1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended December 31, 1998 Commission File Number 0-23599
MERCURY COMPUTER SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2741391
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
199 RIVERNECK ROAD 01824
CHELMSFORD, MA (Zip Code)
(Address of principal
executive offices)
978-256-1300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
----- -----
Number of shares outstanding of the issuer's classes of common stock as of
January 31, 1999:
Class Number of Shares Outstanding
------------------------- ----------------------------
Common Stock, 10,222,693
par value $.01 per share
Total number of pages 15
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MERCURY COMPUTER SYSTEMS, INC.
TABLE OF CONTENTS
PAGE NUMBER
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PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 1998 and June 30, 1998 3
Consolidated Statements of Operations for the Three Months Ended
December 31, 1998 and December 31, 1997 and for the Six Months Ended
December 31, 1998 and December 31, 1997 4
Consolidated Statements of Cash Flows for the Six Months Ended
December 31, 1998 and December 31, 1997 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-11
PART II. OTHER INFORMATION
Item 2. Use of Proceeds from Registered Securities 12
Item 6. Exhibits and Reports Filed on Form 8-K 13
SIGNATURE 14
EXHIBIT INDEX 15
2
3
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
MERCURY COMPUTER SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
DECEMBER 31, JUNE 30,
1998 1998
----------- -------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 6,898 $ 6,054
Marketable securities 6,071 10,077
Trade accounts receivable, net of allowances of $292
and $218 at December 31, 1998 and June 30, 1998,
respectively 16,400 17,143
Inventory 9,257 9,125
Deferred income taxes, net 1,669 1,669
Prepaid expenses and other current assets 1,845 1,255
-------- --------
Total current assets 42,140 45,323
Marketable securities 26,510 18,889
Property and equipment, net 13,615 8,466
Capitalized software costs, net 418 104
Deferred income taxes, net 429 429
Other assets 254 358
-------- --------
Total assets $ 83,366 $ 73,569
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,501 $ 3,368
Accrued expenses 3,655 2,804
Accrued compensation 3,651 3,316
Billings in excess of revenues and customer advances 803 1,017
Income taxes payable 1,118 2,024
-------- --------
Total current liabilities 14,728 12,529
Commitments and contingencies (note E) -- --
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares
authorized and none issued and outstanding at
December 31, 1998 and June 30, 1998 respectively
(liquidation preference none) -- --
Common stock, $.01 par value: 25,000,000 shares
authorized; 10,168,663 and 9,973,491 shares
issued and outstanding at December 31, 1998 and
June 30, 1998,respectively 102 100
Additional paid-in capital 27,472 25,961
Retained earnings 41,046 35,483
Cumulative translation adjustment (8) (185)
Unrealized gains/(losses) on securities 26 6
Related parties notes receivable -- (325)
-------- --------
Total stockholders' equity 68,638 61,040
-------- --------
Total liabilities and stockholders' equity $ 83,366 $ 73,569
======== ========
The accompanying notes are an integral part of the consolidated financial statements
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MERCURY COMPUTER SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
---------------- ----------------
Net revenue $ 25,598 $ 20,624 $ 49,660 $ 39,663
Cost of revenue 8,606 7,283 17,066 13,944
-------- -------- -------- --------
Gross profit 16,992 13,341 32,594 25,719
Operating expenses:
Selling, general and administrative 8,304 6,846 15,662 13,491
Research and development 4,669 3,405 9,376 6,786
-------- -------- -------- --------
Total operating expenses 12,973 10,251 25,038 20,277
Income from operations 4,019 3,090 7,556 5,442
Interest income, net 326 219 695 450
Other income (expenses), net 261 (125) 306 (43)
-------- -------- -------- --------
Income before income taxes 4,606 3,184 8,557 5,849
Provision for income taxes 1,572 1,210 2,994 2,270
-------- -------- -------- --------
Net income $ 3,034 $ 1,974 $ 5,563 $ 3,579
======== ======== ======== ========
Net income per share:
Basic $ 0.30 $ 0.37 $ 0.55 $ 0.68
======== ======== ======== ========
Diluted $ 0.28 $ 0.24 $ 0.52 $ 0.44
======== ======== ======== ========
Weighted average shares
outstanding:
Basic 10,117 5,307 10,072 5,262
======== ======== ======== ========
Diluted 10,787 8,281 10,704 8,136
======== ======== ======== ========
The accompanying notes are an integral part of the consolidated financial statements
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MERCURY COMPUTER SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
SIX MONTHS ENDED
DECEMBER 31,
1998 1997
------------------
Cash flows provided from operating activities:
Net income $ 5,563 $ 3,579
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,927 1,645
Deferred income taxes -- (331)
Provision for doubtful accounts 116 --
Changes in assets and liabilities:
Trade accounts receivable 833 277
Inventory (1,633) (113)
Prepaid expenses and other current assets (548) (764)
Other assets 86 (15)
Accounts payable 2,131 (1,007)
Accrued expenses and compensation 1,165 1,430
Billings in excess of revenues and customer advances (218) (263)
Income taxes payable (918) (449)
------- --------
Net cash provided by operating activities 10,024 2,469
------- --------
Cash flows from investing activities:
Purchase of marketable securities (3,595) --
Purchases of property and equipment (6,787) (2,696)
Capitalized software development costs (575) (51)
Notes receivable from related parties 325 --
------- --------
Net cash used in investing activities (10,632) (2,747)
Cash flows from financing activities:
Net proceeds from issuance of common stock -- --
Proceeds from exercise of stock options and warrants 1,513 252
------- --------
Net cash provided by financing activities 1,513 252
------- --------
Effect of exchange rate change on cash and cash equivalents (61) 29
------- --------
Net change in cash and cash equivalents 844 3
Cash and cash equivalents at beginning of period 6,054 15,193
------- --------
Cash and cash equivalents at end of period $ 6,898 $ 15,196
======= ========
Cash paid during the period for:
Interest -- --
Income taxes $ 4,109 $ 3,064
The accompanying notes are an integral part of the consolidated financial statements
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MERCURY COMPUTER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION
These consolidated financial statements should be read in conjunction with the
Company's financial statements and footnotes included in the Company's Form
10-K, filed with the Securities and Exchange Commission. In the opinion of
management, the accompanying unaudited financial statements include all
adjustments, consisting of normal recurring adjustments, necessary to present
fairly the consolidated financial position, results of operations and cash flows
of Mercury Computer Systems, Inc.
B. INVENTORY
DECEMBER 31, 1998 JUNE 30, 1998
IN THOUSANDS) (IN THOUSANDS)
------------ ------------
Raw materials $ 3,783 $ 4,707
Work in process 4,625 2,814
Finished goods 849 1,604
------- -------
Total $ 9,257 $ 9,125
======= =======
C. NET INCOME PER COMMON SHARE
The Company has adopted Statement of Financial Accounting Standard ("SFAS") No.
