10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 30, 2006
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file no. 000-51598

iROBOT CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	77-0259 335
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
63 South Avenue, Burlington, MA (Address of principal executive offices)	01803 (Zip Code)

(781) 345-0200
(Registrant’s telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Common Stock, $0.01 par value per share     The NASDAQ Stock Market LLC

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None

Indicate by check-mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o     No þ

Indicate by check-mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o     No þ

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  þ

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

Large accelerated filer o     Accelerated filer þ     Non-accelerated filer o

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

The aggregate market value of the Common Stock held by nonaffiliates of the registrant was approximately $292,346,419 based on the last reported sale of the Common Stock on the NASDAQ Global Market on July 1, 2006.

As of February 23, 2007, there were shares 23,860,330 of the registrant’s Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant intends to file a definitive Proxy Statement pursuant to Regulation 14A within 120 days of the end of the fiscal year ended December 30, 2006. Portions such Proxy Statement are incorporated by reference into Part III of this Form 10-K.

iROBOT CORPORATION

ANNUAL REPORT ON FORM 10-K
Year Ended December 30, 2006

TABLE OF CONTENTS

			Page
Part I
	Item 1.	Business		3
	Item 1A.	Risk Factors		17
	Item 1B.	Unresolved Staff Comments		32
	Item 2.	Properties		32
	Item 3.	Legal Proceedings		32
	Item 4.	Submission of Matters to a Vote of Security Holders		32
Part II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		33
	Item 6.	Selected Financial Data		34
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		35
	Item 7A.	Quantitative and Qualitative Disclosures about Market Risk		53
	Item 8.	Financial Statements and Supplementary Data		54
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		79
	Item 9A.	Controls and Procedures		79
	Item 9B.	Other Information		80
Part III
	Item 10.	Directors, Executive Officers and Corporate Governance		80
	Item 11.	Executive Compensation		80
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		80
	Item 13.	Certain Relationships and Related Transactions, and Directors Independence		80
	Item 14.	Principal Accounting Fees and Services		81
Part IV
	Item 15.	Exhibits, Financial Statement Schedules		81
EX-10.4 SENIOR EXECUTIVE INCENTIVE COMPENSATION PLAN
EX-10.21 SEPARATION AND RELEASE AGREEMENT - GREGORY F. WHITE
EX-10.22 LEASE AGREEMENT
EX-23.1 CONSENT OF PRICEWATERHOUSECOOPERS LLP
EX-31.1 SECTION 302 CERTIFICATION OF CEO
EX-31.2 SECTION 302 CERTIFICATION OF CFO
EX-32.1 SECTION 906 CERTIFICATION OF CEO AND CFO

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PART I

ITEM 1.   BUSINESS

This Annual Report on Form 10-K contains forward-looking statements. All statements other than statements of historical facts contained in this Annual Report on Form 10-K, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss certain of these risks in greater detail in the “Risk Factors” section and elsewhere in this Annual Report on Form 10-K. Also, these forward-looking statements speak only as of the date of this Annual Report on Form 10-K, and we have no plans to update our forward-looking statements to reflect events or circumstances occurring after the date of this Annual Report. We caution readers not to place undue reliance upon any such forward-looking statements.

iRobot, Roomba, Scooba, PackBot and AWARE are trademarks of iRobot Corporation. Gator, M-Gator and R-Gator are trademarks of Deere & Company.

Overview

iRobot Corporation (“iRobot” or the “Company”) provides robots that enable people to complete complex tasks in a better way. For over 15 years, we have developed proprietary technology incorporating advanced concepts in navigation, mobility, manipulation and artificial intelligence to build industry-leading robots. Our Roomba floor vacuuming robot and Scooba floor washing robot perform time-consuming domestic chores, and our PackBot tactical military robots perform battlefield reconnaissance and bomb disposal. In addition, we are developing the Small Unmanned Ground Vehicle reconnaissance robot for the U.S. Army’s transformational Future Combat Systems, or FCS, program and, in conjunction with Deere & Company, the R-Gator unmanned ground vehicle. We sell our robots to consumers through a variety of distribution channels, including chain stores and other national retailers, and our on-line store, and to the U.S. military and other government agencies worldwide.

Since our founding by roboticists who performed research at the Massachusetts Institute of Technology, we have accumulated expertise in all the disciplines necessary to build durable, high-performance and cost-effective robots through the close integration of software, electronics and hardware. Our core technologies serve as reusable building blocks that we adapt and expand to develop next generation and new products, reducing the time, cost and risk of product development. For example, our proprietary AWARE Robot Intelligence Systems enable the behavioral control of robots. Our AWARE systems allow our Roomba floor vacuuming robot to clean an entire floor while avoiding obstacles and not falling down stairs, and also allow our PackBot robots and the R-Gator unmanned ground vehicle to accomplish complex missions such as waypoint navigation and real-time obstacle avoidance.

Our significant expertise in robot design and engineering, combined with our management team’s experience in military and consumer markets, positions us to capitalize on the growth we expect in the market for robot-based products. We believe that the sophisticated technologies in our existing consumer and military applications are adaptable to a broad array of markets such as law enforcement, homeland security, commercial cleaning, elderly care, oil services, home automation, landscaping, agriculture and construction. Our strategy is to maintain a leadership position in pursuing new applications for robot solutions by leveraging our ability to innovate, to bring new products to market quickly, to reduce costs through design and outsourcing capabilities, and to commercialize the results of our research, much of which is government funded.

Over the past five years, we sold more than 2.0 million of our home floor care robots. We also sold during that time more than 800 of our PackBot tactical military robots, most of which have been sold to the U.S. military and deployed on missions in Afghanistan and Iraq.

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Strategy

Our objective is to rapidly invent, design, market and support innovative robots that will expand our leadership globally in our existing and newly addressable markets. Key elements of our strategy to achieve this objective include:

Deliver Great Products and Continue to Expand Our Existing Markets.  Our success is built upon our ability to deliver innovative products rapidly at economical price points and to offer a broad product line to our customers. Within the consumer market today we offer floor cleaning products for various surfaces at multiple price points, as well as a number of product accessories. We are extending our military robot offerings from small, unmanned ground vehicles (such as our PackBot line of robots) to full-scale autonomous vehicles such as R-Gator. In addition, we intend to leverage our increasing installed base to expand our revenues from recurring sales of consumables, services and support.

Innovate to Penetrate New Markets.  Our goal is to develop innovative robots to perform dull, dirty or dangerous tasks. We develop robots with functionalities that are adaptable for use in a broad range of applications. We intend to target new markets, such as law enforcement, homeland security, commercial cleaning, elderly care, oil services, home automation, landscaping, agriculture and construction, where robots can create high value and can provide a better way to complete complex tasks.

Leverage Research and Development Across Different Products and Markets.  We leverage our research and development across all our products and markets. For example, we use technological expertise developed through government-funded research and development projects across our other product development efforts. Similarly, expertise developed while designing consumer products is used in designing products for government and industrial applications. This strategy helps us in avoiding the need to start each robot project from scratch, developing robots in a cost-effective manner and minimizing time to market.

Continue to Strengthen Our Brand.  We intend to continue to enhance our brand image and corporate identity. The iRobot brand is designed to communicate innovation, reliability, safety and value. Our robots’ performance and uniqueness have enabled us to obtain strong word-of-mouth and extensive press coverage leading to increasing brand awareness, brand personality and momentum. We intend to continue to invest in our marketing programs to strengthen our brand recognition and reinforce our message of innovation, reliability, safety and value.

Continue to Invest Aggressively in Our Business and Our People.  We believe the best path to maximizing long-term profit is to continue to invest significant resources in our business and our people over the next several years. We plan to invest in research and development and sales distribution channels to extend and expand our market. We intend to also continue to hire top talent and invest in our people through training and on-the-job experience. We believe this aggressive reinvestment in our business and our people will help us maintain our market leadership.

Complement Core Competencies with Strategic Alliances.  Our core competencies are the design, development and marketing of robots. We rely on strategic alliances to provide complementary competencies that we integrate into our products and to enhance market access. For example, our alliance with The Clorox Company, through which Clorox manufactures cleaning fluid, allows us to integrate world-class cleaning technology and know-how into our Scooba floor washing robot. Our alliance with Deere & Company allows us to integrate our robot controls, navigation and obstacle avoidance systems with rugged vehicles manufactured by Deere & Company. We outsource other non-core activities, such as manufacturing and back-office functions, which helps us focus our resources on our core competencies.

Develop a Community of Third-Party Developers Around Our Platforms.  We have developed products around which communities of third-party developers can create related accessories, software and complementary products. We intend to foster this community by making our products into extensible platforms with open interfaces designed to carry payloads. For example, our robots are designed to allow third-party designers to add sensors and other functionalities, such as acoustic sniper detection and web-based control.

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Technology

We are focused on behavior-based, artificially-intelligent systems developed to meet customer requirements in multiple market segments. In contrast to robotic manufacturing equipment or entertainment systems that are designed to repeat actions in specific, known environments, our systems are designed to complete missions in complex and dynamic real-world environments.

Our robots rely on the interplay among behavior-based artificially intelligent systems, real-world dynamic sensors, user-friendly interfaces and tightly-integrated, electromechanical designs to accomplish their missions efficiently.

AWARE Robot Intelligence Systems.  Our proprietary AWARE Robot Intelligence Systems are code bases that enable the behavioral control of robots. Moreover, the AWARE Systems include modules that control behaviors, sensor fusion, power management and communication. Our AWARE systems allow our Roomba floor vacuuming robot and our Scooba floor washing robot to clean an entire floor while avoiding obstacles and not falling down stairs, and also allow our PackBot robots and the R-Gator unmanned ground vehicle to accomplish complex missions such as waypoint navigation and real-time obstacle avoidance.

Real-World, Dynamic Sensing.  The degree of intelligence that our robots display is directly attributable to their ability to perceive — or sense — the world around them. Using specialized hardware and signal processing, iRobot has developed sensors that fit particular cost-performance criteria. In other cases, we use off-the-shelf sensing hardware, such as laser scanners, cameras and optical sensors.

User-Friendly Interfaces.  Our robots require that users interact and instruct our robots in intuitive ways without extensive end-user set-up, installation, training or instruction. For example, our Roomba Discovery robot requires only one button to have the robot begin its mission, determine the size of the room to be cleaned, thoroughly clean the room and return to its re-charger, right out of the box without any pre-programmed knowledge of the user’s home. Similarly, our PackBot robots use intuitive controllers, interoperable between systems, which integrate high-level supervisory commands from the user into the behaviors of the robot.

Tightly-Integrated, Electromechanical Design.  Our products rely on our ability to build inherently robust integrated electrical and mechanical components into required form factors. For instance, the computer that powers the PackBot tactical military robot must withstand being dropped from more than ten feet onto concrete. Such high performance specifications require tight design integration.

Combining these four components, we have created proprietary, reusable building blocks of robotics capabilities, including mobility platforms, manipulators, navigation and control algorithms and user interfaces. Our technology building blocks typically allow us to take a known platform and modify it for a new mission instead of starting from scratch for each application. We believe this allows us to design and develop innovative robots rapidly and cost-effectively.

Products and Development Contracts

We design and sell robots for the consumer and government and industrial markets.

Consumer Products

We sell various products that are designed for use in the home. Our current consumer products are focused on floor cleaning tasks. We believe our consumer products provide value to our customers by producing better cleaning results at an affordable price and by freeing people from repetitive home cleaning tasks.

Home Floor Cleaning Robots.  Over the past five years, we sold more than 2.0 million home floor care robots. We currently offer eight Roomba models that comprise our second generation floor vacuuming robots and two models of the Scooba floor washing robot with varying price points and performance characteristics.

Our Roomba robot’s compact disc shape allows it to clean under beds and other furniture, resulting in cleaner floors since the Roomba can access more of the floor than standard upright vacuum cleaners. Roomba is

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programmed to keep operating until the floor is clean. In addition, Roomba eliminates the need to push a vacuum — it cleans automatically upon the push of a button.

All of our current Roomba floor vacuuming robots include the following features:

•  the ability to sense a “cliff” or drop-off point and to react by reversing course automatically;

•  a non-marring bumper to clean up to obstacles without damaging furniture or walls;

•  a wide cleaning path to clean an entire room on a single battery charge;

•  an edging brush to clean along surface edges;

•  dirt-sensing, which allows the Roomba robot to detect dirtier areas in the home and respond by increasing and extending the intensity of its cleaning efforts in that concentrated space; and

•  improved cleaning and maintenance operations, enhancing the user friendliness of the Roomba robot.

Our flagship Roomba Discovery robot also features automatic self-docking, which enables the robot to return to its Home Base for battery recharging when its battery runs low or it has cleaned the room, and an advanced power system that charges faster and runs longer than many other vacuums. Roomba Discovery can clean, on average, three rooms on a single charge.

The suggested retail price for Roomba Discovery is $279 per unit. The suggested retail price for our Roomba Red base product is $149 per unit.

The iRobot Roomba Scheduler is our floor vacuuming robot that cleans a room automatically on a user-determined schedule. The Scheduler robot is available in retail outlets at a suggested retail price of $300 per unit.

We also offer a Scheduler accessory kit which allows owners of the Roomba Discovery and Roomba Red to upgrade their robot to achieve scheduling capability. In addition to the Scheduler upgrade kit, we offer other accessories that allow users to upgrade and maintain their Roomba, including virtual wall sensing devices that direct Roomba to clean specific areas, batteries and chargers, filters and brushes, and wall mounts. We plan to continue to develop upgrades to our Roomba product line.

In the third quarter of 2006, we introduced our Dirt Dog Workshop Robot — a floor vacuuming robot designed to pick up small nails, dirt, sawdust and other debris that accumulates in garages, basements and workbench zones. The Dirt Dog is available primarily through the iRobot website at $129 per unit.

Also in 2006, we introduced the Roomba for Pets and the Roomba Discovery for Pets, both of which incorporate a specially designed brush for enhanced performance on pet hair, at retail prices of $220 and $300, respectively. We also introduced the Intellibin for Roomba, which alerts the user when the dust bin is full and needs to be emptied. Intellibin was initially offered on the Roomba Scheduler platform and has since been expanded to other Roomba platforms.

iRobot Scooba.  Scooba, our second major consumer product line, is the first floor washing robot available for home use. Our Scooba robot utilizes the expertise gained from years of Roomba development to create a robot that scrubs your floor.

Our Scooba robot’s innovative cleaning process allows the robot to simultaneously sweep, wash, scrub and dry hard floors, all at the touch of a button. Unlike a conventional mop that spreads dirty water on the floor, Scooba will apply only fresh water and cleaning solution to the floor from a clean tank. Scooba will clean wet spills in addition to dirt and grime, and it is safe for use on all sealed, hard floor surfaces, including wood and tile.

Scooba has the ability to navigate around the room using a light-touch bumper and is smart enough to avoid carpets. Scooba features the most advanced diagnostic system of any of our consumer robots to provide the user with important maintenance feedback and improve user experience and product life. The suggested retail price for Scooba 5800 and Scooba 5900, our floor washing robots, are $299 and $399, respectively.

With The Clorox Company, we have developed a specially-engineered cleaning solution for use with the Scooba floor washing robot. We began collaborating with The Clorox Company in 2004 to create a cleaning

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solution that, when combined with the Scooba, would clean hard floor surfaces and assist in the mobility of the robot. We are currently jointly marketing this specially-engineered cleaning solution with The Clorox Company.

Government and Industrial Products

Our current government and industrial product offerings extend from our PackBot line of small, unmanned ground robots to the prototype R-Gator autonomous vehicle. Our government and industrial robots are designed for high-performance, durability and ease of use. Our PackBot family of robots is based on a common platform and is currently priced from approximately $50,000 to $120,000 per unit.

iRobot PackBot Scout.  PackBot Scout is a portable, tactical, mobile robot designed for military operations in urban terrain and other 21st century battle missions. This lightweight, rugged robot can be hand-carried and deployed by a single soldier. Deployed in Afghanistan and Iraq for the past several years, PackBot Scout is designed to search dangerous or inaccessible areas, providing soldiers with a safe first look so they know what to expect and how to respond. Less than 20 centimeters high and only 18 kilograms fully loaded, PackBot Scout offers five open payload bays for significant upgrade potential. The PackBot Scout is our most rugged PackBot configuration, able to sustain a 10-foot drop onto concrete and still function properly.

iRobot PackBot Explorer.  PackBot Explorer is designed for performing real-time targeting and battle damage assessment in dangerous or inaccessible areas or other urban warfare scenarios. PackBot Explorer can enter the danger zone before responders are exposed to risk and function as the incident commander’s remote information gatherer. PackBot Explorer can help assess the situation, ensure the appropriate response, and reduce risk.

iRobot PackBot EOD.  PackBot EOD is a rugged, lightweight robot designed to conduct explosive ordnance disposal, hazardous materials, search-and-surveillance and other vital law enforcement tasks for bomb squads, SWAT teams, military units and other authorities. PackBot EOD can handle a full range of improvised explosive devices and conventional ordnance disposal challenges. Our PackBot EOD robot’s lightweight and rugged OmniReach Manipulator System can extend up to six feet to safely disrupt improvised explosive devices, military ordnance, land mines and other incendiary devices.

In 2006, we focused on developing various payloads for the PackBot platform. In particular, we have teamed with ICx Technologies to integrate its explosive-detection technology onto the combat-proven PackBot platform. The payload can detect explosives’ vapors emanating from improvised explosive devices.

R-Gator: Autonomous Unmanned Ground Vehicle.  The R-Gator prototype is built on the well-established, rugged Deere & Company M-Gator military utility vehicle platform and is enhanced with iRobot robotic controls, navigation and obstacle avoidance systems. The R-Gator is designed to serve numerous important roles, acting as unmanned scout, “point man,” perimeter guard, as well as pack/ammunition/supply carrier for soldiers. In conjunction with Deere & Company, we expect to produce a number of R-Gator prototypes in 2007, some of which will be used for evaluation by a number of potential government customers. The net proceeds of R-Gator sales will be shared between us and Deere & Company, subject to recoupment of each party’s respective contribution to the project. While early editions of these units will be targeted exclusively for military use, there are many potential industrial applications for the technology derived from the R-Gator program, including potential applications in agriculture, perimeter patrol, above-ground pipeline security and logistics.

Contract Research and Development Projects

We are involved in several contract development projects with various U.S. governmental agencies and departments. The durations of these projects range from a few months to several years. These projects are usually funded as either cost-plus arrangements or time and materials contracts. In a cost-plus contract, we are allowed to recover our actual costs plus a fixed fee. The total price on a cost-plus contract is based primarily on allowable costs incurred, but generally is subject to a maximum contract funding limit. On our time and materials contracts, we recover a specific amount per hour worked based on a bill rate schedule, plus the cost of direct materials, subcontracts, and other non-labor costs, including an agreed-upon mark-up. A time and materials contract may provide for a not-to-exceed price ceiling, as well as the potential that we will absorb any cost overrun.

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Government funding is provided to further the development of robot technologies to solve various in-field challenges and with the expectation that if the projects result in the development of technically viable prototypes, then the government will purchase multiple production units for future use in the field. The government funding that we receive allows iRobot to accelerate the development of multiple technologies. While the U.S. government retains certain rights to military projects that it has funded, such as the right to use inventions and disclose technical data relating to those projects without constraining the recipient’s use of that data, we retain ownership of patents and know-how and are generally free to develop other commercial products, including consumer and industrial products, utilizing the technologies developed during these projects. The rights which the government retains, however, may allow it to provide use of patent rights and know-how to others, and some of the know-how might be used by these third parties for their own development of consumer and industrial products. The contract development projects that we are currently undertaking include, but are not limited to:

Small Unmanned Ground Vehicle (SUGV).  FCS is a major program intended to transform the U.S. Army to be strategically responsive and dominant at every point on the spectrum of operations, through real-time network centric communications and systems of a family of manned vehicles and unmanned platforms by the next decade. The FCS program combines advanced technologies, organizations, people and processes with concepts to create new sources of military power that are more responsive, deployable, agile, versatile, lethal, survivable and sustainable. The FCS system of systems is designed to provide increased strategic responsiveness, adaptive modular organizations, and units of action with three to seven days of self-sustainment.

Our specific role in the FCS program is to design and develop the SUGV, which is intended to be the “soldier’s robot.” The SUGV is expected to be a light-weight, man-portable robot that will support reconnaissance, remote sensing and urban warfare. Our involvement in the FCS program has enabled us to improve various management and control systems and enhance our engineering capabilities to achieve the Software Executive Institute’s Configuration Maturity Model, or CMM, certification Level III. The program has also funded the development of earned value measurement and advanced modeling and simulation.

Warrior (formerly named NEOMover).  Warrior is a 250-pound tracked vehicle, capable of transporting up to 150 pounds of payload, with a small footprint and extreme mobility. This effort is sponsored by the Technical Support Working Group, or TSWG. The Warrior design incorporates a number of concepts present in other iRobot remote controlled vehicles and demonstrates many of the advantages that modular payloads and common interfaces can bring to the explosive ordnance disposal community. There are two goals of this effort. The first is to advance the maturity levels of the Warrior hardware, firmware and software, and to enhance environmental ruggedness to a level suitable for small quantity manufacturing and evaluation of Warrior platforms in field trials. The second is to maintain a level of architectural openness for future component integration with other TSWG common architecture components to enable continued future development.

Sentinel.  Sentinel is an applied research project funded by the U.S. Army Tank – Automation and Armaments Command, or TACOM. Unmanned Ground Vehicles, or UGVs, have taken an increasingly prominent role in the modern battlespace, whether providing intelligence, surveillance and reconnaissance, or performing vital force protection functions such as searching for vehicle-borne improvised explosive devices. In order for these unmanned systems to realize their full potential as a force multiplier, they must grow beyond their one-operator-per-vehicle command and control metaphors. Sentinel is aimed at developing intuitive user interface technologies and UGV autonomy allowing a single human operator to effectively control and coordinate multiple semi-autonomous UGVs.

Tactical Teams.  The Defense Advanced Research Projects Agency, or DARPA, has funded initial research into how mixed teams of human and robot agents can best work together towards achieving a common mission goal. Key features of this project include the development of more natural methods of communication between robots and humans (gesture or speech recognition) and team member identification. Natural communications will eliminate the need for constant joystick control of the robotic agents, enabling them to be used in scenarios without the limitation of dedicated robotic control personnel, head-down to a console. The ultimate goal of Tactical Teams is to field a mixed team of humans and robots and to employ them effectively in a building clearance maneuver.

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The Company is engaged in a number of other research programs funded by the U.S. Army Research, Development & Engineering Center, or ARDEC, TACOM, and several other U.S. governmental agencies.

Strategic Alliances

Our strategic alliances are an important part of our product development and distribution strategies. We rely on strategic alliances to provide technology, complementary product offerings and increased and quicker access to markets. We seek to form relationships with those entities that can provide best-in-class technology or complementary market advantages for establishing iRobot technology in new market segments.

Among the strategic alliances we have established with commercial entities are the following:

Deere & Company.  We have entered into a strategic business agreement with the commercial and consumer equipment division of Deere & Company to explore and potentially collaborate on multiple projects involving technology and product development and commercialization efforts. We have collaborated with Deere & Company on the development of the R-Gator unmanned ground vehicle. Deere & Company has provided funded research and development, access to its M-Gator military utility vehicle platform and certain other technology, and we have provided robot technologies, including our AWARE Robot Intelligence Systems. Technology jointly developed under the agreement will be owned by both Deere & Company and us, and technology independently developed by either Deere & Company or us will be owned by the developing party. We and Deere & Company expect to produce a limited number of R-Gator prototypes for evaluation by potential customers. Net proceeds from sales of the R-Gator generally will be shared equally between us and Deere & Company, subject to recoupment of each party’s respective contribution to the project.

To facilitate management of the R-Gator project and additional collaborative activities, we and Deere & Company have established a joint management committee to develop proposals for projects, oversee and report on the progress and fulfillment of projects, and seek opportunities to further the goals of the strategic business relationship through joint demonstration of technology and products at trade shows, industry days and internal management reviews. We believe that our strategic alliance with Deere & Company will lead to technologies, and later products, that are directly applicable to serving markets such as agricultural and construction equipment, in which we believe autonomous vehicles can play a significant role. Under the agreement, we have agreed not to work with any third party on projects competitive with certain Deere & Company products if Deere & Company makes minimum annual payments to us under the agreement of at least $2.0 million, or as otherwise mutually agreed.

The Clorox Company.  We have entered into a joint development and license agreement with The Clorox Company, whereby Clorox is the exclusive provider of the cleaning solution for the Scooba floor washing robot. Our alliance with The Clorox Company allows us to integrate their cleaning technology and know-how into our floor washing robot and improves consumer perception and awareness of our brand by association and through joint marketing.

Our strategy of working closely with third parties extends to the design of our products. By offering extensible platforms designed to carry payloads, we have designed and manufactured our products to leverage the work of those individuals and organizations that offer specialized technological expertise. The PackBot, the Roomba and the Scooba robots are designed with open interfaces that allow third-party designers to add sensors or other functionality to our robots.

Sales and Distribution Channels

We sell our products through distinct sales channels to the consumer and government and industrial markets.

Home Robots

We sell our consumer products through a network of national retailers. In 2006, this network consisted of more than 20 retailers, representing over 7,000 stores in the United States, each of which sold some combination of these products. We also offer our products through the iRobot on-line store on our website. Internationally, our products

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are sold in over 40 countries, primarily through in-country distributors who resell to retail stores in their respective countries.

We have a philosophy to choose supportive channel partners, and we have grown, and intend to continue to selectively grow our retail network globally and by product line. We began with four retailers in 2002, grew to twelve retailers in 2003, 15 retailers in 2004, 19 retailers in 2005 and have continued to expand our retail network to more than 20 retailers in 2006. Certain smaller domestic retail operations are supported by distributors to whom we sell product directly. The table below represents the breakdown of our home robots product revenue for the fiscal years ended December 30, 2006 and December 31, 2005.

	Fiscal Year Ended
	December 30,			December 31,
Channel	2006			2005
Domestic		72.7	%		79.6	%
International		11.3			11.1
Direct		16.0			9.3
Total		100.0	%		100.0	%

Although, our retail network is our primary distribution channel for our consumer products, the continued investment in our direct-to-consumer offerings through the iRobot on-line store has resulted in this direct channel increasing to 16.0% of home robots division revenue in fiscal 2006 compared to 9.3% in fiscal 2005. We have established valuable databases and customer lists that allow us to target directly those consumers most likely to purchase a new robot or upgrade. We believe we maintain a close connection with our customers in each of our markets to provide an enhanced position from which to improve our distribution and product offerings.

In the United States, we maintain an in-house sales and product management team of eleven employees. Outside the United States and Canada, we sell our consumer products through distributors. Our consumer distribution strategy is intended to increase our global penetration and presence while maintaining high quality standards to ensure end-user satisfaction.

Government and Industrial

We sell our government and industrial products directly to end users and indirectly through prime contractors. While the majority of government and industrial products have been sold to date to various operations within the U.S. Federal government, we also sell to state and local government organizations. Our military products are sold overseas in compliance with the International Trafficking in Arms Regulations, or ITAR. We have sold our products to the governments of various countries in the past several years, including The United Kingdom, France, Germany, Israel, Singapore and Sweden.

Customers and sponsors for our government products and contracts for the year ended December 30, 2006 include:

Research Support Agencies	Government Customers
• U.S. Defense Advanced Research Projects Agency (DARPA)	• U.S. Army
• U.S. Space and Naval Warfare Systems Command (SPAWAR)	• U.S. Marine Corps/U.S. Navy
• U.S. Army Tank-Automotive and Armaments Command (TACOM)	• U.S. Army
• Technical Support Working Group (TSWG)	• U.S. Air Force
• U.S. Army Armament Research, Development and Engineering Center (ARDEC)	• U.S. Army
• National Center for Defense Robotics (NCDR)	• Independent non-government technical collaborative based in Pennsylvania

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Our government products are sold by a team of 15 government sales specialists with significant experience in selling to government and defense agencies. All of these individuals have years of experience selling military products to government procurement offices, both in the United States and internationally. We maintain a single person direct sales and support presence in Europe.

Customer Service and Support

We also invest in our ongoing customer service and support. Consumer customer service representatives, some of whom are in-house and some of whom are employees of outsourced service organizations, are extensively trained on the technical intricacies of our consumer products. Government and industrial customer representatives are usually former military personnel who are experienced in logistical and technical support requirements for military operations.

Marketing and Brand

iRobot markets its home robots in the United States to end-user customers directly through our sales and product management team of 11 employees. We also market our consumer products in the United States through our retail network of 22 national retailers and internationally through in-country distributors. We market our government and industrial products directly through our team of 15 government sales specialists to end users and indirectly through prime contractors. We also market our product offerings through the iRobot website. Our marketing strategy is to increase our brand awareness and associate the iRobot brand with innovation, reliability, safety and value. Our sales and marketing expenses represented 18.0% and 15.3% of our total revenue in 2006 and 2005, respectively.

We believe that we have built a trusted, recognized brand by providing high-quality robots. We believe that customer word-of-mouth has been a significant driver of our brand’s success to date, which can work very well for products that inspire a high level of user loyalty because users are likely to share their positive experiences. Our grass-roots marketing efforts focus on feeding this word-of-mouth momentum and we use public relations and advertising to promote our products.

Our innovative robots and public relations campaigns have generated extensive press coverage. In addition, iRobot and our consumer robots have won several awards and our inclusion as the only small business among the first tier partners on the FCS program has greatly enhanced our brand and awareness among government and industrial customers. Through these efforts, we have been able to build our brand, and we expect that our reputation for innovative products and customer support will continue to play a significant role in our growth and success.

We expect to accelerate our investment in national advertising, consumer and industry trade shows, direct marketing and public relations to further build brand awareness. We believe that our significant in-house experience designing direct marketing campaigns and promotional materials, combined with our media-targeting expertise, gives us a significant competitive advantage.

Our website is also playing an increasing role in supporting brand awareness, addressing customer questions and serving as a showcase for our products. Our home robots and accessories are also sold through our online store. In 2006, the online store was the single largest channel of our home robots division products.

Manufacturing

Our core competencies are the design, development and marketing of robots. Our manufacturing strategy is to outsource non-core activities, such as the production of our robots, to third-party entities skilled in manufacturing. By relying on the outsourced manufacture of both our consumer and military robots, we can focus our engineering expertise on the design of robots.

Using our engineering team, we believe that we can rapidly prototype design concepts and products to achieve optimal value, produce products at lower cost points and optimize our designs for manufacturing requirements, size and functionality.

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Manufacturing a new product requires a close relationship between our product designers and the manufacturing organizations. Using multiple engineering techniques, our products are introduced to the selected production facility at an early-development stage and the feedback provided by manufacturing is incorporated into the design before tooling is finalized and mass production begins. As a result, we believe that we can significantly reduce the time required to move a product from its design phase to mass production deliveries, with improved quality and yields.

Since 2002, we have outsourced the manufacturing of our consumer products to one contract manufacturer, Jetta Company Limited, at a single plant in China. Jetta Company Limited has been manufacturing products since 1977 and brings substantial experience to our production requirements. Jetta Company Limited has several manufacturing locations and last year expanded one of its facilities to increase capacity for the production of our Roomba and Scooba robots. Combined with our own engineering operations in India and Hong Kong, this allows us to design our products in the United States, use our own engineers in India and Hong Kong as the technical interface with the facilities in China, and benefit from the experience of Jetta Company Limited and its engineers.

Our government and industrial products are manufactured by Gem City Engineering Corporation at one plant in Dayton, Ohio. Gem City Engineering Corporation’s location is particularly important as military products supplied to the U.S. government must have the majority of their content manufactured in the United States. Gem City Engineering Corporation has multiple facilities and relies on other subcontractors for certain component manufacturing capabilities. Gem City Engineering Corporation has been in the business of manufacturing primarily metal-tooled products since 1936, and has produced numerous products for military contractors. We believe that their engineers are skilled in the production of products meeting military specifications, preparing final products for military inspection and conducting quality reviews.

Research and Development

We believe that our future success depends upon our ability to continue to develop new products and product accessories, and enhancements to and applications for our existing products. For the years ended December 30, 2006, December 31, 2005 and 2004, our research and development expenses were $17.0 million, $11.6 million and $5.5 million, respectively. In addition to our internal research and development activities, for the years ended December 30, 2006, December 31, 2005 and 2004, we have incurred research and development expenses under funded development arrangements with governments and industrial third parties of $15.6 million, $12.5 million and $8.4 million, respectively. Of our total research and development spending in 2006 and 2005, approximately 36.4% and 37.2%, respectively was funded by government-sponsored research and development contracts. We intend to continue our investment in research and development to respond to and anticipate customer needs, and to enable us to introduce new products over the next few years that will continue to address our existing market sectors.

Team Organization

Our research and development is conducted by small teams of individuals dedicated to particular projects, examples of which. include the Roomba team, Scooba team, Warrior team and PackBot team. In connection with our FCS SUGV program involving more than 50 employees, we have instituted a formal integrated product team structure consisting of integrated System of Systems, Integrated Logistical Support, Program Operations and Business Operations teams to work together to deliver a platform that integrates with the FCS system of systems.

Global Engineering

Our domestic research and development efforts are primarily located at our headquarters in Burlington, Massachusetts, and our special projects engineering office in San Luis Obispo, California. In addition, we have an engineering design center in India and a product development team working out of Hong Kong. Our global engineering development process for consumer products allows us to leverage the time differences between our United States operations and our teams in Asia resulting in a fast, low cost global design and manufacturing cycle. The first stage of the cycle takes place in our Burlington, Massachusetts office where we focus on product definition, prototyping, market research and financial analysis. We then create a design that is manufacturable, including complete modeling and simulation and initial validation of the product/market concept. After the initial

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development of the prototypes, we leverage the teams in India and Hong Kong for the production stage of the cycle. During this stage, engineers on two continents work on refining the designs, preparing the product for manufacturing and working through the issues for pilot production, including detailed regression testing. The product is then turned over to the contract manufacturer for volume production.

Spiral Development

One of the methods we use to develop military products is a “spiral development” process to get field tested equipment to the troops more quickly. After we develop a new product or product upgrade that will fulfill the desired requirements of the user, the product is tested with soldiers in the field. The user provides performance feedback on the product to the in-field engineer. Revisions are made quickly to retest in the field. This method has allowed our research and development team to not only make revisions on existing products quickly and efficiently, but also capture feedback for future upgrades and innovations to meet user needs. An example of our spiral development process was the introduction of our first PackBot tactical military robot. When the PackBot was first deployed by the U.S. Army in Afghanistan, we sent one of our technical program managers into the field with the robot. The soldiers gave feedback upon returning from a mission, and our development team made the desired changes to the software. These changes were then downloaded to the PackBot in Afghanistan, sometimes even before the next mission. In addition, based on design ideas from the soldiers using the PackBot, our engineers developed the PackBot Explorer, a recent addition to our PackBot product line. We intend to solicit similar user feedback in the field for the new prototype R-Gator intelligent vehicle to capture the users’ operational requirements as the product advances in development.

Leveraged Model

Our research and development efforts for our next-generation products are supported by a variety of sources. Our next-generation military products are predominately supported by U.S. governmental research organizations such as the Defense Advanced Research Projects Agency, or DARPA, U.S. Space and Warfare Command, or SPAWAR, Technical Support Working Group, or TSWG, U.S. Army Tank-Automotive and Armaments Command, or TACOM, U.S. Army Armament Research, Development and Engineering Center, or ARDEC, and the U.S. Army’s FCS program. While the U.S. government retains certain rights in the research projects that it has funded, we retain ownership of patents and know-how and are generally free to develop other commercial products, including consumer and industrial products, utilizing the technologies developed during these projects. Similarly, expertise developed while designing consumer products is used in designing products for government and industrial applications. We also work with strategic collaborators to develop industry-specific technologies. Moreover, we continue to reinvest in advanced research and development projects to maintain our technical capability and to enhance our product offerings.

Competition

The market for robots is highly competitive, rapidly evolving and subject to changing technologies, shifting customer needs and expectations and the likely increased introduction of new products. We believe that a number of established companies have developed or are developing robots that will compete directly with our product offerings, and many of our competitors have significantly more financial and other resources than we possess. Our current principal competitors include:

•  developers of robot floor care products such as AB Electrolux, Alfred Kärcher GmbH & Co., Samsung Electronics Co., Ltd., LG Electronics Inc., Infinuvo/Metapo, Inc, Matsutek Enterprises Co Ltd. and Yujin Robotic Co. Ltd.;

•  developers of small unmanned ground vehicles such as Foster-Miller, Inc. — a wholly owned subsidiary of QinetiQ North America, Inc., Allen-Vanguard Corporation, and Remotec — a division of Northrop Grumman Corporation; and

•  established government contractors working on unmanned systems such as Lockheed Martin Corporation, BAE Systems, Inc. and General Dynamics Corporation.

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While we believe many of our customers purchase our Roomba floor cleaning robots as a supplement to, rather than a replacement for, their traditional vacuum cleaners, we do compete in some cases with providers of traditional vacuum cleaners.

We believe that the principal competitive factors in the market for robots include product features, performance for the intended mission, cost of purchase, total cost of system operation, including maintenance and support, ease of use, integration with existing equipment, quality, reliability, customer support, brand and reputation.

Our ability to remain competitive will depend to a great extent upon our ongoing performance in the areas of product development and customer support. We cannot assure you that our products will continue to compete favorably or that we will be successful in the face of increasing competition from new products and enhancements introduced by existing competitors or new companies entering the markets in which we provide products.

Intellectual Property

We believe that our continued success depends in large part on our proprietary technology, the intellectual skills of our employees and the ability of our employees to continue to innovate. We rely on a combination of patent, copyright, trademark and trade secret laws, as well as confidentiality agreements, to establish and protect our proprietary rights.

As of December 30, 2006, we held 28 U.S. patents and more than 50 pending U.S. patent applications. Also, we held 9 foreign patents, additional design registrations, and more than 30 pending foreign applications. Our first U.S. patent is set to expire in 2008. We do not expect the expiration of this patent to adversely affect our intellectual property position. Our other U.S. patents will begin to expire in 2019. We will continue to file and prosecute patent (or design registration, as applicable) applications when and where appropriate to attempt to protect our rights in our proprietary technologies. We also encourage our employees to continue to invent and develop new technologies so as to maintain our competitiveness in the marketplace. It is possible that our current patents, or patents which we may later acquire, may be successfully challenged or invalidated in whole or in part. It is also possible that we may not obtain issued patents for our pending patent applications or other inventions we seek to protect. In that regard, we sometimes permit certain intellectual property to lapse or go abandoned under appropriate circumstances and due to uncertainties inherent in prosecuting patent applications, sometimes patent applications are rejected and we subsequently abandon them. It is also possible that we may not develop proprietary products or technologies in the future that are patentable, or that any patent issued to us may not provide us with any competitive advantages, or that the patents of others will harm or altogether preclude our ability to do business.

Our registered U.S. trademarks include iRobot, Roomba, PackBot and Virtual Wall. Our marks, iRobot and Roomba, and certain other trademarks, have also been registered in selected foreign countries.

Our means of protecting our proprietary rights may not be adequate and our competitors may independently develop technology that is similar to ours. Legal protections afford only limited protection for our technology. The laws of many countries do not protect our proprietary rights to as great an extent as do the laws of the United States. Despite our efforts to protect our proprietary rights, unauthorized parties have in the past attempted, and may in the future attempt, to copy aspects of our products or to obtain and use information that we regard as proprietary. Third parties may also design around our proprietary rights, which may render our protected products less valuable, if the design around is favorably received in the marketplace. In addition, if any of our products or the technology underlying our products is covered by third-party patents or other intellectual property rights, we could be subject to various legal actions. We cannot assure you that our products do not infringe patents held by others or that they will not in the future. We have received in the past communications from third parties relating to technologies used in our Roomba floor vacuuming robots that have alleged infringement of patents or violation of other intellectual property rights. In response to these communications, we have contacted these third parties to convey our good faith belief that we do not infringe the patents in question or otherwise violate those parties’ rights. Although there have been no additional actions or communications with respect to these allegations, we cannot assure you that we will not receive further correspondence from these parties, or not be subject to additional allegations of infringement from others. Litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or

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invalidity, misappropriation, or other claims. Any such litigation could result in substantial costs and diversion of our resources. Moreover, any settlement of or adverse judgment resulting from such litigation could require us to obtain a license to continue to use the technology that is the subject of the claim, or otherwise restrict or prohibit our use of the technology. Any required licenses may not be available to us on acceptable terms, if at all. If we attempt to design around the technology at issue or to find another provider of suitable alternative technology to permit us to continue offering applicable software or product solutions, our continued supply of software or product solutions could be disrupted or our introduction of new or enhanced software or products could be significantly delayed.

Regulations

We are subject to various government regulations, including various U.S. federal government regulations as a contractor and subcontractor to the U.S. federal government. Among the most significant U.S. federal government regulations affecting our business are:

•  the Federal Acquisition Regulations and supplemental agency regulations, which comprehensively regulate the formation and administration of, and performance under government contracts;

•  the Truth in Negotiations Act, which requires certification and disclosure of all cost and pricing data in connection with contract negotiations;

•  the Cost Accounting Standards, which impose accounting requirements that govern our right to reimbursement under cost-based government contracts;

•  the Foreign Corrupt Practices Act, which prohibits U.S. companies from providing anything of value to a foreign official to help obtain, retain or direct business, or obtain any unfair advantages;

•  the False Claims Act and the False Statements Act, which, respectively, impose penalties for payments made on the basis of false facts provided to the government, and impose penalties on the basis of false statements, even if they do not result in a payment; and

•  laws, regulations and executive orders restricting the use and dissemination of information classified for national security purposes and the exportation of certain products and technical data.

We also need special security clearances to continue working on and advancing certain of our projects with the U.S. federal government. Classified programs generally will require that we comply with various Executive Orders, federal laws and regulations and customer security requirements that may include restrictions on how we develop, store, protect and share information, and may require our employees to obtain government clearances.

The nature of the work we do for the federal government may also limit the parties who may invest in or acquire us. Export laws may keep us from providing potential foreign acquirers with a review of the technical data they would be acquiring. In addition, there are special requirements for foreign parties who wish to buy or acquire control or influence over companies that control technology or produce goods in the security interests of the United States. There may need to be a review under the Exon-Florio provisions of the Defense Production Act. Finally, the government may require a prospective foreign owner to establish intermediaries to actually run that part of the company that does classified work, and establishing a subsidiary and its separate operation may make such an acquisition less appealing to such potential acquirers.

In addition, the export from the United States of many of our products may require the issuance of a license by the U.S. Department of Commerce under the Export Administration Act, as amended, and its implementing Regulations as kept in force by the International Emergency Economic Powers Act of 1977, as amended. Some of our products may require the issuance of a license by the U.S. Department of State under the Arms Export Control Act and its implementing Regulations, which licenses are generally harder to obtain and take longer to obtain than do Export Administration Act licenses.

Government Product Backlog

Our government product backlog consists of written orders or contracts to purchase our products received from our government customers. Total backlog of product sales to government customers as of December 30, 2006 and

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December 31, 2005 amounted to approximately $7.5 million and $10.9 million, respectively. We do not have long-term contracts with non-government customers, and purchases from our non-government customers generally occur on an order-by-order basis, which can be terminated or modified at any time by these customers. In addition, our funded research and development contracts may be cancelled or delayed at any time without significant, if any, penalty. As a result, we believe that backlog with respect to product sales to our non-government customers and funded research and development is not meaningful. There can be no assurance that any of our backlog will result in revenue.

