (including Cash Management Services), then undrawn outstanding Letters of Credit, the FX Reserve, or any other accommodations issued or incurred, or caused to be issued or incurred by Silicon for the account and/or benefit of the Borrower. (B) (i) 80.0% of the amount of Borrower's Eligible Receivables (as defined in Section 8 above); minus (ii) the aggregate amounts of all Loans (including Cash Management Services), then undrawn outstanding Letters of Credit, the FX Reserve, or any other accommodations issued or incurred, or caused to be issued or incurred by Silicon for the account and/or benefit of Borrower. Silicon may, from time to time, modify the advance rate(s) set forth herein in its good faith business judgment upon notice to Borrower based on changes in collection experience with respect to the Receivables or other issues or factors relating to the Receivables or the Collateral. Letter of Credit/FX Reserve/Cash Management Services Sublimit (Section 1.5, 1.6, 1.7): $1,000,000 1 Silicon Valley Bank Schedule to Loan and Security Agreement ======================================================================= 2. Interest. Interest Rate (Section 1.2): A rate equal to the Prime Rate (as defined below) plus 0.75% per annum. Interest shall be calculated on the basis of a 360-day year for the actual number of days elapsed "Prime Rate" is the greater of (i) 4.0% or (ii) the rate announced from time to time by Silicon as its "prime rate;" it is a base rate upon which other rates charged by Silicon are based, and it is not necessarily the best rate available at Silicon. The interest rate applicable to the Obligations shall change on each date there is a change in the Prime Rate. Notwithstanding the foregoing, upon Borrower's achievement of two (2) consecutive quarters of positive net income, the interest rate hereunder shall be reduced to the Prime Rate (as defined above) plus 0.25% per annum. Such reduction in the interest rate shall be effective immediately upon receipt by Silicon of sufficient evidence of such achievement of positive net income. Notwithstanding the foregoing, such reduction in the interest rate shall be effective no later than the day upon which Borrower files a second consecutive quarterly statement on Form 10-Q indicating positive net income. ======================================================================= 3. Fees (Section 1.4): Initial Loan Fee: $37,500.00 payable concurrently herewith. Supplemental Loan Fee: A fully earned as of the date hereof, non- refundable annual fee of $37,500.00 due on the earlier to occur of (i) acceleration of the Obligations after an Event of Default hereunder or (ii) June 10, 2004. Collateral Handling Fee: $1,500.00 ($500.00 when not borrowing and Borrower has advised Silicon that it has elected to be on "non-borrowing reporting status" pursuant to Section 6, below) per month, payable in arrears. Notwithstanding the foregoing, if Borrower maintains at least $2,000,000.00 on deposit with Silicon at all times during any month in a separate non-interest bearing account (the "Compensating Balances Account") other than the Borrower's operating account, no Collateral Handling Fee shall be due hereunder, for the prior month. Unused Line Fee: In the event, in any calendar month (or portion thereof at the beginning and end of the term hereof), the average daily principal balance of the Loans outstanding during the month is less than the amount of the Maximum Credit Limit, Borrower shall pay Silicon an unused line fee in an amount equal to 0.25% per annum on the difference between the amount of the Maximum Credit Limit and the average daily principal balance of the Loans outstanding during the month, which unused line fee shall be computed and paid monthly, in arrears, on the first day of the following month. Notwithstanding the foregoing, if Borrower maintains at least $2,000,000.00 on deposit with Silicon at all times in the Compensating Balances Account, no Unused Line Fee shall be due hereunder. Cancellation Fee: If the Obligations are voluntarily or involuntarily prepaid or if this Agreement is otherwise terminated prior to June 10, 2004, the Borrower shall pay to Silicon a termination fee of $100,000. If the Obligations are voluntarily or involuntarily prepaid or if this Agreement is otherwise terminated after June 10, 2004 but prior to the Maturity Date, Borrower shall pay to Silicon a termination fee of $50,000. Notwithstanding the foregoing, no such termination fee shall be charged if the credit facility hereunder is replaced or transferred to another division of Silicon. The termination fee shall be due and payable upon prepayment by the Borrower in the case of voluntary 2 Silicon Valley Bank Schedule to Loan and Security Agreement prepayments or upon demand by Silicon in the event of involuntary prepayment, and if not paid immediately shall bear interest at a rate equal to the highest rate applicable to any of the Obligations. ======================================================================= 4. Maturity Date (Section 6.1): June 10, 2005 ======================================================================= 5. Financial Covenants (Section 5.1): Borrower shall comply with each of the following covenant(s). Compliance shall be determined as of the end of each month, except as otherwise specifically provided below: a. Minimum EBITDA: Borrower shall have EBITDA of no less than ($100,000) for the month ending May 31, 2003. b. Fixed Charge Coverage: Borrower shall maintain, tested on a rolling three month basis, a Minimum Fixed Charge Coverage of at least: (a) 1.00 to 1.00 from June 30, 2003 through August 31, 2003, and (b) 1.20 to 1.00 from September 1, 2003 and thereafter. c. Minimum Cash or Excess Availability: Borrower shall at all times maintain $750,000 in (i) cash deposits maintained at Silicon, and/or (ii) excess "availability" under this Agreement (net of Loans, Letters of Credit or other indebtedness under this Agreement), as determined by Silicon based upon the Credit Limit restrictions set forth in Section 1 above). Definitions. For purposes of the foregoing financial covenants, the following term shall have the following meaning: "EBITDA" means Borrower's consolidated earnings before interest, taxes, depreciation and amortization in accordance with GAAP. "Minimum Fixed Charge Coverage" means the ratio of (i) EBITDA to (ii) payments of indebtedness (including interest payments to be made in connection with this Agreement and any subordinated indebtedness), plus interest expense, cash dividends, cash taxes, capital lease payments and unfinanced capital expenditures for the period. ======================================================================= 6. Reporting. (Section 5.3): Borrower shall provide Silicon with the following: 3 Silicon Valley Bank Schedule to Loan and Security Agreement 1. Weekly (monthly, if no amounts are outstanding under this Agreement and Borrower has advised Silicon in writing that it has elected to be on "non-borrowing reporting status"), and upon each loan request, borrowing base certificates and transaction reports. 2. Monthly accounts payable agings, aged by invoice date, and outstanding or held check registers, if any, within fifteen (15) days after the end of each month. 3. Monthly Receivable agings, aged by invoice date, and receivable reconciliations, within fifteen (15) days after the end of each month. 4. Monthly unaudited financial statements, as soon as available, and in any event within thirty (30) days after the end of each month. 5. Monthly Compliance Certificates, within thirty (30) days after the end of each month, in such form as Silicon shall reasonably specify, signed by the Chief Financial Officer of Borrower, certifying that as of the end of such month Borrower was in full compliance with all of the terms and conditions of this Agreement, and setting forth calculations showing compliance with the financial covenants set forth in this Agreement and such other information as Silicon shall reasonably request, including, without limitation, a statement that at the end of such month there were no held checks. 6. Annual operating budgets (including income statements, balance sheets and cash flow statements, by month) for the upcoming fiscal year of Borrower within thirty (30) days prior to the end of each fiscal year of Borrower. 7. Annual financial statements, as soon as available, and in any event within ninety (90) days following the end of Borrower's fiscal year, together with an unqualified opinion on the financial statements from an independent certified public accounting firm reasonably acceptable to Silicon. 8. Such additional reports and information as Silicon may reasonably from time to time specify. Borrower may elect to be on "non-borrowing reporting status" if Borrower notifies Silicon in writing that it so elects and there are no Loans or other Obligations outstanding hereunder. After Borrower has notified Silicon of its intention to be on "non-borrower reporting status", as further set forth in Section 4.3 of this Agreement, Borrower must provide Silicon at least 30 days prior written notice of its intention to borrow. ======================================================================= 7. Borrower Information: Prior Names of Borrower (Section 3.2): See Perfection Certificates of even date herewith 4 Silicon Valley Bank Schedule to Loan and Security Agreement Prior Trade Names of Borrower (Section 3.2): See Perfection Certificates of even date herewith Existing Trade Names of Borrower (Section 3.2): See Perfection Certificates of even date herewith Other Locations and Addresses (Section 3.3): See Perfection Certificates of even date herewith Material Adverse Litigation (Section 3.10): None ======================================================================= 8. Other Covenants (Section 5.1): Borrower shall at all times comply with all of the following additional covenants: (1) Banking Relationship. In order for Silicon to properly monitor its loan arrangement with the Borrower, Borrower shall at all times maintain all of its domestic deposit accounts, operating accounts and securities accounts with Silicon (or an affiliate of Silicon with respect to securities accounts ). (2) Subordination of Inside Debt. All present and future indebtedness of the Borrower to its officers, directors and shareholders shall be referred to as ("Inside Debt"). Borrower warrants and represents that there is no Inside Debt presently outstanding. Prior to incurring any Inside Debt in the future, Borrower shall cause the person to whom such Inside Debt will be owed to execute and deliver to Silicon a subordination agreement on Silicon's standard form. (3) Subordination Agreements. Borrower warrants and represents that it is not presently indebted to any third party for borrowed money. Prior to incurring any future indebtedness, Borrower shall cause each creditor to execute and deliver to Silicon a subordination agreement on Silicon's standard form subordinating to the Obligations the indebtedness of Borrower to any such creditor. (4) Intellectual Property Security Agreement. As a condition precedent to the effectiveness of this Agreement, Borrower shall have executed and delivered to Silicon an Intellectual Property Security Agreement (the "IP Security Agreement") on form reasonably satisfactory to Silicon. 