128, "Earnings Per Share," which specifies the computation, presentation and
disclosure requirements for net income per common share. Basic net income per
common share is computed based on the weighted average number of common shares
outstanding during the period. Diluted net income per common share gives effect
to all diluted potential common shares outstanding during the period. Under SFAS
No. 128, the computation of diluted earnings per share does not assume the
issuance of common shares that have an antidilutive effect on net income per
common share.
Prior to the adoption of this statement, all common and common equivalent shares
issued during the twelve month period prior to the filing of the initial public
offering ("cheap stock") were included in the calculation of basic and diluted
earnings per share as if they were outstanding for all periods presented.
Adoption of this statement, and the related guidance set out in Securities and
Exchange Commission Staff Accounting Bulletin No. 98, has eliminated the
inclusion of cheap stock from the calculation of basic and diluted earnings per
share prior to issuance of the securities.
THREE MONTHS SIX MONTHS
ENDED DECEMBER 31, ENDED DECEMBER 31,
1998 1997 1998 1997
(IN THOUSANDS) (IN THOUSANDS) (IN THOUSANDS) (IN THOUSANDS)
------------- -------------- -------------- --------------
Net income $ 3,034 $ 1,974 $ 5,563 $ 3,579
Shares used in computation:
Weighted average common shares
Outstanding used in computation
of basic net income per share 10,117 5,307 10,072 5,262
Dilutive effect of convertible preferred stock -- 2,557 -- 2,557
Dilutive effect of stock options 670 632 417 317
------- ------- ------- -------
Shares used in computation of diluted net income per share 10,787 8,281 10,704 8,136
======= ======= ======= =======
Basic net income per share $ 0.30 $ 0.37 $ 0.55 $ 0.68
======= ======= ======= =======
Dilutive net income per share $ 0.28 $ 0.24 $ 0.52 $ 0.44
======= ======= ======= =======
Options to purchase 5,842 and 249,692 shares of common stock were outstanding
during the three months ended December 31, 1998 and December 31, 1997,
respectively, but were not included in the calculation of diluted net income per
common share because the option price was greater than the average market price
of the common shares during the period. Options to purchase 44,690 and 141,810
shares of common stock were outstanding during the six months ended December 31,
1998 and December 31, 1997, respectively, but were not included in the
calculation of diluted net income per common share because the option price was
greater than the average market price of the common shares during the period.
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D. COMPREHENSIVE INCOME
Mercury's total comprehensive income was as follows (in thousands)
THREE MONTHS SIX MONTHS
ENDED DECEMBER 31, ENDED DECEMBER 31,
1998 1997 1998 1997
--------------------------------------------
Net income $ 3,034 $ 1,974 $ 5,563 $ 3,579
Other comprehensive income, net of tax:
Foreign currency translation adjustments 99 (25) 115 --
Unrealized gains on securities (14) -- 13 --
------- ------- ------- -------
Other comprehensive income 85 (25) 128 --
------- ------- ------- -------
Total comprehensive income $ 3,119 $ 1,949 $ 5,691 $ 3,579
======= ======= ======= =======
E. INTERNAL REVENUE SERVICE AUDIT
On December 12, 1997, the Internal Revenue Service ("IRS") concluded an audit of
the Company's tax returns for the years ended June 30, 1992 through June 30,
1995, and issued a formal report reflecting proposed adjustments with respect to
the years under audit. The proposed IRS adjustments primarily relate to the
disallowance of research and experimental tax credits claimed by the Company, as
well as the treatment of certain other items. As of December 12, 1997 the total
deficiency attributable to the proposed adjustments was $4,181,000, including
penalties and interest in the amount of $1,591,000. The Company has appealed the
proposed adjustments to the Appeals Division of the IRS. While the Company does
not believe that the final outcome of the IRS audit will have a material adverse
effect on the Company's financial condition or results of operations, no
assurance can be given as to the final outcome of the audit, the amount of any
final adjustments or the potential impact of such adjustments on the Company's
financial condition or results of operations.
F. NEW ACCOUNTING PRONOUNCEMENTS
In June of 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement supercedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise." This statement
includes requirements to report selected segment information quarterly and
entity-wide disclosures about products and services, major customers, and the
material countries in which the entity holds assets and reports revenues. The
statement will be effective for annual periods beginning after December 15, 1997
and the Company will adopt its provisions in fiscal 1999. Reclassification for
earlier periods is required, unless impracticable, for comparative purposes. The
Company is currently evaluating the impact this statement will have on its
financial statements.
In March 1998, the American Institute of Certified Public Accountants issued SOP
98-1, "Internal Use Software," which provides guidance on the accounting for the
costs of software developed or obtained for internal use. SOP 98-1 is effective
for fiscal years beginning after December 15, 1998. Management does not expect
the statement to have a material impact on its financial position or results of
operations.
On June 15, 1998 the FASB issued SFAS No. 133 " Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 is effective for all fiscal
quarters for all fiscal years beginning after June 15, 1999. SFAS No. 133
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and the type of hedge
transaction. Management of the Company anticipates that, due to its limited use
of derivative instruments, the adoption of SFAS No. 133 will not have a material
impact on its financial position or results of operations.
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MERCURY COMPUTER SYSTEMS, INC.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, information provided by the Company, statements made by its
employees or information included in its filings with the Securities and
Exchange Commission may contain statements which are not historical facts but
which are "forward-looking statements" that involve risks and uncertainties. The
words "may," "will," "expect," "anticipate," "continue", "estimate", "project,"
"intend" and similar expressions are intended to identify forward-looking
statements regarding events, conditions and financial trends that may affect the
Company's future plans of operations, business strategy, results of operations
and financial position. These statements are based on the Company's current
expectations and estimates as to prospective events and circumstances about
which there can be no firm assurances given. Further, any forward-looking
statement speaks only as of the date on which such statement is made, and the
Company undertakes no obligation to update any forward-looking statement to
reflect events or circumstances after the date on which such statement is made.
As it is not possible to predict every new factor that may emerge,
forward-looking statements should not be relied upon as a prediction of actual
future financial condition or results. Important factors that may cause the
Company's actual results to differ from forward-looking statements are
referenced in the Company's Form 10K filed annually with the Securities and
Exchange Commission.
RESULTS OF OPERATIONS:
REVENUES
The Company's total revenues increased 24% from $20.6 million during the three
months ended December 31, 1997 to $25.6 million during the three months ended
December 31, 1998. The Company's total revenues increased 25% from $39.7 million
during the six months ended December 31, 1997 to $49.7 million during the six
months ended December 31, 1998.
Defense electronics revenues increased 23% from $15.7 million or 76% of total
revenues during the three months ended December 31, 1997 to $19.2 million or 75%
of total revenues during the three months ended December 31, 1998. Defense
electronics revenues increased 20% from $30.8 million or 78% of total revenues
during the six months ended December 31, 1997 to $36.9 million or 74% of total
revenues during the six months ended December 31, 1998. Increases in defense
electronic revenues were due primarily to continued strong unit demand for
defense electronics products, largely comprised of advanced military
applications in radar, sonar and airborne surveillance.