Employees

As of December 30, 2006, we had 371 full-time employees located in the United States and abroad, of whom 190 are in research and development, 75 are in operations, 31 are in sales and marketing and 75 are in general and administration. We believe that we have a good relationship with our employees.

Available Information

We were incorporated in California in August 1990 under the name IS Robotics, Inc. and reincorporated as IS Robotics Corporation in Massachusetts in June 1994. We reincorporated in Delaware as iRobot Corporation in December 2000. We conduct operations and maintain a number of subsidiaries in the United States and abroad, including operations in Hong Kong and India. We also maintain iRobot Securities Corporation, a Massachusetts securities corporation, to invest our cash balances on a short-term basis. Our website address is www.irobot.com. Our Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available through the investor relations page of our internet website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

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ITEM 1A.   RISK FACTORS

We operate in a rapidly changing environment that involves a number of risks, some of which are beyond our control. This discussion highlights some of the risks which may affect future operating results. These are the risks and uncertainties we believe are most important for you to consider. Additional risks and uncertainties not presently known to us, which we currently deem immaterial or which are similar to those faced by other companies in our industry or business in general, may also impair our business operations. If any of the following risks or uncertainties actually occurs, our business, financial condition and operating results would likely suffer.

Risks Related to Our Business

We operate in an emerging market, which makes it difficult to evaluate our business and future prospects.

Robots represent a new and emerging market. Accordingly, our business and future prospects are difficult to evaluate. We cannot accurately predict the extent to which demand for consumer robots will increase, if at all. Moreover, there are only a limited number of major programs under which the U.S. federal government is currently funding the development or purchase of military robots. You should consider the challenges, risks and uncertainties frequently encountered by companies using new and unproven business models in rapidly evolving markets. These challenges include our ability to:

•  generate sufficient revenue and gross profit to maintain profitability;

•  acquire and maintain market share in our consumer and military markets;

•  manage growth in our operations;

•  attract and retain customers of our consumer robots;

•  develop and renew government contracts for our military robots;

•  attract and retain additional engineers and other highly-qualified personnel;

•  adapt to new or changing policies and spending priorities of governments and government agencies; and

•  access additional capital when required and on reasonable terms.

If we fail to successfully address these and other challenges, risks and uncertainties, our business, results of operations and financial condition would be materially harmed.

Our financial results often vary significantly from quarter-to-quarter due to a number of factors, which may lead to volatility in our stock price.

Our quarterly revenue and other operating results have varied in the past and are likely to continue to vary significantly from quarter-to-quarter. For instance, our consumer product revenue is significantly seasonal. For the fiscal years ended December 30, 2006 and December 31, 2005, 64.5% and 79.8%, respectively, of our revenue from sales of consumer products has been generated in the second half of the year. This variability may lead to volatility in our stock price as equity research analysts and investors respond to these quarterly fluctuations. These fluctuations will be due to numerous factors including:

•  seasonality in the sales of our consumer products;

•  the size and timing of orders from retail stores for our home floor care robots;

•  the size and timing of orders from military and other government agencies;

•  the mix of products that we sell in the period;

•  disruption of supply of our products from our manufacturers;

•  the inability to attract and retain qualified, revenue-generating personnel;

•  unanticipated costs incurred in the introduction of new products;

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•  costs of labor and raw materials;

•  changes in our rate of returns for our consumer products;

•  our ability to introduce new products and enhancements to our existing products on a timely basis;

•  price reductions;

•  the amount of government funding and the political, budgetary and purchasing constraints of our government agency customers; and

•  cancellations, delays or contract amendments by government agency customers.

Revenue for any particular quarter and revenue from sales of our consumer products are difficult to predict. Chain stores and other national retailers typically place orders for the holiday season in the third quarter and early in the fourth quarter. The timing of these holiday season shipments could materially affect our third or fourth quarter results in any fiscal year. Because of quarterly fluctuations, we believe that quarter-to-quarter comparisons of our operating results are not necessarily meaningful. Moreover, our operating results may not meet expectations of equity research analysts or investors. If this occurs, the trading price of our common stock could fall substantially either suddenly or over time.

Our future profitability is uncertain, and we have a limited operating history on which you can base your evaluation of our business.

As a result of historical operating losses, we had an accumulated deficit of $20.7 million at December 30, 2006. Because we operate in a rapidly evolving industry, we have difficulty predicting our future operating results, and we cannot be certain that our revenue will grow at rates that will allow us to maintain profitability on a quarterly or annual basis. In addition, we only have a limited operating history on which you can base your evaluation of our business. If we fail to maintain profitability, the market price of our common stock will likely fall.

We introduced our Scooba home robot product line at multiple price points. If this product line does not generate significant sales in the future, our revenue and operating results would be negatively impacted.

In December 2005, we made our Scooba floor washing robot available for volume distribution. We have limited experience with the enhancement, development and introduction of new product lines. We introduced the Scooba line of robots at a suggested retail price of $399 per unit, and in 2006 we introduced a second unit at $299 per unit. For this second unit, we devoted significant time and incurred significant expenses in connection with developing the product. The second unit was introduced toward the end of the second quarter of 2006. We are unable to determine at this time whether any of our Scooba floor washing robots will attain market acceptance, at any price, or generate significant sales to consumers. Our revenues and operating results in 2007 and in the future will depend in part on the success of this product line, and our revenues and operating results will be negatively impacted if this product line does not generate significant sales to consumers or support pricing that allows us to achieve an acceptable gross margin.

A majority of our business currently depends on our consumer robots, and our sales growth and operating results would be negatively impacted if we are unable to enhance our current consumer robots or develop new consumer robots at competitive prices or in a timely manner.

For the years ended December 30, 2006 and December 31, 2005, we derived 59.5% and 65.4% of our total revenue from our home floor care robots, respectively. For the foreseeable future, we expect that a majority of our revenue will continue to be derived from sales of home floor care products. Accordingly, our future success depends upon our ability to further penetrate the consumer home floor care market, to enhance our current consumer products and develop and introduce new consumer products offering enhanced performance and functionality at competitive prices. The development and application of new technologies involve time, substantial costs and risks. For example, we have devoted significant time and incurred significant expenses in connection with the development of our Scooba robot, which is designed to sweep, wash, scrub and dry hard floors, and during 2006 we made our Scooba robot available for volume distribution. Our results in 2007 will depend in part on the success of this

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product line, and there can be no assurance that it will maintain any level of retail or consumer acceptance. Our inability to achieve significant sales of our Scooba robot, or to enhance, develop and introduce other products in a timely manner, or at all, would materially harm our sales growth and operating results.

We depend on the U.S. federal government for a significant portion of our revenue, and any reduction in the amount of business that we do with the U.S. federal government would negatively impact our operating results and financial condition.

For the years ended December 30, 2006 and December 31, 2005, we derived 34.4% and 28.3% of our total revenue, respectively, directly or indirectly, from the U.S. federal government and its agencies. Any reduction in the amount of revenue that we derive from the U.S. federal government without an offsetting increase in new sales to other customers would have a material adverse effect on our operating results.

Our participation in specific major U.S. federal government programs is critical to both the development and sale of our military robots. For example, in the years ended December 30, 2006 and December 31, 2005, 59.8% and 59.7% of our contract revenue was derived from our participation in the U.S. Army’s Future Combat Systems program, respectively. Future sales of our PackBot robots will depend largely on our ability to secure contracts with the U.S. military under its robot programs. We expect that there will continue to be only a limited number of major programs under which U.S. federal government agencies will seek to fund the development of, or purchase, robots. Our business will, therefore, suffer if we are not awarded, either directly or indirectly through third-party contractors, government contracts for robots that we are qualified to develop or build. In addition, if the U.S. federal government or government agencies terminate or reduce the related prime contract under which we serve as a subcontractor, revenues that we derive under that contract could be lost, which would negatively impact our business and financial results. Moreover, it is difficult to predict the timing of the award of government contracts and our revenue could fluctuate significantly based on the timing of any such awards.

Even if we continue to receive funding for research and development under these contracts, there can be no assurance that we will successfully complete the development of robots pursuant to these contracts or that, if successfully developed, the U.S. federal government or any other customer will purchase these robots from us. The U.S. federal government has the right when it contracts to use the technology developed by us to have robots supplied by third parties. Any failure by us to complete the development of these robots, or to achieve successful sales of these robots, would harm our business and results of operations.

Our contracts with the U.S. federal government contain certain provisions that may be unfavorable to us and subject us to government audits, which could materially harm our business and results of operations.

Our contracts and subcontracts with the U.S. federal government subject us to certain risks and give the U.S. federal government rights and remedies not typically found in commercial contracts, including rights that allow the U.S. federal government to:

•  terminate contracts for convenience, in whole or in part, at any time and for any reason;

•  reduce or modify contracts or subcontracts if its requirements or budgetary constraints change;

•  cancel multi-year contracts and related orders if funds for contract performance for any subsequent year become unavailable;

•  exercise production priorities, which allow it to require that we accept government purchase orders or produce products under its contracts before we produce products under other contracts, which may displace or delay production of more profitable orders;

•  claim certain rights in products provided by us; and

•  control or prohibit the export of certain of our products.

Several of our prime contracts with the U.S. federal government do not contain a limitation of liability provision, creating a risk of responsibility for direct and consequential damages. Several subcontracts with prime contractors hold the prime contractor harmless against liability that stems from our work and do not contain a

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limitation of liability. These provisions could cause substantial liability for us, especially given the use to which our products may be put.

In addition, we are subject to audits by the U.S. federal government as part of routine audits of government contracts. As part of an audit, these agencies may review our performance on contracts, cost structures and compliance with applicable laws, regulations and standards. If any of our costs are found to be allocated improperly to a specific contract, the costs may not be reimbursed and any costs already reimbursed for such contract may have to be refunded. Accordingly, an audit could result in a material adjustment to our revenue and results of operations. Moreover, if an audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or debarment from doing business with the government.

If any of the foregoing were to occur, or if the U.S. federal government otherwise ceased doing business with us or decreased the amount of business with us, our business and operating results could be materially harmed and the value of your investment in our common stock could be impaired.

Some of our contracts with the U.S. federal government allow it to use inventions developed under the contracts and to disclose technical data to third parties, which could harm our ability to compete.

Some of our contracts allow the U.S. federal government rights to use, or have others use, patented inventions developed under those contracts on behalf of the government. Some of the contracts allow the federal government to disclose technical data without constraining the recipient in how that data is used. The ability of third parties to use patents and technical data for government purposes creates the possibility that the government could attempt to establish additional sources for the products we provide that stem from these contracts. It may also allow the government the ability to negotiate with us to reduce our prices for products we provide to it. The potential that the government may release some of the technical data without constraint creates the possibility that third parties may be able to use this data to compete with us in the commercial sector.

Government contracts are subject to a competitive bidding process that can consume significant resources without generating any revenue.

Government contracts are frequently awarded only after formal competitive bidding processes, which are protracted. In many cases, unsuccessful bidders for government agency contracts are provided the opportunity to protest certain contract awards through various agency, administrative and judicial channels. If any of the government contracts awarded to us are protested, we may be required to expend substantial time, effort and financial resources without realizing any revenue with respect to the potential contract. The protest process may substantially delay our contract performance, distract management and result in cancellation of the contract award entirely.

We depend on single source manufacturers, and our reputation and results of operations would be harmed if these manufacturers fail to meet our requirements.

We currently depend on one contract manufacturer, Jetta Company Limited, to manufacture our home robot products at a single plant in China and rely on one contract manufacturer, Gem City Engineering Corporation, to manufacture our military products at a single plant in the United States. Moreover, we do not have a long-term contract with Jetta Company Limited and the manufacture of our consumer products is provided on a purchase-order basis. These manufacturers supply substantially all of the raw materials and provide all facilities and labor required to manufacture our products. If these companies were to terminate their arrangements with us or fail to provide the required capacity and quality on a timely basis, we would be unable to manufacture our products until replacement contract manufacturing services could be obtained. To qualify a new contract manufacturer, familiarize it with our products, quality standards and other requirements, and commence volume production is a costly and time-consuming process. We cannot assure you that we would be able to establish alternative manufacturing relationships on acceptable terms.

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Our reliance on these contract manufacturers involves certain risks, including the following:

•  lack of direct control over production capacity and delivery schedules;

•  lack of direct control over quality assurance, manufacturing yields and production costs;

•  lack of enforceable contractual provisions over the production and costs of consumer products;

•  risk of loss of inventory while in transit from China; and

•  risks associated with international commerce with China, including unexpected changes in legal and regulatory requirements, changes in tariffs and trade policies, risks associated with the protection of intellectual property and political and economic instability.

Any interruption in the manufacture of our products would be likely to result in delays in shipment, lost sales and revenue and damage to our reputation in the market, all of which would harm our business and results of operations. In addition, while our contract obligations with our contract manufacturer in China are typically denominated in U.S. dollars, changes in currency exchange rates could impact our suppliers and increase our prices. In particular, the Chinese government announced in 2005 that the Chinese yuan has moved to a managed floating exchange rate regime, which could lead to our suppliers in China negotiating increased pricing terms with us.

Any efforts to expand our product offerings beyond our current markets may not succeed, which could negatively impact our operating results.

We have focused on selling our robots in the home floor care and military markets. We plan to expand into other markets. Efforts to expand our product offerings beyond the two markets that we currently serve, however, may divert management resources from existing operations and require us to commit significant financial resources to an unproven business, either of which could significantly impair our operating results. Moreover, efforts to expand beyond our existing markets may never result in new products that achieve market acceptance, create additional revenue or become profitable.

If we are unable to implement appropriate controls and procedures to manage our growth, we may not be able to successfully implement our business plan.

Our headcount and operations are growing rapidly. This rapid growth has placed, and will continue to place, a significant strain on our management, administrative, operational and financial infrastructure. From December 31, 2005 to December 30, 2006, the number of our employees increased from 276 to 371. We anticipate further growth will be required to address increases in our product offerings and the geographic scope of our customer base. Our success will depend in part upon the ability of our senior management to manage this growth effectively. To do so, we must continue to hire, train, manage and integrate a significant number of qualified managers and engineers. If our new employees perform poorly, or if we are unsuccessful in hiring, training, managing and integrating these new employees, or retaining these or our existing employees, our business may suffer.

In addition, we face risks associated with managing operations outside the United States, including operations in Hong Kong, India and the United Kingdom. To manage the expected continued growth of our headcount and operations, we will need to continue to improve our information technology infrastructure, operational, financial and management controls and reporting systems and procedures, and manage expanded operations in geographically distributed locations. Our expected additional headcount and capital investments will increase our costs, which will make it more difficult for us to offset any future revenue shortfalls by offsetting expense reductions in the short term. If we fail to successfully manage our growth, we will be unable to successfully execute our business plan, which could have a negative impact on our business, financial condition or results of operations.

If the consumer robot market does not experience significant growth or if our products do not achieve broad acceptance, we will not be able to achieve our anticipated level of growth.

We derive a substantial portion of our revenue from sales of our home floor care robots. For the years ended December 30, 2006 and December 31, 2005, home floor care robots accounted for 59.5% and 65.4% of total revenue, respectively. We cannot accurately predict the future growth rate or the size of the home floor care robot

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market. Demand for home floor care robots may not increase, or may decrease, either generally or in specific geographic markets, for particular types of robots or during particular time periods. The expansion of the home robot market and the market for our products depends on a number of factors, such as:

•  the cost, performance and reliability of our products and products offered by our competitors;

•  public perceptions regarding the effectiveness and value of robots;

•  customer satisfaction with robots; and

•  marketing efforts and publicity regarding robots.

Even if consumer robots gain wide market acceptance, our robots may not adequately address market requirements and may not continue to gain market acceptance. If robots generally, or our robots specifically, do not gain wide market acceptance, we may not be able to achieve our anticipated level of growth, and our revenue and results of operations would suffer.

Our business and results of operations could be adversely affected by significant changes in the policies and spending priorities of governments and government agencies.

We derive a substantial portion of our revenue from sales to and contracts with U.S. federal, state and local governments and government agencies, and subcontracts under federal government prime contracts. For the years ended December 30, 2006 and December 31, 2005, U.S. federal government orders, contracts and subcontracts accounted for 34.4% and 28.3%, of total revenue, respectively. We believe that the success and growth of our business will continue to depend on our successful procurement of government contracts either directly or through prime contractors. Many of our government customers are subject to stringent budgetary constraints and our continued performance under these contracts, or award of additional contracts from these agencies, could be jeopardized by spending reductions or budget cutbacks at these agencies. We cannot assure you that future levels of expenditures and authorizations will continue for governmental programs in which we provide products and services. A significant decline in government expenditures generally, or with respect to programs for which we provide products, could adversely affect our government product and funded research and development revenues and prospects, which would harm our business, financial condition and operating results. Our operating results may also be negatively impacted by other developments that affect these governments and government agencies generally, including:

•  changes in government programs that are related to our products and services;

•  adoption of new laws or regulations relating to government contracting or changes to existing laws or regulations;

•  changes in political or public support for security and defense programs;

•  delays or changes in the government appropriations process;

•  uncertainties associated with the war on terror and other geo-political matters; and

•  delays in the payment of our invoices by government payment offices.

These developments and other factors could cause governments and governmental agencies, or prime contractors that use us as a subcontractor, to reduce their purchases under existing contracts, to exercise their rights to terminate contracts at-will or to abstain from renewing contracts, any of which would cause our revenue to decline and could otherwise harm our business, financial condition and results of operations.

We face intense competition from other providers of robots, including diversified technology providers, as well as competition from providers offering alternative products, which could negatively impact our results of operations and cause our market share to decline.

We believe that a number of companies have developed or are developing robots that will compete directly with our product offerings. Additionally, large and small companies, government-sponsored laboratories and universities are aggressively pursuing contracts for robot-focused research and development. Many current and

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potential competitors have substantially greater financial, marketing, research and manufacturing resources than we possess, and there can be no assurance that our current and future competitors will not be more successful than us. Moreover, while we believe many of our customers purchase our floor vacuuming robots as a supplement to, rather than a replacement for, their traditional vacuum cleaners; we also compete in some cases with providers of traditional vacuum cleaners. Our current principal competitors include:

•  developers of robot floor care products such as AB Electrolux, Alfred Kärcher GmbH & Co., Samsung Electronics Co., Ltd., LG Electronics Inc., Infinuvo/Metapo, Inc., Matsutek Enterprises Co Ltd. and Yujin Robotic Co. Ltd.;

•  developers of small unmanned ground vehicles such as Foster-Miller, Inc. — a wholly owned subsidiary of QinetiQ North America, Inc., Allen-Vanguard Corporation, and Remotec — a division of Northrop Grumman Corporation; and

•  established government contractors working on unmanned systems such as Lockheed Martin Corporation, BAE Systems, Inc. and General Dynamics Corporation.

In the event that the robot market expands, we expect that competition will intensify as additional competitors enter the market and current competitors expand their product lines. Companies competing with us may introduce products that are competitively priced, have increased performance or functionality, or incorporate technological advances that we have not yet developed or implemented. Increased competitive pressure could result in a loss of sales or market share or cause us to lower prices for our products, any of which would harm our business and operating results.

The market for robots is highly competitive, rapidly evolving and subject to changing technologies, shifting customer needs and expectations and the likely increased introduction of new products. Our ability to remain competitive will depend to a great extent upon our ongoing performance in the areas of product development and customer support. We cannot assure you that our products will continue to compete favorably or that we will be successful in the face of increasing competition from new products and enhancements introduced by existing competitors or new companies entering the markets in which we provide products. Our failure to compete successfully could cause our revenue and market share to decline, which would negatively impact our results of operations and financial condition.

Our business is significantly seasonal and, because many of our expenses are based on anticipated levels of annual revenue, our business and operating results will suffer if we do not achieve revenue consistent with our expectations.

Our home robots revenue is significantly seasonal. For the fiscal years ended December 30, 2006 and December 31, 2005, 64.5% and 79.8%, respectively, of our revenue from sales of consumer products has been generated in the second half of the year. We expect a majority of such revenue will continue to be generated in the second half of the year for the foreseeable future. As a result of this seasonality, we believe that quarter-to-quarter comparisons of our operating results are not necessarily meaningful and that these comparisons cannot be relied upon as indicators of future performance.

We base our current and future expense levels on our internal operating plans and sales forecasts, including forecasts of holiday sales for our consumer products. A significant portion of our operating expenses, such as research and development expenses, certain marketing and promotional expenses and employee wages and salaries, do not vary directly with sales and are difficult to adjust in the short term. As a result, if sales for a quarter, particularly the final quarter of a fiscal year, are below our expectations, we might not be able to reduce operating expenses for that quarter and, therefore, we would not be able to reduce our operating expenses for the fiscal year. Accordingly, a sales shortfall during a fiscal quarter, and in particular the fourth quarter of a fiscal year, could have a disproportionate effect on our operating results for that quarter or that year. As a result of these factors, we may report operating results that do not meet the expectations of equity research analysts and investors. This could cause the trading price of our common stock to decline.

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If critical components of our products that we currently purchase from a small number of suppliers become unavailable, we may incur delays in shipment, which could damage our business.

We and our outsourced manufacturers obtain hardware components, various subsystems and raw materials from a limited group of suppliers. We do not have any long-term agreements with these suppliers obligating them to continue to sell components or products to us. Our reliance on these suppliers involves significant risks and uncertainties, including whether our suppliers will provide an adequate supply of required components of sufficient quality, will increase prices for the components and will perform their obligations on a timely basis. If we or our outsourced manufacturers are unable to obtain components from third-party suppliers in the quantities and of the quality that we require, on a timely basis and at acceptable prices, we may not be able to deliver our products on a timely or cost-effective basis to our customers, which could cause customers to terminate their contracts with us, reduce our gross profit and seriously harm our business, results of operations and financial condition. Moreover, if any of our suppliers become financially unstable, we may have to find new suppliers. It may take several months to locate alternative suppliers, if required, or to re-tool our products to accommodate components from different suppliers. We may experience significant delays in manufacturing and shipping our products to customers and incur additional development, manufacturing and other costs to establish alternative sources of supply if we lose any of these sources. We cannot predict if we will be able to obtain replacement components within the time frames that we require at an affordable cost, or at all. In particular, the prices of ABS plastic and nickel (for batteries) have recently increased and we cannot provide assurance that will not materially impact our results of operations.

Our products are complex and could have unknown defects or errors, which may give rise to claims against us, diminish our brand or divert our resources from other purposes.

Our robots rely on the interplay among behavior-based artificially intelligent systems, real-world dynamic sensors, friendly user interfaces and tightly-integrated, electromechanical designs to accomplish their missions. Despite testing, our new or existing products have contained defects and errors and may in the future contain defects, errors or performance problems when first introduced, when new versions or enhancements are released, or even after these products have been used by our customers for a period of time. These problems could result in expensive and time-consuming design modifications or warranty charges, delays in the introduction of new products or enhancements, significant increases in our service and maintenance costs, exposure to liability for damages, damaged customer relationships and harm to our reputation, any of which could materially harm our results of operations and ability to achieve market acceptance. In addition, increased development and warranty costs could be substantial and could reduce our operating margins. Moreover, because military robots are used in dangerous situations, the failure or malfunction of any of these robots, including our own, could significantly damage our reputation and support for robot solutions in general. The existence of any defects, errors, or failures in our products could also lead to product liability claims or lawsuits against us. A successful product liability claim could result in substantial cost, diminish our brand and divert management’s attention and resources, which could have a negative impact on our business, financial condition and results of operations.

The robot industry is and will likely continue to be characterized by rapid technological change, which will require us to develop new products and product enhancements, and could render our existing products obsolete.

Continuing technological changes in the robot industry and in the markets in which we sell our robots could undermine our competitive position or make our robots obsolete, either generally or for particular types of services. Our future success will depend upon our ability to develop and introduce a variety of new capabilities and enhancements to our existing product offerings, as well as introduce a variety of new product offerings, to address the changing needs of the markets in which we offer our robots. Delays in introducing new products and enhancements, the failure to choose correctly among technical alternatives or the failure to offer innovative products or enhancements at competitive prices may cause existing and potential customers to forego purchases of our products and purchase our competitors’ products. Moreover, the development of new products has required, and will require, that we expend significant financial and management resources. We have incurred, and expect to continue to incur, significant research and development expenses in connection with our efforts to expand our product offerings. If we are unable to devote adequate resources to develop new products or cannot otherwise

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successfully develop new products or enhancements that meet customer requirements on a timely basis, our products could lose market share, our revenue and profits could decline, or we could experience operating losses. Moreover, if we are unable to offset our product development costs through sales of existing or new products or product enhancements, our operating results and gross margins would be negatively impacted.

If we are unable to attract and retain additional skilled personnel, we may be unable to grow our business.

To execute our growth plan, we must attract and retain additional, highly-qualified personnel. Competition for hiring these employees is intense, especially with regard to engineers with high levels of experience in designing, developing and integrating robots. Many of the companies with which we compete for hiring experienced employees have greater resources than we have. In addition, in making employment decisions, particularly in the high-technology industries, job candidates often consider the value of the equity they are to receive in connection with their employment. Therefore, significant volatility in the price of our stock may adversely affect our ability to attract or retain technical personnel. Furthermore, changes to accounting principles generally accepted in the United States relating to the expensing of stock options may discourage us from granting the sizes or types of stock options that job candidates may require to accept our offer of employment. If we fail to attract new technical personnel or fail to retain and motivate our current employees, our business and future growth prospects could be severely harmed.

We may be sued by third parties for alleged infringement of their proprietary rights, which could be costly, time-consuming and limit our ability to use certain technologies in the future.

If the size of our markets increases, we would be more likely to be subject to claims that our technologies infringe upon the intellectual property or other proprietary rights of third parties. In addition, the vendors from which we license technology used in our products could become subject to similar infringement claims. Our vendors, or we, may not be able to withstand third-party infringement claims. Any claims, with or without merit, could be time-consuming and expensive, and could divert our management’s attention away from the execution of our business plan. Moreover, any settlement or adverse judgment resulting from the claim could require us to pay substantial amounts or obtain a license to continue to use the technology that is the subject of the claim, or otherwise restrict or prohibit our use of the technology. There can be no assurance that we would be able to obtain a license from the third party asserting the claim on commercially reasonable terms, if at all, that we would be able to develop alternative technology on a timely basis, if at all, or that we would be able to obtain a license to use a suitable alternative technology to permit us to continue offering, and our customers to continue using, our affected product. In addition, we may be required to indemnify our retail and distribution partners for third-party intellectual property infringement claims, which would increase the cost to us of an adverse ruling in such a claim. An adverse determination could also prevent us from offering our products to others. Infringement claims asserted against us or our vendors may have a material adverse effect on our business, results of operations or financial condition.

If we fail to maintain or increase our consumer robot sales through our primary distribution channels, which include third-party retailers, our product sales and results of operations would be negatively impacted.

Chain stores and other national retailers are the primary distribution channels for our consumer robots and accounted for approximately 41.6% and 47.8% of our total revenue for the years ended December 30, 2006 and December 31, 2005, respectively. We do not have long-term contracts regarding purchase volumes with any of our distributors. As a result, purchases generally occur on an order-by-order basis, and the relationships, as well as particular orders, can generally be terminated or otherwise materially changed at any time by our distributors. A decision by a major retail distributor, whether motivated by competitive considerations, financial difficulties, economic conditions or otherwise, to decrease its purchases from us, to reduce the shelf space for our products or to change its manner of doing business with us could significantly damage our consumer product sales and negatively impact our business, financial condition and results of operations. In addition, during recent years, various retailers, including some of our distributors, have experienced significant changes and difficulties, including consolidation of ownership, increased centralization of purchasing decisions, restructurings, bankruptcies and liquidations. These

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and other financial problems of some of our retailers increase the risk of extending credit to these retailers. A significant adverse change in a retail distributor relationship with us or in a retail distributor’s financial position could cause us to limit or discontinue business with that distributor, require us to assume more credit risk relating to that distributor’s receivables or limit our ability to collect amounts related to previous purchases by that distributor, all of which could harm our business and financial condition. Disruption of the iRobot on-line store could also decrease our home floor care robot sales.

If we fail to enhance our brand, our ability to expand our customer base will be impaired and our operating results may suffer.

We believe that developing and maintaining awareness of the iRobot brand is critical to achieving widespread acceptance of our existing and future products and is an important element in attracting new customers. Furthermore, we expect the importance of global brand recognition to increase as competition develops. Successful promotion of our brand will depend largely on the effectiveness of our marketing efforts, including our mass media outreach, in-store training and presentations and public relations, and our ability to provide customers with reliable and technically sophisticated robots at competitive prices. If customers do not perceive our products to be of high quality, our brand and reputation could be harmed, which could adversely impact our financial results. In addition, brand promotion efforts may not yield significant revenue or increased revenue sufficient to offset the additional expenses incurred in building our brand. If we incur substantial expenses to promote and maintain our brand, we may fail to attract sufficient customers to realize a return on our brand-building efforts, and our business would suffer.

If our existing collaborations are unsuccessful or we fail to establish new collaborations, our ability to develop and commercialize additional products could be significantly harmed.

If we cannot maintain our existing collaborations or establish new collaborations, we may not be able to develop additional products. We anticipate that some of our future products will be developed and commercialized in collaboration with companies that have expertise outside the robot field. For example, we are currently collaborating with Deere & Company on the development of the R-Gator unmanned ground vehicle, and The Clorox Company on the cleaning solution used in our Scooba floor washing robot. Under these collaborations, we may be dependent on our collaborators to fund some portion of development of the product or to manufacture and market either the primary product that is developed pursuant to the collaboration or complementary products required in order to operate our products. In addition, we cannot assure you that we will be able to establish additional collaborative relationships on acceptable terms.

Our existing collaborations and any future collaborations with third parties may not be scientifically or commercially successful. Factors that may affect the success of our collaborations include the following:

•  our collaborators may not devote the resources necessary or may otherwise be unable to complete development and commercialization of these potential products;

•  our existing collaborations are and future collaborations may be subject to termination on short notice;

•  our collaborators may be pursuing alternative technologies or developing alternative products, either on their own or in collaboration with others, that may be competitive with our products, which could affect our collaborators’ commitment to the collaboration with us;

•  reductions in marketing or sales efforts or a discontinuation of marketing or sales of our products by our collaborators could reduce our revenue;

•  our collaborators may terminate their collaborations with us, which could make it difficult for us to attract new collaborators or harm our reputation in the business and financial communities; and

•  our collaborators may pursue higher priority programs or change the focus of their development programs, which would weaken our collaborators’ commitment to us.

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We depend on the experience and expertise of our senior management team and key technical employees, and the loss of any key employee may impair our ability to operate effectively.

Our success depends upon the continued services of our senior management team and key technical employees, such as our project management personnel and senior engineers. Moreover, we often must comply with provisions in government contracts that require employment of persons with specified levels of education and work experience. Each of our executive officers, key technical personnel and other employees could terminate his or her relationship with us at any time. The loss of any member of our senior management team might significantly delay or prevent the achievement of our business objectives and could materially harm our business and customer relationships. In January 2007, Gregory F. White resigned his position as the president of the Home Robots division of the Company, although he is expected to continue as an employee of the Company through the end of March 2007. Mr. White has been critical to our home robots division and we may experience difficulties in competing effectively, developing our home robots division and implementing our business strategies. We have not identified a successor to Mr. White to serve as the President of the Home Robots division in the future. In addition, because of the highly technical nature of our robots, the loss of any significant number of our existing engineering and project management personnel could have a material adverse effect on our business and operating results.

We are subject to extensive U.S. federal government regulation, and our failure to comply with applicable regulations could subject us to penalties that may restrict our ability to conduct our business.

As a contractor and subcontractor to the U.S. federal government, we are subject to and must comply with various government regulations that impact our operating costs, profit margins and the internal organization and operation of our business. Among the most significant regulations affecting our business are:

•  the Federal Acquisition Regulations and supplemental agency regulations, which comprehensively regulate the formation and administration of, and performance under government contracts;

•  the Truth in Negotiations Act, which requires certification and disclosure of all cost and pricing data in connection with contract negotiations;

•  the Cost Accounting Standards, which impose accounting requirements that govern our right to reimbursement under cost-based government contracts;

•  the Foreign Corrupt Practices Act, which prohibits U.S. companies from providing anything of value to a foreign official to help obtain, retain or direct business, or obtain any unfair advantage;

•  the False Claims Act and the False Statements Act, which, respectively, impose penalties for payments made on the basis of false facts provided to the government, and impose penalties on the basis of false statements, even if they do not result in a payment; and

•  laws, regulations and executive orders restricting the use and dissemination of information classified for national security purposes and the exportation of certain products and technical data.

Also, we need special clearances to continue working on and advancing certain of our projects with the U.S. federal government. Obtaining and maintaining security clearances for employees involves a lengthy process, and it is difficult to identify, recruit and retain employees who already hold security clearances. If our employees are unable to obtain security clearances in a timely manner, or at all, or if our employees who hold security clearances are unable to maintain the clearances or terminate employment with us, then a customer requiring classified work could terminate the contract or decide not to renew it upon its expiration. In addition, we expect that many of the contracts on which we will bid will require us to demonstrate our ability to obtain facility security clearances and employ personnel with specified types of security clearances. To the extent we are not able to obtain facility security clearances or engage employees with the required security clearances for a particular contract, we may not be able to bid on or win new contracts, or effectively rebid on expiring contracts. For example, if we were to lose our security clearance, we would be unable to continue to participate in the U.S. Army’s Future Combat Systems program. Classified programs generally will require that we comply with various Executive Orders, federal laws and regulations and customer security requirements that may include restrictions on how we develop, store, protect and share information, and may require our employees to obtain government clearances.

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Our failure to comply with applicable regulations, rules and approvals could result in the imposition of penalties, the loss of our government contracts or our suspension or debarment from contracting with the federal government generally, any of which would harm our business, financial condition and results of operations.

If we fail to protect, or incur significant costs in defending, our intellectual property and other proprietary rights, our business and results of operations could be materially harmed.

Our success depends on our ability to protect our intellectual property and other proprietary rights. We rely primarily on patents, trademarks, copyrights, trade secrets and unfair competition laws, as well as license agreements and other contractual provisions, to protect our intellectual property and other proprietary rights. Significant technology used in our products, however, is not the subject of any patent protection, and we may be unable to obtain patent protection on such technology in the future. Moreover, existing U.S. legal standards relating to the validity, enforceability and scope of protection of intellectual property rights offer only limited protection, may not provide us with any competitive advantages, and may be challenged by third parties. In addition, the laws of countries other than the United States in which we market our products may afford little or no effective protection of our intellectual property. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property or otherwise gaining access to our technology. Unauthorized third parties may try to copy or reverse engineer our products or portions of our products or otherwise obtain and use our intellectual property. Some of our contracts with the U.S. federal government allow the federal government to disclose technical data regarding the products developed on behalf of the government under the contract without constraining the recipient on how it is used. This ability of the government creates the potential that third parties may be able to use this data to compete with us in the commercial sector. If we fail to protect our intellectual property and other proprietary rights, our business, results of operations or financial condition could be materially harmed.

In addition, defending our intellectual property rights may entail significant expense. We believe that certain products in the marketplace may infringe our existing intellectual property rights. We have, from time to time, resorted to legal proceedings to protect our intellectual property and may continue to do so in the future. We may be required to expend significant resources to monitor and protect our intellectual property rights. Any of our intellectual property rights may be challenged by others or invalidated through administrative processes or litigation. If we resort to legal proceedings to enforce our intellectual property rights or to determine the validity and scope of the intellectual property or other proprietary rights of others, the proceedings could result in significant expense to us and divert the attention and efforts of our management and technical employees, even if we were to prevail.

Potential future acquisitions could be difficult to integrate, divert the attention of key personnel, disrupt our business, dilute stockholder value and impair our financial results.

As part of our business strategy, we intend to consider acquisitions of companies, technologies and products that we believe could accelerate our ability to compete in our core markets or allow us to enter new markets. Acquisitions involve numerous risks, any of which could harm our business, including:

•  difficulties in integrating the operations, technologies, products, existing contracts, accounting and personnel of the target company and realizing the anticipated synergies of the combined businesses;

•  difficulties in supporting and transitioning customers, if any, of the target company;

•  diversion of financial and management resources from existing operations;

•  the price we pay or other resources that we devote may exceed the value we realize, or the value we could have realized if we had allocated the purchase price or other resources to another opportunity;

•  risks of entering new markets in which we have limited or no experience;

•  potential loss of key employees, customers and strategic alliances from either our current business or the target company’s business;

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•  assumption of unanticipated problems or latent liabilities, such as problems with the quality of the target company’s products; and

•  inability to generate sufficient revenue to offset acquisition costs.

Acquisitions also frequently result in the recording of goodwill and other intangible assets which are subject to potential impairments in the future that could harm our financial results. In addition, if we finance acquisitions by issuing convertible debt or equity securities, our existing stockholders may be diluted, which could lower the market price of our common stock. As a result, if we fail to properly evaluate acquisitions or investments, we may not achieve the anticipated benefits of any such acquisitions, and we may incur costs in excess of what we anticipate. The failure to successfully evaluate and execute acquisitions or investments or otherwise adequately address these risks could materially harm our business and financial results.

We will incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.

Prior to November 9, 2005, we were a private company. As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the Securities and Exchange Commission and the NASDAQ Global Market, have imposed various new requirements on public companies, including requiring changes in corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these new compliance initiatives. Moreover, these rules and regulations have and will continue to increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, these new rules and regulations have made it more difficult and more expensive for us to obtain , and will likely make it more difficult to renew, our director and officer liability insurance, and we may be required to incur substantial costs to maintain the same or similar coverage.

In addition, the Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. In particular, we have and must continue to perform system and process evaluation and testing of our internal control over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our testing, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses. Our compliance with Section 404 have and will continue to require that we incur substantial accounting expense and expend significant management time on compliance-related issues. We currently do not have an internal audit group, and we will evaluate the need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the NASDAQ Global Market, the Securities and Exchange Commission or other regulatory authorities, which would require additional financial and management resources.

We may not be able to obtain capital when desired on favorable terms, if at all, or without dilution to our stockholders.

We anticipate that our current cash, cash equivalents, cash provided by operating activities and funds available through our working capital line of credit, will be sufficient to meet our current and anticipated needs for general corporate purposes. We operate in an emerging market, however, which makes our prospects difficult to evaluate. It is possible that we may not generate sufficient cash flow from operations or otherwise have the capital resources to meet our future capital needs. If this occurs, we may need additional financing to execute on our current or future business strategies, including to:

•  hire additional engineers and other personnel;

•  develop new, or enhance existing, robots and robot accessories;

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•  enhance our operating infrastructure;

•  acquire complementary businesses or technologies; or

•  otherwise respond to competitive pressures.

If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could be significantly diluted, and these newly-issued securities may have rights, preferences or privileges senior to those of existing stockholders. We cannot assure you that additional financing will be available on terms favorable to us, or at all. If adequate funds are not available or are not available on acceptable terms, if and when needed, our ability to fund our operations, take advantage of unanticipated opportunities, develop or enhance our products, or otherwise respond to competitive pressures would be significantly limited.

Environmental laws and regulations and unforeseen costs could negatively impact our future earnings.

The manufacture and sale of our products in certain states and countries may subject us to environmental and other regulations. We also face increasing complexity in our product design as we adjust to new and upcoming requirements relating to our products, including the restrictions on lead and certain other substances in electronics that will apply to specified electronics products put on the market in the European Union as of July 1, 2006 (Restriction of Hazardous Substances in Electrical and Electronic Equipment Directive). Similar laws and regulations have been or may be enacted in other regions, including in the United States, Canada, Mexico, China, the United Kingdom, Germany and Japan. There is no assurance that such existing laws or future laws will not impair future earnings or results of operations.

Business disruptions resulting from international uncertainties could negatively impact our profitability.

We derive, and expect to continue to derive, a portion of our revenue from international sales in various European markets, Canada, Japan, Korea and Singapore. For the fiscal years ended December 30, 2006 and December 31, 2005, sales to non-U.S. customers accounted for 11.0% and 9.9% of total revenue, respectively. Our international revenue and operations are subject to a number of material risks, including, but not limited to:

•  difficulties in staffing, managing and supporting operations in multiple countries;

•  difficulties in enforcing agreements and collecting receivables through foreign legal systems and other relevant legal issues;

•  fewer legal protections for intellectual property;

•  foreign and U.S. taxation issues and international trade barriers;

•  difficulties in obtaining any necessary governmental authorizations for the export of our products to certain foreign jurisdictions;

•  potential fluctuations in foreign economies;

•  government currency control and restrictions on repatriation of earnings;

•  fluctuations in the value of foreign currencies and interest rates;

•  general economic and political conditions in the markets in which we operate;

•  domestic and international economic or political changes, hostilities and other disruptions in regions where we currently operate or may operate in the future; and

•  different and changing legal and regulatory requirements in the jurisdictions in which we currently operate or may operate in the future.

Negative developments in any of these areas in one or more countries could result in a reduction in demand for our products, the cancellation or delay of orders already placed, threats to our intellectual property, difficulty in collecting receivables, and a higher cost of doing business, any of which could negatively impact our business,

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financial condition or results of operations. Moreover, our sales, including sales to customers outside the United States, are primarily denominated in U.S. dollars, and downward fluctuations in the value of foreign currencies relative to the U.S. dollar may make our products more expensive than other products, which could harm our business.

If we are unable to continue to obtain U.S. federal government authorization regarding the export of our products, or if current or future export laws limit or otherwise restrict our business, we could be prohibited from shipping our products to certain countries, which would harm our ability to generate revenue.

We must comply with U.S. laws regulating the export of our products. In addition, we are required to obtain a license from the U.S. federal government to export our PackBot line of tactical military robots. We cannot be sure of our ability to obtain any licenses required to export our products or to receive authorization from the U.S. federal government for international sales or domestic sales to foreign persons. Moreover, the export regimes and the governing policies applicable to our business are subject to change. We cannot assure you of the extent that such export authorizations will be available to us, if at all, in the future. In some cases where we act as a subcontractor, we rely upon the compliance activities of our prime contractors, and we cannot assure you that they have taken or will take all measures necessary to comply with applicable export laws. If we or our prime contractor partners cannot obtain required government approvals under applicable regulations in a timely manner or at all, we would be delayed or prevented from selling our products in international jurisdictions, which could materially harm our business, operating results and ability to generate revenue.

Risks Related to Ownership of Our Common Stock

An active trading market for our common stock may not be available on a consistent basis, which could depress the market price of our common stock.

Prior to November 9, 2005, there was no public market for our common stock. An active trading market for shares of our common stock may not be available or be sustained on a consistent basis. If no trading market is sustained, securities analysts may not initiate or maintain research coverage of our company, which could further depress the market for our common stock.

Our directors and management will exercise significant control over our company, which will limit your ability to influence corporate matters.

As of December 30, 2006, our directors and executive officers and their affiliates collectively beneficially owned approximately 37.7% of our outstanding common stock. As a result, these stockholders, if they act together, will be able to influence our management and affairs and all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control of our company and might negatively affect the market price of our common stock.

Provisions in our certificate of incorporation and by-laws, our shareholder rights agreement or Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our common stock.

Provisions of our certificate of incorporation and by-laws and Delaware law may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares of our common stock. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. These provisions include:

•  limitations on the removal of directors;

•  a classified board of directors so that not all members of our board are elected at one time;

•  advance notice requirements for stockholder proposals and nominations;

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•  the inability of stockholders to act by written consent or to call special meetings;

•  the ability of our board of directors to make, alter or repeal our by-laws; and

•  the ability of our board of directors to designate the terms of and issue new series of preferred stock without stockholder approval.