5 Silicon Valley Bank Schedule to Loan and Security Agreement PARLEX CORPORATION By: /s/ Peter J. Murphy - ----------------------- Name: Peter J. Murphy Title: President PARLEX DYNAFLEX CORPORATION By: /s/ Peter J. Murphy - ----------------------- Name: Peter J. Murphy Title: President POLY-FLEX CIRCUITS, INC. By: /s/ Peter J. Murphy - ----------------------- Name: Peter J. Murphy Title: Treasurer Silicon: SILICON VALLEY BANK, d/b/a SILICON VALLEY EAST By: /s/ David Rodriguez - ----------------------- Name: David Rodriguez Title: Vice President 6 EX-99 14 park2991.txt EXHIBIT 99.1 Exhibit 99.1 CONTACT: Jon Kosheff Chief Financial Officer (978) 946-2591 NASDAQ SYMBOL "PRLX" Parlex Corporation Completes Sale/Leaseback and Bank Financing Transactions Methuen, Massachusetts (June 16, 2003)...Parlex Corporation, a world leader in the design and manufacture of flexible interconnect products, has completed the sale and leaseback of its facilities in Methuen, Massachusetts and Cranston, Rhode Island for $12,000,000, which consists of $2.65 million on a 3 year interest bearing term loan, a potential earn out of $1 million over 5 years and $8.35 million paid at closing. The proceeds were used to pay down the Company's working line with Fleet Bank. In addition, the Company has secured a new $10 million working capital line of credit agreement with Silicon Valley Bank. The two-year line of credit agreement replaces the Fleet Bank loan and is intended to provide the working capital necessary for projected growth through fiscal year 2005. In connection with the new loan facility, Parlex granted Silicon Valley Bank a warrant to purchase up to 250,000 shares at an exercise price of $6.885 per share. Peter J. Murphy, Parlex president and CEO stated, "The sale of property allows Parlex to focus its resources on our core business as we transition back to profitability. While we have had a long and supportive relationship with Fleet Bank, we believe the retirement of that debt coupled with our new line of credit with Silicon Valley Bank will allow us to place all of our energy addressing the operational opportunities that will significantly improve financial performance." About Parlex Corporation - ------------------------ Parlex Corporation is a world leader in the design and manufacture of flexible interconnect products. Parlex produces custom flexible circuits and laminated cables utilizing proprietary processes and patented technologies, which are designed to satisfy the unique requirements of a wide range of customers. Its manufacturing facilities are located in the United States, China, Mexico and the United Kingdom. The foregoing contains certain forward-looking statements. The Company's actual results of operations may differ significantly from those contemplated by such forward-looking statements as a result of various factors beyond its control, including economic conditions in the electronics industry, particularly in the principal industry sectors served by the Company, changes in customer requirements and in the volume of sales to principal customers, competition and technological change. For a detailed discussion of these and other cautionary statements, please refer to Parlex's filings with the Securities and Exchange Commission. 2 EX-99 15 park2992.txt EXHIBIT 99.2 Exhibit 99.2 CONTACT: Jon Kosheff Chief Financial Officer (978) 946-2591 NASDAQ SYMBOL "PRLX" Parlex Corporation Completes Sale/Leaseback and Bank Financing Transactions Methuen, Massachusetts (June 19, 2003)...Parlex Corporation, a world leader in the design and manufacture of flexible interconnect products, has completed the sale and leaseback of its facilities in Methuen, Massachusetts and Cranston, Rhode Island for $12,000,000, which consists of $2.65 million on a 3 year interest bearing term loan, a potential earn out of $1 million over 5 years and $8.35 million paid at closing. The proceeds were used to pay down the Company's working line with Fleet Bank. In addition, the Company has secured a new $10 million working capital line of credit agreement with Silicon Valley Bank. The two-year line of credit agreement replaces the Fleet Bank loan and is intended to provide the working capital necessary for projected growth through fiscal year 2005. In connection with the new loan facility, Parlex granted Silicon Valley Bank a warrant to purchase up to 25,000 shares at an exercise price of $6.885 per share. Peter J. Murphy, Parlex president and CEO stated, "The sale of property allows Parlex to focus its resources on our core business as we transition back to profitability. While we have had a long and supportive relationship with Fleet Bank, we believe the retirement of that debt coupled with our new line of credit with Silicon Valley Bank will allow us to place all of our energy addressing the operational opportunities that will significantly improve financial performance." About Parlex Corporation - ------------------------ Parlex Corporation is a world leader in the design and manufacture of flexible interconnect products. Parlex produces custom flexible circuits and laminated cables utilizing proprietary processes and patented technologies, which are designed to satisfy the unique requirements of a wide range of customers. Its manufacturing facilities are located in the United States, China, Mexico and the United Kingdom. The foregoing contains certain forward-looking statements. The Company's actual results of operations may differ significantly from those contemplated by such forward-looking statements as a result of various factors beyond its control, including economic conditions in the electronics industry, particularly in the principal industry sectors served by the Company, changes in customer requirements and in the volume of sales to principal customers, competition and technological change. For a detailed discussion of these and other cautionary statements, please refer to Parlex's filings with the Securities and Exchange Commission. 2 -----END PRIVACY-ENHANCED MESSAGE-----