Medical imaging revenues increased 49% from $2.9 million or 14% of total
revenues during the three months ended December 31, 1997 to $4.3 million or 17%
of total revenues during the three months ended December 31, 1998. Medical
imaging revenues increased 45% from $5.1 million or 13% of total revenues during
the six months ended December 31, 1997 to $7.4 million or 15% of total revenues
during the six months ended December 31, 1998. Increases in medical imaging
revenues are reflective of the Company's ongoing investment in this business,
expansion into new modalities and the resulting increased unit demand.
Other revenues, which include the Shared Storage and other commercial
businesses, remained essentially flat at $2.1 million during the three months
ended December 31, 1997 and 1998. In terms of percentage to total revenues,
other revenues declined from 10% during the three months ended December 31, 1997
to 8% during the three months ended December 31, 1998. Other revenues increased
39% from $3.8 million or 10% of total revenues during the six months ended
December 31, 1997 to $5.3 million or 11% of total revenues during the six months
ended December 31, 1998. The increase in other revenues during the six month
period, year over year, was primarily due to a sharp rise in the Company's
commercial business, and resulting increased unit demand, during the first
quarter of fiscal 1999.
COST OF REVENUES
Cost of revenues increased 18% from $7.3 million or 35% of total revenues during
the three months ended December 31, 1997 to $8.6 million or 34% of total
revenues during the three months ended December 31, 1998. Cost of revenues
increased 22% from $13.9 million or 35% of total revenues during the six months
ended December 31, 1997 to $17.1 million or 34% of total revenues during the six
months ended December 31, 1998. The cost increases correlate with the
corresponding revenue increases and the reductions as a percentage of revenues
reflect component cost reductions and modest efficiency gains.
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SELLING, GENERAL AND ADMINISTRATIVE
Selling, general, and administrative expenses increased 21% from $6.8 million or
33% of total revenues during the three months ended December 31 1997 to $8.3
million or 32% of total revenues during the three months ended December 31,
1998. Selling, general and administrative expenses increased 16% from $13.5
million or 34% of total revenues during the six months ended December 31, 1997
to $15.7 million or 32% of total revenues during the six months ended December
31, 1998. These increases reflect the hiring of additional sales and
administrative personnel, information system investments, increased commissions
and marketing related costs, all of which are associated with higher sales
volume.
RESEARCH AND DEVELOPMENT
Research and development expenses increased 37% from $3.4 million or 17% of
total revenues during the three months ended December 31, 1997 to $4.7 million
or 18% of total revenues during the three months ended December 31, 1998.
Research and development expenses increased 38% from $6.8 million or 17% of
total revenues during the six months ended December 31, 1997 to $9.4 million or
19% of total revenues during the six months ended December 31, 1998. This
increase was due primarily to the hiring of additional engineers to develop and
enhance the features and functionality of the Company's current products and to
develop the Company's next generation products. Engineering expenses currently
are running higher than management's target levels as the Company is working on
major development programs to deliver important new technology to its customers.
INCOME FROM OPERATIONS
Income from operations increased 30% from $3.1 million or 15% of total revenues
during the three months ended December 31, 1997 to $4.0 million or 16% of total
revenues during the three months ended December 31, 1998. Income from operations
increased 39% from $5.4 million or 14% of total revenues during the six months
ended December 31, 1997 to $7.6 million or 15% of total revenues during the six
months ended December 31, 1998.
Included in income from operations during the three months ended December 31,
1998 were $689,000 in hardware and software revenues and $1.1 million in direct
expenses related to the Shared Storage business. Included in income from
operations during the three months ended December 31, 1997 were $47,000 in
hardware and software revenues and $820,000 in direct expenses related to the
Shared Storage business. Included in income from operations during the six
months ended December 31, 1998 were $1.3 million in hardware and software
revenues and $2.0 million in direct expenses related to the Shared Storage
business. Included in income from operations during the six months ended
December 31, 1997 were $84,000 in hardware and software revenues and $1.5
million in direct expenses related to the Shared Storage business. The direct
expenses include expenses from marketing and engineering activities, primarily
related to compensation, trade shows, prototype development and direct costs
related to the sale of the product, including certain hardware costs.
INTEREST INCOME, NET
Interest income, net, increased 49% from $219,000 during the three months ended
December 31, 1997 to $326,000 during the three months ended December 31, 1998.
Interest income, net, increased 54% from $450,000 during the six months ended
December 31, 1997 to $695,000 during the six months ended December 31, 1998.
This increase reflects an increase in the Company's average cash and cash
equivalent balances primarily as a result of cash received from the Company's
initial public offering. Offsetting the effect of higher average cash balances
were lower yields achieved on the Company's cash. These lower yields were the
result of a shift in investment strategy from taxable money market instruments
to non-taxable securities. Additionally, $50,000 of interest expense was accrued
during the quarter ended December 31, 1998 related to the Internal Revenue
Service audit as described in the notes to the financial statements.
PROVISION FOR INCOME TAX
The Company recorded a tax provision of $1.6 million during the three months
ended December 31, 1998 reflecting a 34% tax rate as compared to a $1.2 million
tax provision during the three months ended December 31, 1997, reflecting a 38%
tax rate. The Company recorded a tax provision of $3.0 million during the six
months ended December 31, 1998 reflecting a 35% tax rate as compared to a $2.3
million tax provision during the six months ended December 31, 1997 reflecting a
39% tax rate. The reduced tax rate was primarily due to a one-time tax provision
adjustment during the current quarter to reflect Congressional extension of the
research and experimentation tax credit through June, 1999.
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LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1998, the Company had cash and marketable investments of
approximately $39.5 million. During the six months ended December 31, 1998, the
Company generated approximately $10.0 million in cash from operations compared
to $2.5 million generated during the six months ended December 30, 1997. The
increase in cash generated from operations was due primarily to increased
profitability, accounts payable increases and improved management of accounts
receivable. Days sales outstanding (DSO) increased from 45 days at December 31,
1997 to 58 days at December 31, 1998. This DSO increase is primarily due to a
disproportionate amount of revenue being recognized early in the quarter ended
December 31, 1997. However, DSO during the quarter ended December 31, 1998
reflected significant improvement over the previous quarter's DSO of 75.
The Company has a line of credit agreement with a commercial bank on which the
Company can borrow up to $5.0 million at an interest rate equal to the prime
rate or, at the election of the Company, two and one quarter percentage points
above the London InterBank Offered Rate. As of December 31, 1998, there was no
outstanding borrowing on this line of credit.