The affirmative vote of the holders of at least 75% of our shares of capital stock entitled to vote is necessary to amend or repeal the above provisions of our certificate of incorporation. In addition, absent approval of our board of directors, our by-laws may only be amended or repealed by the affirmative vote of the holders of at least 75% of our shares of capital stock entitled to vote.

We have also adopted a shareholder rights agreement that entitles our stockholders to acquire shares of our common stock at a price equal to 50% of the then-current market value in limited circumstances when a third party acquires or announces its intention to acquire 15% or more of our outstanding common stock.

In addition, Section 203 of the Delaware General Corporation Law prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.

The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.

ITEM 1B.   UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2.   PROPERTIES

Our corporate headquarters are located in Burlington, Massachusetts, where we lease approximately 82,000 square feet. Approximately 24,000 square feet of this lease expires on September 30, 2007 and the remainder expires on December 31, 2008. We lease 6,150 square feet of space at an adjacent facility in Burlington for our prototype work on unmanned ground vehicles. We also lease 7,550 square feet in Mysore, India and we lease smaller facilities in Hong Kong; San Luis Obispo, California; and Crystal City, Virginia. We do not own any real property. We believe that our leased facilities and additional or alternative space available to us will be adequate to meet our needs for the foreseeable future.

On February 22, 2007, we entered into a lease agreement for our new corporate headquarters in Bedford, Massachusetts to which we expect to relocate on or about May 1, 2008.

ITEM 3.   LEGAL PROCEEDINGS

From time to time in the ordinary course of our business, we may be involved in disputes or litigation relating to claims arising out of our operations. The outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be disposed of unfavorably to us, which could materially and adversely affect our financial condition or results of operations.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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PART II

ITEM 5.   MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock commenced trading on the NASDAQ Global Market on November 9, 2005 under the symbol “IRBT”. The following table sets forth the high and low sale prices for our common stock for fiscal 2005 since our initial public offering and for fiscal year 2006 as reported on the NASDAQ Global Market.

	High		Low
Fiscal 2005:
Fourth quarter*	$	37.33	$	26.29
Fiscal 2006:
First quarter	$	37.90	$	25.49
Second quarter	$	29.30	$	20.50
Third quarter	$	25.50	$	16.09
Fourth quarter	$	24.98	$	17.55

* Our common stock began trading on November 9, 2005.

As of February 23, 2007, there were approximately 23,860,330 shares of our common stock outstanding held by approximately 164 stockholders of record and the last reported sale price of our common stock on the NASDAQ Global Market on February 23, 2007 was $15.03 per share.

Dividend Policy

We have never declared or paid any cash dividends on our capital stock. We currently expect to retain future earnings, if any, to finance the growth and development of our business and we do not anticipate paying any cash dividends in the foreseeable future.

Equity Compensation Plan Information

We maintain the following four equity compensation plans under which our equity securities are authorized for issuance to our employees and/or directors: Amended and Restated 1994 Stock Plan; Amended and Restated 2001 Special Stock Option Plan; Amended and Restated 2004 Stock Option and Incentive Plan; and 2005 Stock Option and Incentive Plan. Each of the foregoing compensation plans was approved by our stockholders. The following table represents information about these plans as of December 30, 2006:

	(A)		(B)		(C)
					Number of Securities
					Remaining Available for
	Number of Securities				Future Issuance Under
	to be Issued Upon		Weighted-Average		Equity Compensation
	Exercise of		Exercise Price of		Plans (Excluding
	Outstanding Options,		Outstanding Options,		Securities Reflected in
Plan Category	Warrants and Rights		Warrants and Rights		Column (A))
Equity compensation plans approved by security holders		3,499,710	$	8.340		690,629
Equity compensation plans not approved by security holders		—		—		—
Total		3,499,710	$	8.340		690,629

No further grants are being made under the Amended and Restated 1994 Stock Plan, the Amended and Restated 2001 Special Stock Option Plan and the Amended and Restated 2004 Stock Option and Incentive Plan.

Issuer Purchases of Equity Securities

During the fiscal quarter ended December 30, 2006, there were no repurchases made by us or on our behalf, or by any “affiliated purchasers,” of shares of our common stock.

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ITEM 6.   SELECTED FINANCIAL DATA

The selected historical financial data set forth below as of December 30, 2006 and December 31, 2005 and for the years ended December 30, 2006, December 31, 2005 and 2004 are derived from our financial statements, which have been audited by PricewaterhouseCoopers LLP, our independent registered public accounting firm, and which are included elsewhere in this Annual Report on Form 10-K. The selected historical financial data as of December 31, 2004, 2003 and 2002 and for the years ended December 31, 2003 and 2002 are derived from our financial statements which have been audited by PricewaterhouseCoopers LLP and which are not included elsewhere in this Annual Report.

The following selected consolidated financial data should be read in conjunction with our consolidated financial statements, the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report on Form 10-K. The historical results are not necessarily indicative of the results to be expected for any future period.

	Year Ended
	December 30,		December 31,		December 31,		December 31,			December 31,
	2006		2005		2004		2003			2002
	(In thousands, except earnings per share amounts)
Consolidated Statement of Operations:
Revenue
Product revenue(1)	$	167,687	$	124,616	$	82,678	$	46,655		$	7,594
Contract revenue		21,268		17,352		12,365		7,661			7,223
Total revenue		188,955		141,968		95,043		54,316			14,817
Cost of Revenue
Cost of product revenue		103,651		81,855		59,321		31,194			4,896
Cost of contract revenue		15,569		12,534		8,371		6,143			11,861
Total cost of revenue		119,220		94,389		67,692		37,337			16,757
Gross Profit (Loss)(1)		69,735		47,579		27,351		16,979			(1,940	)
Operating Expenses
Research and development		17,025		11,601		5,504		3,848			1,736
Selling and marketing		33,969		21,796		14,106		12,757			1,911
General and administrative		18,703		12,072		7,298		7,764			5,217
Total operating expenses		69,697		45,469		26,908		24,369			8,864
Operating Income (Loss)		38		2,110		443		(7,390	)		(10,804	)
Net Income (Loss)	$	3,565	$	2,610	$	219	$	(7,411	)	$	(10,774	)
Net Income (Loss) Attributable to Common Stockholders	$	3,565	$	1,553	$	118	$	(7,411	)	$	(10,774	)
Net Income (Loss) Per Common Share
Basic	$	0.15	$	0.13	$	0.01	$	(0.79	)	$	(2.00	)
Diluted	$	0.14	$	0.11	$	0.01	$	(0.79	)	$	(2.00	)
Shares Used in Per Common Share Calculations
Basic		23,516		12,007		9,660		9,352			5,391
Diluted		25,601		14,331		19,183		9,352			5,391

(1) Beginning in the first quarter of 2004, we converted from recognizing revenue from U.S. consumer product sales on a “sell-through” basis (when retail stores sold our robots) to a “sell-in” basis (when our robots are

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shipped to retail stores). As a result of this conversion, our revenue and gross profit in the first quarter of 2004 included $5.7 million and $2.5 million, respectively, from robots shipped prior to 2004.

	December 30,		December 31,		December 31,			December 31,			December 31,
	2006		2005		2004			2003			2002
	(In thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	5,583	$	76,064	$	19,441		$	4,620		$	3,014
Short term investments		64,800		—		—			—			—
Total assets		135,308		124,935		45,137			27,827			8,705
Total liabilities		40,389		37,379		31,921			25,624			12,049
Total redeemable convertible preferred stock		—		—		37,506			27,562			14,639
Total stockholders’ equity (deficit)		94,919		87,556		(24,290	)		(25,359	)		(17,983	)

ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information contained in this section has been derived from our consolidated financial statements and should be read together with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange act of 1934, as amended, and are subject to the “safe harbor” created by those sections. Some of the forward-looking statements can be identified by the use of forward-looking terms such as “believes,” “expects,” “may,” “will,” “should,” “seek,” “intends,” “plans,” “estimates,” “anticipates,” or other comparable terms. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those in the forward-looking statements. We urge you to consider the risks and uncertainties discussed in greater detail under the heading “Risk Factors” in evaluating our forward-looking statements. We have no plans to update our forward-looking statements to reflect events or circumstances after the date of this report. We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made.

Overview

iRobot provides robots that enable people to complete complex tasks in a better way. Founded in 1990 by roboticists who performed research at the Massachusetts Institute of Technology, we have developed proprietary technology incorporating advanced concepts in navigation, mobility, manipulation and artificial intelligence to build industry-leading robots. Our Roomba floor vacuuming robot and Scooba floor washing robot perform time-consuming domestic chores, and our PackBot tactical military robots perform battlefield reconnaissance and bomb disposal. In addition, we are developing the Small Unmanned Ground Vehicle reconnaissance robot for the U.S. Army’s FCS program and, in conjunction with Deere & Company, the R-Gator unmanned ground vehicle. We sell our robots to consumers through a variety of distribution channels, including chain stores and other national retailers, and our on-line store, and to the U.S. military and other government agencies worldwide.

As of December 30, 2006, we had 371 full-time employees. We have developed expertise in all the disciplines necessary to build durable, high-performance and cost-effective robots through the close integration of software, electronics and hardware. Our core technologies serve as reusable building blocks that we adapt and expand to develop next generation and new products, reducing the time, cost and risk of product development. Our significant expertise in robot design and engineering, combined with our management team’s experience in military and consumer markets, positions us to capitalize on the expected growth in the market for robots.

Over the past five years, we have sold more than 2.0 million of our home floor care robots. We have also sold more than 800 of our PackBot tactical military robots, most of which have been sold to the U.S. military and deployed on missions in Afghanistan and Iraq.

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Although we have successfully launched consumer and military products, our continued success depends upon our ability to respond to a number of future challenges. We believe the most significant of these challenges include increasing competition in the markets for both our consumer and military products, our ability to obtain U.S. federal government funding for research and development programs, and our ability to successfully develop and introduce products and product enhancements.

Initial Public Offering

On November 15, 2005, we completed our initial public offering of 4,945,000 shares of common stock at $24.00 per share, comprised of 3,260,870 primary shares and 1,684,130 shares offered by selling stockholders, which includes the exercise of the over-allotment option by the underwriters of the offering. In connection with the offering, all of the outstanding shares of our preferred stock were converted into an equal number of shares of common stock. The sale of the 3,260,870 shares of common stock in connection with our initial public offering resulted in net proceeds to us of approximately $70.4 million after deducting underwriters’ discounts and offering-related expenses. A summary of the terms of the offering can be found in our Registration Statement No. 333-126907 on Form S-1, as amended, as filed with the Securities and Exchange Commission.

Revenue

We currently derive revenue from product sales and research and development services. Product revenue is derived from the sale of our various home floor care and PackBot robots and related accessories. Research and development revenue is derived from the execution of contracts awarded by the U.S. federal government, other governments and a small number of other partners. In the future, we expect to derive increasing revenue from product maintenance and support services due to a focused effort to market these services and the expanding installed base of our robots.

We currently derive a majority of our product revenue from the sale of our home floor care robots and our PackBot tactical military robots. For the fiscal years ended December 30, 2006 and December 31, 2005, product revenues accounted for 88.7% and 87.8% of total revenue, respectively. For the fiscal years ended December 30, 2006 and December 31, 2005, our funded research and development contracts accounted for approximately 11.3% and 12.2% of our total revenue, respectively. We expect to continue to perform funded research and development work with the intent of leveraging the technology developed to advance our new product development efforts. In the future, however, we expect that revenue from funded research and development contracts could grow modestly on an absolute dollar basis and represent a decreasing percentage of our total revenue due to the anticipated growth in consumer and military product revenue.

For the fiscal years ended December 30, 2006 and December 31, 2005 approximately 65.4% and 78.6%, respectively, of our home robot product revenue resulted from sales to 15 customers, primarily U.S. retailers. Direct-to-consumer revenue generated through our iRobot on-line store accounted for 16.0% of our home robot product revenue for the fiscal year ended December 30, 2006 compared to 9.3% in the fiscal year ended December 31, 2005. In addition, 88.4% and 87.5% of military product revenue, and 76.2% and 71.6% of funded research and development contract revenue, resulted from orders and contracts with the U.S. federal government in the fiscal years ended December 30, 2006 and December 31, 2005, respectively.

For the fiscal years ended December 30, 2006 and December 31, 2005, sales to non-U.S. customers accounted for 11.0% and 9.9% of total revenue, respectively.

Our revenue from product sales is generated through sales to our retail distribution channels, our distributor network and to certain U.S. and foreign governments. In 2002, when our Roomba robot was first commercially introduced and throughout 2003, we recognized revenue from our U.S. consumer product sales on a “sell-through basis” (when retail stores sold our Roomba robots to end users). In the first quarter of 2004, we began recognizing revenue from U.S. consumer product sales on a “sell-in basis” (when our robots are shipped by us to the retail stores). As a result of this change in accounting treatment, in the first quarter of 2004 we recognized $5.7 million of product revenue from products shipped prior to 2004. This one-time increase impacts period-to-period comparisons relating to 2004. Revenue from sales of our military robots is recognized upon the later to occur of shipment or customer acceptance.

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Revenue from consumer product sales is significantly seasonal, with a majority of our consumer product revenue generated in the second half of the year (in advance of the holiday season). The timing of holiday season shipments could materially affect our third or fourth quarter consumer product revenue in any fiscal year. Revenue from our military robot sales and revenue from funded research and development contracts are occasionally influenced by the September 30 fiscal year-end of the U.S. federal government, but are not otherwise significantly seasonal. In addition, our revenue can be affected by the timing of the release of new products and the award of new contracts.

Cost of Revenue

Cost of product revenue includes the cost of raw materials and labor that go into the development and manufacture of our products as well as manufacturing overhead costs such as manufacturing engineering, quality assurance, logistics and warranty costs. For the fiscal years ended December 30, 2006 and December 31, 2005, cost of product revenue was 61.8% and 65.7% of total product revenue, respectively. While raw material costs, which are our most significant cost items, generally have not fluctuated materially as a percentage of revenue since the introduction of our robots in 2002, the cost for some materials have recently risen, including ABS plastic and nickel (for batteries). There can be no assurance that our costs of raw materials will not increase. Labor costs also comprise a significant portion of our cost of revenue. Compared to our PackBot tactical military robots, labor costs for our home floor cleaning robots comprise a greater percentage of the associated cost of revenue. We outsource the manufacture of our home floor cleaning robots to a contract manufacturer in China. While labor costs in China traditionally have been favorable compared to labor costs elsewhere in the world, including the United States, we believe that labor in China is becoming more scarce. Consequently, the labor costs for our home floor cleaning robots could increase in the future.

Cost of contract revenue includes the direct labor costs of engineering resources committed to funded research and development contracts, as well as third-party consulting, travel and associated direct material costs. Additionally, we include overhead expenses such as indirect engineering labor, occupancy costs associated with the project resources, engineering tools and supplies and program management expenses. For the fiscal years ended December 30, 2006 and December 31, 2005, cost of contract revenue was 73.2% and 72.2% of total contract revenue, respectively.

Gross Profit

Our gross profit as a percentage of revenue varies according to the mix of product and contract revenue, the mix of products sold and the total sales volume. Currently, our consumer robots typically have a higher gross profit as a percentage of revenue than our military robots. For the years ended December 30, 2006 and December 31, 2005, gross profit was 36.9% and 33.5% of total revenue, respectively.

As a result of our change in accounting from a “sell-through” to “sell-in” basis in the first quarter of 2004, we recognized $2.5 million of gross profit in the first quarter of 2004, which disproportionately increased our gross profit as a percentage of revenues in that quarter and in 2004.

Research and Development Expenses

Research and development expenses consist primarily of:

•  salaries and related costs for our engineers;

•  costs for high technology components used in product and prototype development; and

•  costs of test equipment used during product development.

We have significantly expanded our research and development capabilities and expect to continue to expand these capabilities in the future. An example of this is the engineering design center we opened in India late in 2005. A substantial portion of our research and development is performed in the United States, although we maintain an increasing number of engineering personnel in India and Hong Kong to serve as a liaison between our U.S.-based engineering staff and our outsourced manufacturer in China. We are committed to increasing the level of innovative

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design and development of new products as we strive to enhance our ability to serve our existing consumer and military markets as well as new markets for robots. Accordingly, we anticipate that research and development expenses will continue to increase in absolute dollars for the foreseeable future.

For the fiscal years ended December 30, 2006 and December 31, 2005, research and development expense was $17.0 million and $11.6 million, or 9.0% and 8.2% of total revenue, respectively.

In addition to our internal research and development activities discussed above, we incur research and development expenses under funded development arrangements with both governments and other third parties. For the fiscal years ended December 30, 2006 and December 31, 2005, these expenses amounted to $15.6 million and $12.5 million, respectively. In accordance with generally accepted accounting principles, these expenses have been classified as cost of revenue rather than research and development expense.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses consist primarily of:

•  salaries and related costs for sales and marketing personnel;

•  salaries and related costs for executives and administrative personnel;

•  advertising, marketing and other brand-building costs;

•  fulfillment costs associated with direct-to-consumer sales through the iRobot on-line store;

•  professional services costs;

•  information systems and infrastructure costs;

•  travel and related costs; and

•  occupancy and other overhead costs.

As we focus on increasing our market penetration and continuing to build brand awareness, we anticipate that selling, general and administrative expenses will continue to increase both in absolute dollars and as a percentage of sales for the foreseeable future, as we intend to continue aggressively building on the iRobot brand. We also expect our general and administrative expenses will increase due to the costs associated with being a public company, including costs associated with compliance with Section 404 of the Sarbanes-Oxley Act, directors’ and officers’ liability insurance and increased professional services.

For the fiscal years ended December 30, 2006 and December 31, 2005, selling, general and administrative expense was $52.7 million and $33.9 million, or 27.9% and 23.8% of total revenue, respectively.

Fiscal Periods

Historically, our fiscal year ended on December 31 and our fiscal quarters ended on March 31, June 30, September 30 and December 31. Reference to fiscal 2004, for example, refers to the fiscal year ended December 31, 2004. Beginning in fiscal 2005, we began to operate and report using a 52-53 week fiscal year ending on the Saturday closest to December 31. Accordingly, each of our fiscal quarters ends on the Saturday that falls closest to the last day of the third calendar month of the quarter.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates.

We believe that of our significant accounting policies, which are described in the notes to our consolidated financial statements, the following accounting policies involve a greater degree of judgment and complexity.

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Accordingly, we believe that the following accounting policies are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations.

Revenue Recognition

We recognize revenue from sales of consumer products under the terms of the customer agreement upon transfer of title to the customer, provided the price is fixed or determinable, collection is determined to be probable and no significant obligations remain. Sales to resellers are subject to agreements allowing for limited rights of return for defective products only, rebates and price protection. We have typically not taken product returns except for defective products. Accordingly, we reduce revenue for our estimates of liabilities for these rights at the time the related sale is recorded. We establish a provision for sales returns for products sold by resellers directly or through our distributors based on historical return experience. We have aggregated and analyzed historical returns from resellers and end users which form the basis of our estimate of future sales returns by resellers or end users. In accordance with Statement of Financial Accounting Standards No. 48 “Revenue Recognition When Right of Return Exists,” the provision for these estimated returns is recorded as a reduction of revenue at the time that the related revenue is recorded. If actual returns from retailers differ significantly from our estimates, such differences could have a material impact on our results of operations for the period in which the actual returns become known. Our returns reserve is calculated as a percentage of gross consumer product revenue. A one percentage point increase or decrease in our actual experience of returns would have a material impact on our quarterly and annual results of operations. The estimates for returns are adjusted periodically based upon historical rates of returns. The estimates and reserve for rebates and price protection are based on specific programs, expected usage and historical experience. Actual results could differ from these estimates. Through 2003, we recognized revenue on sales to certain distributors and retail customers upon their sale to the end user. Starting in the first quarter of 2004, as a result of our accumulation of sufficient experience to reasonably estimate allowances for product returns, we adopted the standard industry practice of recognizing revenue on all sales upon delivery of product to distributors and retail stores and established a related allowance for future returns based upon historical experience. If future trends or our ability to estimate were to change significantly from those experienced in the past, incremental reductions or increases to revenue may result based on this new experience.

Under cost-plus research and development contracts, we recognize revenue based on costs incurred plus a pro-rata portion of the total fixed fee. We recognize revenue on fixed-price contracts using the percentage-of- completion method. Costs and estimated gross profits on contracts are recorded as work is performed based on the percentage that incurred costs bear to estimated total costs utilizing the most recent estimates of costs and funding. Changes in job performance, job conditions and estimated profitability, including those arising from final contract settlements, may result in revisions to costs and income, and are recorded or recognized, as the case may be, in the period in which the revisions are determined. Since many contracts extend over a long period of time, revisions in cost and funding estimates during the progress of work have the effect of adjusting earnings applicable to past performance in the current period. When the current contract estimate indicates a loss, provision is made for the total anticipated loss in the current period. Revenue earned in excess of billings, if any, is recorded as unbilled revenue. Billings in excess of revenue earned, if any, are recorded as deferred revenue.

Accounting for Stock-Based Awards

Effective January 1, 2006, we adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), Share-Based Payment, which establishes accounting for equity instruments exchanged for employee services. Under the provisions of SFAS No. 123(R), share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity grants). Prior to January 1, 2006, we accounted for share-based compensation to employees in accordance with Accounting Principles Board Opinion (“APB”) No. 25, Accounting for Stock Issued to Employees, and related interpretations. We also followed the disclosure requirements of SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure. We elected to adopt the modified prospective transition method as provided by SFAS No. 123(R) and, accordingly financial statement amounts

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for the prior periods presented in this Annual Report on Form 10-K have not been restated to reflect the fair value method of expensing share-based compensation.

Under SFAS No. 123(R), entities that become public companies after June 15, 2005 and used the minimum value method of measuring equity share options and similar instruments as a non-public company for either recognition or pro forma disclosure purposes under SFAS No. 123 shall apply the provisions of SFAS No. 123(R) prospectively to new and/or modified awards after the adoption of SFAS No. 123(R). Companies should continue to account for any portion of awards outstanding at the date of initial application of SFAS No. 123(R) using the accounting principles originally applied to those awards — either the minimum value method under SFAS No. 123 or the provisions of APB No. 25 and its related interpretive guidance. Accordingly, we did not record any cumulative effect of a change in accounting principle associated with the adoption of SFAS No. 123(R). Additionally, since we valued options under the minimum value method up to our initial public offering on November 9, 2005, options granted prior to this date had a zero expected volatility. Prior to our initial public offering, we had accounted for certain option grants under APB 25. As of December 30, 2006, the deferred stock-based compensation balance associated with these grants was $2.3 million. We will continue to recognize the associated stock-based compensation expense, in accordance with the provisions of APB No. 25, related to these shares of $0.7 million, $0.7 million, $0.7 million and $0.2 million for 2007, 2008, 2009 and 2010, respectively.

Under the provisions of SFAS No. 123(R), we recognized $1.8 million of stock-based compensation expense during the fiscal year ended December 30, 2006 for stock options granted subsequent to the initial public offering. The unamortized fair value as of December 30, 2006 associated with these grants was $9.8 million with a weighted average remaining recognition period of 1.83 years.

The fair value of each option grant for the fiscal year ended December 30, 2006 was computed on the grant date using the Black-Scholes option-pricing model with the following assumptions:

	Fiscal Year Ended
	December 30, 2006
Risk-free interest rate		4.32% — 5.11	%
Expected dividend yield		—
Expected life		3.5 — 6.5 years
Expected volatility		65	%

The risk-free interest rate is derived from the average U.S. Treasury constant maturity rate, which approximates the rate in effect at the time of grant, commensurate with the expected life of the instrument. The dividend yield is zero based upon the fact that we have never paid and have no present intention to pay cash dividends. The expected term calculation is based upon the simplified method provided under SEC Staff Accounting Bulletin (“SAB”) No. 107. Under SAB No. 107, the expected term is developed by averaging the contractual term of the stock option grants (7 or 10 years) with the associated vesting term (typically 4 to 5 years). Given our initial public offering in November 2005 and the resulting short history as a public company, we could not rely solely on company specific historical data for purposes of establishing expected volatility. Consequently, we performed an analysis of several peer companies with similar expected option lives to develop an expected volatility assumption.

Based upon the above assumptions, the weighted average fair value of each stock option granted for the fiscal year ended December 30, 2006 was $12.771.

We have assumed a forfeiture rate of 5% for all stock options granted subsequent to the initial public offering with the exception of those issued to executives and directors for which a zero forfeiture rate has been assumed. In the future, we will record incremental stock-based compensation expense if the actual forfeiture rates are lower than estimated and will record a recovery of prior stock-based compensation expense if the actual forfeitures are higher than estimated.

SFAS No. 123(R) requires significant judgment and the use of estimates, particularly surrounding assumptions such as stock price volatility and expected option lives, as well as expected option forfeiture rates to value equity-based compensation. There is little experience or guidance with respect to developing these assumptions and models. There is also uncertainty as to how the standard will be interpreted and applied as more companies adopt the standard and companies and their advisors gain experience with the standard. SFAS No. 123(R) requires the

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recognition of the fair value of stock-based compensation in net income. Refer to Note 2 — Summary of Significant Accounting Policies in our notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more discussion.

Accounting for Income Taxes

Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Valuation allowances are provided if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

We have $8.0 million of gross federal net operating loss carry-forwards as of December 30, 2006. Of this amount, $7.5 million relates to stock option deductions for which the tax effected amount is approximately $3.0 million which would be credited to additional paid-in capital upon realization. The use of these net operating loss carry-forwards may be limited by changes in our ownership. We expect that these net operating loss carry-forwards will impact our tax liability over the next several years. There, however, can be no assurance as to the rate at which these net operating loss carry-forwards can be utilized, or as to whether there will be any other tax incentives available after 2006.

We monitor the realization of our deferred tax assets based on changes in circumstances, for example, recurring periods of income for tax purposes following historical periods of cumulative losses or changes in tax laws or regulations. Our income tax provision and our assessment of the realizability of our deferred tax assets involve significant judgments and estimates. If we continue to generate taxable income through profitable operations in future years we may be required to recognize these deferred tax assets through the reduction of the valuation allowance which would result in a material benefit to our results of operations in the period in which the benefit is determined, excluding the recognition of the portion of the valuation allowance which relates to stock compensation.

Warranty

We typically provide a one-year warranty against defects in materials and workmanship and will either repair the goods, provide replacement products at no charge to the customer or refund amounts to the customer for defective products. We record estimated warranty costs, based on historical experience by product, at the time we recognize product revenue. As the complexity of our products increases, we could experience higher warranty claims relative to sales than we have previously experienced, and we may need to increase these estimated warranty reserves.

Inventory Valuation

We value our inventory at the lower of the actual cost of our inventory or its current estimated market value. We write down inventory for obsolescence or unmarketable inventories based upon assumptions about future demand and market conditions. Because of the seasonality of our consumer product sales and inventory levels, obsolescence of technology and product life cycles, we generally write down inventory to net realizable value based on forecasted product demand. Actual demand and market conditions may be lower than those that we project and this difference could have a material adverse effect on our gross profit if inventory write-downs beyond those initially recorded become necessary. Alternatively, if actual demand and market conditions are more favorable than those we estimated at the time of such a write-down, our gross profit could be favorably impacted in future periods.

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Overview of Results of Operations

The following table sets forth our results of operations for the periods shown:

	Fiscal Year Ended
	December 30,		December 31,		December 31,
	2006		2005		2004
	(In thousands)
Revenue
Product revenue(1)	$	167,687	$	124,616	$	82,678
Contract revenue		21,268		17,352		12,365
Total revenue		188,955		141,968		95,043
Cost of Revenue
Cost of product revenue(2)		103,651		81,855		59,321
Cost of contract revenue(2)		15,569		12,534		8,371
Total cost of revenue		119,220		94,389		67,692
Gross profit(1)		69,735		47,579		27,351
Operating Expenses
Research and development(2)		17,025		11,601		5,504
Selling and marketing(2)		33,969		21,796		14,106
General and administrative(2)		18,703		12,072		7,298
Total operating expenses		69,697		45,469		26,908
Operating Income		38		2,110		443
Other Income (Expense), Net		3,831		676		(80	)
Income Before Income Taxes		3,869		2,786		363
Income Tax Expense		304		176		144
Net Income	$	3,565	$	2,610	$	219

(1)

Beginning in the first quarter of 2004, we converted from recognizing revenue from U.S. consumer product sales on a “sell-through” basis (when retail stores sold our robots) to a “sell-in” basis (when our robots are shipped to retail stores). As a result of this conversion, our revenue and gross profit in the first quarter of 2004 included $5.7 million and $2.5 million, respectively, from robots shipped prior to 2004.

(2)

Stock-based compensation recorded in 2006, 2005 and 2004 breaks down by expense classification as follows.

	Fiscal Year Ended
	December 30,		December 31,		December 31,
	2006		2005		2004
	(In thousands)
Cost of product revenue	$	326	$	33	$	—
Cost of contract revenue		267		58		—
Research and development		376		95		—
Selling and marketing		389		32		—
General and administrative		1,211		380		283

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The following table sets forth our results of operations as a percentage of revenue for the periods shown:

	Fiscal Year Ended
	December 30,			December 31,			December 31,
	2006			2005			2004
Revenue
Product revenue		88.7	%		87.8	%		87.0	%
Contract revenue		11.3			12.2			13.0
Total revenue		100.0			100.0			100.0
Cost of Revenue
Cost of product revenue		54.9			57.7			62.4
Cost of contract revenue		8.2			8.8			8.8
Total cost of revenue		63.1			66.5			71.2
Gross profit		36.9			33.5			28.8
Operating Expenses
Research and development		9.0			8.2			5.8
Selling and marketing		18.0			15.3			14.8
General and administrative		9.9			8.5			7.7
Total operating expenses		36.9			32.0			28.3
Operating Income		0.0			1.5			0.5
Other Income (Expense), Net		2.0			0.4			(0.1	)
Income Before Income Taxes		2.0			1.9			0.4
Income Tax Expense		0.1			0.1			0.2
Net Income		1.9	%		1.8	%		0.2	%

Comparison of Years Ended December 30, 2006 and December 31, 2005

Revenue

	Fiscal Year Ended
	December 30,		December 31,
	2006		2005		Dollar Change		Percent Change
	(Dollars in thousands)
Total Revenue	$	188,955	$	141,968	$	46,987		33.1	%

Our revenue increased 33.1% to $189.0 million in fiscal 2006 from $142.0 million in fiscal 2005. Revenue increased approximately $18.4 million, or 19.7%, in our home robots business and $28.6 million, or 59.6%, in our government and industrial business.

The $18.4 million increase in revenue from our home robots division was driven primarily by the initial distribution into the retail channel of our Scooba floor washing robot, which was released late in 2005, continued demand for our Roomba floor vacuuming robot and an 8.2% increase in net average selling prices. Total home floor care robots shipped in fiscal 2006 was approximately 725,000 units compared to approximately 663,000 units in fiscal 2005. Included in this $18.4 million growth was an increase of approximately $9.4 million in sales through our direct on-line store as compared to $8.6 million of direct revenue in fiscal 2005. During fiscal 2005, we reduced our home robots products return reserve accrual rate based on an analysis that indicated that our actual customer return rates had decreased significantly and, accordingly, during the third quarter we revised our returns reserve rate and reduced the returns reserve as of October 1, 2005. As a result of this decrease, during the third quarter of 2005, we recognized an additional $2.7 million of home robots product revenue related to robots shipped both during the third quarter of 2005 and during prior periods.

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The $28.6 million increase in revenue from our government and industrial business for fiscal 2006 as compared to fiscal 2005 was due to a 52.8% increase in the number of military robots shipped combined with a 5.5% increase in associated net average selling prices, a 30.9% increase in recurring contract revenues generated under funded research and development contracts and the one-time impact of $2.2 million associated with the United Kingdom Ministry of Defence contract modification. Also included in this $28.6 million growth was an increase of approximately $7.5 million in product life cycle revenue (robot spares), as compared to $5.4 million of product life cycle revenue in fiscal 2005, which was primarily driven by the increased demand for our military robots,. Total military robot units shipped in fiscal 2006 was 385 compared to 252 in fiscal 2005. This unit increase was directly related to 229 units shipped under our contract with the Naval Sea Systems Command for Man Transportable Robotics Systems.

Cost of Revenue

	Fiscal Year Ended
	December 30,			December 31,
	2006			2005			Dollar Change		Percent Change
	(Dollars in thousands)
Total cost of revenue	$	119,220		$	94,389		$	24,831		26.3	%
As a percentage of total revenue		63.1	%		66.5	%

Total cost of revenue increased to $119.2 million in fiscal 2006, compared to $94.4 million in the fiscal 2005. The increase is primarily attributable to a 9.4% increase in the unit sales of our home floor care robots, a 52.8% increase in the unit sales of our military robots and higher costs associated with a 30.9% increase in recurring contract revenues generated under funded research and development contracts in fiscal 2006 as compared to fiscal 2005.

The home robots division cost of revenue decreased as a percent of revenue by 1.2 percentage points in fiscal 2006 as compared to fiscal 2005. This decrease was attributable to the above-mentioned increase in average selling prices offset by a 6.4% increase in average unit costs as a result of a shift in the product mix of the home floor care robots that we sold. In particular, the average unit cost increase was largely attributable to a significant number of Scooba floor washing robots shipped in fiscal 2006. Our Scooba floor washing robot carries a higher per unit cost than our Roomba floor vacuuming robot which represented nearly 100% of home floor care robots shipped in fiscal 2005.

The government and industrial robots division cost of revenue decreased as a percent of revenue by 8.8 percentage points for fiscal 2006 as compared to fiscal 2005. This decrease was due primarily to the above-mentioned increase in average selling prices, a 9.1% reduction in the average unit cost of product sold, higher margins on increased product life cycle revenue and lower cost of warranty partially offset by higher manufacturing overhead.

Gross Profit

	Fiscal Year Ended
	December 30,			December 31,
	2006			2005			Dollar Change		Percent Change
	(Dollars in thousands)
Total gross profit	$	69,735		$	47,579		$	22,156		46.6	%
As a percentage of total revenue		36.9	%		33.5	%

Gross profit increased 46.6% to $69.7 million in fiscal 2006, from $47.6 million in fiscal 2005. Gross profit as a percentage of revenue increased to 36.9% in fiscal 2006 from 33.5% of revenue in fiscal 2005. This 3.4 percentage increase in gross profit was the result of the home robots division gross profit increasing 1.2 percentage points and the government and industrial gross profit increasing 8.8 percentage points. These increases were partially offset by the fact that the home robots division, which carries a higher overall gross profit than the government and industrial division, accounted for 63.6% of total gross profit in fiscal 2006 as compared to 75.5% in the fiscal 2005. Included in the total gross profit for fiscal 2006 was $2.6 million associated with the United Kingdom Ministry of Defence

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contract modification, which accounted for 0.6 percentage points of the year over year improvement in gross profit as a percent of revenue.

Research and Development

	Fiscal Year Ended
	December 30,			December 31,
	2006			2005			Dollar Change		Percent Change
	(Dollars in thousands)
Total research and development	$	17,025		$	11,601		$	5,424		46.8	%
As a percentage of total revenue		9.0	%		8.2	%

Research and development expenses increased by $5.4 million or 46.8% to $17.0 million (9.0% percent of revenue) in fiscal 2006, from $11.6 million (8.2% of revenue) for fiscal 2005. The increase in research and development expense is primarily due to an increase of $3.6 million in compensation and benefit related expenses attributed to increased headcount. Consulting and related material costs associated with internal research projects increased by $1.9 million and $1.3 million, respectively. Additionally, $0.4 million of the increase related to increased occupancy and depreciation expenses that include the addition of the Mysore, India office, which opened in late 2005, as well as increased depreciation expense on computer equipment related to increased headcount. These increases were offset by a reduction of $2.3 million in internally funded research and development projects primarily related to the Scooba floor washing robot, which was launched late in the fourth quarter of 2005. In fiscal 2007, we intend to continue to invest in research and development to respond to and anticipate customer needs. Accordingly, we anticipate research and development expenses will continue to increase in absolute dollars, but decrease as a percentage of total revenue.

Overall research and development headcount increased to 104 at December 30, 2006 compared to 72 as of December 31, 2005, an increase of 32 employees or 44% growth.

In addition to our internal research and development activities discussed above, we incur research and development expenses under funded development arrangements with both governments and industrial third parties. For fiscal 2006 these expenses amounted to $15.6 million compared to $12.5 million for the comparable period in 2005. The increase in these expenses was primarily due to increased headcount in our research and development function to 58 employees at December 30, 2006 from 48 employees at December 31, 2005. In accordance with generally accepted accounting principles, these expenses have been classified as cost of revenue rather than research and development expense.

Selling and Marketing

	Fiscal Year Ended
	December 30,			December 31,
	2006			2005			Dollar Change		Percent Change
	(Dollars in thousands)
Total selling and marketing	$	33,969		$	21,796		$	12,173		55.8	%
As a percentage of total revenue		18.0	%		15.4	%

Selling and marketing expenses increased by $12.2 million or 55.8% to $34.0 million (18.0% of revenue) in fiscal 2006 from $21.8 million (15.4% of revenue) in fiscal 2005. The increase in selling and marketing expense was primarily driven by an increase in home robot division selling and marketing expense of $9.3 million over fiscal 2005. This increase was primarily made up of $2.9 million of increased television advertising and related production costs, $2.9 million increase in direct fulfillment costs associated with the $9.4 million increase in our direct on-line store sales, $1.7 million increased cooperative advertising, $0.7 million increased compensation and benefit related expense, $0.7 million increased customer service costs and $0.5 million increased sales commissions. All of these increases are attributable to the increase in fiscal 2006 of $18.4 million of home robot revenue as compared to fiscal 2005. Government and industrial division selling and marketing expenses were up $1.8 million for fiscal 2006 as compared to fiscal 2005 due primarily to $0.5 million of increased bid and proposal activities, $0.4 million of increased compensation and benefit related expense attributed to incremental headcount and $0.2 million increased travel costs. Corporate sales and marketing increased $1.0 million of which $0.6 million

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relates to public relations expenses. In fiscal 2007, we expect to accelerate our investment in sales and marketing to increase brand awareness. Accordingly, we anticipate selling and marketing expenses will increase in absolute dollars and as a percentage of total revenue.

Overall selling and marketing headcount increased to 31 at December 30, 2006 compared to 24 as of December 31, 2005, an increase of 7 employees or 29% growth.

General and Administrative

	Fiscal Year Ended
	December 30,			December 31,
	2006			2005			Dollar Change		Percent Change
	(Dollars in thousands)
General and administrative	$	18,703		$	12,072		$	6,631		54.9	%
As a percentage of total revenue		9.9	%		8.5	%

General and administrative expenses increased by $6.6 million or 54.9% to $18.7 million (9.9% of revenue) in fiscal 2006 from $12.1 million (8.5% of revenue) in fiscal 2005. The increase in general and administrative expense was primarily driven by an increase of $2.7 million in compensation, benefits, occupancy, depreciation and other people related expenses due to increased headcount over the comparable period and $0.4 million related to increases in software maintenance and general liability insurance. Also included in the $6.6 million increase was $2.2 million relating to costs incurred on professional accounting, legal and other costs associated with being a public company, including costs associated with Section 404 of the Sarbanes-Oxley, all of which were not required in 2005 as we were a private company for the majority of the year. SFAS 123R stock-based compensation costs totaling $0.8 million were recorded, a factor that did not exist in the comparable period. In fiscal 2007, we anticipate general and administrative expenses will increase in absolute dollars in support of expected globalization activities.

Overall general and administrative headcount increased to 72 at December 30, 2006 compared to 61 as of December 31, 2005, an increase of 11 employees or 18% growth.

Other Income (Expense), Net

	Fiscal Year Ended
	December 30,			December 31,
	2006			2005			Dollar Change		Percent Change
	(Dollars in thousands)
Other Income (expense), net	$	3,831		$	676		$	3,155		466.7	%
As a percentage of total revenue		2.0	%		0.4	%

For fiscal 2006, other income (expense), net amounted to $3.8 million compared to $0.7 million in fiscal 2005. The other income (expense), net was directly related to $4.0 million of interest income resulting from the investment of net proceeds from our initial public offering that occurred in November, 2005.

Income Tax Provision

	Fiscal Year Ended
	December 30,			December 31,
	2006			2005			Dollar Change		Percent Change
	(Dollars in thousands)
Income tax provision	$	304		$	176		$	128		72.7	%
As a percentage of total revenue		0.1	%		0.1	%

The provision for income taxes for fiscal 2006 consists of $0.2 million of federal alternative minimum taxes and $0.1 million of state taxes compared to $0.2 million of federal alternative minimum taxes in fiscal 2005.

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Comparison of Years Ended December 31, 2005 and 2004

Revenue

	Fiscal Year Ended
	December 31,		December 31,
	2005		2004		Dollar Change		Percent Change
	(Dollars in thousands)
Total Revenue	$	141,968	$	95,043	$	46,925		49.4	%

Our revenue increased 49.4% to $141.9 million in fiscal 2005 from $95.0 million in fiscal 2004. Revenue increased approximately $22.6 million, or 31.7%, in our consumer business and $24.7 million, or 106.4%, in our government and industrial business.

The increase in revenue from our home robots products was primarily driven by continued demand for our Roomba floor vacuuming robots and to a lesser degree, for our Scooba floor washing robot, as it was released late in 2005. During the year we added four retailers to our retail network, which accounted for 5% of our total revenue during the period and increased the total number of retailers offering our products to 19. During fiscal 2005, we also reduced our consumer products return reserve accrual rate based on an analysis that indicated that our actual customer return rates had decreased significantly and, accordingly, during the third quarter we revised our returns reserve rate and reduced the returns reserve as of October 1, 2005. As a result of this decrease, during the third quarter of 2005, we recognized an additional $2.7 million of consumer product revenue related to robots shipped both during the third quarter of 2005 and during prior periods.

The increase in revenue from our government and industrial business in fiscal 2005 as compared to fiscal 2004 was due primarily to increased revenue from sales of our military robots, including the shipment of 152 of our PackBot tactical military robots to the U.S. Navy, and a significant increase in contract revenues generated under funded research and development contracts, including under the Future Combat Systems program.

Our revenue in fiscal 2004 was positively impacted by our conversion in accounting for U.S. consumer product sales from a “sell-through” basis (when retail stores sell our Roomba robots to their customers) to a “sell-in” basis (when our robots are shipped by us to the retail stores). As a result of this conversion, in 2004 we recognized $5.7 million of product revenue from products shipped by us prior to fiscal 2004.

Cost of Revenue

	Fiscal Year Ended
	December 31,			December 31,
	2005			2004			Dollar Change		Percent Change
	(Dollars in thousands)
Total cost of revenue	$	94,389		$	67,692		$	26,697		39.4	%
As a percentage of total revenue		66.5	%		71.2	%

Our cost of revenue increased to $94.4 million in fiscal 2005, compared to $67.7 million in fiscal 2004. The increase is primarily attributable to a 136.8% increase in the unit sales of our PackBot robots in fiscal 2005 as compared to fiscal 2004, and a $4.1 million increase in costs associated with the $5.0 million increase in contract revenue. Unit sales in our consumer business increased by approximately 12.0% in fiscal 2005 as compared to fiscal 2004. After giving effect to the impact of converting to “sell-in” accounting in the first quarter of fiscal 2004 as described above, the increase was 2.3%. In addition to the changes in sales volume, the unit costs of manufacturing our consumer robots increased by approximately 17.9% over the comparable period in fiscal 2004 related primarily to an increase in costs associated with the production of the second generation Roomba robots and a shift in the mix of the consumer robots that we sold. The unit costs of manufacturing our PackBot robots decreased by approximately 12.6% over the comparable period in fiscal 2004 primarily as a result of manufacturing economies of scale.

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Gross Profit

	Fiscal Year Ended
	December 31,			December 31,
	2005			2004			Dollar Change		Percent Change
	(Dollars in thousands)
Total gross profit	$	47,579		$	27,351		$	20,228		74.0	%
As a percentage of total revenue		33.5	%		28.8	%

Gross profit increased 74.0% to $47.6 million in fiscal 2005, from $27.4 million in fiscal 2004. Gross profit as a percentage of revenue increased to 33.5% in fiscal 2005 from 28.8% of revenue in fiscal 2004. The 4.7% percentage point increase in gross profit as a percent of revenue in fiscal 2005 was primarily due to improved gross profit of 6.0% on our consumer and government and industrial robots, including a gross profit increase resulting from the reduction of our returns reserve. The favorable impact from improved product gross profit was offset by approximately 0.7% as the result of lower gross profit realized on funded research and development contracts and, to a lesser extent, a decrease in gross profit from royalty revenue for fiscal 2005. Gross profit in fiscal 2004 included $2.5 million as a result of the change in accounting from a “sell-through” to “sell-in” basis.

Research and Development

	Fiscal Year Ended
	December 31,			December 31,
	2005			2004			Dollar Change		Percent Change
	(Dollars in thousands)
Total research and development	$	11,601		$	5,504		$	6,097		110.8	%
As a percentage of total revenue		8.2	%		5.8	%

Research and development expenses increased approximately 110.8% to $11.6 million (8.2% of revenue) in fiscal 2005 from $5.5 million (5.8% of revenue) in fiscal 2004. The increase in research and development expenses was primarily due to increased headcount in our internal research and development function to 72 employees at December 31, 2005 from 48 employees at December 31, 2004. For fiscal years 2005 and 2004 we incurred the majority of our internal (non-funded) research and development expenses to support the development of enhancements to our Roomba product line as well as our Scooba floor washing robot development which began in early 2004.

In addition to our internal research and development activities discussed above, we incur research and development expenses under funded development arrangements with both governments and industrial third parties. For fiscal year 2005 these expenses amounted to $12.5 million compared to $8.4 million for the comparable period in 2004. The increase in these expenses was primarily due to increased headcount in our research and development function to 48 employees at December 31, 2005 from 18 employees at December 31 2004. In accordance with generally accepted accounting principles, these expenses have been classified as cost of revenue rather than research and development expense.

Selling and Marketing

	Fiscal Year Ended
	December 31,			December 31,
	2005			2004			Dollar Change		Percent Change
	(Dollars in thousands)
Total selling and marketing	$	21,796		$	14,106		$	7,690		54.5	%
As a percentage of total revenue		15.3	%		14.8	%

Selling and marketing expenses increased 54.5% to $21.8 million (15.3% of revenue) in fiscal 2005 from $14.1 million (14.8% of revenue) in fiscal 2004. The increase in selling and marketing expense was primarily due to an increase in direct marketing and advertising programs and promotional expenses in support of the Roomba product line, including our Roomba Scheduler robot, which was launched in the third quarter of 2005, as well as increased salaries and related personnel costs associated with the expansion of our selling and marketing headcount to 24 employees from 13 employees.

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General and Administrative

	Fiscal Year Ended
	December 31,			December 31,
	2005			2004			Dollar Change		Percent Change
	(Dollars in thousands)
General and administrative	$	12,072		$	7,298		$	4,774		65.4	%
As a percentage of total revenue		8.5	%		7.7	%

General and administrative expenses increased 65.4% to $12.1 million (8.5% of revenue) in fiscal 2005 from $7.3 million (7.7% of revenue) in fiscal 2004. The increase in general and administrative expenses was primarily due to increased salaries and related personnel costs associated with the growth in headcount in our general and administrative functions to 61 employees from 33 employees, primarily in the areas of accounting, information technology, human resources, and legal, and the related expenses associated with our preparations to become and operate as a public company during the fiscal year.

Other Income (Expense), Net

	Fiscal Year Ended
	December 31,			December 31,
	2005			2004			Dollar Change		Percent Change
	(Dollars in thousands)
Other Income (expense), net	$	676		$	(80	)	$	756		N/M
As a percentage of total revenue		0.4	%		(0.1	)%

Other income, net amounted to $0.7 million for fiscal 2005 compared to other expense, net of approximately $0.1 million for fiscal 2004. The other income (expense), net was directly related to $0.8 million of interest income earned offset partially by increased franchise taxes associated with our increased capitalization after our initial public offering.

Income Tax Provision

	Fiscal Year Ended
	December 31,			December 31,
	2005			2004			Dollar Change		Percent Change
	(Dollars in thousands)
Income tax provision	$	176		$	144		$	32		22.2	%
As a percentage of total revenue		0.1	%		0.1	%

The provision for income taxes of $0.2 million for fiscal 2005, compared with a provision of $0.1 million for fiscal 2004, represents taxes due based on federal alternative minimum taxes.

Liquidity and Capital Resources

At December 30, 2006 our principal sources of liquidity were cash and cash equivalents totaling $5.6 million, short-term investments of $64.8 million and accounts receivable of $28.5 million. Prior to our initial public offering in November 2005, we funded our growth primarily with proceeds from the issuance of convertible preferred stock for aggregate net cash proceeds of $37.5 million, occasional borrowings under a working capital line of credit and cash generated from operations. In the initial public offering, we raised $70.4 million net of underwriting and professional fees associated with this offering.

We manufacture and distribute our products through contract manufacturers and third-party logistics providers. We believe that this approach gives us the advantages of relatively low capital investment and significant flexibility in scheduling production and managing inventory levels. By leasing our office facilities, we also minimize the cash needed for expansion. Accordingly, our capital spending is generally limited to leasehold improvements, computers, office furniture and product-specific production tooling, internal use software and test equipment. In fiscal 2006 and 2005, we spent $7.5 million and $5.5 million, respectively, on capital equipment.

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During 2006, our strategy for delivering product to our retail customers changed from a model that emphasized container shipments directly to the retailer from China to a model emphasizing improved logistics capabilities that allow our retail partners to take possession of product on a domestic basis. Accordingly, our home robots product inventory consists of goods shipped to our domestic third-party logistic providers for the fulfillment of domestic retail orders and direct-to-consumer sales. Our inventory of military products is minimal as they are generally built to order. Our contract manufacturers are responsible for purchasing and stocking the components required for the production of our products, and they invoice us when the finished goods are shipped.

Our consumer product sales are, and are expected to continue to be, highly seasonal. This seasonality typically results in a net use of cash in support of operating needs during the first half of the year with the low point generally occurring in the middle of the third quarter, and a favorable cash flow during the second half of the year. In the past, we have relied on our working capital line of credit to cover the short-term cash needs resulting from the seasonality of our consumer business.

Discussion of Cash Flows

Net cash provided by our operating activities in fiscal 2006 was $0.6 million compared to net cash used by operating activities of $9.0 million in fiscal 2005 and net cash provided by operating activities of $8.9 million in fiscal 2004. The cash provided by our operating activities in fiscal 2006 was primarily due to net income of $3.6 million and an increase in accounts payable, accrued expenses and accrued compensation of $8.7 million, offset by an increase in accounts receivable and unbilled revenue of $6.0 million, an increase in inventory of $5.0 million, an increase in other assets of $1.3 million, and a decrease in provision for contract settlement and deferred revenue of $5.7 million. In addition, in fiscal 2006, we had depreciation and amortization of approximately $3.7 million and amortization of deferred compensation of $2.6 million, both of which are non-cash expenses. The increase in accounts receivable, inventory and liabilities in fiscal 2006 are directly attributable to the 33.1% growth in revenue from the comparable period in fiscal 2005. The cash used by our operating activities in fiscal 2005 was primarily due to an increase in accounts receivable of $9.8 million, an increase in inventory of $8.2 million, an increase in other current assets of $1.1 million, and an increase in unbilled revenue of $0.7 million, offset by net income of $2.6 million, and an increase in liabilities of approximately $5.5 million. In addition, in fiscal 2005, we had depreciation and amortization of approximately $2.1 million and amortization of deferred compensation of $0.6 million, both of which are non-cash expenses. The increase in accounts receivable, inventory and liabilities in fiscal 2005 are directly attributable to the 49.4% growth in revenue from the comparable period in fiscal 2004. The cash provided by our operating activities in fiscal 2004 was primarily due to net income of approximately $0.2 million, an increase in total liabilities of $7.6 million, a decrease in inventory of $3.8 million, a decrease in unbilled revenue of approximately $0.4 million and a decrease in other assets of approximately $0.4 million, which were partially offset by an increase in accounts receivable of $5.1 million. In addition, in fiscal 2004, we had $1.3 million of depreciation expense and approximately $0.3 million in deferred compensation, both of which represent non-cash expenses.

Net cash used in our investing activities was $72.3 million in fiscal 2006, $5.5 million in fiscal 2005, and $3.2 million in fiscal 2004. Investment activities in 2006 represent the purchase of short-term investments (net of the sale of short-term investments) of $64.8 million and the purchase of capital equipment of $7.5 million. Investment activities in 2005 and 2004 represent the purchase of capital equipment in support of our growth, including computer equipment, internal use software, furniture and fixtures, engineering and test equipment, and production tooling. The 2006 investment in capital equipment of $7.5 million consisted primarily of purchases of production tooling, internal use software and computer equipment.

Net cash provided by our financing activities was approximately $1.2 million in fiscal 2006, $71.1 million in fiscal 2005, and $9.2 million in fiscal 2004. Net cash provided by our financing activities in fiscal 2006 consisted primarily of proceeds from stock option exercises. Net cash provided by our financing activities in fiscal 2005 consisted primarily of $70.4 million of proceeds from our initial public offering and $0.7 million from the exercise of common stock options. Net cash provided by our financing activities in fiscal 2004 consisted primarily of proceeds of $9.9 million from the issuance of a series of convertible preferred stock, approximately $0.3 million from exercises of common stock options and approximately $0.3 million from the issuance of restricted stock, offset by $1.3 million for repayment of borrowings under our working capital line of credit.

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The majority of our long-lived assets for the years ended December 30, 2006, December 31, 2005 and 2004 are located in the United States. However, we have invested in production tooling for the manufacture of the Roomba and Scooba product lines in China.

We currently have a $20.7 million accumulated deficit as a result of significant losses incurred through 2003, largely attributable to our investment in internally funded research and development. Based on our historical product development efforts, we launched our first commercial products, our Roomba floor vacuuming robot and our PackBot tactical military robot, in fiscal 2002. Since fiscal 2002, our revenue has significantly increased, our investment in internally-funded research and development has declined as a percentage of revenue, and we achieved profitability in fiscal years 2004, 2005 and 2006. We have not invested significantly in property, plant and equipment, primarily as a result of our outsourced approach to manufacturing that provides significant flexibility in both managing inventory levels and financing our inventory. Our consumer revenue has been highly seasonal. This seasonality tends to result in the net use of cash during the first half of the year and significant generation of cash in the second half of the year. Given the recent success of our products and resulting growth in revenue, we believe that existing cash, cash equivalents, cash provided by operating activities and funds available through our bank line of credit will be sufficient to meet our working capital and capital expenditure needs for the foreseeable future.

Working Capital Facility

On May 26, 2005, we obtained a working capital line of credit with a bank under which we can borrow up to $20.0 million, including a $2.0 million sub-limit for equipment financing. Interest accrues at a variable rate based on prime or published LIBOR rates. The line expires on May 26, 2007 at which time all advances will be immediately due and payable. As of December 30, 2006, we had no amounts outstanding and $20.0 million available under our working capital line of credit. Borrowings are secured by substantially all of our assets other than our intellectual property. The credit facility restricts our ability to:

•  incur or guaranty additional indebtedness;

•  create liens;

•  enter into transactions with affiliates;

•  make loans or investments;

•  sell assets;

•  pay dividends or make distributions on, or repurchase, our stock; or

•  consolidate or merge with other entities.

In addition, we are required to maintain quarterly tangible net worth thresholds based on our stockholders’ equity under the credit facility that vary by quarter based on anticipated seasonality in our business. These operating and financial covenants may restrict our ability to finance our operations, engage in business activities or expand or pursue our business strategies. At December 30, 2006, we were in compliance with all covenants under the credit facility. To the extent we are unable to satisfy those covenants in the future, we will need to obtain waivers to avoid being in default of the terms of this credit facility. In addition to a covenant default, other events of default under our credit facility include the filing or entry of a tax lien, attachment of funds or material judgment against us, or other uninsured loss of our material assets. If a default occurs, the bank may require that we repay all amounts then outstanding.

Working Capital and Capital Expenditure Needs

We currently have no material cash commitments, except for normal recurring trade payables, expense accruals and operating leases, all of which we anticipate funding through our existing working capital line of credit, working capital and funds provided by operating activities. We do anticipate making significant capital commitments in the next twelve months for expenditures associated with the planned move to our new corporate headquarters on or about May 1, 2008. These expenditures will be jointly funded by the landlord for this site and by the Company. Other than this project, we do not currently anticipate significant investment in property and

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equipment, and we believe that our outsourced approach to manufacturing provides us with flexibility in both managing inventory levels and financing our inventory. We believe our existing cash, cash equivalents, cash provided by operating activities, and funds available through our working capital line of credit will be sufficient to meet our working capital and capital expenditure needs over at least the next twelve months. In the event that our revenue plan does not meet our expectations, we may eliminate or curtail expenditures to mitigate the impact on our working capital. Our future capital requirements will depend on many factors, including our rate of revenue growth, the expansion of our marketing and sales activities, the timing and extent of spending to support product development efforts, the timing of introductions of new products and enhancements to existing products, the acquisition of new capabilities or technologies, and the continuing market acceptance of our products and services. Moreover, to the extent that existing cash, cash equivalents, cash from operations, and cash from short-term borrowing are insufficient to fund our future activities, we may need to raise additional funds through public or private equity or debt financing. Although we are currently not a party to any agreement or letter of intent with respect to potential investments in, or acquisitions of, businesses, services or technologies, we may enter into these types of arrangements in the future, which could also require us to seek additional equity or debt financing. Additional funds may not be available on terms favorable to us or at all.

Contractual Obligations

We generally do not enter into binding purchase commitments. Our principal commitments consist of obligations under our working capital line of credit, leases for office space and minimum contractual obligations for services. The following table describes our commitments to settle contractual obligations in cash as of December 30, 2006:

	Payments Due by Period
	Less Than		1 to 3		3 to 5		More Than
	1 Year		Years		Years		5 Years		Total
	(In thousands)
Operating leases	$	1,909	$	1,726	$	75	$	—	$	3,710
Minimum contractual payments		—		1,750		1,750		—		3,500
Total	$	1,909	$	3,476	$	1,825	$	—	$	7,210

On February 22, 2007, we entered into a lease agreement for our new corporate headquarters in Bedford, Massachusetts to which we expect to relocate on or about May 1, 2008.

Off-Balance Sheet Arrangements

As of December 30, 2006, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

Recently Issued Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, Fair Value Measurements which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This statement does not require any new fair value measurements; rather, it applies under other accounting pronouncements that require or permit fair value measurements. The provisions of SFAS No. 157 are effective for fiscal years beginning after November 15, 2007. We are currently assessing SFAS No. 157 and have not yet determined the impact, if any, that its adoption will have on our result of operations or financial condition.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”). SAB 108 provides guidance on how prior year misstatements should be taken into consideration when quantifying misstatements in current year financial statements for purposes of determining whether the current year’s financial statements are materially misstated. SAB 108 is effective for fiscal years ending on or after November 15, 2006. The adoption of SAB 108 did not have any impact on our results of operations or financial condition.

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In June 2006, FASB issued FASB Interpretation No. (“FIN”) 48, Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 will be effective for fiscal years beginning after December 15, 2006. We are continuing to evaluate the impact that the adoption of FIN 48 will have on our results of operations or financial condition. We do not expect the adoption to have a material impact on our results of operations or financial condition.

In May 2005, FASB issued SFAS No. 154, Accounting Changes and Error Corrections, which replaces APB No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements — An Amendment of APB Opinion No. 28. SFAS No. 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application, or the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We adopted SFAS No. 154 effective January 1, 2006 and the adoption did not have an effect on our consolidated results of operations and financial condition.

In November 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of Accounting Research Bulletin (“ARB”) No. 43, Chapter 4, Inventory Pricing. SFAS No. 151 amends previous guidance regarding treatment of abnormal amounts of idle facility expense, freight, handling costs, and spoilage. SFAS No. 151 requires that those items be recognized as current period charges regardless of whether they meet the criterion of “so abnormal” which was the criterion specified in ARB No. 43. In addition, SFAS No. 151 requires that allocation of fixed production overheads to the cost of the production be based on normal capacity of the production facilities. We adopted SFAS No. 151 effective January 1, 2006 and the adoption did not have an effect on our consolidated results of operations and financial condition.

From time to time, new accounting pronouncements are issued by FASB that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s consolidated financial statements upon adoption.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Exchange Risk

Nearly all of our revenue is derived from transactions denominated in U.S. dollars, even though we maintain sales and business operations in foreign countries. As such, we have exposure to adverse changes in exchange rates associated with operating expenses of our foreign operations, but we believe this exposure to be immaterial.

Interest Rate Sensitivity

We had unrestricted cash and cash equivalents of $5.6 million and short term investments of $64.8 million at December 30, 2006. The unrestricted cash and cash equivalents are held for working capital purposes. We do not enter into investments for trading or speculative purposes. Some of the securities in which we invest, however, may be subject to market risk. This means that a change in prevailing interest rates may cause the principal amount of the investment to fluctuate. To minimize this risk in the future, we intend to maintain our portfolio of cash equivalents and short-term investments in a variety of securities, including auction rate securities, commercial paper, money market funds, debt securities and certificates of deposit. Due to the short-term nature of these investments, we believe that we do not have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. As of December 30, 2006, all of our cash equivalents were held in money market accounts and our short-term investments were comprised of auction rate securities.

Our exposure to market risk also relates to the increase or decrease in the amount of interest expense we must pay on our outstanding debt instruments, primarily certain borrowings under our bank line of credit. The advances under this line of credit bear a variable rate of interest determined as a function of the prime rate or the published LIBOR rate at the time of the borrowing. At December 30, 2006, there were no amounts outstanding under our working capital line of credit.

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ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

iROBOT CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm		55
Consolidated Balance Sheets at December 30, 2006 and December 31, 2005		57
Consolidated Statements of Operations for the Years ended December 30, 2006, December 31, 2005 and 2004		58
Consolidated Statements of Stockholders’ Equity (Deficit) for the Years ended December 30, 2006, December 31, 2005 and 2004		59
Consolidated Statements of Cash Flows for the Years ended December 30, 2006, December 31, 2005 and 2004		60
Notes to Consolidated Financial Statements		61

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

iRobot Corporation:

We have completed an integrated audit of iRobot Corporation’s 2006 consolidated financial statements and of its internal control over financial reporting as of December 30, 2006 and audits of its 2005 and 2004 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of iRobot Corporation and its subsidiaries at December 30, 2006 and December 31, 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 30, 2006 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for share-based compensation in 2006.

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of December 30, 2006 based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 30, 2006, based on criteria established in Internal Control — Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,

55

accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/  PricewaterhouseCoopers LLP

Boston, Massachusetts

February 28, 2007

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iROBOT CORPORATION

CONSOLIDATED BALANCE SHEETS

	December 30,			December 31,
	2006			2005
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	5,583		$	76,064
Short term investments		64,800			—
Accounts receivable, net of allowance of $163 and $117 at December 30, 2006 and December 31, 2005, respectively		28,510			23,045
Unbilled revenue		1,961			1,424
Inventory, net		20,890			15,903
Other current assets		2,863			1,533
Total current assets		124,607			117,969
Property and equipment, net		10,701			6,966
Total assets	$	135,308		$	124,935
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	27,685		$	23,721
Accrued expenses		7,020			3,484
Accrued compensation		5,227			4,002
Provision for contract settlements		—			5,154
Deferred revenue		457			1,018
Total current liabilities		40,389			37,379
Commitments and contingencies (Note 12):
Redeemable convertible preferred stock, 5,000 shares authorized and zero outstanding at December 30, 2006 and December 31, 2005		—			—
Common stock, $0.01 par value, 100,000 and 100,000 shares authorized and 23,791 and 23,406 issued and outstanding at December 30, 2006 and December 31, 2005, respectively		238			234
Additional paid-in capital		117,718			114,808
Deferred compensation		(2,326	)		(3,210	)
Accumulated deficit		(20,711	)		(24,276	)
Total stockholders’ equity		94,919			87,556
Total liabilities, redeemable convertible preferred stock and stockholders’ equity	$	135,308		$	124,935

See accompanying Notes to Consolidated Financial Statements

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iROBOT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

	Fiscal Year Ended
	December 30,		December 31,		December 31,
	2006		2005		2004
	(In thousands, except per share amounts)
Revenue:
Product revenue	$	167,687	$	124,616	$	82,678
Contract revenue		21,268		17,352		12,365
Total revenue		188,955		141,968		95,043
Cost of revenue:
Cost of product revenue(1)		103,651		81,855		59,321
Cost of contract revenue(1)		15,569		12,534		8,371
Total cost of revenue		119,220		94,389		67,692
Gross profit		69,735		47,579		27,351
Operating expenses:
Research and development(1)		17,025		11,601		5,504
Selling and marketing(1)		33,969		21,796		14,106
General and administrative(1)		18,703		12,072		7,298
Total operating expenses		69,697		45,469		26,908
Operating income		38		2,110		443
Other income (expense), net		3,831		676		(80	)
Income before income taxes		3,869		2,786		363
Income tax expense		304		176		144
Net income	$	3,565	$	2,610	$	219
Net income attributable to common stockholders	$	3,565	$	1,553	$	118
Net income per share
Basic	$	0.15	$	0.13	$	0.01
Diluted	$	0.14	$	0.11	$	0.01
Number of shares used in per share calculations
Basic		23,516		12,007		9,660
Diluted		25,601		14,331		19,183

(1) Stock-based compensation recorded in 2006, 2005 and 2004 breaks down by expense classification as follows:

	Fiscal Year Ended
	December 30,		December 31,		December 31,
	2006		2005		2004
	(In thousands)
Cost of product revenue	$	326	$	33	$	—
Cost of contract revenue		267		58		—
Research and development		376		95		—
Selling and marketing		389		32		—
General and administrative		1,211		380		283

See accompanying Notes to Consolidated Financial Statements

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iROBOT CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

								Note
					Additional			Receivable
	Common Stock				Paid-In			from			Deferred			Accumulated
	Shares		Value		Capital			Stockholder			Compensation			Deficit			Total
	(In thousands, except share amounts)
Balance at December 31, 2003		9,360,750		93		1,696			(43	)		—			(27,105	)		(25,359	)
Issuance of restricted stock		397,584		4		967						(670	)					301
Amortization of deferred compensation relating to restricted stock												283						283
Issuance of common stock for exercise of stock options		371,123		4		262												266
Net income															219			219
Balance at December 31, 2004		10,129,457		101		2,925			(43	)		(387	)		(26,886	)		(24,290	)
Amortization of deferred compensation relating to restricted stock												200						200
Issuance of common stock for exercise of stock options		442,204		4		633												637
Repayment of note receivable from stockholder									43									43
Conversion of preferred to common stock		9,557,246		96		37,411												37,507
Proceeds of initial public offering, net of costs		3,260,870		33		70,374												70,407
Conversion of warrants to common stock		16,155																—
Deferred compensation relating to issuance of stock options						3,421						(3,421	)					—
Tax benefit of disqualifying dispositions						44												44
Amortization of deferred compensation relating to stock options												398						398
Net income															2,610			2,610
Balance at December 31, 2005		23,405,932		234		114,808			—			(3,210	)		(24,276	)		87,556
Amortization of deferred compensation relating to restricted stock												101						101
Issuance of common stock for exercise of stock options		384,827		4		1,045												1,049
Tax benefit of disqualifying dispositions						180												180
Amortization of deferred compensation relating to stock options						1,768						700						2,468
Reversal of deferred compensation related to cancelled stock options						(83	)					83						—
Net income															3,565			3,565
Balance at December 30, 2006		23,790,759	$	238	$	117,718		$	—		$	(2,326	)	$	(20,711	)	$	94,919

See accompanying Notes to Consolidated Financial Statements

59

iROBOT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Fiscal Year Ended
	December 30,			December 31,			December 31,
	2006			2005			2004
	(In thousands)
Cash flows from operating activities:
Net income	$	3,565		$	2,610		$	219
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation and amortization		3,743			2,078			1,314
Loss on disposal of fixed assets		7			—			1
Amortization of deferred compensation		2,569			598			283
Changes in working capital — (use) source
Accounts receivable		(5,465	)		(9,786	)		(5,122	)
Unbilled revenue		(537	)		(650	)		369
Inventory		(4,987	)		(8,235	)		3,751
Other assets		(1,330	)		(1,051	)		420
Accounts payable		3,964			4,140			12,800
Accrued expenses		3,536			842			(159	)
Accrued compensation		1,225			851			1,118
Provision for contract settlement		(5,154	)		(37	)		(143	)
Deferred revenue		(561	)		(270	)		(5,913	)
Change in long-term liabilities		—			(67	)		(67	)
Net cash provided by (used in) operating activities		575			(8,977	)		8,871
Cash flows from investing activities:
Purchase of property and equipment		(7,485	)		(5,531	)		(3,222	)
Purchase of investments		(174,100	)		—			—
Sales of investments		109,300			—			—
Net cash used in investing activities		(72,285	)		(5,531	)		(3,222	)
Cash flows from financing activities:
Borrowings under revolving line of credit, net		—			—			(1,339	)
Repayment of note receivable from stockholder		—			43			—
Proceeds from stock option exercises		1,049			637			266
Proceeds from initial public offering, net offering costs		—			70,407			—
Proceeds from issuance of restricted stock		—			—			301
Tax benefit of disqualifying dispositions		180			44			—
Net proceeds from sale of preferred stock		—			—			9,944
Net cash provided by financing activities		1,229			71,131			9,172
Net increase (decrease) in cash and cash equivalents		(70,481	)		56,623			14,821
Cash and cash equivalents, at beginning of period		76,064			19,441			4,620
Cash and cash equivalents, at end of period	$	5,583		$	76,064		$	19,441
Supplemental disclosure of cash flow information
Cash paid for interest	$	15		$	13		$	142
Cash paid for income taxes	$	155			11			124

Supplemental disclosure of noncash investing and financing activities (in thousands)

During 2006, 2005 and 2004, the Company transferred $1,260, $327 and $186, respectively, of inventory to fixed assets.

On November 15, 2005, in connection with the Company’s initial public offering of common stock, the Company converted 9,557 shares of outstanding preferred stock into an equivalent number of shares of common stock.

See accompanying Notes to Consolidated Financial Statements

60

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   Nature of the Business

iRobot Corporation, formerly IS Robotics, Inc., was incorporated in 1990 to develop robotics and artificial intelligence technologies and apply these technologies in producing and marketing robots. The majority of the Company’s revenue is generated from product sales, and government and industrial research and development contracts.

The Company is subject to risks common to companies in high-tech industries including, but not limited to, uncertainty of progress in developing technologies, new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, uncertainty of market acceptance of products and the need to obtain financing, if necessary.

2.   Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include those of iRobot and our subsidiaries, after elimination of all intercompany accounts and transactions. iRobot has prepared the accompanying consolidated financial statements in conformity with accounting principles generally accepted in the United States of America.

Use of Estimates

The preparation of these financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates these estimates and judgments, including those related to revenue recognition, sales returns, bad debts, warranty claims, inventory reserves, valuation of investments and income taxes. The Company bases these estimates on historical and anticipated results and trends and on various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results may differ from the Company’s estimates.

Reclassification

Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation.

Fiscal Year-End

Beginning in fiscal 2005, the Company operates and reports using a 52-53 week fiscal year ending on the Saturday closest to December 31. Accordingly, the Company’s fiscal quarters will end on the Saturday that falls closest to the last day of the third month of each quarter.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original or remaining maturity of three months or less at the time of purchase to be cash equivalents. The Company invests its excess cash primarily in money market funds of major financial institutions. Accordingly, its investments are subject to minimal credit and market risk. At December 30, 2006 and December 31, 2005, cash equivalents were comprised of money market funds totaling $3.8 million and $73.6 million, respectively. These cash equivalents are carried at cost, which approximates fair value.

61

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Short Term Investments

The Company’s investments are classified as available-for-sale and are recorded at fair value with any unrealized gain or loss recorded as an element of stockholders’ equity. The fair value of investments is determined based on quoted market prices at the reporting date for those instruments. As of December 30, 2006, investments consisted of:

			Fair
	Cost		Market Value
	(In thousands)
Auction Rate Debt Securities	$	64,800	$	64,800

The Company did not hold any investments as of December 31, 2005.

As of December 30, 2006, the Company’s investments had maturity dates ranging from July 2018 to August 2045. Despite the long-term contractual maturities of the auction rate securities held at December 30, 2006, all of these securities are available for immediate sale and it is the Company’s intention to liquidate these securities within one year.

Revenue Recognition

The Company derives its revenue from product sales, government research and development contracts and commercial research and development contracts. The Company sells products directly to customers and indirectly through resellers and distributors. The Company recognizes revenue from sales of consumer robots under the terms of the customer agreement upon transfer of title to the customer, net of estimated returns, provided that collection is determined to be probable and no significant obligations remain. Sales to resellers are subject to agreements allowing for limited rights of return for defective products only, rebates and price protection. The Company has typically not taken product returns except for defective products. Accordingly, the Company reduces revenue for its estimates of liabilities for these rights at the time the related sale is recorded. The Company makes an estimate of sales returns for products sold by resellers directly or through its distributors based on historical returns experience. The Company has aggregated and analyzed historical returns from resellers and end users which form the basis of its estimate of future sales returns by resellers or end users. In accordance with Statement of Financial Accounting Standards No. 48, “Revenue Recognition When Right of Return Exists,” the provision for these estimated returns is recorded as a reduction of revenue at the time that the related revenue is recorded. If actual returns differ significantly from its estimates, such differences could have a material impact on the Company’s results of operations for the period in which the returns become known. The estimates for returns are adjusted periodically based upon historical rates of returns. The estimates and reserve for rebates and price protection are based on specific programs, expected usage and historical experience. Actual results could differ from these estimates. Through fiscal 2003, the Company recognized revenue on sales to certain distributors and retail customers upon their sale to the end-user when an allowance for future returns from the end-user could not be reasonably estimated. In fiscal 2004, the Company recognized revenue on all sales to distributors and retail customers upon delivery of product and established a related allowance for future returns based upon historical experience. As a result of this change, the Company recorded revenue of approximately $5.7 million in fiscal 2004 for products shipped prior to January 1, 2004.

Under cost-plus-fixed-fee (CPFF) type contracts, the Company recognizes revenue based on costs incurred plus a pro rata portion of the total fixed fee. Revenue on firm fixed price (FFP) contracts is recognized using the percentage-of-completion method. Costs and estimated gross profits on contracts are recorded as revenue as work is performed based on the percentage that incurred costs bear to estimated total costs utilizing the most recent estimates of costs and funding. Changes in job performance, job conditions, and estimated profitability, including those arising from final contract settlements, may result in revisions to costs and income and are recognized in the period in which the revisions are determined. Since many contracts extend over a long period of time, revisions in cost and funding estimates during the progress of work have the effect of adjusting earnings applicable to past

62

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

performance in the current period. When the current contract estimate indicates a loss, provision is made for the total anticipated loss in the current period. Revenue earned in excess of billings, if any, is recorded as unbilled revenue. Billings in excess of revenue earned, if any, are recorded as deferred revenue.

Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts to provide for the estimated amount of accounts receivable that may not be collected. The allowance is based upon an assessment of customer creditworthiness, historical payment experience and the age of outstanding receivables.

Activity related to the allowance for doubtful accounts was as follows:

	Fiscal Year Ended
	December 30,			December 31,			December 31,
	2006			2005			2004
	(In thousands)
Balance at beginning of period	$	117		$	50		$	248
Provision		121			83			(65	)
Deduction(*)		(75	)		(16	)		(133	)
Balance at end of period	$	163		$	117		$	50

(*) Deductions related to allowance for doubtful accounts represent amounts written off against the allowance, less recoveries.

Inventory

Inventory is stated at the lower of cost or market with cost being determined using the first-in, first-out (FIFO) method. The Company maintains a reserve for inventory items to provide for an estimated amount of excess or obsolete inventory.

Activity related to the inventory reserve was as follows:

	Fiscal Year Ended
	December 30,			December 31,			December 31,
	2006			2005			2004
	(In thousands)
Balance at beginning of period	$	485		$	1,903		$	2,369
Provision		267			251			—
Deduction(*)		(198	)		(1,669	)		(466	)
Balance at end of period	$	554		$	485		$	1,903

(*) Deductions related to inventory reserve accounts represent amounts written off against the reserve.

63

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Property and Equipment

Property and equipment are recorded at cost and consist primarily of computer equipment, business applications software and machinery. Depreciation is computed using the straight-line method over the estimated useful lives as follows:

	Estimated
	Useful Life
Computer and research equipment	3 years
Furniture	5
Machinery	2-5
Tooling	2
Business applications software	5
Capital leases and leasehold improvements	Term of lease

Expenditures for additions, renewals and betterments of plant and equipment are capitalized. Expenditures for repairs and maintenance are charged to expense as incurred. As assets are retired or sold, the related cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to operations.

Impairment of Long-Lived Assets

The Company periodically evaluates the recoverability of long-lived assets whenever events and changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. When indicators of impairment are present, the carrying values of the assets are evaluated in relation to the operating performance and future undiscounted cash flows of the underlying business. The net book value of the underlying asset is adjusted to fair value if the sum of the expected discounted cash flows is less than book value. Fair values are based on estimates of market prices and assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates, reflecting varying degrees of perceived risk. There were no impairment charges recorded during any of the periods presented.

Research and Development

Costs incurred in the research and development of the Company’s products are expensed as incurred.

Internal Use Software

The Company capitalizes costs associated with the development and implementation of software obtained for internal use in accordance with American Institute of Certified Public Accountants Statement of Position 98-1, Accounting for Costs of Computer Software Developed or Obtained for Internal Use (“SOP 98-1”). At December 30, 2006 and December 31, 2005, the Company had $3.6 million and $1.3 million respectively, of internal costs related to enterprise-wide software included in fixed assets. Capitalized costs are being amortized over the assets’ estimated useful lives. The Company has recorded $0.6 million, $0.2 million and $0.2 million of amortization expense for the years ended December 30, 2006, December 31, 2005 and 2004, respectively.

Concentration of Credit Risk and Significant Customers

The Company maintains its cash in bank deposit accounts at high quality financial institutions. The individual balances, at times, may exceed federally insured limits. At December 30, 2006 and December 31, 2005, the Company exceeded the insured limit by $6.1 million and $74.3 million, respectively.

Financial instruments which potentially expose the Company to concentrations of credit risk consist of accounts receivable. Management believes its credit policies are prudent and reflect normal industry terms and

64

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

business risk. At December 30, 2006 and December 31, 2005, 12% and 24%, respectively, of the Company’s accounts receivable were due from the federal government. At December 30, 2006, two additional customers each accounted for 17% of the Company’s account receivable balance. At December 31, 2005, two additional customers each accounted for 12% of the Company’s accounts receivable balance. For the years ended December 30, 2006, 2005, and 2004 revenue from one customer, the federal government, represented 34%, 28% and 20% of total revenue, respectively.

Stock-Based Compensation

Effective January 1, 2006, the Company adopted the provisions of SFAS No. 123(R), Share-Based Payment, which establishes accounting for equity instruments exchanged for employee services. Under the provisions of SFAS No. 123(R), share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity grants). Prior to January 1, 2006, the Company accounted for share-based compensation to employees in accordance with Accounting Principles Board Opinion (“APB”) No. 25, Accounting for Stock Issued to Employees, and related interpretations. The Company also followed the disclosure requirements of SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure. The Company elected to adopt the modified prospective transition method as provided by SFAS No. 123(R) and, accordingly financial statement amounts for the prior periods presented in this Annual Report on Form 10-K have not been restated to reflect the fair value method of expensing share-based compensation.

Under SFAS No. 123(R), entities that become public companies after June 15, 2005 and used the minimum value method of measuring equity share options and similar instruments as a non-public company for either recognition or pro forma disclosure purposes under SFAS No. 123 must apply the provisions of SFAS No. 123(R) prospectively to new and/or modified awards after the adoption of SFAS No. 123(R). Companies should continue to account for any portion of awards outstanding at the date of initial application of SFAS No. 123(R) using the accounting principles originally applied to those awards — either the minimum value method under SFAS No. 123 or the provisions of APB No. 25 and its related interpretive guidance. Accordingly, the Company did not record any cumulative effect of a change in accounting principle associated with the adoption of SFAS No. 123(R).

The Company has historically granted stock options at exercise prices that equaled the fair value of its common stock as estimated by its board of directors, with input from management, as of the date of grant. Because there was no public market for the Company’s common stock prior to its initial public offering on November 9, 2005, its board of directors determined the fair value of its common stock by considering a number of objective and subjective factors, including the Company’s operating and financial performance and corporate milestones, the prices at which it sold shares of convertible preferred stock, the superior rights and preferences of securities senior to its common stock at the time of each grant, and the risk and non-liquid nature of its common stock. The Company has not historically obtained contemporaneous valuations by an unrelated valuation specialist because, at the time of the issuances of stock options, the Company believed its estimates of the fair value of its common stock to be reasonable based on the foregoing factors.

In connection with the initial public offering, the Company retrospectively reassessed the fair value of its common stock for options granted during the period from July 1, 2004 to November 8, 2005. As a result of this reassessment, the Company determined that the estimated fair market value used in granting options for the period from July 1, 2004 to December 31, 2004 was reasonable and appropriate. Accordingly, no deferred compensation was recorded for these grants. For the period from January 1, 2005 through November 8, 2005, the Company determined that the estimated fair value of its common stock increased from $4.60 to $21.60 due to a number of factors such as, among other things, the likelihood of an initial public offering, its improving operating results and the achievement of other corporate milestones in 2005. Based upon this determination, the Company recorded deferred compensation of approximately $3.4 million in the twelve months ended December 31, 2005 under APB

65

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

No. 25 relating to stock options with exercise prices below the retrospectively reassessed fair market value on the date of grant. The Company recognized associated stock-based compensation expense of $0.7 million and $0.4 million for the fiscal years ended December 30, 2006 and December 31, 2005, respectively. As of December 30, 2006, the deferred stock-based compensation balance associated with these grants was $2.3 million. The Company will continue to recognize the associated stock-based compensation expense, in accordance with the provisions of APB No. 25, related to these shares of $0.7 million, $0.7 million, $0.7 million and $0.2 million for 2007, 2008, 2009 and 2010, respectively.

Under the provisions of SFAS No. 123(R), the Company recognized $1.8 million of stock-based compensation expense during the fiscal year ended December 30, 2006 for stock options granted subsequent to the initial public offering. The unamortized fair value as of December 30, 2006 associated with these grants was $9.8 million with a weighted average remaining recognition period of 1.83 years.

The fair value of each option grant for the fiscal year ended December 30, 2006 was computed on the grant date using the Black-Scholes option-pricing model with the following assumptions:

	Fiscal Year Ended
	December 30, 2006
Risk-free interest rate		4.32% — 5.11	%
Expected dividend yield		—
Expected life		3.5 — 6.5 years
Expected volatility		65	%

The risk-free interest rate is derived from the average U.S. Treasury constant maturity rate, which approximates the rate in effect at the time of grant, commensurate with the expected life of the instrument. The dividend yield is zero based upon the fact the Company has never paid and has no present intention to pay cash dividends. The expected term calculation is based upon the simplified method provided under SEC Staff Accounting Bulletin (“SAB”) No. 107. Under SAB No. 107, the expected term is developed by averaging the contractual term of the stock option grants (7 or 10 years) with the associated vesting term (typically 4 to 5 years). Given the Company’s initial public offering in November 2005 and the resulting short history as a public company, the Company could not rely solely on company specific historical data for purposes of establishing expected volatility. Consequently, the Company performed an analysis of several peer companies with similar expected option lives to develop an expected volatility assumption.

Based upon the above assumptions, the weighted average fair value of each stock option granted for the fiscal year ended December 30, 2006 was $12.771.

The Company has assumed a forfeiture rate of 5% for all stock options granted subsequent to the initial public offering with the exception of those issued to executives and directors for which a zero forfeiture rate has been assumed. In the future, the Company will record incremental stock-based compensation expense if the actual forfeiture rates are lower than estimated and will record a recovery of prior stock-based compensation expense if the actual forfeitures are higher than estimated.

66

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company had previously adopted the provisions of SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure through disclosure only. The following table illustrates the effects on net income and earnings per share for the fiscal years ended December 31, 2005 and 2004 as if the Company had applied the fair value recognition provisions of SFAS No. 123 to share-based employee awards.

	Fiscal Year Ended
	December 31,			December 31,
	2005			2004
	(In thousands except
	per share data)
Net income as reported	$	2,610		$	219
Add back:
Stock-based employee compensation expense reported in net income		598			283
Less: Stock-based employee compensation expense determined under fair-value method for all awards		(808	)		(394	)
Pro forma net income	$	2,400		$	108
Pro forma net income attributable to common stockholders	$	1,428		$	58
Net income per share, as reported
Basic	$	0.13		$	0.01
Diluted	$	0.11		$	0.01
Pro forma net income per share
Basic	$	0.12		$	0.01
Diluted	$	0.10		$	0.00
Number of shares used in per share calculations
Basic		12,007			9,660
Diluted		14,331			19,183

The fair value of each option grant for the fiscal years 2005 and 2004 was estimated on the grant date using the Black-Scholes option pricing model with the following assumptions:

	Fiscal Year Ended
	December 31,			December 31,
	2005			2004
Risk-free interest rate		4.1	%		3.4	%
Expected dividend yield		—			—
Expected life		5 years			5 years
Expected volatility		65	%		0	%

The weighted average fair value of options granted during 2005 prior to and subsequent to the initial public offering date of November 9, 2005 was calculated using 0% and 65% volatility, respectively. Until the Company went public the use of the minimum value methodology was acceptable under SFAS No. 123.

Based upon the above assumptions, the weighted average fair value of each stock option granted for fiscal years 2005 and 2004 was $4.402 and $0.416, respectively.

67

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The table below summarizes stock option plan activity:

						Weighted Average		Aggregate
	Number of			Weighted Average		Remaining		Intrinsic
	Shares			Exercise Price		Contractual Term		Value(1)
Outstanding at December 31, 2004		2,605,000		$	1.770
Granted		1,172,475			10.811
Exercised		(442,204	)		1.430
Canceled		(63,787	)		4.540
Outstanding at December 31, 2005		3,271,484		$	1.278
Granted		700,245			21.829
Exercised		(384,827	)		2.726
Canceled		(87,192	)		16.189
Outstanding at December 30, 2006		3,499,710		$	8.340		6.61 years	$	37.9 million
Exercisable as of December 30, 2006		1,209,115		$	2.988		4.88 years	$	18.5 million
Weighted average fair value of options granted during the fiscal year ended December 30, 2006				$	12.771
Options available for future grant at December 30, 2006		690,629

(1) The aggregate intrinsic value on the table was calculated based upon the positive difference between the closing market value of the Company’s stock on December 30, 2006 of $18.06 and the exercise price of the underlying option.