During the six months ended December 31, 1998, the Company's investing
activities used cash of $10.6 million which consisted of $4.8 million related to
the development of additional office space, $3.6 million for the purchase of
marketable securities (net), $2.0 million for computers, furniture, equipment
and leasehold improvements and $575,000 for capitalized software. These outflows
were offset by a reduction in notes receivable from related parties amounting to
$325,000. During the six months ended December 31, 1997, the Company's investing
activities used cash of $2.7 million, consisting of $1.8 million for computers,
furniture, equipment and leasehold improvements and $913,000 related to the
development of additional office space.
During the six months ended December 31, 1998, the Company's financing
activities provided approximately $1.5 million in cash, all related to the
issuance of stock options. During the six months ended December 31, 1997, the
Company's financing activities provided $252,000 in cash from the issuance of
stock options.
The Company believes that its available cash, cash generated from operations,
and the Company's line of credit, will be sufficient to provide for the
Company's working capital and capital expenditure requirements for the
foreseeable future and any final adjustments resulting from the IRS audit
described in the notes to the financial statements. If the Company acquires one
or more businesses or products, the Company's capital requirements could
increase substantially. In the event of such an acquisition or in the event that
any unanticipated circumstances arise which significantly increase the Company's
capital requirements, there can be no assurance that necessary additional
capital will be available on terms acceptable to the Company, if at all.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field and cannot distinguish 21st
century dates from 20th century dates. These date code fields will need to
distinguish 21st century dates from 20th century dates and, as a result, many
company's software and computer systems may need to be upgraded or replaced in
order to comply with such "Year 2000" ("Y2K") requirements. Generally, on a
stand-alone basis Mercury's products are not date dependent and therefore are
not susceptible to Y2K issues like other general purpose computer companies.
However, it should be understood that the majority of Mercury's product
performance is dependent upon third party host computing environments.
Mercury's Y2K Initiative: In the Company's Annual Report on Form 10K for the
fiscal year ended June 30, 1998, the Company made disclosures regarding the
following matters: (i) the Company's state of Y2K readiness of the hardware and
software products sold by the Company ("Products"), the information technology
systems used in its operations ("IT Systems"), and its non-IT Systems, such as
building security, voice mail and other systems, (ii) the expenditures expected
to be incurred in connection with identifying, evaluating and settling any Y2K
compliance issues, (iii) the risks associated with identified Y2K issues, and
(iv) the Company's intention to develop a contingency plan to address identified
Y2K compliance issues.
State of Readiness: Since the Company's original Y2K disclosure, the Company has
reprogrammed the source code underlying its current financial and accounting
software to make it Y2K compliant. Testing of the reprogrammed software is on
schedule and is expected to be completed by May, 1999. The Company also plans to
upgrade certain other business systems supporting human resources and sales
information data bases. These upgrades are expected to be completed by June 30,
1999. The Company has evaluated IT systems and has concluded that the majority
of such systems are compliant. Plans are in place to upgrade the remaining IT
system components with an objective of bringing the entire infrastructure into
compliance by June 30, 1999.
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The Company continues its assessment of all current versions of its Products and
believes they are Y2K compliant. The Company has determined that it is not
feasible to test all prior versions of its Products. To assess whether material
third parties with whom the Company conducts business are Y2K compliant, the
Company is engaged in activities to examine their state of readiness, primarily
through the use of third party questionnaires. This examination includes
professional service providers.
Costs: Based on its investigation to date, the Company does not expect the total
cost of its Y2K Project to have a material adverse effect on the Company's
business or financial results. It is estimated that the cost related to Y2K will
fall between $100,000 and $500,000.
Contingency Plan: To minimize potential disruptions, the Company intends to
adopt a contingency plan as necessary to address any material issues raised
during the completion of the assessment and testing phases of the Project, or
any material issues raised in connection with the response by material third
parties to the Company's questionnaires.
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MERCURY COMPUTER SYSTEMS, INC.
PART II. OTHER INFORMATION
(d) Use of Proceeds from Registered Securities.
During the three months of October, November and December 1998, the Company used
approximately $4.8 million of proceeds received from the sale of 2,000,000
shares in the Company's initial public offering which closed on February 4, 1998
for the construction of an additional facility as discussed in the Company's
Form 10K filed with the Securities and Exchange Commission. The Company intends
to own and occupy this newly constructed building, which consists of 91,000
square feet. A portion of the building will be leased to an unaffiliated third
party. The Company has also purchased its current headquarters building, which
consists of 96,000 square feet. The Company is currently exploring financing
alternatives for both of these properties.
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ITEM 6. EXHIBITS AND REPORTS FILED ON FORM 8-K
(a) Exhibits. See as listed
Exhibit
Item #
------
10.1 Purchase and Sale Agreement for 199 Riverneck Road,
Chelmsford, MA.
10.2 Quitclaim Deed for 199 Riverneck Road, Chelmsford, MA.
27.1 Financial Data Schedule
(b) Reports on Form 8-K. None.
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MERCURY COMPUTER SYSTEMS, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MERCURY COMPUTER SYSTEMS, INC.
Date: February 12, 1999 By: /s/ G. MEAD WYMAN
----------------------------------------
G. Mead Wyman
Senior Vice President, Chief Financial
Officer and Treasurer
(Principal Financial and Accounting
Officer)
14
15
MERCURY COMPUTER SYSTEMS, INC.
EXHIBIT INDEX
Exhibit
Item #
- ------
10.1 Purchase and Sale Agreement for 199 Riverneck Road, Chelmsford, MA.
10.2 Quitclaim Deed for 199 Riverneck Road, Chelmsford, MA.
27.1 Financial Data Schedule
15
1
EXHIBIT 10.1
PURCHASE AND SALE AGREEMENT
199 RIVERNECK ROAD, CHELMSFORD, MASSACHUSETTS
1. PARTIES - This 5th day of February, 1999, THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES (the "SELLER") agrees to sell and 199 RIVERNECK,
LLC (the "BUYER") agrees to buy, upon the terms and conditions set forth herein,
the real estate that is the subject of this agreement (the "Premises").
2. PREMISES - The Premises consist of approximately 6.3 acres of land
with the approximately 96,104 square foot building thereon situated in
Chelmsford, Middlesex County, Massachusetts, known as and numbered 199 Riverneck
Road, more particularly described in Exhibit A hereto. Included in the sale for
no additional consideration are all fixtures and other property belonging to the
SELLER located in or on the Premises and all rights of the SELLER relating to
the Property.
3. TITLE DEED - The Premises are to be conveyed by a good and sufficient
Massachusetts quitclaim deed in a form appropriate for recording with the
Middlesex North Registry of Deeds running to the BUYER, or to the nominee
designated by the BUYER by written notice to the SELLER given at least seven (7)
days before the deed is to be delivered as herein provided. The deed shall
convey good and clear record and marketable title to the Premises insurable by a
title insurance company at standard rates, free from encumbrances, except:
(a) Provisions of building, environmental, zoning and. other land use
laws;
(b) Such municipal taxes for the then current fiscal period as are
not due and payable on the date of the delivery of the deed;
(c) Any liens for municipal betterments assessed after the date of
this agreement; and
(d) All matters of record as of the date of this Agreement and
matters shown on a current and accurate survey of the Premises
which are not objected to by the BUYER prior to the end of the
Review Period, as defined in Section 6.
4. PURCHASE PRICE - The agreed purchase price for the Premises is
$8,300,000, which shall be paid at the time of delivery of the deed in cash, or
by certified, cashier's, treasurer's or bank check, or if requested by the
SELLER, by wire transfer of immediately available federal funds.
2
5. TIME FOR PERFORMANCE: DELIVERY OF DEED - The deed is to be delivered
at 11:00 o'clock a.m. on February 9, 1999 (the "Closing Date"), at the offices
of the SELLER'S counsel, Nutter, McClennen & Fish, LLP, One International Place,
Boston, MA 02110-2699, unless otherwise agreed upon in writing. It is agreed
that time is of the essence of this Agreement. The consummation of the sale
contemplated by this Agreement is sometimes referred to herein as the "closing."
6. REVIEW PERIOD. The BUYER shall have until the closing (the "Review
Period") to (a) review the SELLER's title to the Premises and to obtain a survey
of the Premises; (b) have made an assessment of the Premises for the presence of
any oil, hazardous material, hazardous waste or hazardous substance (hereinafter
collectively called "Hazardous Substances") as those terms are defined by any
applicable federal, state or local law, rule, regulation (hereinafter
collectively called "Applicable Environmental Laws"); (c) otherwise review the
Premises as the BUYER in its sole discretion shall deem necessary; and (d)
contact and consult with any and all federal, state, municipal and other
governmental bodies having jurisdiction over the Premises ("Governmental
Authorities") regarding the zoning, building code and other governmental permits
and approvals necessary under any applicable laws, regulations, codes, orders,
ordinances, rules and statutes now in effect, including, without limitation, the
Applicable Environmental Laws (collectively referred to as "Applicable Laws")
for the use and operation of the improvements on the Premises. All of the
investigations described in this Section 6 shall be undertaken by the BUYER at
the BUYER'S sole cost and expense, including, without limitation, the cost of
such surveys, inspections and tests.
In the event that the BUYER determines, in its sole discretion, (a) the
title to, or any matter shown on the survey of, the Premises to be
unsatisfactory, (b) the environmental condition of the Premises to be
unsatisfactory, or (c) that the Premises does not comply with Applicable Laws or
is otherwise unsatisfactory, then, in any such case, the BUYER may terminate
this Agreement by giving written notice to the SELLER and Escrow Agent on or
before the expiration of the Review Period detailing the basis on which the
BUYER reasonably determined the Premises to be unsatisfactory or in violation of
Applicable Laws, as aforesaid, whereupon the Deposit shall be refunded to the
BUYER, this Agreement shall terminate and neither party shall have any rights or
remedies hereunder, except as otherwise provided herein to survive the
termination of this Agreement.
In the event that notice of termination is not given by the BUYER by the
expiration of the Review Period, the BUYER shall be deemed to have approved the
condition of the Premises (except any condition first arising after the date of
the BUYER'S inspection of the Premises during the Review Period), the compliance
of the Premises with all Applicable Laws and other matters and the state of
title to the Premises as it exists as of the closing.
3
During the Review Period, the BUYER and its representatives, contractors,
architects and engineers, and each of their respective officers, directors,
agents, employees and representatives shall have access to the Premises at
reasonable times and for reasonable periods (a) to show the Premises to
third-parties (including, without limitation, lenders, insurers or attorneys)
and (b) to perform any and all tests, borings, inspections and measurements
which, in the BUYER'S opinion, are reasonably necessary or appropriate; provided
that in all cases the BUYER and any such representatives, contractors,
architects and engineers shall be accompanied by a representative of the SELLER.
If the closing shall not occur, after its inspections are completed, the
BUYER shall restore the Premises, at the BUYER'S sole cost and expense,
substantially to its condition immediately prior to the BUYER'S inspections. The
BUYER agrees to indemnify and hold the SELLER harmless from and against all
claims, damages and liability arising out of or relating to the exercise by the
BUYER, or such any other person, of the access rights under this Section 6,
including, without limitation, such claims, damages and liability for personal
injury or property damage, and all costs and reasonable attorneys' fees.
Such indemnity and obligations of the BUYER under this Section 6 shall
survive the Closing (as hereinafter defined) or the earlier termination of this
Agreement.
7. CONDITION OF PROPERTY. The BUYER and the SELLER agree that the BUYER
is acquiring the Premises in its "AS-IS" condition, with all faults, if any, and
without any warranty, express or implied, except as set forth in this Agreement.
By accepting the deed and paying the purchase price, the BUYER acknowledges that
(a) it is familiar with the Premises and has had full opportunity, to the extent
it desired to do so, to fully inspect and review (i) the environmental condition
of the Premises, (ii) the title to the Premises, (iii) the compliance with the
Premises with Applicable Laws and (iv) such other engineering and other matters
related to the Premises as the BUYER has found appropriate and the BUYER thereby
acknowledges that the BUYER is satisfied with each of the foregoing matters. The
BUYER hereby confirms that, except as set forth in this Agreement, neither the
SELLER nor any director, officer, employee, agent or representative of the
SELLER nor any other person purporting to act on behalf of the SELLER has made
any representation upon which the BUYER is relying with respect to the Premises.
The BUYER hereby releases the SELLER, its agents, representatives, employees,
successors and assigns from and against any and all claims, demands and causes
of action that the BUYER may have relating to (a) the condition of the Premises,
or (b) any other matter pertaining to the Premises, as of the closing hereunder.
Such release shall survive the Closing or the earlier termination of this
Agreement.
Except as otherwise provided in Section 8 of this Agreement, the BUYER
hereby agrees that any loss, damage or deterioration in respect of the buildings
or other improvements on the Premises which may occur between the Effective Date
and the
4
closing shall not give rise to any adjustment of the Purchase Price or any
change in the rights and obligations of the parties.
8. POSSESSION AND CONDITION OF PREMISES - Full possession of the Premises
free of all tenants and occupants (other than the BUYER and those claiming under
the BUYER) is to be delivered at the time of the delivery of the deed, the
Premises to be then (a) in the same condition as they now are in on the
Effective Date, excepting only reasonable use and wear thereof and damage by
fire or other insured casualty not exceeding $100,000 in cost to repair (a
"Minor Insured Casualty"), and (b) in compliance with the provisions of any
instrument referred to in paragraph 3(d) hereof. In the event of a Minor Insured
Casualty between the date hereof and the closing, at the closing insurance
proceeds in an amount sufficient to effect the repair by a reputable licensed
professional contractor shall be paid to the BUYER. If the Premises shall be
damaged by fire or casualty which is not a Minor Insured Casualty, the
provisions of Sections 9, 10 and 11 shall be applicable.