During fiscal years 2006 and 2005, the total intrinsic value of stock options exercised was $7.0 million and $5.7 million, respectively. No amounts relating to stock-based compensation have been capitalized.

The table below summarizes activity relating to restricted stock awards:

	Number of			Weighted Average
	Shares Underlying			Grant Date Fair
	Restricted Stock			Value
Outstanding at December 31, 2004		297,724		$	1.804
Granted		—			—
Vested		(124,363	)	$	1.614
Forfeited		—			—
Outstanding at December 31, 2005		173,361		$	1.941
Granted		—			—
Vested		(124,362	)	$	1.614
Forfeited		—			—
Outstanding at December 30, 2006		48,999		$	2.770

68

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of December 30, 2006, the unamortized fair value of all restricted stock awards was $85,000. The Company expects to recognize associated stock-based compensation expense of $68,000 in 2007 and $17,000 in 2008.

The following table summarizes information about stock options outstanding at December 30, 2006:

			Options Outstanding
			Weighted Average					Options Exercisable
	Number		Remaining			Weighted Average		Number		Weighted Average
Range of Exercise Prices	Outstanding		Contractual Life			Exercise Price		Exercisable		Exercise Price
$0.0002 - $ 0.240		383,930		0.63	years	$	0.023		383,930	$	0.023
0.550 -  1.870		266,685		5.07			1.156		207,858		1.327
2.330 -  2.330		599,484		6.96			2.330		278,791		2.330
2.780 -  2.780		490,396		7.57			2.780		151,125		2.780
4.600 -  4.600		145,655		8.05			4.600		29,930		4.600
4.960 -  4.960		403,550		8.16			4.960		65,700		4.960
5.660 - 16.460		492,665		7.64			13.453		29,485		12.228
17.400 - 22.200		352,850		7.52			20.572		21,796		18.733
24.000 - 33.940		352,995		7.58			25.925		40,500		25.348
34.980 - 34.980		11,500		9.07			34.980		—		—
$0.0002 - $34.980		3,499,710		6.61		$	8.340		1,209,115	$	2.988

Advertising Expense

The Company expenses advertising costs as they are incurred. During the years ended December 30, 2006, December 31, 2005 and 2004, advertising expense totaled $14.3 million, $10.5 million and $7.8 million, respectively.

Income Taxes

Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Valuation allowances are provided if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company monitors the realization of its deferred tax assets based on changes in circumstances, for example recurring periods of income for tax purposes following historical periods of cumulative losses or changes in tax laws or regulations. The Company’s income tax provisions and its assessment of the realizability of its deferred tax assets involve significant judgments and estimates. If the Company continued to generate taxable income through profitable operations in future years it may be required to recognize these deferred tax assets through the reduction of the valuation allowance which would result in a material benefit to its results of operations in the period in which the benefit is determined, excluding the recognition of the portion of the valuation allowance which relates to stock compensation.

Comprehensive Income (Loss)

SFAS No. 130, Reporting Comprehensive Income, establishes standards for the reporting and display of comprehensive income (loss) and its components in financial statements. The Company’s comprehensive income (loss) is equal to the Company’s net income (loss) for all periods presented.

69

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, Fair Value Measurements which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This statement does not require any new fair value measurements; rather, it applies under other accounting pronouncements that require or permit fair value measurements. The provisions of SFAS No. 157 are effective for fiscal years beginning after November 15, 2007. The Company is currently assessing SFAS No. 157 and has not yet determined the impact, if any, that its adoption will have on its result of operations or financial condition.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”). SAB 108 provides guidance on how prior year misstatements should be taken into consideration when quantifying misstatements in current year financial statements for purposes of determining whether the current year’s financial statements are materially misstated. SAB 108 is effective for fiscal years ending on or after November 15, 2006. The adoption of SAB 108 did not have any impact on the Company’s results of operations or financial condition.

In June 2006, FASB issued FASB Interpretation No. (“FIN”) 48, Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 will be effective for fiscal years beginning after December 15, 2006. The Company is continuing to evaluate the impact that the adoption of FIN 48 will have on its results of operations or financial condition. The Company does not expect the adoption to have a material impact on its results of operations or financial condition.

In May 2005, FASB issued SFAS No. 154, Accounting Changes and Error Corrections, which replaces APB No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements — An Amendment of APB Opinion No. 28. SFAS No. 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application, or the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company adopted SFAS No. 154 effective January 1, 2006 and the adoption did not have an effect on its consolidated results of operations and financial condition.

In November 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of Accounting Research Bulletin (“ARB”) No. 43, Chapter 4, Inventory Pricing. SFAS No. 151 amends previous guidance regarding treatment of abnormal amounts of idle facility expense, freight, handling costs, and spoilage. SFAS No. 151 requires that those items be recognized as current period charges regardless of whether they meet the criterion of “so abnormal” which was the criterion specified in ARB No. 43. In addition, SFAS No. 151 requires that allocation of fixed production overheads to the cost of the production be based on normal capacity of the production facilities. The Company adopted SFAS No. 151 effective January 1, 2006 and the adoption did not have an effect on its consolidated results of operations and financial condition.

From time to time, new accounting pronouncements are issued by FASB that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s consolidated financial statements upon adoption.

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iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

3.   Inventory

Inventory consists of the following at:

	December 30,		December 31,
	2006		2005
	(In thousands)
Raw materials	$	1,248	$	990
Work in process		311		15
Finished goods		19,331		14,898
	$	20,890	$	15,903

4.   Property and Equipment

Property and equipment consists of the following at:

	December 30,		December 31,
	2006		2005
	(In thousands)
Computer and equipment	$	6,392	$	5,333
Furniture		536		442
Machinery		1,257		892
Tooling		4,445		3,485
Leasehold improvements		1,331		777
Software purchased for internal use		3,563		1,326
Leased equipment		—		145
		17,524		12,400
Less: accumulated depreciation and amortization		6,823		5,434
	$	10,701	$	6,966

Depreciation and amortization expense for the years ended December 30, 2006, December 31, 2005 and 2004 was $3.7 million, $2.1 million, and $1.3 million, respectively. Accumulated amortization on leased equipment was $0.1 million at December 31, 2005.

5.   Accrued Expenses

Accrued expenses consist of the following at:

	December 30,		December 31,
	2006		2005
	(In thousands)
Accrued warranty	$	2,462	$	2,031
Accrued direct fulfillment costs		2,123		—
Accrued rent		284		323
Accrued sales commissions		502		468
Accrued accounting fees		332		255
Accrued income taxes		168		174
Accrued other		1,149		233
	$	7,020	$	3,484

71

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

6.   Revolving Line of Credit

In April 2004, the Company entered into an amendment to the Credit Agreement which further reduced the tangible net worth (deficit) requirement to ($2.0 million), increased the amount of the facility to $6.3 million, decreased the applicable interest rate to the bank’s prime rate plus 1.00% and extended the maturity date to March 2006. On May 24, 2005, in connection with the Company obtaining a new line of credit, the Credit Agreement was terminated.

On May 26, 2005, the Company obtained a working capital line of credit with a bank under which the Company can borrow up to $20.0 million, including a $2.0 million sub-limit for equipment financing. Interest accrues at a variable rate based on prime or published LIBOR rates. The line expires on May 26, 2007 at which time all advances will be immediately due and payable. Borrowings are secured by substantially all of the Company’s assets other than its intellectual property. The Company is required to maintain quarterly tangible net worth thresholds based on its stockholders’ equity under the credit facility that vary by quarter based on anticipated seasonality in the business. These operating and financial covenants may restrict the Company’s ability to finance its operations, engage in business activities or expand or pursue its business strategies. At December 30, 2006, the Company was in compliance with all covenants under the credit facility. To the extent the Company is unable to satisfy these covenants in the future, the Company will need to obtain waivers to avoid being in default of the terms of this credit facility. In addition to a covenant default, other events of default under our credit facility include the filing or entry of a tax lien, attachment of funds or material judgment against the Company, or other uninsured loss of its material assets. If a default occurs, the bank may require the Company to repay all amounts then outstanding. As of December 30, 2006, the Company had no amounts outstanding and $20.0 million was available under the working capital line of credit.

7.   Common Stock

Common stockholders are entitled to one vote for each share held and to receive dividends if and when declared by the Board of Directors and subject to and qualified by the rights of holders of the preferred stock. Upon dissolution or liquidation of the Company, holders of common stock will be entitled to receive all available assets subject to any preferential rights of any then outstanding preferred stock.

8.   Note Receivable from Stockholder

In May 1999, the Company issued a note receivable to a consultant for the purchase of 200,000 common shares at $0.24 per share. The note accrued interest on June 30 and December 31 at 8% per annum. Interest was payable semiannually in arrears on June 30 and December 31 of each year, and the principal was payable in full on the earlier of May 15, 2005, or immediately prior to an initial public offering. At December 31, 2004 the remaining note receivable balance was $43,000 and was included as a reduction of stockholders’ equity. This remaining balance was paid in full in 2005.

9.   Stock Option Plan

Under the Company’s 1994 Stock Option Plan (the “1994 Plan”), as amended, 8,785,465 shares of the Company’s common stock were reserved for issuance to directors, officers, employees and consultants of the Company. Options may be designated and granted as either “Incentive Stock Options” or “Nonstatutory” Stock Options. Eligibility for Incentive Stock Options (“ISOs”) is limited to those individuals whose employment status would qualify them for the tax treatment associated with ISOs in accordance with the Internal Revenue Code. The 1994 Plan expired November 16, 2004.

In October 2001, the Company adopted the 2001 Special Stock Option Plan (the “2001 Plan”). Under the 2001 Plan, the Board authorized the issuance of options to purchase 642,310 shares of previously authorized common stock under modified vesting requirements. The 2001 Plan is administered by a Committee of the Board of

72

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Directors. Options granted to employees under the 2001 Plan may be designated as ISOs or Nonstatutory Stock Options. In 2004 and 2003, there were 571,405 and 40,000 options granted, respectively, under the 2001 Plan.

During 2004, the Company issued 25,899 and 371,685 restricted shares of common stock under the 1994 Plan and 2001 Plan, respectively, all of which were outstanding at December 31, 2004. Deferred compensation of $0.7 million was recorded in association with the issuance of these restricted shares, of which $0.1 million, $0.2 million and $0.3 million was expensed in fiscal years, 2006, 2005 and 2004, respectively. The remaining balance of $0.1 million will be expensed in 2007 through 2008. Upon termination of the stockholder’s business relationship with the Company, per the terms of the restricted stock agreements, the Company 1) shall purchase all unvested shares from the stockholder at the price paid for them and 2) may purchase all but not less than all of the stockholder’s vested shares at the greater of i) the price paid for them and ii) the product of the Fair Market Value (as defined in the 2001 Plan) at the time of repurchase and the number of vested shares to be repurchased.

Immediately upon expiration of the 1994 Plan, the Company adopted the 2004 Stock Option and Incentive Plan (the “2004 Plan”). Under the 2004 Plan, 1,189,423 shares of the Company’s common stock were reserved for issuance to directors, officers, employees and consultants of the Company. In addition, stock options returned to the 1994 Plan, in accordance therewith, after November 16, 2004, as a result of the expiration, cancellation or termination, are automatically made available for issuance under the 2004 Plan. The aggregate number of shares that may be issued pursuant to the 2004 Plan shall not exceed 3,695,223 shares. Options may be designated and granted as either “Incentive Stock Options” or “Nonstatutory” Stock Options. Eligibility for ISOs is limited to those individuals whose employment status would qualify them for the tax treatment associated with ISOs in accordance with the Internal Revenue Code.

Effective October 10, 2005, the Company terminated the 2004 Plan and adopted the 2005 Stock Option and Incentive Plan (the “2005 Plan”). Under the 2005 Plan, 1,583,682 shares were reserved for issuance in the form of incentive stock options, non-qualified stock options, stock appreciation rights, deferred stock awards and restricted stock awards. Additionally, the 2005 Plan provides that the number of shares reserved and available for issuance under the plan will automatically increase each January 1, beginning in 2007, by 4.5% of the outstanding number of shares of common stock on the immediately preceding December 31. Stock options returned to the 1994 Plan, 2001 Plan, 2004 Plan and 2005 Plan, as a result of their expiration, cancellation or termination, are automatically made available for issuance under the 2005 Plan. Eligibility for incentive stock options is limited to those individuals whose employment status would qualify them for the tax treatment associated with incentive stock options in accordance with the Internal Revenue Code. As of December 30, 2006, there were 690,629 shares available for future grant under the 2005 Plan.

Options granted under the 1994 Stock Option Plan, the 2001 Plan, the 2004 Plan and the 2005 Plan (the “Plans”) are subject to terms and conditions as determined by the Compensation Committee of the Board of Directors, including vesting periods. Options granted under the Plans are exercisable in full at any time subsequent to vesting, generally vest over periods from 0 to 5 years, and expire upon the earlier of 10 years from the date of grant or 60 or 90 days from employee termination. The exercise price for each ISO grant is determined by the Board of Directors of the Company to be equal to the fair value of the common stock on the date of grant. In reaching this determination at the time of each such grant, the Board considers a broad range of factors, including the illiquid nature of an investment in the Company’s common stock, the Company’s historical financial performance, the Company’s future prospects and the value of preferred stock based on recent financing activities. Subsequent to the Company’s initial public offering, the exercise price of stock options granted is equal to the closing price on the NASDAQ Global Market on the date of grant. The exercise price of nonstatutory options may be set at a price other than the fair market value of the common stock.

Effective January 1, 2006, the Company adopted the provisions of SFAS No. 123(R), in accounting for stock options used subsequent to this date. Prior to January 1, 2006, the Company utilized the provisions of APB No. 25 and related interpretations in accounting for options granted.

73

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

10.   Warrants

Under the terms of the January 30, 2003 Credit Agreement with a bank (Note 6), the Company issued warrants to the bank to purchase 18,000 shares of common stock at an approximate exercise price of $3.74 per share. The warrants were subject to certain adjustments and could be exercised at any time until January 29, 2010. The estimated fair value of the warrants of $22,312 was determined using the Black-Scholes option-pricing model. For this purpose, the Company assumed a risk-free rate of return of 3.12%; an expected life of 2 years; 100% volatility and no dividends. The Company recorded the estimated fair value of the warrants as additional paid-in-capital and other assets and amortized the fair value to interest expense over the eleven months outstanding under the Credit Agreement in 2003.

On November 14, 2005 the bank exercised its warrants and consistent with the conversion rights contained in the warrant agreement, the Company issued 16,155 shares of common stock.

11.   Income Taxes

The components of income tax expense were as follows:

	2006		2005		2004
	(In thousands)
Current
Federal	$	169	$	129	$	90
State		135		47		54
	$	304	$	176	$	144

The components of net deferred tax assets are as follows at December 30, 2006 and December 31, 2005

	2006			2005
	(In thousands)
Deferred tax asset
Net operating loss carryforwards	$	287		$	4,264
Tax credits		3,212			1,336
Reserves and accruals		7,314			6,095
Total deferred tax asset		10,813			11,695
Valuation allowance		(10,813	)		(11,695	)
Net deferred tax asset	$	—		$	—

The Company has provided a full valuation allowance for the deferred tax assets since it is more likely than not that these future benefits will not be realized. If the Company achieves future profitability, a significant portion of these deferred tax assets could be available to offset future income taxes.

At December 30, 2006, the Company had available net operating loss carryforwards for federal and state purposes of $8.0 million and $9.1 million, respectively. Approximately $7.5 million of the federal and state net operating loss carryforwards relate to deductions from stock option compensation for which the associated tax benefit will be credited to additional paid in capital when realized. The federal net operating loss carryforwards expire at various dates from 2022 through 2025. The state net operating loss carryforwards will begin to expire in 2007. The Company also had available research and development credit carryforwards to offset future federal and state taxes of $1.9 million and $1.4 million, respectively, which expire at various dates from 2012 through 2026. Under the Internal Revenue Code, certain substantial changes in the Company’s ownership could result in an annual limitation of the amount of net operating loss and tax credit carryforwards which can be utilized in future years.

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iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The reconciliation of the expected tax (benefit) expense (computed by applying the federal statutory rate to income before income taxes) to actual tax expense was as follows:

	2006			2005			2004
	(In thousands)
Expected federal income tax	$	1,315		$	947		$	124
Permanent items		38			26			45
State taxes		(236	)		133			(302	)
Credits		(742	)		(166	)		(166	)
Non deductible stock compensation		234			—			—
Other		6			36			57
Increase (decrease) in valuation allowance		(311	)		(800	)		386
	$	304		$	176		$	144

12.   Commitments and Contingencies

Legal

The Company received a letter from the United Kingdom’s Ministry of Defence (the “Customer”) dated February 9, 2004, attempting to terminate a contract for the design, development, production and support of a number of man-portable remote control vehicles for use in explosive ordnance disposal operations. The Company entered into the contract with the Customer on May 23, 2001, and substantially completed the product design and development phase of the work. The Company received payments based upon achieving a number of contract milestones and has recognized revenue based on progress under the percentage-of-completion method of accounting. In addition to the milestone payments, the Customer advanced the Company funds to purchase long-lead inventory components in advance of the production contemplated in the contract. On July 27, 2006, the Company signed an agreement with the United Kingdom’s Ministry of Defence (MoD) Defence Procurement Agency (DPA) to supply 30 iRobot PackBot EOD robots, spare parts and support in exchange for the payments received by the Company under the contract. At December 30, 2006, all obligations, with the exception of normal warranty and support, resulting from the signing of this agreement had been satisfied.

Lease Obligations

The Company leases its facilities. Rental expense under operating leases for 2006, 2005 and 2004 amounted to $2.1 million, $1.3 million, and $0.9 million, respectively. Future minimum rental payments under operating leases were as follows as of December 30, 2006:

	Operating
	Leases
2007	$	1,909
2008		1,587
2009		139
2010		75
2011		—
Thereafter		—
Total minimum lease payments	$	3,710

75

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Guarantees and Indemnification Obligations

The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to these agreements, the Company indemnifies and agrees to reimburse the indemnified party for losses incurred by the indemnified party, generally the Company’s customers, in connection with any patent, copyright, trade secret or other proprietary right infringement claim by any third party with respect to the Company’s software. The term of these indemnification agreements is generally perpetual any time after execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the estimated fair value of these agreements is minimal. Accordingly, the Company has no liabilities recorded for these agreements as of December 30, 2006 and December 31, 2005, respectively.

Warranty

The Company provides warranties on most products and has established a reserve for warranty based on identified warranty costs. The reserve is included as part of accrued expenses (Note 5) in the accompanying balance sheets.

Activity related to the warranty accrual was as follows:

	Fiscal Year Ended
	December 30,			December 31,			December 31,
	2006			2005			2004
	(In thousands)
Balance at beginning of period	$	2,031		$	1,398		$	1,522
Provision		5,971			4,133			1,278
Warranty usage(*)		(5,540	)		(3,500	)		(1,402	)
Balance at end of period	$	2,462		$	2,031		$	1,398

(*) Warranty usage includes the pro rata expiration of product warranties unutilized.

13.   Employee Benefits

The Company sponsors a retirement plan under Section 401(k) of the Internal Revenue Code (the “Retirement Plan”). All Company employees, with the exception of temporary and contract employees are eligible to participate in the Retirement Plan after satisfying age and length of service requirements prescribed by the plan. Under the Retirement Plan, employees may make tax-deferred contributions, and the Company, at its sole discretion, and subject to the limits prescribed by the IRS, may make either a nonelective contribution on behalf of all eligible employees or a matching contribution on behalf of all plan participants.

The Company elected to make a matching contribution of approximately $0.7 million, $0.5 million and $0.3 million for the plan years ended December 30, 2006, December 31, 2005 and 2004 (“Plan-Year 2006,” “Plan-Year 2005” and “Plan-Year 2004”), respectively. The employer contribution represents a matching contribution at a rate of 50% of each employee’s first six percent contribution. Accordingly, each employee participating during Plan-Year 2006, Plan-Year 2005 and Plan-Year 2004 is entitled up to a maximum of three percent of his or her eligible annual payroll. The employer matching contribution for Plan-Year 2006 is included in accrued compensation.

76

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

14.   Industry Segment, Geographic Information and Significant Customers

The Company operates in two reportable segments, the consumer business and government and industrial business. The nature of products and types of customers for the two segments vary significantly. As such, the segments are managed separately.

Home Robots

The Company’s consumer business offers products through a network of retail businesses throughout the U.S. and to certain countries through international distributors. The Company’s consumer segment includes mobile robots used in the maintenance of domestic households sold primarily to retail outlets.

Government and Industrial

The Company’s government and industrial division offers products through a small U.S. government-focused sales force, while products are sold to a limited number of countries other than the United States through international distribution. The Company’s government and industrial products are robots used by various U.S. and foreign governments, primarily for reconnaissance and bomb disposal missions.

The table below presents segment information about revenue, cost of revenue, gross profit and income (loss) before income taxes:

	Fiscal Year Ended
	December 30,			December 31,			December, 31
	2006			2005			2004
	(In thousands)
Revenue:
Home Robots	$	112,430		$	93,955		$	71,333
Government & Industrial		76,525			47,945			23,231
Other		—			68			479
Total revenue		188,955			141,968			95,043
Cost of revenue:
Home Robots		68,066			58,025			48,282
Government & Industrial		51,189			36,279			19,308
Other		(35	)		85			102
Total cost of revenue		119,220			94,389			67,692
Gross profit (loss):
Home Robots		44,364			35,930			23,051
Government & Industrial		25,336			11,666			3,923
Other		35			(17	)		377
Total gross profit		69,735			47,579			27,351
Research and development
Other		17,025			11,601			5,504
Selling and marketing
Other		33,969			21,796			14,106
General and administrative
Other		18,703			12,072			7,298
Other income (expense), net
Other		3,831			676			(80	)
Income (loss) before income taxes
Other	$	3,869		$	2,786		$	363

77

iROBOT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Geographic Information

For the fiscal years ended December 30, 2006 and December 31, 2005, sales to non-U.S. customers accounted for 11.0% and 9.9% of total revenue, respectively. For the year ended December 30, 2006, no one country accounted for more than 10% of total revenue.

Significant Customers

For the fiscal years ended December 30, 2006 and December 31, 2005, U.S. federal government orders, contracts and subcontracts accounted for 34.4% and 28.3% of total revenue, respectively.

15.   Quarterly Information (Unaudited)

	Fiscal Quarter Ended
	March 31,			July 2,			October 1,		December 31,		April 1,			July 1,			September 30,		December 30,
	2005			2005			2005		2005		2006			2006			2006		2006
	(In thousands, except per share amounts)
Revenue	$	17,132		$	25,886		$	52,458	$	46,492	$	38,209		$	34,561		$	55,047	$	61,138
Gross profit		4,167			6,311			20,707		16,394		12,193			11,777			22,983		22,782
Net income (loss)		(4,101	)		(3,056	)		9,752		15		(2,917	)		(1,777	)		10,042		(1,783	)
Diluted earnings (loss) per share	$	(0.42	)	$	(0.30	)	$	0.40	$	0.00	$	(0.12	)	$	(0.08	)	$	0.39	$	(0.08	)

16.  Subsequent Event

On February 22, 2007, the Company and Boston Properties Limited Partnership entered into a Lease Agreement for the Company’s new corporate headquarters. The lease is for 157,776 square feet space located at 4-18 Crosby Drive, Bedford, Massachusetts and shall commence, subject to certain conditions, on May 1, 2008. The term of the lease is 144 months with a base rent of $2.0 million per year, which shall increase to $2.1 million per year beginning in the third year of Lease Agreement. Pursuant to the Lease Agreement, the Company has rights to renew the Lease Agreement. Under the terms of the Lease Agreement, the Company is required to provide a security deposit of $2.0 million, subject to reduction commencing March 1, 2010 upon the occurrence of certain conditions, and will be required to pay its pro rata share of any building operating expenses and real estate taxes.

78

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There have been no changes in or disagreements with accountants on accounting or financial disclosure matters during our two most recent fiscal years.

ITEM 9A.   CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.

As required by Rule 13a-15(b) under the Exchange Act, we have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), of the effectiveness, as of the end of the period covered by this report, of the design and operation of our “disclosure controls and procedures” as defined in Rule 13a-15(e) promulgated by the SEC under the Exchange Act. Based upon that evaluation, our CEO and our CFO concluded that our disclosure controls and procedures, as of the end of such period, were adequate and effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and that such information was accumulated and communicated to management, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

•  Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

•  Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

•  Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of management, including our principal executive and financial officers, we assessed the Company’s internal control over financial reporting as of December 30, 2006, based on criteria for effective internal control over financial reporting established in Internal Control — Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, management concluded that the Company maintained effective internal control over financial reporting as of December 30, 2006 based on the specified criteria.

Our management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 30, 2006 has been audited by PricewaterhouseCoopers LLC, an independent registered public accounting firm, as stated in their report which is included herein.

79

Changes in Internal Control Over Financial Reporting

During the quarter ended December 30, 2006, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting except as described above.

ITEM 9B.   OTHER INFORMATION

Our policy governing transactions in our securities by directors, officers, and employees permits our officers, directors, funds affiliated with our directors, and certain other persons to enter into trading plans complying with Rule 10b5-l under the Securities Exchange Act of 1934, as amended. We have been advised that certain officers (including Colin Angle, Chief Executive Officer; Helen Greiner, Chairman; Dr. Rodney Brooks, Chief Technology Officer; Geoffrey Clear, Senior Vice President, Chief Financial Officer & Treasurer; and Glen Weinstein, Senior Vice President, General Counsel & Secretary) of the Company have entered into a trading plan (each a “Plan” and collectively, the “Plans”) covering periods after the date of this Annual Report on Form 10-K in accordance with Rule 10b5-l and our policy governing transactions in our securities. Generally, under these trading plans, the individual relinquishes control over the transactions once the trading plan is put into place. Accordingly, sales under these plans may occur at any time, including possibly before, simultaneously with, or immediately after significant events involving our company.

We anticipate that, as permitted by Rule 10b5-l and our policy governing transactions in our securities, some or all of our officers, directors and employees may establish trading plans in the future. We intend to disclose the names of executive officers and directors who establish a trading plan in compliance with Rule 10b5-l and the requirements of our policy governing transactions in our securities in our future quarterly and annual reports on Form 10-Q and 10-K filed with the Securities and Exchange Commission. However, we undertake no obligation to update or revise the information provided herein, including for revision or termination of an established trading plan, other than in such quarterly and annual reports.

PART III

ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 30, 2006.

ITEM 11.   EXECUTIVE COMPENSATION

The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 30, 2006.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 30, 2006.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 30, 2006.

80

ITEM 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 30, 2006.

PART IV

ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) The following are filed as part of this Annual Report on Form 10-K:

1.   Financial Statements

The following consolidated financial statements are included in Item 8:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at December 30, 2006 and December 31, 2005

Consolidated Statements of Operations for the Years ended December 30, 2006, December 31, 2005 and 2004

Consolidated Statements of Stockholders’ Equity (Deficit) for the Years ended December 30, 2006, December 31, 2005 and 2004

Consolidated Statements of Cash Flows for the Years ended December 30, 2006, December 31, 2005 and 2004

Notes to Consolidated Financial Statements

2.   Financial Statement Schedules

All other schedules have been omitted since the required information is not present, or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements or the Notes thereto.

3.   Exhibits — See item 15(b) of this report below

(b)   Exhibits

The following exhibits are filed as part of and incorporated by reference into this Annual Report:

Exhibit
Number			Description
	3	.1(1)	Form of Second Amended and Restated Certificate of Incorporation of the Registrant dated November 15, 2005
	3	.2(1)	Amended and Restated By-laws of the Registrant
	4	.1(1)	Specimen Stock Certificate for shares of the Registrant’s Common Stock
	4	.2(1)	Shareholder Rights Agreement between the Registrant and Computershare Trust Company, Inc., as the Rights Agent dated November 15, 2005
	10	.1(1)	Fifth Amended and Restated Registration Rights Agreement by and among the Registrant, the Investors and the Stockholders named therein, dated as of November 10, 2004
	10	.2†(1)	Form of Indemnification Agreement between the Registrant and its Directors and Executive Officers
	10	.3†	Registrant’s 2006 Incentive Compensation Plan (filed as Exhibit 10.4 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 and incorporated by reference herein)
	10	.4†*	Registrant’s Senior Executive Incentive Compensation Plan
	10	.5†(1)	Amended and Restated 1994 Stock Plan and forms of agreements thereunder

81

Exhibit
Number			Description
	10	.6†	Amended and Restated 2001 Special Stock Option Plan and forms of agreements thereunder (filed as Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 and incorporated by reference herein)
	10	.7†(1)	Amended and Restated 2004 Stock Option and Incentive Plan and forms of agreements thereunder
	10	.8(1)	Lease Agreement between the Registrant and Burlington Crossing Office LLC for premises located at 63 South Avenue, Burlington, Massachusetts, dated as of October 29, 2002, as amended
	10	.9	Sublease between the Registrant and Lahey Clinic Hospital, Inc. for premises located at 63 South Avenue, Burlington, Massachusetts, dated as of September 20, 2005 (filed as Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 and incorporated by reference herein)
	10	.10(1)	Loan and Security Agreement between the Registrant and Fleet National Bank, dated as of May 26, 2005
	10	.11†	Form of Executive Agreement between the Registrant and certain executive officers of the Registrant, dated as of March 16, 2006 (filed as Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 and incorporated by reference herein)
	10	.12†(1)	Employment Agreement between the Registrant and Helen Greiner, dated as of January 1, 1997
	10	.13†(1)	Employment Agreement between the Registrant and Colin Angle, dated as of January 1, 1997
	10	.14†(1)	Employment Agreement between the Registrant and Joseph W. Dyer, dated as of February 18, 2004
	10	.15†(1)	Independent Contractor Agreement between the Registrant and Rodney Brooks, dated as of December 30, 2002
	10	.16(1)	Government Contract DAAE07-03-9-F001 (Small Unmanned Ground Vehicle)
	10	.17(1)	Government Contract N00174-03-D-0003 (Man Transportable Robotic System)
	10	.18†(1)	2005 Stock Option and Incentive Plan and forms of agreements thereunder
	10	.19#(1)	Manufacturing and Services Agreement between the Registrant and Gem City Engineering Corporation, dated as of July 27, 2004
	10	.20†(1)	Non-Employee Directors’ Deferred Compensation Program
	10	.21†*	Separation Agreement between the Registrant and Gregory F. White, dated as of January 23, 2007
	10	.22*	Lease Agreement between the Registrant and Boston Properties Limited Partnership for premises located at 4-18 Crosby Drive, Bedford, Massachusetts, dated as of February 22, 2007
	21	.1	Subsidiaries of the Registrant (filed as Exhibit 21.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 and incorporated by reference herein)
	23	.1*	Consent of PricewaterhouseCoopers LLP
	24	.1	Power of Attorney (incorporated by reference to the signature page of this report on Form 10-K)
	31	.1*	Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
	31	.2*	Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
	32	.1*	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

†	Indicates a management contract or any compensatory plan, contract or arrangement.
#	Confidential treatment requested for portions of this document.
(1)	Incorporated by reference herein to the exhibits to the Company’s Registration Statement on Form S-1 (File No. 333-126907)
*	Filed herewith

82

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

iROBOT CORPORATION

By:  /s/  Colin M. Angle

Colin M. Angle

Chief Executive Officer and Director

Date: March 2, 2007

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Colin M. Angle and Geoffrey P. Clear, jointly and severally, his or her attorney-in-fact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-K has been signed by the following persons in the capacities indicated on March 2, 2007.

Signature	Title(s)
/s/  Helen Greiner Helen Greiner	Chairman of the Board
/s/  Colin M. Angle Colin M. Angle	Chief Executive Officer and Director (Principal Executive Officer)
/s/  Geoffrey P. Clear Geoffrey P. Clear	Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)
/s/  Gerald C. Kent, Jr. Gerald C. Kent, Jr.	Vice President and Controller (Principal Accounting Officer)
/s/  Ronald Chwang Ronald Chwang	Director
/s/  Jacques S. Gansler Jacques S. Gansler	Director
/s/  Rodney A. Brooks Rodney A. Brooks	Director

83

Signature	Title(s)
/s/  Andrea Geisser Andrea Geisser	Director
/s/  George C. McNamee George C. McNamee	Director
/s/  Peter Meekin Peter Meekin	Director
/s/  Paul J. Kern Paul J. Kern	Director

84

EXHIBIT INDEX

Exhibit
Number			Description
	3	.1(1)	Form of Second Amended and Restated Certificate of Incorporation of the Registrant dated November 15, 2005
	3	.2(1)	Amended and Restated By-laws of the Registrant
	4	.1(1)	Specimen Stock Certificate for shares of the Registrant’s Common Stock
	4	.2(1)	Shareholder Rights Agreement between the Registrant and Computershare Trust Company, Inc., as the Rights Agent dated November 15, 2005
	10	.1(1)	Fifth Amended and Restated Registration Rights Agreement by and among the Registrant, the Investors and the Stockholders named therein, dated as of November 10, 2004
	10	.2†(1)	Form of Indemnification Agreement between the Registrant and its Directors and Executive Officers
	10	.3†	Registrant’s 2006 Incentive Compensation Plan (filed as Exhibit 10.4 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 and incorporated by reference herein)
	10	.4†*	Registrant’s Senior Executive Incentive Compensation Plan
	10	.5†(1)	Amended and Restated 1994 Stock Plan and forms of agreements thereunder
	10	.6†	Amended and Restated 2001 Special Stock Option Plan and forms of agreements thereunder (filed as Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 and incorporated by reference herein)
	10	.7†(1)	Amended and Restated 2004 Stock Option and Incentive Plan and forms of agreements thereunder
	10	.8(1)	Lease Agreement between the Registrant and Burlington Crossing Office LLC for premises located at 63 South Avenue, Burlington, Massachusetts, dated as of October 29, 2002, as amended
	10	.9	Sublease between the Registrant and Lahey Clinic Hospital, Inc. for premises located at 63 South Avenue, Burlington, Massachusetts, dated as of September 20, 2005 (filed as Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 and incorporated by reference herein)
	10	.10(1)	Loan and Security Agreement between the Registrant and Fleet National Bank, dated as of May 26, 2005
	10	.11†	Form of Executive Agreement between the Registrant and certain executive officers of the Registrant, dated as of March 16, 2006 (filed as Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 and incorporated by reference herein)
	10	.12†(1)	Employment Agreement between the Registrant and Helen Greiner, dated as of January 1, 1997
	10	.13†(1)	Employment Agreement between the Registrant and Colin Angle, dated as of January 1, 1997
	10	.14†(1)	Employment Agreement between the Registrant and Joseph W. Dyer, dated as of February 18, 2004
	10	.15†(1)	Independent Contractor Agreement between the Registrant and Rodney Brooks, dated as of December 30, 2002
	10	.16(1)	Government Contract DAAE07-03-9-F001 (Small Unmanned Ground Vehicle)
	10	.17(1)	Government Contract N00174-03-D-0003 (Man Transportable Robotic System)
	10	.18†(1)	2005 Stock Option and Incentive Plan and forms of agreements thereunder
	10	.19#(1)	Manufacturing and Services Agreement between the Registrant and Gem City Engineering Corporation, dated as of July 27, 2004
	10	.20†(1)	Non-Employee Directors’ Deferred Compensation Program
	10	.21†*	Separation Agreement between the Registrant and Gregory F. White, dated as of January 23, 2007
	10	.22*	Lease Agreement between the Registrant and Boston Properties Limited Partnership for premises located at 4-18 Crosby Drive, Bedford, Massachusetts, dated as of February 22, 2007
	21	.1	Subsidiaries of the Registrant (filed as Exhibit 21.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 and incorporated by reference herein)
	23	.1*	Consent of PricewaterhouseCoopers LLP
	24	.1	Power of Attorney (incorporated by reference to the signature page of this report on Form 10-K)

Exhibit
Number			Description
	31	.1*	Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
	31	.2*	Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
	32	.1*	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

†	Indicates a management contract or any compensatory plan, contract or arrangement.
#	Confidential treatment requested for portions of this document.
(1)	Incorporated by reference herein to the exhibits to the Company’s Registration Statement on Form S-1 (File No. 333-126907)
*	Filed herewith

EX-10.4

                                                                    EXHIBIT 10.4


                               IROBOT CORPORATION
                  SENIOR EXECUTIVE INCENTIVE COMPENSATION PLAN


1.       Purpose

         This Senior Executive Incentive Compensation Plan (the "Incentive
Plan") is intended to provide an incentive for superior work and to motivate
eligible executives of iRobot Corporation (the "Company") and its subsidiaries
toward even higher achievement and business results, to tie their goals and
interests to those of the Company and its stockholders and to enable the Company
to attract and retain highly qualified executives. The Incentive Plan is for the
benefit of Covered Executives (as defined below).

2.       Covered Executives

         From time to time, the Compensation Committee of the Board of Directors
of the Company (the "Compensation Committee") may select certain key executives
(the "Covered Executives") to be eligible to receive bonuses hereunder.

3.       Administration

         The Compensation Committee shall have the sole discretion and authority
to administer and interpret the Incentive Plan.

4.       Bonus Determinations

         (a) A Covered Executive may receive a bonus payment under the Incentive
Plan based upon the attainment of performance targets that are established by
the Compensation Committee and relate to financial and operational metrics with
respect to the Company or any of its subsidiaries (the "Performance Goals"),
including, but not limited to, the following: revenue, earnings per share,
EBITDA and specific strategic milestones.

         (b) Except as otherwise set forth in this Section 4(b): (i) any bonuses
paid to Covered Executives under the Incentive Plan shall be based upon
objectively determinable bonus formulas that tie such bonuses to one or more
performance targets relating to the Performance Goals, (ii) bonus formulas for
Covered Executives shall be adopted in each performance period by the
Compensation Committee and (iii) no bonuses shall be paid to Covered Executives
unless and until the Compensation Committee makes a determination with respect
to the attainment of the performance objectives. Notwithstanding the foregoing,
the Company may adjust bonuses payable under the Incentive Plan based on
achievement of individual performance goals or pay bonuses (including, without
limitation, discretionary bonuses) to Covered Executives under the Incentive
Plan based upon such other terms and conditions as the Compensation Committee
may in its discretion determine.


iRobot Corporation
Senior Executive Incentive Compensation Plan
Page 1 of 2






         (c) Each Covered Executive shall have a targeted bonus opportunity for
each performance period. The maximum bonus payable to a Covered Executive under
the Plan is 125% of the Covered Executive's bonus opportunity.

         (d) The payment of a bonus to a Covered Executive with respect to a
performance period shall be conditioned upon the Covered Executive's employment
by the Company on the last day of the performance period; provided, however,
that the Compensation Committee may make exceptions to this requirement, in its
sole discretion, including, without limitation, in the case of a Covered
Executive's termination of employment, retirement, death or disability.

5.       Timing of Payment

         The Performance Goals will be measured at the end of each fiscal year
after the Company's financial reports have been published. If the Performance
Goals are met, payments will be made within 30 days thereafter, but not later
than March 15.

6.       Amendment and Termination

         The Company reserves the right to amend or terminate the Incentive Plan
at any time in its sole discretion.


iRobot Corporation
Top Management Incentive Compensation Plan
Page 2 of 2

EX-10.21

                                (IROBOT(R) LOGO)

                                January 23, 2007

Mr. Gregory F. White
**
**

          Re: Separation and Release Agreement

Dear Greg:

     As you know, you have advised iRobot Corporation (the "Company") of your
intent to resign from employment with the Company. This letter confirms the
agreement that you have reached with the Company with respect to the terms for
your resignation, including the terms for a transitional period of employment
until your successor can be identified. The purpose of this Agreement is to
establish an amicable arrangement for transitioning and ending your employment
relationship, including, but not limited to, releasing the Company and related
persons or entities from any claims, permitting you to receive certain benefits,
and acknowledging your continuing obligations to the Company. If you agree to
the terms of this Agreement, you acknowledge that you are entering into this
Agreement voluntarily.

     With those understandings, you and the Company agree as follows:

     1. RESIGNATION FROM EMPLOYMENT.

     (a) Provided that you perform your responsibilities diligently and do not
otherwise provide the Company with cause to terminate your employment, your
resignation from employment with the Company will be effective as of 5:00 p.m.
(ET) on March 26, 2007 (the "Separation Date"). You hereby agree to resign as
President of the Company's Home Robots division and as an executive officer of
the Company effective immediately. You hereby assume the role and title of
"Special Advisor" to the Chief Executive Officer at an annual base salary of
$125,000.00 to be paid in accordance with the Company's ordinary payroll
practices. You shall hold such position until the March 26, 2007 Separation
Date.

     (b) As of the Separation Date, your salary will cease, and any entitlement
you have or might have under a Company provided benefit plan, program or
practice will terminate, except as required by federal or state law, or as
otherwise described below. The Company shall pay you, however, for all accrued
but unused vacation time through the Separation Date. In accordance with the
terms of your Executive Agreement with the Company, dated March 16, 2006
("Executive Agreement"), you are not entitled to any payments, salary
continuation, severance or other benefits because your resignation from
employment with the Company is not pursuant to Section 4 or Section 5 of your
Executive Agreement. You acknowledge that the Company has complied with its
obligations under your Executive Agreement through the date hereof.

     2. HEALTH BENEFITS. The Separation Date shall be the date of the
"qualifying event" under the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA"). If you elect to continue medical insurance coverage after the
Separation Date in accordance with the provisions of

                               IROBOT CORPORATION

  63 South Avenue, Burlington, MA 01803-4903 - 781.345.0200 - Fax 781.345.0201
                                - www.irobot.com



Separation & Release Agreement
January 23, 2007
Page 2 of 7


COBRA, you may do so at your own expense. A separate letter describing your
rights pursuant to COBRA will be sent to you on or after the Separation Date.

     3. RESTRICTED COMMON STOCK REPURCHASE.

     (a) On May 3, 2004, you and the Company entered into that certain
Restricted Stock Purchase Agreement ("Restricted Stock Agreement") pursuant to
which you purchased sixteen thousand one hundred and eighty-seven (16,187)
shares of the Company's common stock, par value $0.01 per share ("Common
Stock"). If you first provide the Company with an effective release in the form
attached hereto as Exhibit A, the Company shall exercise its repurchase right
pursuant to Section 4 of the Restricted Stock Agreement with respect to all the
then Unvested Shares (as defined in the Restricted Stock Agreement) held by you.
The Company will tender to you the aggregate Repurchase Price (as defined in the
Restricted Stock Agreement) for the Unvested Shares being repurchased. In
connection with the foregoing, you will execute and deliver the stock power
attached hereto as Exhibit B authorizing the transfer of the aggregate Unvested
Shares to the Company.

     (b) Except as otherwise specified in Section 3(a) of this Agreement, the
terms and conditions of any and all other stock option agreements and or
restricted stock purchase agreements entered into between you and the Company
during the course of your employment are not modified in any way and remain
subject to the terms of the Amended and Restated 2001 Special Stock Plan of
iRobot Corporation or any applicable predecessor or successor plans.
Specifically, this Section 3 is not intended to modify in any respect the rights
to which you would otherwise be entitled if you were not to agree to this
Agreement as set forth in the June 12, 2003 Incentive Stock Option Agreement,
the July 1, 2003 Incentive Stock Option Agreement, the January 12, 2004
Restricted Stock Purchase Agreement and/or the February 28, 2004 Incentive Stock
Option Agreement entered into between you and the Company.