9. EXTENSION TO PERFECT TITLE OR MAKE PREMISES CONFORM - If the SELLER
shall be unable to give title, or to make conveyance, or to deliver possession
of the Premises, all as herein stipulated, or if at the time of the delivery of
the deed the Premises do not conform with the provisions hereof, the SELLER
shall use reasonable efforts to remove any defects in title, or to deliver
possession as provided herein, or to make the Premises conform to the provisions
hereof, as the case may be. In such event, the time for performance shall be
extended for a period of thirty (30) days. "Reasonable efforts", as used in this
paragraph, shall not require the expenditure of more than $50,000 by the SELLER;
provided, however, that such $50,000 limitation shall not apply to monetary
encumbrances voluntarily incurred by the SELLER on the Premises.
10. FAILURE TO PERFECT TITLE OR MAKE PREMISES CONFORM, ETC. - If at the
expiration of the extended time the SELLER shall have failed so to remove any
defects in title, deliver possession, or make the Premises conform, as the case
may be, all as herein agreed, then at the BUYER'S option, all deposits made
under this Agreement shall be forthwith refunded, and thereupon all other
obligations of all parties hereto shall cease and this agreement shall be void
and without recourse to the parties hereto.
11. BUYER'S ELECTION TO ACCEPT TITLE - The BUYER shall have the election,
at either the original or any extended time for performance, to accept such
title as the SELLER can deliver to the Premises in its then condition and to pay
therefor the full purchase price without reduction. In the event of such
conveyance, if the Premises shall have been damaged by fire or casualty insured
against and have not been fully restored, the SELLER shall pay over or assign to
the BUYER, on delivery of the deed, all amounts recovered or recoverable on
account of such insurance, less any amounts reasonably expended for any partial
restoration.
5
12. ACCEPTANCE OF DEED - The acceptance of a deed by the BUYER or its
nominee, as the case may be, shall be deemed to be a full performance and
discharge of every agreement and obligation herein contained or expressed,
except such as are, by the terms hereof, to be performed after the delivery of
the deed.
13. USE OF PURCHASE MONEY TO CLEAR TITLE - To enable the SELLER to make
conveyance as herein provided, if required, the SELLER shall, at the time of
delivery of the deed, use the purchase money or any portion thereof to clear the
title of any or all encumbrances or interests, provided that all instruments so
procured are delivered simultaneously with the delivery of the deed, with the
exception of mortgage discharges from recognized lending institutions, which may
be obtained expeditiously and recorded in due course.
14. INSURANCE - Until the delivery of the deed, the SELLER shall maintain
fire and extended coverage casualty insurance on the Premises as currently
insured.
15. ADJUSTMENTS - The BUYER is the tenant of the Premises and pays all
real estate taxes, electricity, gas and water and sewer use charges.
Accordingly, there shall be no adjustments on account thereof.
16. INTENTIONALLY DELETED.
17. INTENTIONALLY DELETED.
18. CONSTRUCTION OF AGREEMENT - This instrument, executed in four original
counterparts, is to be construed as a Massachusetts contract, is to take effect
as a sealed instrument, sets forth the entire contract between the parties, is
binding upon and enures to the benefit of the parties hereto and their
respective heirs, devisees, executors, administrators, successors and assigns,
and may be cancelled, modified or amended only by a written instrument executed
by both the SELLER and the BUYER. The captions are used only as a matter of
convenience and are not to be considered a part of this agreement or to be used
in determining the intent of the parties to it.
19. SUPERSEDES OTHER AGREEMENTS - This agreement supersedes any and all
other agreements made prior hereto by and between any or all of the parties
hereto with respect to the transaction contemplated hereby and all of such prior
agreements are hereby made void and without recourse to the parties thereto.
20. ENFORCEMENT OF AGREEMENT - In the event that either party shall engage
legal counsel for the purpose of enforcing this agreement, and litigation is
actually commenced by either party, the costs and reasonable attorney's fees of
the prevailing party in such litigation shall be paid by the non-prevailing
party.
6
21. BROKERAGE WARRANTY - The SELLER and the BUYER represent and warrant to
each other that neither has dealt with any real estate agent or broker in
connection with the transaction contemplated hereby and was not called to the
attention of the other as a result of any services or facilities of any such
other real estate agent or broker, other than Spaulding & Slye. The SELLER and
the BUYER agree to indemnify, exonerate and hold the other harmless from and
against any claim, loss, damage, cost or liability for any brokerage commission
or fee which may be asserted against the other as a result of the other's breach
of this warranty. The provisions of this paragraph shall survive delivery of the
deed hereunder.
22. NOTICE - Any notice given hereunder shall be deemed duly given when
mailed by registered or certified mail, return receipt requested, postage and
registration or certification charges prepaid, addressed in the case of the
SELLER to the SELLER c/o Lend Lease Real Estate, 787 Seventh Avenue, New York,
New York 10019, Attention: John C. Schoser, Vice President, with a copy
simultaneously mailed by first class mail, postage prepaid to James W. Hackett,
Esq., Nutter, McClennen & Fish, LLP, One International Place, Boston, MA
02110-2699 and in the case of the BUYER to the BUYER at the Premises, with a
copy simultaneously so mailed to Anthony J. Medaglia, Jr., Esq., Hutchins,
Wheeler & Dittmar, 101 Federal Street, Boston, MA 02110, except that either
party may by written notice to the other designate another address which shall
thereupon become the effective address of such party for the purposes of this
clause.
23. NO ASSIGNMENT; NO RECORDING - The BUYER shall not assign this
agreement or any of the BUYER'S rights under this agreement without the written
consent of the SELLER which may be withheld by the SELLER in the SELLER'S sole
and uncontrolled discretion. This document shall not be recorded.
24. NON-FOREIGN CERTIFICATION - The SELLER shall deliver to the BUYER at
the closing a duly executed non-foreign certification pursuant to Internal
Revenue Code Section 1445 and the Treasury Regulations adopted thereunder.
25. TITLE INSURANCE AFFIDAVIT - The SELLER shall execute and deliver to
the BUYER'S title insurance company at the time of closing a
parties-in-possession and mechanic's lien affidavit in customary form.
26. INVESTMENT COMMITTEE APPROVAL - The BUYER acknowledges that this
Agreement is subject to approval by the SELLER at each stage in its investment
committee approval process. The SELLER agrees that, upon execution of this
Agreement, the SELLER shall attempt to secure such investment committee approval
and provide notice of the same to the BUYER on or before the Closing Date. If
the SELLER is unable to obtain such investment committee approval on or before
the Closing Date, this Agreement shall automatically terminate without recourse
to the parties hereto and the deposit shall be refunded.
7
27. ERISA - The BUYER shall, in order to enable the SELLER to comply with
the requirements of ERISA, execute and deliver to the SELLER at Closing, the
BUYER'S written representation, in form satisfactory to the SELLER, that the
BUYER is not acquiring the Premises with the assets of an employee benefit plan
as defined in Section 3(3) of ERISA. If the BUYER shall be unable to deliver
such written representation, such failure shall be deemed a default by the BUYER
hereunder and the SELLER shall have the right to terminate this Agreement.
28. TITLE STANDARDS - In any dispute as to the existence or nonexistence
of a defect in the title to the Premises, the title standards formulated by the
Massachusetts Conveyancer's Association shall be determinative.
29. AFFIDAVITS - At the time of delivery of the SELLER'S deed, the SELLER
shall execute and deliver to the BUYER and any title insurance company insuring
the title to the Premises (for the BUYER or for any lender granting mortgage
financing to the BUYER with respect to the Premises): (i) either (a) affidavits
setting forth that the SELLER is not a foreign person or foreign corporation and
providing the SELLER'S United States Taxpayer Identification Number, or (b) such
other documentation as is required by Section 1445 of the Internal Revenue Code
and any regulations promulgated thereunder to exempt the SELLER and/or the sale
of the Premises from the provisions of said Section 1445, and (ii) any other
usual and customary affidavits, documents and certificates required by the
BUYER'S mortgagee and/or the BUYER'S title insurance company.
30. TRANSFER OF WARRANTIES. The SELLER hereby transfers, assigns and sets
over to the BUYER, as of and from and after the closing hereunder, all of the
SELLER'S right, title and interest in, to and under any and all warranties and
guaranties received by or benefitting the SELLER from manufacturers,, suppliers,
contractors or the like, with respect to the Premises and any and all appliances
and any and all work therein, all to the extent such warranties and guaranties,
if any, are then in force, applicable and assignable; but in any event, without
any recourse against or liability of the SELLER on account thereof or in
connection with the enforcement thereof by the BUYER. The provisions of this
paragraph shall survive delivery of the deed.
31. NOT SUBSTANTIALLY ALL THE SELLER'S ASSETS - The SELLER represents and
warrants that the sale of the Premises does not constitute the sale of all or
substantially all the assets of the corporation and therefore the provisions of
M.G.L., c. 62C, ss.52 do not apply to this sale.
The SELLER shall include an appropriate certificate in the deed, in form
satisfactory to the BUYER and the BUYER'S counsel, to this effect. The warranty
in the first sentence of this paragraph shall survive the delivery of the deed
hereunder.
8
32. WARRANTIES AND REPRESENTATIONS OF THE SELLER - The SELLER hereby
warrants and represents to the BUYER as follows:
(1) TITLE TO THE PREMISES. The SELLER has, or will have, at time of
closing, the full and sole right, power and authority to sell, assign and
convey the Premises pursuant to this Agreement. The SELLER has not
mortgaged, hypothecated, pledged or assigned all or any portion of the
SELLER's estate, right, title and interest in and to the Premises.
(2) LITIGATION. To the SELLER's knowledge, there is no action, suit or
proceeding either at law or in equity, or any arbitration proceeding or
investigation, inquiry or other proceeding by or before any court or
Governmental instrumentality, board, agency or the like now pending or
threatened, affecting the Premises. No judgment, decree or order of any
court or Governmental authority has been issued against or binds the SELLER
which has, or is likely to have, any material adverse effect on the ability
of the SELLER to perform the transactions contemplated hereby.
(3) NO NOTICE OF VIOLATION. Seller has received no written notice from
any governmental authority that the Premises do not comply with any legal
requirement.
(4) NO PENDING TAKINGS. To the SELLER's knowledge, there is no pending or
threatened, condemnation, eminent domain or similar proceeding or
assessment affecting the Premises or any part thereof, nor is any such
proceeding or assessment contemplated by any Governmental authority.
(5) EXISTENCE AND AUTHORITY OF THE SELLER. The SELLER is, and will be on
the Closing date, a corporation duly organized, validly existing and in
good standing under the laws of the State of New York. The SELLER has, and
will have on the Closing date, all necessary power and authority to (a)
carry on the business for which the SELLER has been organized, (b) own the
Premises, and (c) enter into this Agreement and perform the SELLER's
obligations hereunder.
9
WHEREFORE, the parties have hereto set their hands and seals on the
date first written above.
SELLER: BUYER:
THE EQUITABLE LIFE ASSURANCE 199 RIVERNECK, LLC
SOCIETY OF THE UNITED STATES By Its Manager
MERCURY COMPUTER SYSTEMS, INC.
By: /s/ John C. Schoser By: /s/ James R. Bertelli
------------------------ ----------------------------
Investment Officer James R. Bertelli, President
10
EXHIBIT A
A certain parcel of land, with the buildings and other improvements
thereon, situated in the Town of Chelmsford, Middlesex County, Massachusetts
(the "Premises") shown as Lot 1 on a plan entitled "Plan of Land in Chelmsford,
Mass.", (the "Plan") prepared for Corcoran Chelmsford Trust, dated August 9,
1985, prepared by Fleming, Bienvenu & Associates, Inc., recorded with the
Middlesex North District Registry of Deeds in Plan Book 152, Page 115, bounded
and described as follows:
SOUTHERLY by Riverneck Road as shown on the Plan, in two courses
measuring, respectively, 91.90 feet and 60.00 feet
SOUTHWESTERLY by land shown on the Plan as Lot 2-B, 56.04 feet;
SOUTHWESTERLY by said Lot 2-B, in five courses measuring, and
WESTERLY respectively, 8.46 feet, 61.09 feet, 218.68 feet, 47.26
feet, 37.60 feet;
SOUTHERLY by said Lot 2-B, 25.00 feet;
WESTERLY by said Lot 2-B, 77.00 feet;
SOUTHWESTERLY by said Lot 2-B, 133.97 feet;
WESTERLY by said Lot 2-B, 287.06 feet;
NORTHERLY by land shown on the Plan as Lot 3, 41.15 feet;
NORTHWESTERLY by said Lot 3, 180.51 feet;
NORTHEASTERLY by said Lot 3, 46.00 feet;
NORTHWESTERLY by said Lot 3, 125.00 feet;
NORTHEASTERLY by land shown on the Plan as of the Commonwealth of
Massachusetts, 104.00 feet;
EASTERLY by land shown on the Plan as now or formerly of Riverneck
Realty Trust, 636.94 feet;
SOUTHERLY by land shown on the Plan as now or formerly of McKennedy,
103.13 feet;
EASTERLY by the same, 172.12 feet.
11
The Premises contain 6.40 acres of land, according to the Plan.
The Premises are subject to and have the benefit of the rights,
restrictions easements and reservations listed below:
1. Easement granted by Anthony Zabierek and Nellie Zabierek to Merrimack-Essex
Electric Company to construct and maintain utility poles dated
September 24, 1959 and recorded with said Deeds in Book 1455, Page 365.