     4. TAX TREATMENT. The Company shall undertake to make deductions,
withholdings and tax reports with respect to payments and benefits under this
Agreement to the extent that it reasonably and in good faith determines that it
is required to make such deductions, withholdings and tax reports. Payments
under this Agreement shall be in amounts net of any such deductions or
withholdings. Nothing in this Agreement shall be construed to require the
Company to make any payments to compensate you for any adverse tax effect
associated with any payments or benefits or for any deduction or withholding
from any payment or benefit.

     5. RELEASE. In exchange for your continued employment, as described in
Section 1, which is in addition to anything of value which you otherwise are
entitled to receive, and other good and valuable consideration, the receipt of
which is hereby acknowledged, you and your representatives, agents, estate,
heirs, successors and assigns, absolutely and unconditionally hereby release,
remise, discharge, indemnify and hold harmless the Company (defined to include
the Company and/or any of its parents, subsidiaries or affiliates, predecessors,
successors or assigns, and its and their respective current and/or former
partners, directors, shareholders/stockholders, officers, employees, attorneys
and/or agents, all both individually and in their official capacities), from any
and all actions or causes of action, suits, claims, complaints, contracts,
liabilities, agreements, promises, contracts, torts, debts, damages,
controversies, judgments, rights and demands, whether existing or contingent,
known or unknown ("Claims"), which arise out of your employment with,



Separation & Release Agreement
January 23, 2007
Page 3 of 7


change in employment status with, and/or separation of employment from, the
Company. This release is intended by you to be all encompassing and to act as a
full and total release of any Claims, whether specifically enumerated herein or
not, that you may have or have had against the Company arising from conduct
occurring up to and through the date of this Agreement, including, but not
limited to, any Claims: relating to your employment by the Company or the
termination of your employment with the Company; of wrongful discharge; of
breach of contract; of retaliation or discrimination under federal, state or
local law (including, without limitation, Claims of age discrimination or
retaliation under the Age Discrimination in Employment Act, Claims of disability
discrimination or retaliation under the Americans with Disabilities Act, and
Claims of discrimination or retaliation under Title VII of the Civil Rights Act
of 1964); under any other federal or state statute; of defamation or other
torts; of violation of public policy; for wages, bonuses, incentive
compensation, stock, stock options, vacation pay or any other compensation or
benefits; and for damages or other remedies of any sort, including, without
limitation, compensatory damages, punitive damages, injunctive relief and
attorney's fees; provided, however, that this release shall not affect your
vested rights under the Company's Section 401(k) plan or your rights under this
Agreement. You agree that you shall not seek or accept damages of any nature,
other equitable or legal remedies for your own benefit, attorney's fees, or
costs from any of the Releasees with respect to any Claim released by this
Agreement. As a material inducement to the Company to enter into this Agreement,
you represent that you have not assigned to any third party and you have not
filed with any agency or court any Claim released by this Agreement.

     6. ACKNOWLEDGEMENT AND AMENDMENT OF PRIOR AGREEMENTS.

     (a) Invention, Confidentiality Agreement: You acknowledge and agree that on
or about March 26, 2003, you and the Company entered into an Invention,
Confidentiality Agreement, a copy of which is attached as Exhibit C. You further
acknowledge and agree that certain obligations set forth in that Invention,
Confidentiality Agreement will survive the termination of your employment with
the Company, including but not limited to the obligations set forth in Section
1.2 (Confidential Information).

     (b) Noncompetition and Nonsolicitation Agreement: You acknowledge and agree
that on or about March 16, 2006, you and the Company entered into a
Noncompetition and Nonsolicitation Agreement, a copy of which is attached as
Exhibit D, for which you were provided good and adequate consideration. You
further acknowledge and agree that certain obligations set forth in that
Noncompetition and Nonsolicitation Agreement survive the termination of your
employment, including, but not limited to, the obligations set forth in Section
2 (Noncompetition), Section 3 (Nonsolicitation of Customers), Section 4
(Nonsolicitation of Employees) and Section 5 (Notice to Future Employers and of
Future Employment). In exchange for the additional good and valuable
consideration provided to you in this Agreement, you acknowledge the
enforceability of your continuing obligations as set forth in the Noncompetition
and Nonsolicitation Agreement and further agree that the first clause of the
first sentence contained in each of Sections 2(a) and 4(a) of the Noncompetition
and Nonsolicitation Agreement shall be amended to read as follows:

          During the period of my employment by the Company and for eighteen
          months following the termination of my employment, regardless of the
          reasons for my termination,



Separation & Release Agreement
January 23, 2007
Page 4 of 7


In addition, the first clause of the first sentence contained in Section 3(a) of
the Noncompetition and Nonsolicitation Agreement shall be amended to read as
follows:

          During the period of my employment by the Company and for eighteen
          months following the termination of my employment, regardless of the
          reasons for my termination, without the written consent of the
          Company, which shall not be unreasonably denied,

     7. COMPANY FILES, DOCUMENTS AND OTHER PROPERTY. On the Separation Date, you
will return to the Company all Company property and materials, including but not
limited to, personal computers, laptops, fax machines, scanners, copiers,
cellular phones, personal data assistants, Company credit cards and telephone
charge cards, manuals, building keys and passes, courtesy parking passes,
diskettes, intangible information stored on diskettes, software programs and
data compiled with the use of those programs, software passwords or codes,
tangible copies of trade secrets and confidential information, sales forecasts,
names and addresses of Company customers and potential customers, customer
lists, customer contacts, sales information, sales forecasts, memoranda, sales
brochures, business or marketing plans, reports, projections, and any and all
other information or property previously or currently held or used by you that
is or was related to your employment with the Company ("Company Property"). You
agree that in the event that you discover any other Company Property in your
possession after the Separation Date, you will immediately return such materials
to the Company.

     8. NONDISPARAGEMENT. You agree not to make disparaging, critical or
otherwise detrimental comments to any person or entity concerning the Company,
its officers, directors or employees; the products, services or programs
provided or to be provided by the Company; the business affairs or the financial
condition of the Company; or the circumstances surrounding your employment
and/or separation of employment from the Company. You further agree not to take
any actions or conduct yourself in any way that would reasonably be expected to
affect adversely the reputation or goodwill of the Company or any of its current
or former officers, directors, shareholders, employees or agents. Nothing herein
shall prohibit or bar you from providing truthful testimony in any legal
proceeding or in communicating with any governmental agency or representative or
from making any truthful disclosure required, authorized or permitted under law;
provided, however, that in providing such testimony or making such disclosures
or communications, you will use your best efforts to ensure that this Section is
complied with to the maximum extent possible.

     9. CONFIDENTIALITY OF THIS AGREEMENT. You shall maintain confidentiality
concerning the dollar amount and all other terms of this Agreement. Except as
required pursuant to legal process, you will not discuss the same with anyone
except your immediate family and accountants or attorneys when such disclosure
is necessary for the accountants or attorneys to render professional services.
Prior to any such disclosure that you may make, you shall secure from your
attorney or accountant their agreement to maintain the confidentiality of such
matters.

     10. INFORMATION CONCERNING ACTUAL, POTENTIAL OR ALLEGED FINANCIAL
IRREGULARITIES. You represent that you are not aware of any actual, potential or
alleged financial irregularities concerning the Company.



Separation & Release Agreement
January 23, 2007
Page 5 of 7


     11. FUTURE COOPERATION. You agree to cooperate reasonably with the Company
(including its outside counsel) in connection with the contemplation,
prosecution and defense of all phases of existing, past and future litigation
about which the Company believes you may have knowledge or information. You
further agree to make yourself available at mutually convenient times during and
outside of regular business hours as reasonably deemed necessary by the
Company's counsel. The Company shall not utilize this Section 11 to require you
to make yourself available to an extent that would unreasonably interfere with
full-time employment responsibilities that you may have after the Separation
Date. You agree to appear without the necessity of a subpoena to testify
truthfully in any legal proceedings in which the Company calls you as a witness.
The Company shall also reimburse you for any pre-approved reasonable business
travel expenses that you incur on the Company's behalf as a result of your
litigation cooperation services, after receipt of appropriate documentation
consistent with the Company's business expense reimbursement policy. You further
agree that you shall not voluntarily provide information to or otherwise
cooperate with any individual or entity that is contemplating or pursuing
litigation against any of the Releasees or that is undertaking any investigation
or review of any of the Releasees' activities or practices; provided, however,
that you may participate in or otherwise assist in any investigation or inquiry
conducted by the EEOC or the Massachusetts Commissions Against Discrimination.
Notwithstanding the foregoing, this provision shall not apply to the extent that
your breach of this Agreement consists of initiating a legal action in which you
contend that the release set forth in Section 5 is invalid, in whole or in part,
due to the provisions of 29 U.S.C. Section 626(f).

     12. LEGAL REPRESENTATION. This Agreement is a legally binding document and
your signature will commit you to its terms. You acknowledge that you have been
advised to discuss all aspects of this Agreement with your attorney, that you
have carefully read and fully understand all of the provisions of this Agreement
and that you are voluntarily entering into this Agreement.

     13. ABSENCE OF RELIANCE. In signing this Agreement, you are not relying
upon any promises or representations made by anyone at or on behalf of the
Company.

     14. ENFORCEABILITY. If any portion or provision of this Agreement
(including, without limitation, any portion or provision of any section of this
Agreement) shall to any extent be declared illegal or unenforceable by a court
of competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than those as to
which it is so declared illegal or unenforceable, shall not be affected thereby,
and each portion and provision of this Agreement shall be valid and enforceable
to the fullest extent permitted by law.

     15. WAIVER. No waiver of any provision of this Agreement shall be effective
unless made in writing and signed by the waiving party. The failure of any party
to require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.

     16. ENFORCEMENT.

     (a) Jurisdiction. You and the Company hereby agree that the Superior Court
of the Commonwealth of Massachusetts and the United States District Court for
the District of



Separation & Release Agreement
January 23, 2007
Page 6 of 7


Massachusetts shall have the exclusive jurisdiction to consider any matters
related to this Agreement, including without limitation any claim for violation
of this Agreement. With respect to any such court action, you (i) submit to the
jurisdiction of such courts, (ii) consent to service of process, and (iii) waive
any other requirement (whether imposed by statute, rule of court or otherwise)
with respect to personal jurisdiction or venue.

     (b) Relief. You agree that it would be difficult to measure any harm caused
to the Company that might result from any breach by you of your promises set
forth in this Agreement and its attachments, and that in any event money damages
would be an inadequate remedy for any such breach. Accordingly, you agree that
if you breach, or propose to breach, any portion of your obligations under this
Agreement or its attachments, the Company shall be entitled, in addition to all
other remedies it may have, to an injunction or other appropriate equitable
relief to restrain any such breach, without showing or proving any actual damage
to the Company and without the necessity of posting a bond. In the event that
the Company prevails in any action to enforce the Agreement or its attachments,
then you also shall be liable to the Company for attorney's fees and costs
incurred by the Company in enforcing such provision(s). In addition, in the
event that you breach any portion of Section 6(b), you agree that the
restrictions of Section 6(b) shall remain in effect for the period of such
breach notwithstanding the period of eighteen (18) months set forth above and
you further agree that the same restrictions shall apply for a period of
eighteen (18) months commencing effective upon the cessation of any such breach.

     17. GOVERNING LAW; INTERPRETATION. This Agreement shall be interpreted and
enforced under the laws of the Commonwealth of Massachusetts, without regard to
conflict of law principles. In the event of any dispute, this Agreement is
intended by the parties to be construed as a whole, to be interpreted in
accordance with its fair meaning, and not to be construed strictly for or
against either you or the Company or the "drafter" of all or any portion of this
Agreement.

     18. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between you and the Company. This Agreement supersedes any previous agreements
or understandings between you and the Company, including, but not limited to,
the Executive Agreement, provided that, the stock agreements described in
Section 3, the Invention, Confidentiality Agreement described in Section 6(a)
(Exhibit C hereto) and the Noncompetition and Nonsolicitation Agreement
described in Section 6(b) (Exhibit D hereto) remain in full force and effect as
amended herein.

     19. TIME FOR CONSIDERATION; EFFECTIVE DATE. You have the opportunity to
consider this Agreement for twenty-one (21) days before signing it. To accept
this Agreement, you must return a signed original of this Agreement so that it
is received by the undersigned at or before the expiration of this twenty-one
(21) day period. If you sign this Agreement within less than twenty-one (21)
days of the date of its delivery to you, you acknowledge by signing this
Agreement that such decision was entirely voluntary and that you had the
opportunity to consider this Agreement for the entire twenty-one (21) day
period. For the period of seven (7) days from the date when this Agreement
becomes fully executed, you have the right to revoke this Agreement by written
notice to the undersigned. For such a revocation to be effective, it must be
delivered so that it is received by the undersigned at or before the expiration
of the seven (7) day revocation period. This Agreement shall not become
effective or enforceable during the revocation period. This Agreement shall
become effective on the first business day following the expiration of the
revocation period (the "Effective Date").



Separation & Release Agreement
January 23, 2007
Page 7 of 7

     If this letter correctly states the understanding we have reached, please
indicate your acceptance by countersigning the enclosed copy and returning it to
me.

                                        Very truly yours,


                                        /s/ Colin Angle
                                        ----------------------------------------
                                        Colin Angle
                                        Chief Executive Officer
                                        iRobot Corporation

You are advised to consult with an attorney before signing this Agreement. The
foregoing is agreed to and accepted by:


/s/ Gregory F. White
- -------------------------------------
Gregory F. White

Date: 1/23/07



                                    EXHIBIT A

                                RELEASE AGREEMENT

In consideration of the Company's agreement to provide you with certain
separation benefits, as set forth in paragraph 3(a) of the Agreement dated
January 23,2007 between you and the Company (the "Agreement"), you and your
representatives, agents, estate, heirs, successors and assigns, absolutely and
unconditionally hereby release, remise, discharge, indemnify and hold harmless
the Company (defined to include the Company and/or any of its parents,
subsidiaries or affiliates, predecessors, successors or assigns, and its and
their respective current and/or former partners, directors,
shareholders/stockholders, officers, employees, attorneys and/or agents, all
both individually and in their official capacities), from any and all actions or
causes of action, suits, claims, complaints, contracts, liabilities, agreements,
promises, contracts, torts, debts, damages, controversies, judgments, rights and
demands, whether existing or contingent, known or unknown ("Claims"), which
arise out of your employment with, change in employment status with, and/or
separation of employment from, the Company. This release is intended by you to
be all encompassing and to act as a full and total release of any Claims,
whether specifically enumerated herein or not, that you may have or have had
against the Company arising from conduct occurring up to and through the date of
this Agreement, including, but not limited to, any claims: relating to your
employment by the Company or the termination of your employment with the
Company; of wrongful discharge; of breach of contract; of retaliation or
discrimination under federal, state or local law (including, without limitation,
Claims of age discrimination or retaliation under the Age Discrimination in
Employment Act, Claims of disability discrimination or retaliation under the
Americans with Disabilities Act, and Claims of discrimination or retaliation
under Title VII of the Civil Rights Act of 1964); under any other federal or
state statute; of defamation or other torts; of violation of public policy; for
wages, bonuses, incentive compensation, stock, stock options, vacation pay or
any other compensation or benefits; and for damages or other remedies of any
sort, including, without limitation, compensatory damages, punitive damages,
injunctive relief and attorney's fees; provided, however, that this release
shall not affect your vested rights under the Company's Section 401(k) plan or
your rights under this Agreement. You agree that you shall not seek or accept
damages of any nature, other equitable or legal remedies for your own benefit,
attorney's fees, or costs from any of the Releasees with respect to any Claim
released by this Agreement. As a material inducement to the Company to enter
into this Agreement, you represent that you have not assigned to any third party
and you have not filed with any agency or court any Claim released by this
Agreement.

You understand and agree that the terms of this Agreement are confidential and
you will not disclose to others the terms of this Agreement, except as otherwise
permitted by law and with the written consent of the Company, except that you
may disclose this information to your immediate family or for purposes of
securing professional, financial, tax or legal services, however, prior to that
disclosure you will inform such persons that this confidentiality clause is in
effect and that they are bound by it as well.

You affirm that you have read this Release carefully. You affirm that you have
been given at least 21 days to consider all of the terms of this Release, that
you have been advised to consult with an attorney prior to executing this
Release, and that you fully understand that by signing below you are voluntarily
giving up any right which you may have to sue or bring any other claims against
the Released Parties, including any rights and claims under the Age
Discrimination in Employment Act. You also understand that you have a period of
seven days after signing this Release within which to



revoke his agreement, and that neither you nor any other person is obligated to
make any payments or provide any other benefits to you pursuant to the Agreement
until eight days have passed since your signing of this Release without your
signature having been revoked. Finally, you acknowledge that you have not been
forced or pressured in any manner whatsoever to sign this Release, and you agree
to all of its terms voluntarily.


/s/ Gregory White
- -------------------------------------
Gregory White

SUBSCRIBED AND SWORN TO ME THIS 23RD DAY OF JANUARY, 2007.


/s/ Gilda T. Carr
- -------------------------------------

                                        Notary Public

                                        My commission expires:
                                        12/27/2013

                (SEAL)



                                    EXHIBIT B

                                   STOCK POWER

     FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto iRobot Corporation, a Delaware corporation (the "Company"), an aggregate of
__________ (__) shares of Common Stock, $0.01 par value per share, of the
Company, standing in the undersigned's name on the books of the Company,
represented by Common Stock Certificate Number(s) __________, and does hereby
irrevocably constitute and appoint the Company as his attorney-in-fact to
transfer said shares on the books of the Company with full power of substitution
in the premises. This Stock Power may be executed by facsimile signature.

DATED the _____ day of __________,2007.


                                        /s/ Gregory F. White
                                        ----------------------------------------
                                        Gregory F. White



                                    EXHIBIT C



                                  IROBOT CORP.

                      INVENTION, CONFIDENTIALITY AGREEMENT
                   (MANAGEMENT, TECHNICAL AND MARKETING/SALES)

     Agreement dated as of the 26 day of March, 2003, by and between iRobot
Corp., a Delaware corporation (the "Company") having its principal office at 63
South Avenue, Burlington, MA 01803, and Gregory White ("Employee"), residing at
**

In consideration of employment by the Company, Employee agrees as follows:

1.   DEFINITIONS. The following terms will have the meanings specified below:

     1.1 "PRODUCTS" means all computer programs and other products and services
developed and/or licensed, sold, leased or otherwise distributed or put into use
by the Company, during the term of Employee's employment.

     1.2 "CONFIDENTIAL INFORMATION" means all valuable information of the
Company which may give the Company a competitive advantage and is not generally
known to others. It includes, without limitation, the Inventions (as defined in
Section 2.1 below), customer lists and data, computer programs and documentation
for such programs, information, strategies, internal reports and memoranda and
other data relating to the development, manufacturing, costs, marketing,
licensing, sales and uses of the Products, the source of supplies for the
Products, the Company's budget and strategic plans, and the identity and special
needs of customers for the Products. All Confidential Information and copies
thereof are the sole property of the Company.

     1.3 "THIRD PARTY CONFIDENTIAL INFORMATION" means information or data,
furnished to the Company by third parties, as to which the Company has assumed
obligations of confidentiality.

     1.4 "DOCUMENTS" means all tangible embodiments of Inventions, the Company's
Confidential Information, or Third Party Confidential Information, in written or
printed form, electronic storage media, or other tangible media of expression.

2.   ASSIGNMENT OF INVENTIONS.

     2.1 DISCLOSURE. Employee will promptly and fully disclose to the Company
any and all computer programs and documentation, inventions, discoveries,
developments, designs, data, know-how, concepts and ideas, whether or not
patentable, that are authored, conceived, developed, reduced to practice or
prepared by Employee alone or by Employee and others, during the period of
Employee's employment with the Company, relating to




either the Products or to any prospective activities of the Company known to
Employee as a consequence of employment with the Company (the "Inventions").

     2.2 FURTHER ASSURANCES. Upon and/or following disclosure of each Invention
to the Company, Employee will, during Employee's employment and at any time
thereafter, at the request and cost of the Company, sign, execute, make and do
all such deeds, documents, acts and things as the Company and its duly
authorized agents may reasonably require to apply for, obtain and vest in the
name of the Company alone (unless the Company otherwise directs) letters patent,
copyrights or other analogous protection in any country throughout the world and
when so obtained or vested to renew and restore the same; and to defend any
opposition proceedings in respect of such applications and any opposition
proceedings or petitions or applications for revocation of such letters patent,
copyright or other analogous protection.

     2.3 WORKS MADE FOR HIRE. Employee acknowledges that all computer programs,
documentation, works of authorship and copyrightable works prepared in whole or
in part by Employee in the course of Employee's employment, including without
limitation all Inventions, will be "works made for hire" under the Copyright Act
of 1976 (the "Copyright Act"), and will be the sole property of the Company and
the Company will be the sole author of such works within the meaning of the
Copyright Act. All such works, as well as all copies of such works in whatever
medium, will be owned exclusively by the Company and Employee hereby expressly
disclaims any and all interests in such works. If the copyright to any such work
would not be the property of the Company by operation of law, Employee hereby
and without further consideration, irrevocably assigns to the Company all right,
title and interest in such work, including all so-called "moral rights," and
will assist the Company and its nominees in every proper way, at the Company's
expense, to secure, maintain and defend for the Company's own benefit copyrights
and any extensions and renewals thereof on such work, including translations
thereof in any and all countries, such work to be and to remain the property of
the Company whether copyrighted or not. If the foregoing moral rights cannot be
so assigned under the applicable laws of the countries in which such rights
exist, Employee hereby waives such moral rights and consents to any action of
the Company that would violate such rights in the absence of such consent.

     2.4 ASSIGNMENT; POWER OF ATTORNEY. Without in any way limiting the
foregoing, Employee hereby assigns to the Company all right, title and interest
to all Inventions, including but not limited to patent rights. In the event the
Company is unable, after reasonable effort, to secure Employee's signature on
any letters patent, copyright or other analogous protection relating to an
Invention, whether because of Employee's physical or mental incapacity or for
any other reason whatsoever, Employee hereby irrevocably designates and appoints
the Company and its duly authorized officers and agents as his agent and
attorney-in-fact, to act for and in his behalf and stead to execute and file any
such application or applications and to do all other lawfully permitted acts to
further the prosecution thereon with the same legal force and effect as if
executed by Employee.




                                       -2-



     2.5 EMPLOYEE DEVELOPMENTS. Employee represents that all developments,
inventions, works of authorship or other intellectual property rights to which
Employee claims ownership as of the date of this Agreement (the "Employee
Developments"), and which the parties agree are excluded from this Agreement,
are listed in Exhibit A. If no Employee Developments are listed in Exhibit A,
Employee represents that there are no Employee Developments at the time of
signing this Agreement.

3.   CONFIDENTIAL INFORMATION.

     3.1 CONFIDENTIALITY. Employee agrees that all Confidential Information as
defined above, whether furnished to Employee by the Company or developed solely
by Employee or with others and whether or not developed in whole or in part with
the use of other Confidential Information disclosed to Employee by the Company,
will be Confidential Information of the Company. Employee will not disclose any
Confidential Information to any third party (not including another employee of
the Company, unless specifically directed otherwise) during employment by the
Company or after termination thereof, nor use any Confidential Information after
termination of employment with the Company, except as permitted or directed by
the Company's President or Chief Executive Officer.

     3.2 THIRD PARTIES. Except as directed by Employee's supervisor, Employee
will never, directly or indirectly, use, publish, disseminate or otherwise
disclose any Third Party Confidential Information.

4.   USE AND RETURN OF DOCUMENTS.

     Employee will not copy any Documents nor remove any Documents or copies
thereof from the Company's premises except to the extent necessary to his/her
employment and then only with the authorization of Employee's supervisor. Upon
the termination of Employee's employment with the Company, Employee will return
immediately to the Company any and all Documents and copies thereof then in
his/her possession or control.

5.   PUBLICITY.

     The Company, its subsidiaries and affiliates may use Employee's name and
likeness in or in connection with any technical or promotional material
published by them, without further compensation to Employee.

6.   EMPLOYMENT.

     6.1 EMPLOYMENT AT WILL. Employee agrees that this Agreement does not create
an obligation on the part of the Company to continue Employee's employment with
the Company. Employee agrees that Employee's employment with the Company is "at
will"


                                       -3-


and either the Company or Employee may terminate Employee's employment with the
Company at any time with or without cause.

     6.2 NO OTHER AGREEMENT. Employee represents that he/she is not subject to
any agreement or obligation with any other party which would or could in any way
conflict with Employee's obligation under this agreement, except as set forth in
Exhibit B.

7.   MISCELLANEOUS.

     7.1 ENTIRE AGREEMENT. This Agreement represents the sole agreement between
the Company and Employee and there are no other agreements oral or written,
related to employment with the Company or Employee's post-employment obligations
to the Company. Employee agrees that any modification of this Agreement by any
employee or agent of the Company will not be effective unless it is done by
written amendment signed by a corporate officer of the Company and Employee.

     7.2 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, excluding its
conflicts of laws rules.

     7.3 CONSENT TO JURISDICTION. Without limitation, Employee hereby consents
and submits to the jurisdiction of the state and federal courts in Massachusetts
and in the place where Employee's subsequent employer (at such time as suit is
commenced) is incorporated or has a principal place of business, in connection
with any alleged breach of this Agreement, and will accept service of process by
registered mail or the equivalent directed to Employee's last known address or
by such other means permitted by such court.

     7.4 REMEDIES. Employee acknowledges that in the event of a breach of the
provisions of Sections 2, 3 or 4, the damages to the Company would be
irreparable and would entail inevitable wrongful use or disclosure of the
Confidential Information and/or Third Party Confidential Information. Employee
therefore agrees that in addition to provable damages and reasonable attorneys'
fees, the Company shall be entitled to enjoin any such breach in any competent
court.

     7.5 INTERPRETATION. If anyone or more of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, it shall not affect any other provisions of this Agreement. If
any provision in this Agreement shall be held to be excessively broad, it shall
be construed by limiting it so as to be enforceable to the extent compatible
with applicable law.

     7.6 ASSIGNMENT. This Agreement shall bind and inure to the benefit of the
Company and any successor of the Company by reorganization, merger,
consolidation or liquidation and any assignee of all or substantially all of its
business or assets, but otherwise this Agreement may not be assigned by the
Company or Employee.


                                       -4-



     7.7 WAIVER OF BREACH. The waiver by any party of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.

     7.8 EXISTING EMPLOYMENT RELATIONSHIP. If this Agreement is executed by
Employee after the start of employment with the Company, it is deemed to have
been in effect since the inception of the employment relationship.

     7.9 CONSULTANTS. The terms "employee", "employ" and "employment" shall be
deemed, for purposes of this Agreement, to include the terms "consultant",
"retained by" and "retention" in the event that the undersigned has been
retained by the Company as a consultant or other independent contractor rather
than as an employee.

     7.10 AMENDMENTS. No amendment to this Agreement shall be effective unless
it is in writing and signed by a duly authorized representative of each party.
The term "Agreement", as used herein, includes any future written amendments,
modifications, or supplements made in accordance herewith.

EMPLOYEE ACKNOWLEDGES THAT HE/SHE HAS READ EACH PROVISION OF THIS AGREEMENT
CAREFULLY AND UNDERSTANDS, ACCEPTS AND AGREES TO BE BOUND BY EACH SUCH
PROVISION.

     IN WITNESS WHEREOF, the undersigned have executed this Agreement as an
agreement under seal, as of the date set forth above.

                                        EMPLOYEE:


                                        /s/ Gregory F. White
                                        ----------------------------------------
                                        Print Name: Gregory F. White


                                        IROBOT CORP.


                                        /s/ Helen Greiner
                                        ----------------------------------------
                                        Print Name: HELEN GREINER
                                        Title: PRESIDENT


                                       -5-



                                    EXHIBIT A

                          List of Employee Developments

                          [To be completed by Employee]



                                    EXHIBIT B

                         List of Conflicting Agreements

                          [To be completed by Employee]



                                    EXHIBIT D


                                                   FOR USE IN MASSACHUSETTS ONLY

                  NONCOMPETITION AND NONSOLICITATION AGREEMENT

                                    RECITALS

     A. iRobot Corporation (the "Company") is involved in an extremely
competitive industry in which confidential information and trade secrets are
valuable assets.

     B. I understand the meaning and effect of the terms of this Agreement, and
due to the extremely competitive nature of the business in which the Company is
engaged, I agree that the restrictions contained herein are reasonable and
necessary.

     C. This Agreement was made available to me prior to the date hereof so as
to provide me with an adequate amount of time in which to read the entire
Agreement and review its provisions with my counsel and advisors.

In consideration and as a condition of my employment or participation in the
Company's various stock option plans, I hereby agree as follows:

     1. Best Efforts. During my employment with Company, I will devote my full
time, attention, energies, skills and efforts to the performance of any job
duties and responsibilities assigned to me by Company. Unless approved in
writing by the Company's CEO, I shall not engage in any other business activity,
whether or not such business activity is pursued for gain, profit, or other
pecuniary advantage, which may tend to (a) interfere with the performance of any
job duties and responsibilities assigned to me by Company, (b) create a conflict
of interest, or (c) be competitive with the business activities, products or
services of Company.

     2. Noncompetition.

          (a) During the period of my employment by the Company and for one year
following the termination of my employment, regardless of the reasons for my
termination, I shall not, anywhere in the United States, directly or indirectly,
alone or as an owner, member, manager, partner, officer, employee, director,
investor, lender, consultant or independent contractor of any entity, (i) accept
employment with any business or entity that is in competition with the products
or services being created, developed, manufactured, marketed, distributed or
sold by the Company, or (ii) engage in any business or activity, including but
not limited to, the design, manufacture or sale of robots, components for robots
or related products or services, that is in competition with the products or
services being created, developed, manufactured, marketed, distributed or sold
by the Company.

          (b) My ownership of less than 1% of the equity securities of any
publicly traded company will not, in and of itself, violate the terms of this
Section.

          (c) I agree that this covenant not to compete is reasonable and
necessary to protect Company's legitimate business interests, including, without
limitation, the confidential and professional information and trade secrets of
Company, the substantial relationships between



                                       -2-


Company and its customers and clients, and the goodwill of Company.
Additionally, I acknowledge and agree that Company provides its products and
services on a worldwide basis and, thus, the geographical limitation of this
covenant not to compete also is reasonable. I also agree that the 12-month
duration of this covenant not to compete with the Company is reasonable. I
further agree that the enforcement of this covenant not to compete, whether by
injunctive relief, damages, or otherwise, is in no way contrary to the public
policy.

     3. Nonsolicitation of Customers.

          (a) During the period of my employment by the Company and for one year
following the termination of my employment, regardless of the reasons for my
termination, I shall not, directly or indirectly, alone or as an owner, member,
manager, partner, officer, employee, director, investor, lender, consultant or
independent contractor of any entity, solicit or do business with any customer
of the Company or any potential customer of the Company (i) with whom I have had
contact or (ii) about whom I obtained information, or became familiar with
through the Company's confidential information and trade secrets, during the
course of my employment with the Company.

          (b) I agree that this covenant not to solicit customers is reasonable
and necessary to protect Company's legitimate business interests, including,
without limitation, the confidential business or professional information and
trade secrets of Company, the substantial relationships between Company and its
customers, and the goodwill of Company. I also agree that the 12-month duration
of this covenant not to solicit customers is reasonable. I further agree that
the enforcement of this covenant not to solicit customers, whether by injunctive
relief, damages, or otherwise, is in no way contrary to the public health,
safety and welfare.

     4. Nonsolicitation of Employees.

          (a) During the period of my employment by the Company and for one year
following the termination of my employment, regardless of the reasons for the
termination, I will not, in any manner, directly or indirectly, hire or engage,
or assist any company or business organization by which I am employed or which
is directly or indirectly controlled by me to hire or engage, any person who is
or was employed by the Company (or is or was an agent, representative,
contractor, project consultant or consultant of the Company) at the time of my
termination or during the period of one year prior thereto or thereafter.

          (b) During the period of my employment by the Company and for one year
following the termination of my employment, regardless of the reasons for the
termination, I will not, in any manner, directly or indirectly, solicit, recruit
or induce, or assist any company or business organization by which I am employed
or which is directly or indirectly controlled by me to solicit, recruit or
induce, any person who is or was employed by the Company (or is or was an agent,
representative, contractor, project consultant or consultant of the Company) at
the time of my termination or during the period of one year prior thereto or
thereafter, to leave his or her employment, relationship or engagement with the
Company.

iRobot Corporation
Non-Competition & Non-Solicitation Agreement
Rev. 04.2004



                                       -3-


          (c) I agree that these covenants are reasonable and necessary to
protect Company's legitimate business interests, including, without limitation,
the confidential business or professional information and trade secrets of
Company, the substantial relationships between Company and its officers,
directors, employees, independent contractors, consultants, agents, and other
personnel or representatives. I also agree that the 12-month duration of these
covenants not to solicit and not to hire employees is reasonable. I further
agree that the enforcement of these covenants not to solicit or hire employees,
whether by injunctive relief, damages, or otherwise, is in no way contrary to
the public policy.

     5. Notice to Future Employers and of Future Employment. I agree and
acknowledge that during my employment with Company and for the effective period
of the provisions set forth in Sections 2, 3 and 4, I will inform each
prospective new employer I may have, prior to accepting employment, of the
existence of this Agreement, and I shall provide each prospective employer with
a copy of this Agreement. I also agree and acknowledge that Company has the
right to independently contact any potential or actual future employer of mine
to notify the future employer of my obligations under this Agreement and provide
such future employer with a copy of this Agreement. Company shall also be
entitled to notify such actual or potential future employer of Company's
understanding of the requirements of this Agreement and what steps, if any,
Company intends to take to insure compliance with or enforcement of this
Agreement.

     6. Employment At Will. I understand that this Agreement does not constitute
an implied or written employment contract and that my employment with the
Company is on an "at-will" basis. Accordingly, I understand that either the
Company or I may terminate my employment at any time, for any or no reason, with
or without prior notice.

     7. Reimbursement. I hereby authorize the Company at any time during or
after the term of my employment to withhold from any amounts otherwise owed to
me (including, but not limited to, salary, bonus, commissions and expense
reimbursements) to the fullest extent permitted by applicable law: any and all
amounts due to the Company from me, including, but not limited to, cash
advances, travel advances, overpayments made by the Company to me, amounts
received by me due to the Company's error, unpaid personal credit card or phone
charges or any other debt I owe to the Company for any reason, including amounts
with respect to misuse or misappropriation of Company assets or breach of this
Agreement.

     8. Severability. It is the desire and intent of the parties that the
provisions of this Agreement shall be enforced to the fullest extent permissible
under the laws and public policies applied in Massachusetts. This Agreement
shall be deemed to consist of a series of separate covenants by me, one for each
line of business carried on by the Company. The parties expressly agree that the
character, duration, and geography of this Agreement are reasonable in light of
the circumstances as they exist on the date upon which this Agreement has been
executed. However, should a court of competent jurisdiction nonetheless
determine at a later date that the character, duration or geography of this
Agreement is unreasonable in light of the circumstances as they then exist, then
it is my intention and agreement that this Agreement shall be construed by the
court in such a manner as to impose only those restrictions on my conduct that
are reasonable in light of the circumstances as they then exist and as
are necessary to assure the Company of the

iRobot Corporation
Non-Competition & Non-Solicitation Agreement
Rev. 04.2004



                                       -4-


intended benefit of this Agreement to the maximum extent permitted by applicable
law. If, in any judicial proceeding, a court shall refuse to enforce all of the
separate covenants deemed included herein because, taken together they are more
extensive than necessary to assure the Company of the intended benefit of this
Agreement, it is expressly understood and agreed between the parties hereto that
those of such covenants (or portions thereof), which, if eliminated, would
permit the remaining separate covenants (or portions thereof) to be enforced in
such proceeding shall, for the purpose of such proceeding, be deemed eliminated
from the provisions hereof. Such modification or deletion is to apply only with
respect to the operation of such provision in the particular jurisdiction in
which such court determination is made.

     9. Amendments; Waiver. Any amendment to or modification of this Agreement,
or any waiver of any provision hereof, shall be in writing and signed by the
Company. Any waiver by the Company of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
of such provision or any other provision hereof.

     10. Survival. This agreement shall be effective as of the date entered
below. My obligations under this Agreement shall survive the termination of my
employment regardless of the manner of such termination and shall be binding
upon my heirs, executors, administrators and legal representatives.

     11. Assignment. The Company shall have the right to assign this Agreement
to its successors and assigns, and all covenants and agreements hereunder shall
inure to the benefit of and be enforceable by said successors or assigns. I may
not assign this Agreement.

     12. Representations.

          (a) I represent that I am free to enter into this Agreement, I have
not made and will not make any agreements in conflict with this Agreement, and I
shall not disclose or make available to the Company, or use for the Company's
benefit, any confidential information, including trade secrets, belonging to me
or any third party, including but not limited to, any former employer, partner,
co-venturer, client, customer or supplier. I further represent and warrant that
(i) I have delivered to the Company a copy of every agreement that may bear on
my employment with the Company, including but not limited to, any noncompetition
agreement, nondisclosure agreement or employment agreement, and (ii) I will
honor all such agreements.

          (b) I understand and agree that because of the nature of the Company's
products, services and customers, because of my position with the Company and
because the Company's business is or may become international in scope, the
duration of the restrictive covenants contained herein are reasonable and
necessary. I also understand and agree that the information I may learn in the
course of my employment and the goodwill to which I may be exposed belong
exclusively to the Company and have implications and applications that are
international in scope. Accordingly, I agree that the restrictive covenants
contained herein are reasonable with respect to geographic scope.

iRobot Corporation
Non-Competition & Non-Solicitation Agreement
Rev. 04.2004



                                       -5-


          (c) I represent that I have, and bring to my employment with the
Company, marketable skills that will enable me to secure employment and earn a
living for the duration of this Agreement without violating the restrictive
covenants contained herein. Therefore, I agree that any harm to me caused by the
enforcement of this Agreement will be outweighed by the harm to the Company
should this Agreement not be enforced.

          (d) I agree that any breach of this Agreement by me will cause
irreparable damage to the Company and that in the event of such breach the
Company shall have, in addition to any and all remedies of law, the right to an
injunction, specific performance or other equitable relief to prevent the
violation of my obligations hereunder. The Company may apply for such injunctive
relief in any court of competent jurisdiction without the necessity of posting
any bond or other security.

     13. Governing Law; Forum Selection Clause. This Agreement and any claims
arising out of this Agreement (or any other claims arising out of the
relationship between the parties) shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts and shall in all
respects be interpreted, enforced and governed under the internal and domestic
laws thereof, without giving effect to the Commonwealth's principles of
conflicts of laws. Any claims or legal actions by one party against the other
shall be commenced and maintained in any state or federal court located in
Massachusetts, and I hereby submit to the jurisdiction and venue of any such
court.

     14. Entire Agreement. This Agreement sets forth the complete, sole and
entire agreement between the parties on the subject matter herein and supersedes
any and all other agreements, negotiations, discussions, proposals, or
understandings, whether oral or written, previously entered into, discussed or
considered by the parties. Notwithstanding the foregoing, this agreement does
not supercede the Invention and Confidentiality Agreement that I signed as a
condition of my employment.

                     [REMAINDER OF PAGE INTENTIONALLY BLANK]

iRobot Corporation
Non-Competition & Non-Solicitation Agreement
Rev. 04.2004



                                       -6-


     IN WITNESS WHEREOF, the undersigned have executed this Agreement as a
sealed instrument as of the date first written below.

IROBOT CORPORATION                      EMPLOYEE


/s/ Helen Greiner                       /s/ Gregory White
- -------------------------------------   ----------------------------------------
Signature                               Signature

HELEN GREINER                           Gregory White
Name (Please Print)                     Name (Please Print)

Date: 3/16/06                           Date: 3/15/06

                                        Address: **
                                                 **

iRobot Corporation
Non-Competition & Non-Solicitation Agreement
Rev. 04.2004

EX-10.22

                                                                   Exhibit 10.22

                              BEDFORD BUSINESS PARK
                                4-18 CROSBY DRIVE
                             BEDFORD, MASSACHUSETTS

                         Lease Dated February 22, 2007

     THIS INSTRUMENT IS AN INDENTURE OF LEASE in which the Landlord and the
Tenant are the parties hereinafter named, and which relates to space in a
certain complex (the "Complex") known as Bedford Business Park, and with an
address at, 4-18 Crosby Drive, Bedford, Massachusetts.

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

                                    ARTICLE I

                                 Reference Data

1.1  Subjects Referred To

     Each reference in this Lease to any of the following subjects shall be
     construed to incorporate the data stated for that subject in this Article:

                              
Landlord:                        Boston Properties Limited Partnership, a
                                 Delaware limited partnership

Landlord's Original Address:     c/o Boston Properties, Inc.
                                 111 Huntington Avenue, Suite 300
                                 Boston, Massachusetts 02199-7610

Landlord's Construction          Ben Lavery/Richard Monopoli
Representative:

Tenant:                          iRobot Corporation, a Delaware corporation

Tenant's Original Address:       63 South Avenue
                                 Burlington, Massachusetts 01803

Tenant's Construction            Tom Isley/Mark A. Urbanek, P.E.
Representative:

Commencement Date:               As defined in Sections 2.4 and 3.4.





                              
Term (Sometimes Called           One hundred forty-four (144) calendar months
Original Term):                  (plus the partial month, if any, immediately
                                 following the Commencement Date), unless
                                 extended or sooner terminated as provided in
                                 this Lease.

Extension Option:                Two (2) periods of five (5) years each, as
                                 provided in and on the terms set forth in
                                 Section 8.20 hereof.

The Site:                        That certain parcel of land known as and
                                 numbered 4-18 Crosby Drive, Bedford, Middlesex
                                 County, Massachusetts, being more particularly
                                 described in Exhibit A attached hereto

Building C:                      The building in the "Complex" (as hereinafter
                                 defined in this Section 1.1) presently known as
                                 Building C and appropriately labeled on Exhibit
                                 A-1 attached hereto and incorporated herein by
                                 reference.

Building D:                      The building in the Complex presently known as
                                 Building D and appropriately labeled on Exhibit
                                 A-1 attached hereto and incorporated herein by
                                 reference.

Building E:                      The building in the Complex presently known as
                                 Building E and appropriately labeled on Exhibit
                                 A-1 attached hereto and incorporated herein by
                                 reference.

The Building:                    Building C, Building D or Building E, as may
                                 apply to the context.

The Buildings:                   Building C, Building D and Building E,
                                 collectively.

The Additional Buildings:        The other buildings in the Complex and
                                 presently numbered Buildings A, B, F, G and H,
                                 as shown on Exhibit A-1 attached hereto and
                                 incorporated herein by reference.

The Complex:                     The Buildings and the Additional Buildings
                                 together with all parking areas and the Site.




                                        2



                              
Premises (Sometimes also         The entirety of Buildings C, D and E in
Referred to as "Tenant's         accordance with the floor plans annexed hereto
Space"):                         as Exhibit D and incorporated herein by
                                 reference (subject to the exclusions described
                                 in Section 2.1 below).

Number of Parking Privileges:    Three (3) parking privileges for each 1,000
                                 square feet of rentable floor area leased by
                                 Tenant, subject to and in accordance with the
                                 provisions of Section 2.2.1 below.