2. Easement granted by John M. Corcoran and P. Leo Corcoran, Trustees of
Corcoran Chelmsford Trust to New England Telephone and Telegraph dated
May 16, 1984 and recorded with said Deeds in Book 2753, Page 278.
3. Grant of Easements from John M. Corcoran and P. Leo Corcoran, Trustees of
Corcoran Chelmsford Trust to John M. Corcoran and P. Leo Corcoran, Trustees
of Riverneck Realty Trust, dated March 17, 1986 and recorded with said
Deeds in Book 3389, Page 348, as affected by an Amendment dated October 7,
1997 and recorded with said Deed in Book 8825, Page 208.
4. Rights and easements contained in the deed from John M. Corcoran and P. Leo
Corcoran, Trustees of Corcoran Chelmsford Trust to Corcoran Chelmsford
Corporation, dated March 17, 1986 and recorded with said Deeds in Book
3389, Page 337.
5. Rights and easements contained in the deed from John M. Corcoran and P. Leo
Corcoran, Trustees of Corcoran Chelmsford Trust to Corcoran Chelmsford &
Associates Limited Partnership dated December 5, 1986, recorded with said
Deeds in Book 3818, Page 249.
1
EXHIBIT 10.2
QUITCLAIM DEED
THE EQUITABLE LIFE ASSURANCE SOCIETY of the UNITED STATES, a New York
corporation, successor by merger to The Equitable Variable Life Insurance
Company, for Eight Million Three Hundred Thousand Dollars ($8,300,000) and other
valuable consideration hereby grant to 199 RIVERNECK, LLC, a Delaware limited
liability company, having a principal place of business at 199 Riverneck Road,
Chelmsford, Massachusetts, 01824 with QUITCLAIM COVENANTS, a certain parcel of
land, with the buildings and other improvements thereon, situated in the Town of
Chelmsford, Middlesex County, Massachusetts (the "Premises") shown as Lot 1 on a
plan entitled "Plan of Land in Chelmsford, Mass.", (the "Plan") prepared for
Corcoran Chelmsford Trust, dated August 9, 1985, prepared by Fleming, Bienvenu &
Associates, Inc., recorded with the Middlesex North District Registry of Deeds
in Plan Book 152, Page 115, bounded and described as follows:
SOUTHERLY by Riverneck Road as shown on the Plan, in two courses
measuring, respectively, 91.90 feet and 60.00 feet;
SOUTHWESTERLY by land shown on the Plan as Lot 2-B, 56.04 feet;
SOUTHWESTERLY by said Lot 2-B, in five courses measuring, and
WESTERLY respectively, 8.46 feet, 61.09 feet, 218.68 feet, 47.26
feet, 37.60 feet;
SOUTHERLY by said Lot 2-B, 25.00 feet;
WESTERLY by said Lot 2-B, 77.00 feet;
SOUTHWESTERLY by said Lot 2-B, 133.97 feet;
WESTERLY by said Lot 2-B, 287.06 feet;
NORTHERLY by land shown on the Plan as Lot 3,41.15 feet;
NORTHWESTERLY by said Lot 3, 180.51 feet;
NORTHEASTERLY by said Lot 3, 46.00 feet;
NORTHWESTERLY by said Lot 3, 125.00 feet;
NORTHEASTERLY by land shown on the Plan as of the Commonwealth of
Massachusetts, 104.00 feet;
2
EASTERLY by land shown on the Plan as now or formerly of Riverneck
Realty Trust, 636.94 feet;
SOUTHERLY by land shown on the Plan as now or formerly of McKennedy,
103.13 feet;
EASTERLY by the same, 172.12 feet.
The Premises contain 6.40 acres of land, according to the Plan.
For the Grantor's title to the Premises, see deed from John M. Corcoran and
P. Leo Corcoran, Trustees of Corcoran Chelmsford Trust dated July 29, 1987,
recorded with said Deeds in Book 4174, Page 262.
The Premises are conveyed subject to and with the benefit of the rights,
restrictions easements and reservations set forth on EXHIBIT A, attached hereto
and with of all rights, restrictions, easements, reservations and mortgages of
record, if any, all insofar as now in force and applicable, and further subject
to real estate taxes assessed for the current fiscal year, but not yet due and
payable, which the grantee, by acceptance hereof, hereby assumes and agrees to
pay.
This conveyance is not a sale of all or substantially all of the assets of
The Equitable Life Assurance Society of the United States within the
Commonwealth of Massachusetts.
3
IN WITNESS WHEREOF, we have set our hands and seals this 5th day of
February, 1999.
GRANTOR:
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES,
a New York corporation
By: /s/ John C. Schoser
------------------------
Name: John C. Schoser
Its: Investment Officer
STATE OF NEW YORK
____________________, ss February 5, 1999
Then personally appeared the above-named John C. Schoser, Investment
Officer of The Equitable Life Assurance Society of the United States, and
acknowledged the foregoing to be his free act and deed and the free act and deed
of The Equitable Life Assurance Society of the United States, before me,
/s/ Victoria R. Lockhart
-----------------------------
Notary Public
My Commission Expires:
4
EXHIBIT A
1. Easement granted by Anthony Zabierek and Nellie Zabierek to Merrimack-Essex
Electric Company to construct and maintain utility poles dated
September 24, 1959 and recorded with said Deeds in Book 1455, Page 365.
2. Easement granted by John M. Corcoran and P. Leo Corcoran, Trustees of
Corcoran Chelmsford Trust to New England Telephone and Telegraph dated
May 16, 1984 and recorded with said Deeds in Book 2753, Page 278.
3. Grant of Easements from John M. Corcoran and P. Leo Corcoran, Trustees of
Corcoran Chelmsford Trust to John M. Corcoran and P. Leo Corcoran, Trustees
of Riverneck Realty Trust, dated March 17, 1986 and recorded with said
Deeds in Book 3389, Page 348, as affected by an Amendment dated October 7,
1997 and recorded with said Deed in Book 8825, Page 208.
4. Rights and easements contained in the deed from John M. Corcoran and P. Leo
Corcoran, Trustees of Corcoran Chelmsford Trust to Corcoran Chelmsford
Corporation, dated March 17, 1986 and recorded with said Deeds in Book
3389, Page 337.
5. Rights and easements contained in the deed from John M. Corcoran and P. Leo
Corcoran, Trustees of Corcoran Chelmsford Trust to Corcoran Chelmsford &
Associates Limited Partnership dated December 5, 1986, recorded with said
Deeds in Book 3818, Page 249.
5
1,000
U.S. DOLLARS
3-MOS
JUN-30-1999
JUL-30-1998
DEC-31-1998
1
6,898
32,581
16,400
292
9,257
42,140
27,473
13,858
83,366
14,728
0
0
0
102
68,536
83,366
25,598
25,598
8,606
8,606
12,386
116
50
4,606
1,572
3,034
0
0
0
3,034
.30
.28