Annual Fixed Rent:               (a) During the period commencing on the
                                 Commencement Date and ending on the last day of
                                 the thirty-sixth (36th) full calendar month
                                 immediately following the Commencement Date, at
                                 the annual rate of $2,008,488.48 (being the
                                 product of (i) $12.73 and (ii) the "Rentable
                                 Floor Area of the Premises" (hereinafter
                                 defined in this Section 1.1)).

                                 (b) During the period commencing on the first
                                 day of the thirty-seventh (37th) full calendar
                                 month immediately following the Commencement
                                 Date and ending on the last day of the Original
                                 Term, at the annual rate of $2,087,376.48
                                 (being the product of (i) $13.23 and (ii) the
                                 Rentable Floor Area of the Premises).

                                 (c) During each extension option period (if
                                 exercised), as determined pursuant to Section
                                 8.20.

Additional Rent:                 All charges and other sums payable by Tenant to
                                 Landlord as set forth in this Lease, in
                                 addition to Annual Fixed Rent.

Rentable Floor Area of           51,123 square feet.
Building C:

Rentable Floor Area of           54,507 square feet.
Building D:




                                        3



                              
Rentable Floor Area of           52,126 square feet.
Building E:

Rentable Floor Area of the       157,776 square feet, being the sum of (i) the
Premises (Sometimes also         Rentable Floor Area of Building C, (ii) the
Called "Rentable Floor Area      Rentable Floor Area of Building D and (iii) the
of Tenant's Space"):             Rentable Floor Area of Building E.

Total Rentable Floor Area of     157,776 square feet.
the Buildings:

Total Rentable Floor Area Of     315,928 square feet.
The Additional Buildings:

Total Rentable Floor Area of     473,704 square feet.
the Complex:

Permitted Uses:                  Collectively, the Permitted Use of the
                                 Buildings and the Permitted Use of the
                                 Additional Land Areas (as that term is defined
                                 in Section 8.27 below).

Permitted Use of the             Research, design, engineering, prototyping and
Buildings:                       development of the products and equipment from
                                 time to time of Tenant, light manufacturing
                                 (including installation and operation of
                                 machine shops) and testing of such products and
                                 equipment, and general administrative and
                                 executive office uses, as each of the same may
                                 from time to time be permitted by the Zoning
                                 By-Law for the Town of Bedford.

Permitted Use of Additional      Testing of Tenant's products and equipment
Land Areas:                      (including testing robot-controlled vehicles),
                                 as the same may from time to time be permitted
                                 by the Zoning By-Law for the Town of Bedford.

Initial Minimum Limits of        $6,000,000.00 combined single limit per
Tenant's Commercial General      occurrence, which can be achieved through a
Liability Insurance:             combination of primary and umbrella liability
                                 coverage.

Broker:                          Richards, Barry, Joyce & Partners
                                 53 State Street
                                 Boston, Massachusetts 02109




                                        4



                              
Security Deposit:                $2,000,000.00, to be held and disposed of
                                 (including any reductions in the amount
                                 thereof) pursuant to the provisions of Section
                                 8.21 of this Lease.



1.2  Exhibits

     There are incorporated as part of this Lease:

Exhibit A   -- Description of Site

Exhibit A-1 -- Site Plan of Complex

Exhibit A-2 -- Tenant's Visitor Parking Area

Exhibit B-1 -- Landlord's Base Building Work

Exhibit B-2 -- Preliminary Schematic Plans for Tenant Improvement Work

Exhibit C   -- Landlord's Services

Exhibit D   -- Floor Plans

Exhibit E   -- Form of Commencement Date Agreement

Exhibit F-1 -- Form of Lien Waivers

Exhibit F-2 -- Construction Rules and Regulations

Exhibit G   -- Broker Determination of Prevailing Market Rent

Exhibit H   -- Form of Letter of Credit

Exhibit I-1 -- Land Recreation Area A

Exhibit I-2 -- Land Recreation Area B

Exhibit J   -- MHD Lease

Exhibit K   -- Lease Audit Confidentiality Agreement

Exhibit L   -- Notice of Lease

Exhibit M   -- Current Lender's Standard Form SNDA


                                        5


Exhibit N -- Form of Landlord's Lien Waiver

Exhibit O -- Existing Leases

1.3  Table of Articles and Sections

                                                                          
ARTICLE I ................................................................     1
   Reference Data ........................................................     1
      1.1  Subjects Referred To ..........................................     1
      1.2  Exhibits ......................................................     5
      1.3  Table of Articles and Sections ................................     6

ARTICLE II ...............................................................     8
   Building, Premises, Term and Rent .....................................     8
      2.1  The Premises ..................................................     8
      2.2  Rights to Use Site Facilities .................................     9
      2.3  Landlord's Reservations .......................................    12
      2.4  Habendum ......................................................    13
      2.5  Fixed Rent Payments ...........................................    13
      2.6  Operating Expenses ............................................    14
      2.7  Real Estate Taxes .............................................    21
      2.8  Tenant Electricity ............................................    24

ARTICLE III ..............................................................    24
   Condition of Premises; Alterations ....................................    24
      3.1  Base Building Work ............................................    24
      3.2  Tenant Improvement Work .......................................    26
      3.3  Tenant Allowances .............................................    28
      3.4  Substantial Completion ........................................    31
      3.5  Force Majeure and Other Delays ................................    34
      3.6  Quality and Performance of Work ...............................    36
      3.7  Arbitration ...................................................    39
      3.8  Escrow of Funds ...............................................    39

ARTICLE IV ...............................................................    40
   Landlord's Covenants; Interruptions and Delays ........................    40
      4.1  Landlord Covenants ............................................    40
      4.2  Interruptions and Delays in Services and Repairs, Etc .........    41
      4.3  Landlord's Insurance ..........................................    43
      4.4  Landlord's Indemnity ..........................................    44
      4.5  Compliance with Laws ..........................................    44
      4.6  Leasing Restrictions ..........................................    44

ARTICLE V ................................................................    45




                                        6



                                                                          
   Tenant's Covenants ....................................................    45
      5.1  Payments ......................................................    46
      5.2  Repair and Yield Up ...........................................    46
      5.3  Use ...........................................................    46
      5.4  Obstructions; Items Visible From Exterior; Rules and
           Regulations ...................................................    48
      5.5  Safety Appliances .............................................    48
      5.6  Assignment; Sublease ..........................................    49
      5.7  Indemnity; Insurance ..........................................    57
      5.8  Personal Property at Tenant's Risk ............................    58
      5.9  Right of Entry ................................................    59
      5.10 Floor Load; Prevention of Vibration and Noise .................    60
      5.11 Personal Property Taxes .......................................    60
      5.12 Compliance with Laws ..........................................    60
      5.13 Payment of Litigation Expenses ................................    60
      5.14 Alterations ...................................................    61
      5.15 Vendors .......................................................    64
      5.16 Patriot Act ...................................................    65
      5.17 Signage .......................................................    66

ARTICLE VI ...............................................................    69
   Casualty and Taking ...................................................    69
      6.0  Landlord's Restoration Estimate ...............................    69
      6.1  Damage Resulting from Casualty ................................    69
      6.2  Uninsured Casualty ............................................    71
      6.3  Rights of Termination for Taking ..............................    71
      6.4  Award .........................................................    73
      6.5  Damage to Parking Areas and Land Recreation Area A ............    73
      6.6  Allocation of Proceeds Following Termination ..................    74

ARTICLE VII ..............................................................    75
   Default ...............................................................    75
      7.1  Tenant's Default ..............................................    75
      7.2  Landlord's Default ............................................    79

ARTICLE VIII .............................................................    80
   Miscellaneous Provisions ..............................................    80
      8.1  Extra Hazardous Use ...........................................    80
      8.2  Waiver ........................................................    80
      8.3  Cumulative Remedies ...........................................    80
      8.4  Quiet Enjoyment ...............................................    81
      8.5  Notice to Mortgagee and Ground Lessor .........................    82
      8.6  Assignment of Rents ...........................................    82
      8.7  Surrender .....................................................    82
      8.8  Brokerage .....................................................    83
      8.9  Invalidity of Particular Provisions ...........................    83




                                        7



                                                                          
      8.10 Provisions Binding, Etc .......................................    83
      8.11 Recording; Confidentiality ....................................    84
      8.12 Notices .......................................................    84
      8.13 When Lease Becomes Binding ....................................    85
      8.14 Section Headings ..............................................    85
      8.15 Rights of Mortgagee ...........................................    85
      8.16 Status Reports and Financial Statements .......................    86
      8.17 Self-Help .....................................................    87
      8.18 Holding Over ..................................................    88
      8.19 Non-Subrogation ...............................................    89
      8.20 Extension Option ..............................................    89
      8.21 Security Deposit ..............................................    90
      8.22 Late Payment ..................................................    93
      8.23 Tenant's Payments .............................................    94
      8.24 Waiver of Trial By Jury .......................................    94
      8.25 Governing Law .................................................    94
      8.26 Tenant's Equipment ............................................    94
      8.27 Land Recreation Space .........................................    97
      8.28 Tenant's Expansion Rights: Buildings F, G and H ...............   100
      8.29 Tenant's Expansion Rights: Buildings A and B ..................   105
      8.30 Waiver of Landlord's Lien .....................................   107
      8.31 Arbitration ...................................................   107
      8.32 Temporary Space ...............................................   108



                                   ARTICLE II

                        Building, Premises, Term and Rent

2.1  The Premises

     Landlord hereby demises and leases to Tenant, and Tenant hereby hires and
     accepts from Landlord, Tenant's Space in the Building excluding the roof
     and exterior faces of exterior walls, elevator wells and pipes, ducts,
     conduits, wires and appurtenant fixtures serving exclusively or in common
     other parts of the Buildings or the Complex. Notwithstanding the foregoing,
     for so long as Tenant leases the entire rentable square footage of any of
     the Buildings (or the entire rentable floor area of any of the Additional
     Buildings in the event Tenant shall exercise any expansion rights under
     Sections 8.28 or 8.29 below), Tenant shall have the exclusive right to use
     the loading areas, fan rooms, janitorial, electrical, telephone and
     telecommunications closets, conduits, risers, plenum spaces and elevators
     exclusively serving such Building or Buildings (or Additional Building(s)
     if applicable), subject, however, to Landlord's right to control access to
     such spaces. In the event that Tenant leases less than the entirety of a
     Building or Additional Building, Tenant's rights to use the foregoing areas
     shall be in common with the rights of other occupants of such Building or
     Additional Building.


                                        8


     Tenant's Space with such exclusions is hereinafter referred to as the
     "Premises." The term "Buildings" means the Buildings identified in Section
     1.1, and which are the subject of this Lease; the term "Additional
     Buildings" means the Additional Buildings identified in Section 1.1; the
     term "Site" means all, and also any part of the Land described in Exhibit
     A, plus any additions or reductions thereto resulting from the acquisition
     of adjacent property by Landlord or from the change of any abutting street
     line and all parking areas and structures. The term "Complex" means the
     Buildings, the Additional Buildings and the Site.

     Landlord shall use commercially reasonable efforts to cause the Town of
     Bedford to modify the existing numerical/alphabetical address system for
     the Complex in a manner reasonable acceptable to Tenant prior to the
     Commencement Date; provided, however, that Landlord shall not be deemed to
     be in default of its obligations hereunder in the event that the Town of
     Bedford fails to authorize such modifications, so long as Landlord has used
     commercially reasonable efforts as aforesaid. If the existing address
     system is thus modified, Landlord and Tenant shall within a reasonable time
     thereafter execute a letter agreement confirming the new building
     designations within the Complex.

2.2  Rights to Use Site Facilities

     Subject to Landlord's right to change or alter any of the following in
     Landlord's discretion as expressly herein provided, Tenant shall have, as
     appurtenant to the Premises, the non-exclusive right to use in common with
     others, subject to reasonable rules of general applicability to tenants of
     the Complex from time to time made by Landlord of which Tenant is given
     notice (a) any common lobbies, corridors, stairways, restrooms, elevators,
     loading platforms, janitor's closets, electrical and telephone closets of
     the Buildings and the pipes, ducts, conduits, wires and appurtenant meters
     and equipment serving the Buildings or the Premises, (b) common walkways
     and driveways necessary for access to the Buildings and parking areas
     serving the Complex and (c) the cafeteria and fitness center located or to
     be located in Building A of the Complex and the common corridors in
     Buildings A, B and G providing access thereto (the foregoing collectively
     referred to as the "Common Areas"). So long as Tenant leases the entirety
     of Building E, Tenant shall have the exclusive right, at no additional
     charge, to use the loading areas and bays in or at Building E.
     Notwithstanding anything to the contrary herein, Landlord has no obligation
     to allow any particular telecommunication service provider to have access
     to the Premises except as may be required by applicable law and except that
     Landlord agrees to permit Verizon to have telecommunications access to the
     Premises and the Complex at no additional charge for the purpose of
     providing telecommunications service to Tenant. Except as otherwise
     expressly provided above, if Landlord permits such access, Landlord may
     condition such access upon the payment to Landlord by the service provider
     of fees assessed by Landlord in its reasonable discretion. Notwithstanding
     the foregoing, Landlord will not unreasonably withhold, condition or delay
     its approval of any telecommunications provider designated by Tenant to
     service the Premises, so long as such provider is not utilizing the Site to
     provide service to third parties other than Tenant. Landlord hereby
     represents and warrants to Tenant that Verizon presently provides
     telecommunications services to the Complex.


                                       9



     2.2.1 Tenant's Parking

          (A) In addition, Tenant shall have the right, at no additional charge
          to Tenant, to use the Number of Parking Spaces (referred to in Section
          1.1) in the parking areas of the Complex for the parking of
          automobiles, in common with use by other tenants from time to time of
          the Complex, provided, however, that Landlord shall not be obligated
          to furnish stalls or spaces on the Site specifically designated for
          Tenant's use. Notwithstanding the foregoing, for so long as Tenant
          shall be directly leasing Buildings C and D in their entirety, Tenant
          shall have the exclusive right to use the area designated as "Tenant's
          Visitor Parking Area" on Exhibit A-2 attached hereto for parking by
          Tenant and its visitors (it being understood and agreed that in the
          event Tenant shall cease to directly lease Buildings C and D in their
          entirety, the number of spaces which Tenant shall be entitled to use
          shall be reduced proportionately based upon the square footage Tenant
          continues to directly lease in Buildings C and D). Landlord will use
          reasonable efforts, by the use of signs and markings, to designate the
          spaces as being intended for the use of Tenant's visitors, but shall
          not be obligated to police the use of such spaces, which Tenant
          recognizes are to be operated on a self-parking basis. Tenant's
          visitor parking shall not be subject to or affected by any Managed
          Parking Program instituted by Landlord under this Section 2.2.1.

          In the event that the Rentable Floor Area of the Premises increases or
          decreases at any time during the Lease Term, the Number of Parking
          Spaces provided to Tenant hereunder shall be increased or reduced
          proportionately based upon the ratio set forth in Section 1.1.

          (B) In the event that during the Lease Term, Landlord executes leases
          for premises within the Complex (including this Lease) that result in
          the commitment of more than One Thousand One Hundred (1,100) parking
          spaces in the aggregate, Landlord shall, at its sole cost and expense,
          commence the process of obtaining the necessary permits and approvals
          to construct a structured parking facility on the Site. In the event
          that during the Lease Term, Landlord executes leases for premises
          within the Complex (including this Lease) that result in the
          commitment of more than One Thousand Two Hundred Thirty (1,230)
          parking spaces in the aggregate and such commitments result in the
          existence of a "Parking Shortage" (as hereinafter defined), Landlord
          shall, at its sole cost and expense, use commercially reasonable best
          efforts to at Landlord's election either (x) endeavor to negotiate
          with adjacent landowners for the right to use land adjacent to the
          Site as a satellite parking area serving the Complex or (y) endeavor
          to construct a structured parking facility on the Site (either of the
          options described in subsections (x) or (y) being hereinafter referred
          to as the "Alternative Parking"). During Landlord's pursuit of the
          Alternative Parking, Landlord shall, at its sole cost and expense,
          institute a managed parking program for the parking areas on the Site
          (the "Managed Parking Program"). Tenant acknowledges and agrees that
          there may be a temporary disruption in parking in


                                       10



          connection with the conversion to a Managed Parking Program and/or the
          construction of a new parking facility, and Tenant shall reasonably
          cooperate with Landlord at no cost to Tenant during such conversion
          and/or construction (Landlord hereby agreeing to use commercially
          reasonable efforts to minimize such disruption). Tenant further
          acknowledges that, despite its use of commercially reasonable best
          efforts, Landlord may be unable to obtain rights to use additional
          land or to secure the permits and approvals to construct a new parking
          facility, and accordingly that in no event shall Landlord be in
          default of its obligations hereunder so long as (x) Landlord has used
          commercially reasonable best efforts as aforesaid and (y) Landlord has
          implemented the Managed Parking Program in order to address the
          Parking Shortage.

          For the purposes hereof, a "Parking Shortage" shall be defined as an
          overuse of the parking areas of the Site such that Tenant is unable to
          utilize the Number of Parking Spaces provided to Tenant hereunder, as
          determined in accordance with the following procedure:

          (i)  In the event that Landlord receives four (4) complaints from
               tenants of the Complex over a period of two (2) weeks indicating
               that they are unable to find parking spaces at the Complex,
               Landlord shall perform and complete a parking survey of the
               Complex within two (2) weeks of its receipt of the last such
               complaint.

          (ii) If the parking survey indicates that less than ninety-eight
               percent (98%) of the total number of parking spaces on the Site
               are available for tenant parking over a period of two (2) weeks,
               then Landlord shall attempt to ascertain whether the cause of the
               problem is a particular tenant's overuse of the number of parking
               spaces provided to such tenant under the terms of its lease and
               shall take reasonable measures to enforce the terms of such lease
               and rectify the situation.

          (iii) In the event that the overuse cannot be readily addressed by
               Landlord, then a Parking Shortage shall be deemed to exist and
               shall trigger Landlord's obligations under this Section 2.2.1 to
               implement the Managed Parking Program and endeavor to obtain the
               Alternative Parking.

          Notwithstanding anything contained herein to the contrary, it is
          expressly understood and agreed that Landlord shall be under no
          obligation whatsoever (under this subsection (B) or otherwise) to
          address a Parking Shortage at the Site to the extent such Parking
          Shortage is caused by the use of parking spaces by any subtenant of
          Tenant's in a ratio greater than three (3) parking privileges for each
          1,000 square feet of rentable floor area of the subleased premises. In
          addition, under no circumstances shall Landlord be required to
          endeavor to obtain the Alternative Parking in the event of a Parking
          Shortage that occurs during the last three (3) years of the Lease Term
          unless and until Tenant shall validly exercise its then-current
          extension option under Section 8.20 below (it being understood and


                                       11



          agreed in connection with the foregoing that (x) Landlord shall have
          no obligation to endeavor to obtain the Alternative Parking in the
          event that Tenant shall have no further rights to extend the Lease
          Term and (y) Landlord shall nonetheless be required to implement the
          Managed Parking Program to address the Parking Shortage irrespective
          of the amount of time remaining in the Lease Term).

          (C) Subject to the provisions of Section 8.27 below and for so long as
          Tenant has the exclusive right to use the Additional Land Areas (as
          defined in said Section 8.27), in no event shall the Additional Land
          Areas be used by Landlord to provide additional parking facilities or
          parking spaces for the Site or to satisfy the Number of Parking Spaces
          to which Tenant is entitled hereunder unless (a) Tenant shall request
          the same, (b) such spaces are approved by applicable government
          authorities and (c) such spaces are designated for Tenant's exclusive
          use.

          (D) Tenant covenants and agrees that it and all persons claiming by,
          through and under it, shall at all times abide by all reasonable rules
          and regulations promulgated by Landlord with respect to the use of the
          parking areas on the Site (including, without limitation, those
          relating to the Managed Parking Program, if implemented) provided such
          rules and regulations are not inconsistent with Tenant's rights under
          this Lease and are of general applicability to the occupants of the
          Complex. The parking privileges granted herein are non-transferable
          except to an assignee or subtenant permitted or consented to pursuant
          to Section 5.6 through Section 5.6.5 or to a permitted occupant under
          Section 5.6.6 below. Further, except to the extent of Landlord's gross
          negligence or willful misconduct, Landlord assumes no responsibility
          whatsoever for loss or damage due to fire, theft or otherwise to any
          automobile(s) parked on the Site or to any personal property therein,
          however caused, and Tenant covenants and agrees, upon request from
          Landlord from time to time, to notify its officers, employees, agents
          and invitees of such limitation of liability. Tenant acknowledges and
          agrees that a license only is hereby granted, and no bailment is
          intended or shall be created.

2.3  Landlord's Reservations

     Landlord reserves the right from time to time, without unreasonable
     interference with Tenant's use and upon reasonable prior notice to Tenant
     (except in the event of an emergency): (a) to install, use, maintain,
     repair, replace and relocate for service to the Premises and other parts of
     the Buildings or either, pipes, ducts, conduits, wires and appurtenant
     fixtures, wherever located in the Premises or Buildings, and (b) to alter
     or relocate any other common facility, provided that substitutions are
     substantially equivalent or better. Installations, replacements and
     relocations referred to in clause (a) above shall be located to the extent
     practicable in the central core area of the Buildings, above ceiling
     surfaces, below floor surfaces or within perimeter walls of the Premises.
     Landlord shall use commercially reasonable efforts to schedule any such
     work contemplated by this Section 2.3 during Tenant's non-business hours.


                                       12



2.4  Habendum

     Tenant shall have and hold the Premises for a period commencing on the
     earlier of (a) the Substantial Completion Date (as determined in accordance
     with Section 3.4(D) below), or (b) that date on which Tenant commences
     occupancy of any portion of the Premises for the Permitted Uses, and
     continuing for the Term unless sooner terminated as provided in Article VI
     or Article VII or unless extended as provided in Section 8.20.

     As soon as may be convenient after the date has been determined on which
     the Term commences as aforesaid, Landlord and Tenant agree to join with
     each other in the execution of a written Declaration, in the form of
     Exhibit E, in which the date on which the Term commences as aforesaid and
     the Term of this Lease shall be stated. If Tenant fails to execute or state
     objections to such Declaration within thirty (30) days after such
     Declaration is submitted by Landlord to Tenant, the Commencement Date and
     Lease Term shall be as originally set forth in the Declaration delivered by
     Landlord.

2.5  Fixed Rent Payments

     Tenant agrees to pay to Landlord, or as directed by Landlord, at the
     place(s) specified below, or at such other place as Landlord shall from
     time to time designate by notice, (1) on the Commencement Date (defined in
     Section 1.1 hereof) and thereafter monthly, in advance, on the first day of
     each and every calendar month during the Original Term, a sum equal to one
     twelfth (1/12th) of the then-applicable Annual Fixed Rent for the Premises
     and (2) on the first day of each and every calendar month during each
     extension option period (if exercised), a sum equal to one twelfth (1/12th)
     of the annual fixed rent as determined in Section 8.20 for the extension
     option period. Until notice of some other designation is given, Annual
     Fixed Rent and all other charges for which provision is herein made shall
     be paid by remittance to or for the order of Boston Properties Limited
     Partnership either (i) by mail to P.O. Box 3557, Boston, Massachusetts
     02241-3557, (ii) by wire transfer to Bank of America in Dallas, Texas, Bank
     Routing # 0260-0959-3 or (iii) by ACH transfer to Bank of America in
     Dallas, Texas, Bank Routing Number 111 000 112, and in case of (ii) or
     (iii) referencing Account Number 3756454460, Account Name of Boston
     Properties, LP, Tenant's name and the Property address. All remittances
     received by Boston Properties Limited Partnership or by any subsequently
     designated recipient, shall be treated as payment to Landlord.

     Annual Fixed Rent and Additional Rent for any partial month shall be paid
     by Tenant to Landlord at such rate on a pro rata basis, and, if the
     Commencement Date is a day other than the first day of a calendar month,
     the first payment of Annual Fixed Rent and Additional Rent which Tenant
     shall make to Landlord shall be a payment equal to a proportionate part of
     such monthly Annual Fixed Rent for the partial month from the Commencement
     Date to the first day of the succeeding calendar month.

     The Annual Fixed Rent and all other charges for which provision is herein
     made shall be paid by Tenant to Landlord, without offset, deduction or
     abatement except as otherwise


                                       13



     specifically set forth in this Lease.

2.6  Operating Expenses

     "Landlord's Operating Expenses" means the cost of operation of the
     Buildings and the Site which shall exclude costs of special services
     rendered to tenants (including Tenant) for which a separate charge is made,
     but shall include, without limitation, the following: premiums for
     insurance carried with respect to the Buildings and the Site (including,
     without limitation, liability insurance, insurance against loss in case of
     fire or casualty and insurance of monthly installments of fixed rent and
     any Additional Rent which may be due under this Lease for not more than 12
     months in the case of both fixed rent and Additional Rent and if there be
     any first mortgage of the Property, including such insurance as may be
     required by the holder of such first mortgage), subject in all events to
     the provisions of Section 4.3 below; compensation and all fringe benefits,
     worker's compensation insurance premiums and payroll taxes paid to, for or
     with respect to all persons engaged in the operating, maintaining or
     cleaning of the Buildings or Site (but in the case of persons who are also
     providing services to other properties outside of the Complex, excluding
     any portion of such compensation which is not reasonably allocable to
     services performed for the Complex); water, sewer, gas, electric and oil
     charges (excluding utility charges (i) separately payable by Tenant under
     Section 2.8 below, (ii) separately chargeable to tenants for additional or
     special services, or (iii) for the supply of applicable utilities to
     leaseable areas of the Complex to the extent Tenant's entire use of any
     such utility is separately metered and/or submetered and Tenant pays
     separately therefor); cost of building supplies and equipment; cost of
     maintenance, cleaning and repairs (other than repairs not properly
     chargeable against income or reimbursed from contractors under guarantees);
     cost of snow removal and care of landscaping; payments under service
     contracts with independent contractors; management fees at reasonable rates
     for self-managed buildings consistent with the type of occupancy and the
     service rendered, not to exceed three percent (3%) of the "gross rents" for
     the Premises ("gross rents" for the purposes hereof being defined as all
     annual fixed rent, Landlord's Operating Expenses and Landlord's Tax
     Expenses, as defined in Section 2.7 below, scheduled for the Premises),
     which such management fees shall for the purposes of this Section 2.6 be
     deemed to be part of Landlord's Operating Expenses allocable to the
     Buildings rather than to the Site; the fair market rental value of the
     space in the Complex or at another property owned by Landlord or an
     affiliate of Landlord and used as the management office, provided that if
     the management office services more than one building or properties, the
     rent for such management office shall be equitably prorated and apportioned
     between the Complex and the other building or properties; cost of
     operating, cleaning and maintaining the shared cafeteria and fitness center
     facilities to be constructed in the Complex as part of Landlord's Base
     Building Work under Section 3.0 below (net of any revenue collected from
     the operation of such cafeteria and fitness center); costs of maintaining
     and insuring Land Recreation Area A and Land Recreation Area B (as those
     terms are defined in Section 8.26 below) and any real estate taxes required
     to be paid by Landlord as tenant under the MHD Lease (as that term is
     defined in said Section 8.26) (all of which such costs shall for the
     purposes of this Section 2.6 be deemed to be part of Landlord's Operating
     Expenses allocable to the Buildings rather


                                       14



     than to the Site); and all other reasonable and necessary expenses paid in
     connection with the operation, cleaning and maintenance of the Buildings
     and the Site and properly chargeable against income in accordance with
     generally acceptable accounting practices consistently applied, provided,
     however, that if during the Term of this Lease, Landlord shall make a
     capital expenditure (i) to reduce Landlord's Operating Expenses if Landlord
     shall have reasonably determined that the annual reduction in Landlord's
     Operating Expenses shall exceed the annual charge-off therefor or (ii) to
     comply with applicable laws, rules, regulations, requirements, statutes,
     ordinances, by-laws and court decisions of all public authorities which
     first became applicable to the Complex after the Commencement Date (the
     foregoing categories of capital expenditures in (i) and (ii) being referred
     to as "Permitted Capital Expenditures"), Landlord may include in the
     calculation of Landlord's Operating Expenses for the year in which it was
     made and in Landlord's Operating Expenses for each succeeding year wholly
     or partly falling in the Term until fully amortized, the annual charge off
     of such Permitted Capital Expenditures. Annual charge off shall be
     determined by dividing the original capital expenditure plus an interest
     factor, reasonably determined by Landlord as being the interest rate then
     being charged for long term mortgages by institutional lenders on like
     properties within the locality in which the Complex is located, by the
     number of years of useful life of the improvement made with the capital
     expenditure; and the useful life shall be determined reasonably by Landlord
     in accordance with generally accepted accounting principles and practices
     in effect at the time of making such expenditure.

     Notwithstanding anything in this Lease to the contrary, the following shall
     be excluded from Landlord's Operating Expenses Allocable to the Premises:

     (i)  All capital expenditures and depreciation, except as otherwise
          explicitly provided in this Section 2.6;

     (ii) Interest on indebtedness, debt amortization, ground rent, and
          refinancing costs for any mortgage or ground lease of the Buildings or
          the Complex;

     (iii) Legal, auditing, consulting and professional fees and other costs
          (other than those legal, auditing, consulting and professional fees
          and other costs incurred in connection with the normal and routine
          maintenance and operation of the Complex), including, without
          limitation, those: (i) paid or incurred in connection with financings,
          refinancings or sales of any Landlord's interest in the Buildings or
          the Complex; (ii) relating to any special reporting required by
          securities laws; (iii) relating to negotiations or disputes with, or
          leasing to, tenants or prospective tenants; (iv) relating to
          litigation (including costs of settlement judgments and payments in
          lieu thereof); (v) the interpretation of leases or other occupancy
          agreements; (vi) the enforcement of the provisions of any lease or
          other occupancy agreement affecting the Complex including without
          limitation this Lease; (vii) the initial construction of the
          improvements on the Property; (viii) the review, approval or other
          actions in connection with the sublease or assignment of tenant leases
          (provided, however, that Tenant shall nonetheless be responsible under
          Section 5.6.5(B) for any such costs relative to its own requests for
          consent


                                       15



          to a sublease or assignment); (ix) any action against a present or
          former tenant or occupant under a lease or other occupancy agreement,
          including, without limitation, eviction, distraint, levy and
          collection actions; and (x) costs incurred as a result of the
          violation by Landlord or any tenant of the terms and conditions of any
          lease;

     (iv) The cost of any item or service to the extent reimbursed or
          reimbursable to Landlord by insurance required to be maintained under
          the Lease or by any third party;

     (v)  The cost of repairs or replacements incurred by reason of fire or
          other casualty or condemnation other than costs not in excess of a
          commercially reasonable deductible (currently $25,000.00) on any
          insurance maintained by Landlord which provides a recovery for such
          repair or replacement;

     (vi) Any advertising, promotional or marketing expenses for the Buildings;

     (vii) The cost of any service or materials provided by any party related to
          Landlord (other than the management fee), to the extent such costs
          exceed the reasonable cost for such service or materials absent such
          relationship in buildings similar to the Buildings in the vicinity of
          the Buildings;

     (viii) Payments for rented equipment, the cost of which equipment would
          constitute a capital expenditure if the equipment were purchased to
          the extent that such payments exceed the amount which could have been
          included in Landlord's Operating Expenses had Landlord purchased such
          equipment rather than leasing such equipment;

     (ix) Penalties, damages, and interest for late payment or violations of any
          obligations of Landlord, including, without limitation, taxes, Legal
          Requirements, insurance, equipment leases and other past due amounts;

     (x)  Contributions to charitable or political organizations, and any
          entertainment, dining or travel expenses of Landlord's employees for
          any purpose;

     (xi) The cost of testing, remediation or removal of "Hazardous Materials"
          (as defined in Section 5.3) in the Buildings or on the Site required
          by "Hazardous Materials Laws" (as defined in Section 5.3);

     (xii) Wages, salaries, or other compensation (including benefits) paid to
          any executive employees above the grade of Building manager;

     (xiii) The net (i.e. net of the reasonable costs of collection) amount
          recovered by Landlord under any warranty or service agreement from any
          contractor or service provider shall be credited against Landlord's
          Operating Expenses;


                                       16



     (xii) Costs in connection with leasing space in the Complex or to retain
          existing tenants, including brokerage commissions, lease concessions,
          lease assumptions, rental abatements, construction allowances granted
          to specific tenants and alteration work performed by Landlord to
          prepare space for tenants, including any utilities or services
          incurred in connection with performing such work;

     (xiii) The cost of any work or service performed or rendered exclusively
          for any tenant, including Tenant, or for which Tenant pays directly to
          any third party (i.e. costs of cleaning tenant spaces if Tenant
          provides its own janitorial services for the Premises) and costs
          incurred in connection with the making of repairs which are the
          obligations of another tenant of the Complex;

     (xiv) The cost of acquisition of any sculpture, paintings or other objects
          of art;

     (xv) Any amounts billed or billable to Tenant or any other tenant for any
          services furnished to Tenant or any other tenant by Landlord or
          Landlord's agents or contractors for which a separate charge is made,
          including, without limitation, the supply of overtime
          air-conditioning, ventilation and heating, and above-standard cleaning
          services;

     (xvi) Any costs of maintenance, repairs or replacements required because of
          the negligent or willful act or omission of Landlord, its officers,
          directors, servants, agents, employees or contractors;

     (xvii) Any expenses to design and construct (including permitting fees,
          costs of insurance and bonds, and costs of equipment and materials)
          the Base Building Work, and any costs to correct any defects, latent
          or patent, in any of the equipment or improvements which are a part of
          the Base Building Work (except to the extent caused by Tenant's use of
          the Premises for other than general office use);

     (xviii) Reserves for bad debts or for future improvements, repairs or
          additions;

     (xix) Any above-standard cleaning (which shall include trash collection and
          removal), including, but not limited to construction cleanup or
          special cleanings associated with parties/events and specific tenant
          requirements in excess of service provided to Tenant;

     (xx) The costs of new services or substantial increases in existing
          services to the extent such new or increased level of services are
          required solely as the result of the presence of a particular occupant
          at the Complex, such as for example, the cost of providing additional
          security services due to threats against a particular occupant;

     (xxi) Costs in connection with acquiring additional land or development
          rights or of constructing any additional buildings within the Complex;
          and


                                       17



     (xxii) Costs of installing any new shared building amenities within the
          Complex after the Commencement Date and the cost to renovate the
          existing cafeteria and to construct the new fitness facility in
          Building A.

     "Operating Expenses Allocable to the Premises" shall mean the same
     proportion of Landlord's Operating Expenses for and pertaining to the
     Complex as the Rentable Floor Area of the Premises bears to the Total
     Rentable Floor Area of the Complex; provided, however, that to the extent
     that any components of Landlord's Operating Expenses relate to services
     that are provided solely to a single Building or Buildings, "Operating
     Expenses Allocable to the Premises" for any such services shall mean the
     same proportion of Landlord's Operating Expenses for and pertaining solely
     to such services as the rentable floor area of that portion of the Premises
     located within such Building or Buildings to which the services are being
     exclusively provided bears to the total rentable floor area of such
     Building or Buildings (it being understood and agreed that to the extent
     any components of Landlord's Operating Expenses relate to services that are
     provided solely to a single Additional Building or Buildings in which
     Tenant does not lease any space, the cost of such services would not be
     included within Landlord's Operating Expenses billable to Tenant under this
     Lease).

     For each calendar year falling within the Term, Tenant shall pay to
     Landlord, as Additional Rent, the Operating Expenses Allocable to the
     Premises for such corresponding full calendar year, and for each fraction
     of a calendar year falling within the Term at the beginning or end thereof,
     Tenant shall pay to Landlord, as Additional Rent, the product of (i) such
     applicable fraction of a calendar year and (ii) the Operating Expenses
     Allocable to the Premises for the calendar year in which said fraction
     occurs.

     Not later than one hundred and twenty (120) days after the end of the first
     calendar year or fraction thereof ending December 31 and of each succeeding
     calendar year during the Term or fraction thereof at the end of the Term,
     Landlord shall render Tenant a statement in reasonable detail and according
     to usual accounting practices certified by a representative of Landlord,
     showing for the preceding calendar year or fraction thereof, as the case
     may be, Landlord's Operating Expenses and Operating Expenses Allocable to
     the Premises. Said statement to be rendered to Tenant shall also show for
     the preceding year or fraction thereof as the case may be the amounts of
     operating expenses already paid by Tenant as Additional Rent, and the
     amount of operating expenses remaining due from, or overpaid by, Tenant for
     the year or other period covered by the statement. Within thirty (30) days
     after the date of delivery of such statement, Tenant shall pay to Landlord
     the balance of the amounts, if any, required to be paid pursuant to the
     above provisions of this Section 2.6 with respect to the preceding year or
     fraction thereof, or Landlord shall credit any amounts due from it to
     Tenant pursuant to the above provisions of this Section 2.6 against (i)
     monthly installments of fixed rent next thereafter coming due or (ii) any
     sums then due from Tenant to Landlord under this Lease (or refund such
     portion of the overpayment as aforesaid if the Term has ended and Tenant
     has no further obligation to Landlord).

     In addition, Tenant shall make payments monthly on account of Operating
     Expenses


                                       18



     Allocable to the Premises anticipated for the then current year at the time
     and in the fashion herein provided for the payment of fixed rent. The
     amount to be paid to Landlord shall be an amount reasonably estimated
     annually by Landlord to be sufficient to cover, in the aggregate, a sum
     equal to Operating Expenses Allocable to the Premises for each calendar
     year during the Term. Notwithstanding the foregoing, in determining the
     amount of Landlord's Operating Expenses for any calendar year or portion
     thereof falling within the Lease Term, if less than ninety-five percent
     (95%) of the Total Rentable Floor Area of the Buildings with respect to
     Landlord's Operating Expenses for and pertaining to the Buildings and/or
     less than ninety-five percent (95%) of the Total Rentable Floor Area of the
     Complex with respect to Landlord's Operating Expenses for and pertaining to
     the Site shall have been occupied by tenants at any time during the period
     in question, then, at Landlord's election, those components of Landlord's
     Operating Expenses that vary based on occupancy for such period shall be
     adjusted to equal the amount such components of Landlord's Operating
     Expenses would have been for such period had occupancy been ninety-five
     percent (95%) throughout such period.

     2.6.1 Tenant's Audit Right

          Subject to the provisions of this paragraph, Tenant shall have the
          right, at Tenant's cost and expense, to examine all documentation and
          calculations prepared in the determination of Operating Expenses
          Allocable to the Premises and Landlord's Tax Expenses Allocable to the
          Premises (as defined in Section 2.7 below) (collectively, the "Total
          Expenses"):

          (1)  Such documentation and calculation shall be made available to
               Tenant at the offices where Landlord keeps such records during
               normal business hours within a reasonable time after Landlord
               receives a written request from Tenant to make such examination.

          (2)  Having previously made such examination in respect of any period
               for which Landlord has given Tenant a statement of the actual
               amount of Landlord's Operating Expenses or Landlord's Tax
               Expenses, Tenant may not thereafter make a subsequent examination
               of Landlord's Operating Expenses or Landlord's Tax Expenses, as
               the case may be, for that same period.

          (3)  Any request for examination in respect of any calendar year may
               be made no more than one (1) year after Landlord advises Tenant
               of the actual amount of Landlord's Operating Expenses or
               Landlord's Tax Expenses, as the case may be, in respect of such
               calendar year or fiscal year and provides to Tenant the
               applicable year-end statement required under Section 2.6 or
               Section 2.7.

          (4)  Such examination may be made only by Tenant's employees, internal
               accounting department, outside accountants or other professional
               auditing


                                       19



               company, provided any such outside accountants and/or auditing
               company are not being paid by Tenant on a contingent fee basis.

          (5)  As a condition to performing any such examination, Tenant and its
               examiners shall be required to execute and deliver to Landlord an
               agreement, in form attached hereto as Exhibit K, agreeing to keep
               confidential any information which it discovers about Landlord or
               the Buildings in connection with such examination; provided,
               however, that Tenant may disclose such information (i) to
               Tenant's employees, counsel and advisors who have the need to
               know such information in order to provide Tenant with advice in
               connection with such audit, (ii) actual or proposed successors,
               assigns, subtenants, lenders or purchasers of Tenant and (iii) to
               the extent required by applicable law or reporting requirements
               or by administrative, governmental or judicial proceeding.

          (6)  If, after the audit by Tenant of Landlord's books and records
               pursuant to this Section 2.6.1 with respect to any calendar year
               or fiscal year, as applicable, it is finally determined that: (i)
               Tenant has made an overpayment on account of Operating Expenses
               Allocable to the Premises or Landlord's Tax Expenses Allocable to
               the Premises, as the case may be, Landlord shall credit such
               overpayment against the next installment(s) of Annual Fixed Rent
               thereafter payable by Tenant, except that if such overpayment is
               determined after the termination or expiration of the term of
               this Lease, Landlord shall promptly refund to Tenant the amount
               of such overpayment less any amounts then due from Tenant to
               Landlord; and (ii) Tenant has made an underpayment on account of
               Operating Expenses Allocable to the Premises or Landlord's Tax
               Expenses Allocable to the Premises, as the case may be, Tenant
               shall, within thirty (30) days of such determination, pay such
               underpayment to Landlord.

          (7)  If, Tenant performs any such audit, it is determined that
               Landlord has overcharged Tenant on account of Operating Expenses
               Allocable to the Premises or Landlord's Tax Expenses Allocable to
               the Premises, as the case may be, by more than five percent (5%)
               in the aggregate, then Landlord shall reimburse Tenant for the
               reasonable out-of-pocket costs incurred by Tenant in performing
               such audit not to exceed Five Thousand and 00/100 Dollars
               ($5,000.00).

          (8)  Any disputes under this Section 2.6.1 relating to amounts in
               excess of One Hundred Thousand and 00/100 Dollars ($100,000.00)
               may be resolved by arbitration under Section 8.31 below.

     2.6.2 Tenant's Right to Provide Specified Services

          So long as there shall be no lease of space in any of the Buildings
          then in effect between Landlord and a third party, Tenant shall have
          the right to require


                                       20



          Landlord to terminate all of the "Specified Services" (hereinafter
          defined), which termination shall take effect on the sixtieth (60th)
          day following the date of Landlord's receipt of such termination
          notice (the "Service Termination Date"). Commencing at 12:01 AM on the
          Service Termination Date and continuing for the balance of the Lease
          Term as it may be extended, Tenant shall perform or cause to be
          performed by contractors first reasonably approved by Landlord the
          Specified Services (hereinafter called "Tenant's Performance of the
          Specified Services") and the costs of the Specified Services shall no
          longer be included in Operating Expenses Allocable to the Premises.
          Tenant's Performance of the Specified Services shall be done in a
          manner consistent with the requirements of Exhibit C hereof and
          otherwise consistent with the operation of the Buildings and Site, as
          applicable, in a similar manner as operated by Landlord and in
          conformity with applicable Legal Requirements and the requirements of
          the insurers of the Complex. Tenant's indemnity as set forth in
          Section 5.7 shall include any and all loss, cost, expense and damage
          (including, without limitation, any damage to the Buildings, the Site
          or the Complex) arising or claimed to have arisen from Tenant or any
          other person, firm or entity providing or failing to provide the
          Specified Services. The "Specified Services" shall consist of, and be
          limited to, all of the interior cleaning and janitorial services for
          the Buildings (including replacement of all bulbs and ballasts). In
          any event, Landlord shall continue to provide all other services
          required to be provided by Landlord under this Lease with the
          exception of the Specified Services following Tenant's election to
          perform said Specified Services.

          No later than ninety (90) days after the Service Termination Date,
          Landlord shall render Tenant a statement in reasonable detail and
          according to usual accounting practices certified by a representative
          of Landlord, showing for the "Subject Period" (hereinafter defined)
          Landlord's Operating Expenses respecting the Terminated Services. Such
          statement to be rendered to Tenant also shall show for the Subject
          Period, the amounts already paid by Tenant on account of Tenant's
          payments respecting the Terminated Services and the amount of payments
          remaining due from, or overpaid by, Tenant respecting the Terminated
          Services. If such statement shows a balance remaining due to Landlord,
          Tenant shall pay same to Landlord on or before the thirtieth (30th)
          day following receipt by Tenant of said statement. Any balance shown
          as due to Tenant shall be credited against Annual Fixed Rent next due,
          or refunded to Tenant if the Lease Term has then expired and Tenant
          has no further obligation to Landlord. The "Subject Period" is the
          period beginning on January 1st of the calendar year in which the
          Termination Date occurs and ending on the Service Termination Date.

          The termination right of Tenant set forth in this Section 2.6.3 shall
          only apply to the Specified Services.

2.7  Real Estate Taxes

     For each Tax Year falling within the Term, Tenant shall pay to Landlord, as
     Additional


                                       21



     Rent, the Landlord's Tax Expenses Allocable to the Premises for such
     corresponding Tax Year, and for each fraction of a Tax Year falling within
     the Term at the beginning or end thereof, Tenant shall pay to Landlord, as
     Additional Rent, the product of (i) such applicable fraction of a Tax Year
     and (ii) the Landlord's Tax Expenses Allocable to the Premises for the Tax
     Year in which said fraction occurs. Not later than ninety (90) days after
     Landlord's Tax Expenses Allocable to the Premises are determined for the
     first such Tax Year or fraction thereof and for each succeeding Tax Year or
     fraction thereof during the Term, Landlord shall render Tenant a statement
     in reasonable detail certified by a representative of Landlord showing for
     the preceding year or fraction thereof, as the case may be, real estate
     taxes on the Buildings and the Site and abatements and refunds of any taxes
     and assessments. Expenditures for legal fees and for other expenses
     incurred in seeking the tax refund or abatement may be charged against the
     tax refund or abatement before the adjustments are made for the Tax Year.
     Said statement to be rendered to Tenant shall also show for the preceding
     Tax Year or fraction thereof as the case may be the amounts of real estate
     taxes already paid by Tenant as Additional Rent, and the amount of real
     estate taxes remaining due from, or overpaid by, Tenant for the year or
     other period covered by the statement. Within thirty (30) days after the
     date of delivery of the foregoing statement, Tenant shall pay to Landlord
     the balance of the amounts, if any, required to be paid pursuant to the
     above provisions of this Section 2.7 with respect to the preceding Tax Year
     or fraction thereof, or Landlord shall credit any amounts due from it to
     Tenant pursuant to the provisions of this Section 2.7 against (x) monthly
     installments of fixed rent next thereafter coming due or (y) any sums then
     due from Tenant to Landlord under this Lease (or refund such portion of the
     over-payment as aforesaid if the Term has ended and Tenant has no further
     obligation to Landlord). In the event Landlord succeeds in obtaining a
     reduction of such real estate taxes, rates or assessments with respect to a
     real estate tax fiscal year as to which Tenant contributed Tenant's share
     of Landlord's Tax Expenses, then, Tenant shall be entitled to receive its
     proportionate share of the net amount of any refund received or reduction
     obtained by Landlord to the extent allocable to the Term of this Lease.
     Tenant's entitlement to such refund amount shall survive the expiration of
     the Term.

     Landlord will, upon the written request of Tenant, who together with other
     tenants lease at least fifty (50%) of the Total Rentable Floor Area of the
     Complex, at Landlord's election either (i) apply for an abatement of real
     estate taxes or (ii) allow such tenants to apply for abatements in their
     own name, or in Landlord's name, at their own cost (subject to such
     tenants' right to recover such costs on a first dollar basis from the
     abatement proceeds, if any). If such tenants apply for an abatement of real
     estate taxes, then Landlord shall have the right to be involved in each
     step of the abatement process, including, without limitation, Landlord's
     right to approve all filings in connection with such abatement proceedings
     (such approval not to be unreasonably withheld) and the right to attend all
     meetings between Tenant and its representatives and the representatives of
     the Town of Bedford.

     In addition, payments by Tenant on account of Landlord's Tax Expenses
     Allocable to the Premises anticipated for the then current year shall be
     made monthly at the time and in the fashion herein provided for the payment
     of fixed rent. The amount so to be paid to


                                       22



     Landlord shall be an amount reasonably estimated by Landlord to be
     sufficient to provide Landlord, in the aggregate, a sum equal to Landlord's
     Tax Expenses Allocable to the Premises, at least ten (10) days before the
     day on which such payments by Landlord would become delinquent.

     To the extent that real estate taxes shall be payable to the taxing
     authority in installments with respect to periods less than a Tax Year, the
     foregoing statement shall be rendered and payments made on account of such
     installments.

     Terms used herein are defined as follows:

          (i)  "Tax Year" means the twelve-month period beginning July 1 each
               year during the Term or if the appropriate governmental tax
               fiscal period shall begin on any date other than July 1, such
               other date.

          (ii) "Landlord's Tax Expenses Allocable to the Premises" shall mean
               the same proportion of Landlord's Tax Expenses as the Rentable
               Floor Area of the Premises bears to the Total Rentable Floor Area
               of the Complex.

          (iii) "Landlord's Tax Expenses" with respect to any Tax Year means the
               aggregate real estate taxes on the Complex with respect to that
               Tax Year, reduced by any abatement receipts with respect to that
               Tax Year.

          (iv) "Real estate taxes" means all taxes and special assessments of
               every kind and nature and user fees and other like fees assessed
               by any governmental authority on the Buildings or Site which the
               Landlord shall become obligated to pay because of or in
               connection with the ownership, leasing and operation of the Site,
               the Building and the Property and reasonable expenses of and fees
               for any formal or informal proceedings for negotiation or
               abatement of taxes (collectively, "Abatement Expenses"). The
               amount of special taxes or special assessments to be included
               shall be limited to the amount of the installment (plus any
               interest, other than penalty interest, payable thereon) of such
               special tax or special assessment required to be paid during the
               year in respect of which such taxes are being determined. There
               shall be excluded from such taxes (1) any income, estate,
               succession, inheritance and transfer taxes, (2) any increased
               real estate taxes attributable to any leasehold improvements made
               by other tenants of the Complex and (3) any tax penalties
               incurred as a result of Landlord's failure to make payments
               and/or to file any tax or informational returns when due.
               Notwithstanding the foregoing, if at any time during the Term the
               present system of ad valorem taxation of real property shall be
               changed so that in lieu of the whole or any part of the ad
               valorem tax on real property there shall be assessed on Landlord
               a capital levy or other tax on the gross rents received with
               respect to the Site or Buildings or Property, or a federal,
               state, county, municipal, or other local income, franchise,
               excise or similar tax, assessment, levy or charge


                                       23



               distinct from any now in effect in the jurisdiction in which the
               Property is located is assessed and which is measured solely by,
               or based (in whole or in part) upon, any such gross rents, then
               any and all of such taxes, assessments, levies or charges, to the
               extent so measured or based, shall be deemed to be included
               within the term "real estate taxes" but only to the extent that
               the same would be payable if the Site and Buildings were the only
               property of Landlord. Landlord represents that the Complex
               constitutes one tax parcel which does not currently include any
               real estate or improvements other than the Site, the Buildings
               and the Additional Buildings.

2.8  Tenant Electricity

     Landlord shall, at Landlord's sole cost and expense, install and deliver
     possession of the Premises to Tenant with separate meters installed to
     measure the electrical consumption in each of the Buildings comprising the
     Premises. Effective as of the Commencement Date and continuing throughout
     the Term, for so long as Tenant shall be directly leasing any of the
     Buildings in their entirety, Tenant covenants and agrees to make
     application to the appropriate utility company or utility provider for
     electrical service to any such Building or Buildings being directly leased
     in its or their entirety by Tenant and to make any deposit (including but
     not limited to, such letters of credit) as such utility company or provider
     shall require. Tenant covenants and agrees to pay, punctually as and when
     due, all electricity charges and rates for and relating to the Buildings
     and from time-to-time if requested by Landlord to provide Landlord with
     evidence of payment to, and good standing with, such utility company or
     provider as Landlord may reasonably require. Tenant further covenants and
     agrees to defend, save harmless and, indemnify Landlord against all
     liability, cost and damage arising out of or in any way connected to the
     payment, nonpayment or late payment of any and all charges or deposits to
     such utility company or provider. The provisions of this Section 2.8 shall
     survive the expiration or termination of this Lease for a period of twelve
     (12) full calendar months.

                                   ARTICLE III

                       Condition of Premises; Alterations

3.1  Base Building Work

     (A) Definition of Base Building Work. The "Base Building Work" shall be all
     labor, materials and other work necessary to design, permit and perform the
     renovation of the Buildings and other portions of the Complex, as described
     in the Base Building Plans and Specifications described in subsection (B)
     below and shown in Exhibit B-1 attached hereto.

     (B) Plans and Specifications. Attached hereto as Exhibit B-1 is a
     description of the scope of the Base Building Work, and as further
     reflected in the schematic plans and outline specifications dated January
     25, 2007 describing certain renovations to Buildings


                                       24



     A, B, C, D, E and G of the Complex (the "Base Building Plans and
     Specifications") prepared on behalf of Landlord by Landlord's architect,
     ADD, Inc. ("Landlord's Architect"). Tenant hereby acknowledges its approval
     of the Base Building Plans and Specifications.

     (C) Finish Allowances. It is acknowledged and agreed that Exhibit B-1
     contemplates that Landlord shall be renovating the lobby of Building D as
     part of the Base Building Work. In connection therewith, Landlord shall
     submit its final construction documents showing the Building D lobby area
     to Tenant and, to the extent that Tenant desires to use different finishes
     on the lobby floors than the finishes shown on such final construction
     documents, Tenant shall submit to Landlord a list in reasonable specificity
     (including schematic plans and details where appropriate) of the finishes
     selected by Tenant for the lobby floors within fifteen (15) days after
     Tenant's receipt of the final construction documents from Landlord (such
     submission by Tenant being hereinafter referred to as "Tenant's Finish
     Selection Notice"). As soon as reasonably practicable but no later than
     fifteen (15) business days (unless Landlord has previously advised Tenant
     that a longer time period is reasonably necessary due to the nature and
     scope of Tenant's Finish Selection Notice or the fact that the information
     provided by Tenant in Tenant's Finish Selection Notice is insufficient for
     the purpose of enabling Landlord to make the determination set forth
     herein) after Landlord's receipt of Tenant's Finish Selection Notice,
     Landlord shall advise Tenant of any pricing, budgetary, scheduling or other
     matters, issues and/or problems reflected in or on Tenant's Finish
     Selection Notice which are inconsistent with the design, cost and
     construction schedule for the Base Building Work. In its response to
     Tenant's Finish Selection Notice, Landlord shall provide Tenant with
     available documentation from Landlord's general contractor substantiating
     the determination that an item or items will impact the current pricing of
     or schedule for the Base Building Work. Landlord shall have the right to
     approve all matters reflected in or on Tenant's Finish Selection Notice
     (which such approval shall not be unreasonably withheld, conditioned or
     delayed) and Landlord shall not be obligated to approve any portion of
     Tenant's Finish Selection Notice which (i) is likely to increase the cost
     of the Base Building Work for which Tenant does not agree to pay, (ii)
     extends or increases Landlord's estimated time to substantially complete
     the Base Building Work unless Tenant agrees that any delay caused by such
     portion of Tenant's Finish Selection Notice shall constitute a Tenant Delay
     (as defined in Section 3.5(C) below) for the purposes of this Article III.
     Such portion of Tenant's Finish Selection Notice as is approved by Landlord
     in accordance with the foregoing is hereinafter called the "Approved Tenant
     Lobby Finishes."

     In connection with the foregoing, it is specifically understood and agreed
     that the cost of any portions of the Approved Tenant Lobby Finishes that
     exceed the allowances set forth on Exhibit B-1 relative thereto shall, at
     Tenant's option, either be (x) paid in full by Tenant prior to the
     commencement by Landlord of the Base Building Work or (y) paid by Tenant
     using the Tenant Allowance, subject to and in accordance with the
     provisions of Section 4.3 below. To the extent that the cost of the
     Approved Tenant Lobby Finishes are less than the allowances set forth on
     Exhibit B-1 relative thereto, Tenant shall not be entitled to any credit
     nor shall Tenant be entitled to apply any such savings against the


                                       25



     other costs of the Tenant Improvement Work.

     (D) Performance of Base Building Work. Landlord, at its sole cost and
     expense, shall promptly and with all due diligence perform the Base
     Building Work in a good and workmanlike manner and as set forth in the Base
     Building Plans and Specifications, and, in connection therewith, Landlord
     shall obtain all necessary governmental permits and approvals necessary for
     the construction of the Base Building Work.

3.2  Tenant Improvement Work

     (A) Definition of Tenant Improvement Work. Tenant shall perform all work
     set forth in the Approved Tenant Improvement Construction Documents (as
     defined below) necessary to prepare the Premises for Tenant's use and
     occupancy (such work being hereinafter called the "Tenant Improvement
     Work"). It is expressly understood and agreed that Tenant shall be liable,
     at its sole cost and expense, for the payment of all costs of the Tenant
     Improvement Work (subject to the provisions of Section 3.3 below).

     (B) Tenant Improvement Construction Documents. On or before June 1, 2007,
     Tenant shall cause its architect to prepare construction documents for the
     Tenant Improvement Work based on the preliminary schematic plans attached
     to this Lease as Exhibit B-2 (such construction drawings being hereinafter
     called the "Tenant Improvement Construction Documents") and shall submit
     the same to Landlord for its approval as set forth herein. Landlord shall
     review the Tenant Improvement Construction Documents and within fifteen
     (15) business days after receipt thereof Landlord shall provide Tenant with
     written notice of either (i) its approval of the Tenant Improvement
     Construction Documents or (ii) the need for additional information in order
     to review and approve the same. In its approval of the Tenant Improvement
     Construction Documents, Landlord shall specify those alterations, additions
     and improvements that must be removed by Tenant at the expiration or
     earlier termination of the Term. Landlord's failure to so respond within
     said fifteen (15) business day period shall be deemed to constitute
     Landlord's approval of the Tenant Improvement Construction Documents and
     determination that the alterations, additions and improvements shown
     thereon do not need to be removed by Tenant at the expiration or earlier
     termination of the Term. Notwithstanding the foregoing, it is understood
     and agreed that Tenant may apply for a building permit from the appropriate
     municipal officials prior to Landlord's final approval of the Tenant
     Improvement Construction Documents; provided that if Landlord shall
     disapprove any element of the Tenant Improvement Construction Documents,
     Tenant shall promptly revise the Tenant Improvement Construction Documents
     accordingly and (if required) resubmit the same to the municipal
     authorities. The Tenant Improvement Construction Documents, once approved
     or deemed approved, shall be referred to as the "Approved Tenant
     Improvement Construction Documents."

     (C) Performance of Tenant Improvement Work. Upon the completion of the
     Approved Tenant Improvement Construction Documents, Tenant may enter the
     Premises (subject to and in accordance with the terms and provisions of
     Sections 3.4(A) and 3.6(A) below) to perform the Tenant Improvement Work as
     set forth in the Approved Tenant


                                       26



     Improvement Construction Documents, and, in connection therewith, Tenant
     shall obtain all necessary governmental permits and approvals and submit
     any notifications required in connection with any Legal Requirements
     necessary for the construction of the Tenant Improvement Work (the
     "Tenant's Permits"). All of the Tenant Improvement Work shall be performed
     in accordance with the Approved Tenant Improvement Construction Documents
     and in accordance with applicable Legal Requirements and Insurance
     Requirements. Tenant shall have the Tenant Improvement Work performed by
     contractors, reasonably approved by Landlord (Landlord hereby approving J.
     Calnan & Associates, Inc. as Tenant's general contractor), which
     contractors shall provide to Landlord such insurance as Landlord may
     reasonably require (consistent with the size and scope of the Tenant
     Improvement Work project). Notwithstanding anything contained herein to the
     contrary, it is understood and agreed that Tenant may retain contractors
     and subcontractors that use union or non-union labor in connection with the
     construction of the Tenant Improvement Work. In addition, during such time
     as Tenant is performing the Tenant Improvement Work under this Article III,
     Tenant, at Tenant's expense, or Tenant's general contractor shall also
     maintain builder's risk insurance for the full insurable value of such
     Tenant Improvement Work. It shall be Tenant's obligation to obtain a
     certificate of occupancy for the Tenant Improvement Work (except that
     Tenant shall not be in default hereunder to the extent that Tenant is
     unable to obtain the same due to the status of completion of the Base
     Building Work), and Tenant shall not occupy the Premises for the conduct of
     business until and unless such certificate of occupancy has been authorized
     for issuance by the applicable governmental authority (Tenant hereby
     agreeing to deliver a copy of the final certificate of occupancy for the
     Tenant Improvement Work to Landlord promptly after the issuance thereof).
     Tenant shall also prepare and submit to Landlord within two (2) months
     after the Tenant Improvement Work is substantially complete a set of
     as-built plans in both print and electronic forms showing the work
     performed by Tenant to the Premises including, without limitation, a
     schematic plan of any wiring or cabling installed by Tenant or Tenant's
     contractor for Tenant's computer, telephone and other communication
     systems.

     (D) Change Orders. Tenant shall have the right, in accordance herewith, to
     submit for Landlord's approval change proposals subsequent to the
     completion of the Approved Tenant Improvement Construction Documents (each,
     a "Tenant Improvement Work Change Proposal"). Landlord agrees to respond to
     any such Tenant Improvement Work Change Proposal within such time as is
     reasonably necessary, but no more than five (5) business days, after the
     submission thereof by Tenant (unless Landlord has previously advised Tenant
     that a longer time period is reasonably necessary due to the nature and
     scope of the Tenant Improvement Work Change Proposal, together with
     Landlord's good faith estimate as to the amount of additional time that
     will be necessary, or the fact that the information provided by Tenant in
     the Tenant Improvement Work Change Proposal is insufficient for the
     purposes of enabling Landlord to make the determination set forth herein),
     advising Tenant of any items which Landlord in good faith reasonably
     believes are inconsistent with the design, cost and construction schedule
     for the Base Building Work, as well as specifying (subject to the terms of
     Section 5.2 below) whether any alterations, additions or improvements shown
     in the Tenant Improvement Work Change Proposal must be removed by Tenant
     upon the expiration or earlier termination of the


                                       27



     Term ("Landlord's Tenant Improvement Work Change Order Response") (it being
     understood and agreed that Landlord's failure to respond within said five
     (5) business day period shall be deemed to constitute Landlord's approval
     of the Tenant Improvement Work Change Proposal and determination that none
     of the items shown thereon are to be removed by Tenant at the expiration or
     earlier termination of the Term). Tenant shall have the right to then
     proceed with or withdraw such Tenant Improvement Work Change Proposal
     within five (5) business days after receipt of Landlord's Tenant
     Improvement Work Change Order Response. If Tenant fails to respond to
     Landlord's Tenant Improvement Work Change Order Response within such five
     (5) business day period, such Tenant Improvement Work Change Proposal shall
     be deemed withdrawn. If Tenant proceeds with such Tenant Improvement Work
     Change Proposal, then such Tenant Improvement Work Change Proposal shall be
     deemed to be a part of the Approved Tenant Improvement Construction
     Documents for the purposes of this Article III.

3.3  Tenant Allowances

     (A) Landlord shall provide to Tenant an allowance equal to the product of
     (i) $28.00 and (ii) the Total Rentable Floor Area of the Premises (the
     "Tenant Improvement Allowance"). The Tenant Improvement Allowance shall be
     used and applied by Tenant solely on account of the cost of the Tenant
     Improvement Work. For the purposes hereof, the costs to which the Tenant
     Improvement Allowance may be applied hereunder shall include the cost of
     leasehold improvements but not the cost of any of Tenant's personal
     property, trade fixtures or trade equipment or any so-called soft costs;
     provided, however, that a portion of the Tenant Improvement Allowance in an
     amount not to exceed the product of (x) $5.00 and (y) the Rentable Floor
     Area of the Premises may be applied towards the costs incurred by Tenant
     (as evidenced by paid invoices or receipts submitted by Tenant to Landlord)
     in preparing architectural and engineering plans in connection with the
     Tenant Improvement Work and in installing wiring and cabling for Tenant's
     telecommunications equipment in the Premises.

     In addition, Landlord shall provide to Tenant (i) an allowance of Two
     Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) (the "Restroom
     Allowance") to be used solely towards the costs of upgrades (including,
     without limitation, upgrades necessary to comply with the applicable
     provisions of the Americans With Disabilities Act (the "ADA")) to the
     existing restrooms in the Premises and the construction of a new restroom
     on the first floor of Building C (the "Restroom Work") as part of the
     Tenant Improvement Work and (ii) an allowance of Fifty Thousand and 00/100
     Dollars ($50,000.00) (the "Water Fountain and Fire Alarm Allowance") to be
     used solely towards the costs of installing ADA-compliant water fountains
     and fire alarm strobes in the Premises (the "Water Fountain and Fire Alarm
     Work") as part of the Tenant Improvement Work. In connection therewith, it
     is understood and agreed that (x) the Restroom Allowance may be applied
     solely towards the cost of the Restroom Work and the Water Fountain and
     Fire Alarm Allowance may be applied solely towards the cost of the Water
     Fountain and Fire Alarm Work, and (y) to the extent Tenant does not fully
     utilize the Restroom Allowance and/or the Water Fountain and Fire Alarm
     Allowance, as the case may be, Tenant shall not be entitled to apply any
     unused portions of the


                                       28



     applicable allowance towards the costs of any other portion of the Tenant
     Improvement Work nor shall Tenant be entitled to any credit on account
     thereof; provided, however, that notwithstanding the foregoing, Tenant
     shall be entitled to apply any unused portions of the Water Fountain and
     Fire Alarm Allowance towards the cost of the Restroom Work.

     The Tenant Improvement Allowance, the Restroom Allowance and the Water
     Fountain and Fire Alarm Allowance are hereinafter referred to collectively
     as the "Tenant Allowances."

     (B) Landlord shall pay within thirty (30) days after receipt of a complete
     requisition (as hereinafter defined) submitted by Tenant to Landlord the
     requested portion(s) of the Tenant Allowances as set forth on such
     requisition either to Tenant or, at Tenant's election, directly to the
     contractors, vendors and other service providers performing the Tenant
     Improvement Work as Tenant may designate or request, until the entirety of
     Tenant Allowances have been applied towards the appropriate components of
     the Tenant Improvement Work as set forth in subsection (A) above. For the
     purposes hereof, a "requisition" shall mean written documentation, together
     with (i) an AIA requisition form with respect to work performed pursuant to
     Tenant's construction contract with its general contractor, (ii) invoices
     from Tenant's service providers, showing in reasonable detail the cost of
     the item in question or of the improvements installed to date in the
     Premises, (iii) lien waivers in the form attached hereto as Exhibit F-1
     (provided that Tenant shall not be required to deliver any lien waivers
     with respect to any items of work covered by Tenant's first requisition for
     the Tenant Allowances to the extent Tenant had not paid the service
     provider(s) at issue prior to the date of such requisition, but Tenant
     shall deliver the lien waivers and evidence of payment in full of the items
     of work covered by such first requisition within twenty-one (21) days
     following the disbursement of the Tenant Allowances with respect to such
     first requisition) and (iv) certifications from Tenant that the amount of
     the requisition in question does not exceed the cost of the items, services
     and work covered by such certification. In the event that any portions of
     the Tenant Allowances reflected on a particular requisition are to be
     funded directly to Tenant, as Tenant may designate or request, such
     requisition shall be accompanied by evidence reasonably satisfactory to
     Landlord that the items, services and work covered by such requisition have
     been fully paid by Tenant. Landlord shall have the right, upon reasonable
     advance notice to Tenant, to inspect Tenant's books and records relating to
     each requisition in order to verify the amount thereof. Tenant shall submit
     requisition(s) no more often than monthly.

     Notwithstanding anything contained herein to the contrary:

          (i)  Landlord shall have no obligation to advance funds on account of
               the Tenant Allowances unless and until Landlord has received the
               requisition in question, together with the certifications
               required above.

          (ii) Except with respect to work and/or materials previously paid by
               Tenant (as evidenced by paid invoices and written lien waivers
               provided to


                                       29



               Landlord), Tenant shall have the right to have portions of the
               Tenant Allowances paid directly to Tenant's contractors,
               consultants, service providers and vendors.

          (iii) Tenant shall not be entitled to any portion of the Tenant
               Allowances, and Landlord shall have no obligation to pay the
               Tenant Allowances, in respect of any requisition submitted after
               the date which is two (2) years from the Commencement Date (it
               being understood and agreed that irrespective of said time
               period, Tenant shall not be entitled to any payment or credit on
               account of any unused portions of the Tenant Allowances nor shall
               there be any application of the same toward Annual Fixed Rent or
               Additional Rent owed by Tenant under this Lease).

          (iv) Landlord shall have no obligation to fund any portion of the
               Tenant Allowances to the extent that (a) at the time of the
               requisition Tenant is in default under this Lease beyond the
               expiration of any notice and cure period (it being understood and
               agreed that if Tenant cures a default prior to the expiration of
               the applicable cure period, or if Tenant cures a default
               thereafter and Landlord has not terminated this Lease, Tenant
               shall be entitled to such payment from Landlord) or (b) there are
               any liens (unless bonded to the reasonable satisfaction of
               Landlord) filed against Tenant's interest in this Lease or
               against the Building or the Site arising solely out of the Tenant
               Improvement Work (specifically excluding the Base Building Work)
               or any litigation in which Tenant is a party relating to the
               Tenant Improvement Work.

          (v)  For each requisition submitted by Tenant hereunder, Landlord
               shall only be required to disburse a portion of the applicable
               Tenant Allowance towards the total costs set forth on each such
               requisition in an amount equal to the same proportion as the
               total component of the Tenant Allowance at issue bears to the
               total costs of the Tenant Improvement Work towards which such
               component of the Tenant Allowances may be applied (with Tenant
               being fully and solely responsible for the remainder of the
               amount shown in the requisition). By way of example, if the total
               Tenant Improvement Allowance equals $4,200,000.00 and the total
               costs of the Tenant Improvement Work equal $6,300,000.00, then
               the ratio of the total Tenant Improvement Allowance to the total
               costs of the Tenant Improvement Work would be 2:3 and if Tenant
               submitted a requisition for $300,000.00, Landlord would be
               required to disburse $200,000.00 of the Tenant Improvement
               Allowance on account of such requisition and Tenant would be
               responsible for the remaining $100,000.00.

          (vi) In no event shall Landlord be deemed to have assumed any
               obligations, in whole or in part, of Tenant to any contractors,
               subcontractors, suppliers, workers or materialmen on account of
               the Tenant Improvement Work (specifically excluding the Base
               Building Work).


                                       30


3.4  Substantial Completion

     (A) Delivery Dates. It is understood and agreed that Landlord shall deliver
     the Premises to Tenant in phases in accordance with the following schedule
     so that Tenant may commence its construction of the Tenant Improvement
     Work:



Phase                            Delivery Conditions                   Estimated Delivery Date
- -----                            -------------------                   -----------------------
                                                                    
Building C    -    all replacement exterior glass has been installed   September 14, 2007

              -    new windows have been installed on the first
                   floor level

              -    roof replacement work has been completed

Building D    -    all replacement exterior glass has been installed   September 28, 2007

              -    the perimeter wall of the elevator shaft for the
                   new elevator has been substantially completed

              -    asbestos abatement work to remove the vinyl
                   asbestos floor tile and mastic has been
                   substantially completed

              -    new electrical panel has been installed

Building E    -    all replacement exterior glass has been installed   October 12, 2007

              -    modifications to freight elevator door have been
                   completed


     For the purposes hereof, the "Delivery Date" for each Building shall be
     deemed to have occurred on the date on which all of the applicable Delivery
     Conditions for such Building have been satisfied. Landlord shall use
     commercially reasonable efforts to cause the Delivery Date for each
     Building to occur on or before the respective dates set forth above for
     such Building (it being understood and agreed that the failure by Landlord
     to satisfy the applicable Delivery Conditions for any Building on or before
     the applicable Delivery Date for such Building as set forth above shall
     constitute a Landlord Delay under Section 3.5(A) below, except to the
     extent that such failure is the result of Tenant Delays or, subject to the
     limitations set forth in Section 3.5(B) below, Landlord's Force Majeure).

     Notwithstanding the foregoing, upon the completion of the Approved Tenant
     Improvement Construction Documents, Tenant shall have the right to enter
     portions of the Premises prior to the date on which the applicable Delivery
     Conditions related to such portion of the Premises have been satisfied in
     order to perform specific components of the Tenant Improvement Work as set
     forth below, provided that such work can be performed safely and without
     unreasonable interference with the Base Building Work then being undertaken
     by Landlord in such portions of the Premises:


                                       31





Portion of Premises                   Permissible Items of Tenant Improvement Work
- -------------------                   --------------------------------------------
                                   
Buildings C, D and E - Second Floor   -    mechanical, electrical and plumbing
                                           coordination process

                                      -    electrical makesafe/temporary lighting

                                      -    mechanical, electrical and plumbing
                                           cut/cap/drop

                                      -    demolition

                                      -    metal stud framing/door frames
                                           (excluding the last fifteen
                                           (15) feet of any wall where
                                           it meets a window frame)

                                      -    rough overhead mechanical, electrical
                                           and plumbing work

                                      -    in wall rough (excluding the last
                                           fifteen (15) feet of any wall
                                           where it meets a window frame)

Buildings C, D and E - First Floor    -    mechanical, electrical and plumbing
                                           coordination process

                                      -    electrical makesafe/temporary lighting

                                      -    mechanical, electrical and plumbing
                                           cut/cap/drop


     Notwithstanding the foregoing, Tenant shall not have the right to enter the
     second (2nd) floor of Building D prior to the completion of Landlord's
     asbestos abatement work in that portion of the Premises, which is estimated
     to be finished on or about June 15, 2007.

     Further, Tenant shall have the right to request Landlord's permission to
     enter portions of the Premises prior to the date on which the applicable
     Delivery Conditions related to such portion of the Premises have been
     satisfied in order to perform other components of the Tenant Improvement
     Work provided that the same can be performed safely and without
     unreasonable interference with the Base Building Work then being undertaken
     by Landlord, and Landlord shall evaluate any such requests in good faith
     and advise Tenant within five (5) business days after any request on a
     case-by-case basis whether or not such items of work may be performed by
     Tenant without Tenant's having been deemed to have begun its construction
     of the Tenant Improvement Work for the purpose of triggering the applicable
     Delivery Date hereunder.

     Landlord shall provide Tenant with at least ten (10) days' advance notice
     of the date upon which Landlord estimates that the Delivery Conditions
     related to each of the Delivery Dates will be completed and the applicable
     Delivery Date will occur.

     From and after the Delivery Date for a Building, Tenant shall have free and
     unimpeded access to such Building for purposes of performing the Tenant
     Improvement Work; provided, however, that Landlord shall continue to have
     access to such Building to perform the remaining portions of the Base
     Building Work therein, so long as such work can be performed safely and
     without unreasonable interference to the Tenant


                                       32



     Improvement Work then being undertaken by Tenant.

     (B) Base Building Work. The Base Building Work shall be deemed to be
     substantially completed on the date on which the work described in the Base
     Building Plans and Specifications has been completed except for so-called
     "punch-list" items of work and adjustment of equipment and fixtures which
     can be completed after occupancy has been taken without causing substantial
     interference with Tenant's use and enjoyment of the Premises or the right
     to legally occupy the entire Premises.

     (C) Delays in Completion of the Base Building Work. Landlord shall exercise
     commercially reasonable efforts to complete the Base Building Work within
     the Premises on or before March 31, 2008 and to complete the remainder of
     the Base Building Work outside of the Premises on or before May 1, 2008 (in
     both cases, subject to Tenant Delays and, subject to the limitations set
     forth in Section 3.5(B) below, Landlord's Force Majeure). Notwithstanding
     anything contained in this Lease to the contrary, if Landlord shall fail to
     substantially complete the Base Building Work on or before June 1, 2008
     (which date shall be extended automatically for such periods of time as
     Landlord is prevented in delivering the same by reason of Landlord's Force
     Majeure or any Tenant Delay), the Annual Fixed Rent and payments on account
     of Operating Expenses Allocable to the Premises and Landlord's Tax Expenses
     Allocable to the Premises shall be abated by one (1) day for each day from
     and after June 1, 2008 (as so extended) to the date of substantial
     completion of the Base Building Work.

     If Landlord shall fail to substantially complete the Base Building Work by
     August 1, 2008 (which date shall be extended automatically for such periods
     of time as Landlord is prevented in delivering the same by reason of
     Landlord's Force Majeure or any Tenant Delay), Tenant shall have the right
     to terminate this Lease effective as of the thirtieth (30th) day after
     receipt by Landlord of a notice from Tenant given on or after August 1,
     2008 (as so extended) indicating Tenant's desire to so terminate and upon
     the giving of such notice, the Term of this Lease shall cease and come to
     an end without further liability or obligation on the part of either party
     as of the expiration of the aforesaid thirty (30) day period, unless the
     Base Building Work shall in fact be substantially completed as determined
     pursuant to Section 3.4(B) above on or before the expiration of such thirty
     (30) day period.

     The foregoing abatement and termination rights shall be Tenant's sole and
     exclusive remedies at law or in equity or otherwise for the failure of
     Landlord to substantially complete the Base Building Work within the time
     periods set forth above.

     (D) Tenant Improvement Work. The Premises shall be deemed to be
     substantially completed, notwithstanding that the Tenant Improvement Work
     may not be complete and notwithstanding that a certificate of occupancy for
     the Tenant Improvement Work may not then have been approved for issuance or
     actually issued, on the date (the "Substantial Completion Date") which is
     the later to occur of (x) that date which is Two Hundred Ten (210) days
     after the Building C Delivery Date and (y) May 1, 2008, subject in the case
     of (x) and (y) to Tenant's Force Majeure (subject to the limitations of
     Section 3.5(D)


                                       33



     below) and Landlord Delays; provided, however, that under no circumstances
     shall the Substantial Completion Date be deemed to have occurred hereunder
     until such time as the Base Building Work has been substantially completed
     (or deemed substantially completed) in accordance with the terms and
     conditions of Section 3.4(B) above.

3.5  Force Majeure and Other Delays

     (A) Landlord Delays. A "Landlord Delay" shall be defined as any delay in
     the design, permitting or performance of the Tenant Improvement Work and/or
     the authorization for issuance of a certificate of occupancy to the extent
     that such delay is actually caused by any act or, where there is a duty to
     act under this Lease, any failure to act by Landlord or Landlord's
     contractors, architects, engineers, or anyone else engaged by or on behalf
     of Landlord in connection with the construction of the Base Building Work
     as set forth in this Article III (including, without limitation, any
     failure by Landlord to meet any of the Delivery Conditions for any of the
     Buildings by the applicable date set forth in Section 3.4(A) above, except
     to the extent such failure is the result of Tenant Delays or, subject to
     the limitations of subsection (B) below, Landlord's Force Majeure) and
     disclosed to Landlord as hereinafter provided. Notwithstanding the
     foregoing, in no event shall any delays in the completion of the Tenant
     Improvement Work caused by Landlord's use of non-union labor constitute a
     Landlord Delay hereunder.

     Notwithstanding the foregoing, no event shall be deemed a Landlord Delay
     unless and until Tenant has given Landlord written notice (the "Landlord
     Delay Notice") advising Landlord: (x) that a Landlord Delay is occurring
     and setting forth Tenant's good faith estimate as to the likely length of
     such Landlord Delay; (y) of the basis on which Tenant has determined that a
     Landlord Delay is occurring; and (z) the actions which Tenant believes that
     Landlord must take to eliminate such Landlord Delay; provided, however, no
     Landlord Delay Notice shall be required with respect to any failure of
     Landlord to satisfy the Delivery Conditions for a Building as of the
     Delivery Date applicable to such Building set forth in Section 3.4(A)
     above. No event shall be deemed to be a Landlord Delay unless and until
     Landlord has failed to rectify the situation causing the Landlord Delay
     within forty-eight (48) hours after Landlord's receipt of the Landlord
     Delay Notice (which for the purposes of determining receipt may be
     delivered by hand to Landlord's Construction Representative, with copies to
     follow to Landlord at the notice address set forth in Section 1.1 of this
     Lease within five (5) days thereafter); provided, however, that if Landlord
     shall fail to eliminate the Landlord Delay within the aforesaid 48-hour
     period, then the 48-hour cure period shall be included in the period of
     time charged to Landlord pursuant to such Landlord Delay Notice (it being
     understood and agreed that if Landlord shall in fact eliminate the delay
     within the 48-hour cure period, no Landlord Delay shall be deemed to have
     occurred for the purposes of this Article III). In addition, any delay to
     the extent caused by (i) Tenant Delay (as defined in subsection (C) below)
     or (ii) subject to the limitations set forth in subsection (B) below,
     Landlord's Force Majeure (as defined in said subsection (B)) shall not
     constitute Landlord Delay.

     (B) Landlord's Force Majeure. For the purposes of this Article III,
     "Landlord's Force Majeure" shall mean delays due to unusual scarcity of or
     inability to obtain labor or


                                       34



     materials (to the extent that such scarcity or inability is the result of
     conditions not prevalent in the market, and otherwise unforeseen, as of the
     date of this Lease), unusual or unforeseen labor difficulties (with the
     exception of strikes or other labor difficulties caused by or resulting
     from the use by either Landlord or Tenant of non-union labor at the Site),
     casualty or other causes beyond Landlord's reasonable control. Landlord
     shall provide Tenant with written notice within forty-eight (48) hours
     after the occurrence of any Landlord's Force Majeure event hereunder
     (together with Landlord's good faith estimate of the projected duration of
     such Landlord's Force Majeure event), and shall also notify Tenant as soon
     as such Landlord's Force Majeure event has ended. In no event shall any
     Landlord's Force Majeure under this Section 3.5(B) exceed a total of ninety
     (90) days in the aggregate. In addition, it is expressly understood and
     agreed that any casualty or Taking (as defined in Article VI below) that
     occurs prior to the Commencement Date of this Lease shall be deemed to be
     an event of Landlord's Force Majeure and/or Tenant's Force Majeure (as
     applicable) and shall be governed by the provisions of this Article III
     related thereto and not by the provisions of said Article VI.

     (C) Tenant Delays. A "Tenant Delay" shall be defined as any delay in the
     design, permitting or performance of the Base Building Work to the extent
     that such delay is actually caused by any act or, where there is a duty to
     act under this Lease, any failure to act by Tenant or Tenant's contractors,
     architects, engineers, or anyone else engaged by or on behalf of Tenant in
     connection with the construction of the Tenant Improvement Work as set
     forth in this Article III (including, without limitation, any delays
     resulting from the Approved Tenant Finishes under Section 3.1(C) above) and
     disclosed to Tenant as hereinafter provided. Notwithstanding the foregoing,
     in no event shall any delays in the completion of the Base Building Work
     caused by Tenant's use of non-union labor constitute a Tenant Delay
     hereunder.

     Notwithstanding the foregoing, no event shall be deemed a Tenant Delay
     unless and until Landlord has given Tenant written notice (the "Tenant
     Delay Notice") advising Tenant: (x) that a Tenant Delay is occurring and
     setting forth Landlord's good faith estimate as to the likely length of
     such Tenant Delay; (y) of the basis on which Landlord has determined that a
     Tenant Delay is occurring; and (z) the actions which Landlord believes that
     Tenant must take to eliminate such Tenant Delay. No event shall be deemed
     to be a Tenant Delay unless and until Tenant has failed to rectify the
     situation causing the Tenant Delay within forty-eight (48) hours after
     Tenant's receipt of the Tenant Delay Notice (which for the purposes of
     determining receipt may be delivered by hand to Tenant's Construction
     Representative, with copies to follow to Tenant at the notice address set
     forth in Section 1.2 of this Lease within five (5) days thereafter);
     provided, however, that if Tenant shall fail to eliminate the delay within
     the aforesaid 48-hour period, then the 48-hour cure period shall be
     included in the period of time charged to Tenant pursuant to such Tenant
     Delay Notice (it being understood and agreed that if Tenant shall in fact
     eliminate the Tenant Delay within the 48-hour cure period, no Tenant Delay
     shall be deemed to have occurred for the purposes of this Article III). In
     addition, any delay to the extent caused by (i) Landlord Delay or (ii)
     subject to the limitations of subsection (D) below, Tenant's Force Majeure
     (as defined in said subsection (D)) shall not constitute Tenant Delay.


                                       35



     Tenant covenants that no Tenant Delay shall delay commencement of the Term
     or the obligation to pay Annual Fixed Rent or Additional Rent. The Delivery
     Dates and/or the date of substantial completion of the Base Building Work,
     as applicable, shall be deemed to have occurred as of the date when such
     Delivery Dates and/or date of substantial completion of the Base Building
     Work, as applicable, would have occurred but for any Tenant Delays, as
     determined by Landlord in the exercise of its good faith business judgment
     (it being understood and agreed that the foregoing shall not be construed
     so as to relieve Landlord of its obligation to actually complete the Base
     Building Work, notwithstanding the fact that substantial completion may
     have been deemed to have occurred prior to actual completion as the result
     of Tenant Delays).

     (D)Tenant's Force Majeure. For the purposes of this Article III, "Tenant's
     Force Majeure" shall mean delays due to unusual scarcity of or inability to
     obtain labor or materials (to the extent that such scarcity or inability is
     the result of conditions not prevalent in the market, and otherwise
     unforeseen, as of the date of this Lease), unusual or unforeseen labor
     difficulties (with the exception of strikes or other labor difficulties
     caused by or resulting from the use by either Landlord or Tenant of
     non-union labor at the Site), casualty or other causes beyond Tenant's
     reasonable control. Tenant shall provide Landlord with written notice
     within forty-eight (48) hours after the occurrence of any Tenant's Force
     Majeure event hereunder (together with Tenant's good faith estimate of the
     projected duration of such Tenant's Force Majeure event), and shall also
     notify Landlord as soon as such Tenant's Force Majeure event has ended. In
     no event shall any Tenant's Force Majeure under this Section 3.5(D) exceed
     a total of ninety (90) days in the aggregate. In addition, it is expressly
     understood and agreed that any casualty or Taking (as defined in Article VI
     below) that occurs prior to the Commencement Date of this Lease shall be
     deemed to be an event of Landlord's Force Majeure and/or Tenant's Force
     Majeure (as applicable) and shall be governed by the provisions of this
     Article III related thereto and not by the provisions of said Article VI.

3.6  Quality and Performance of Work

     (A)Quality; Cooperation. All construction work required or permitted by
     this Lease shall be done in a good and workmanlike manner and in compliance
     with all applicable laws, ordinances, rules, regulations, statutes,
     by-laws, court decisions, and orders and requirements of all public
     authorities ("Legal Requirements") and all Insurance Requirements. Landlord
     and Tenant acknowledge and agree that, notwithstanding the phasing of the
     Delivery Dates as set forth in Section 3.4 above, components of the Base
     Building Work and Tenant Improvement Work will be performed simultaneously,
     and accordingly agree to work cooperatively in order to coordinate the
     performance of the Base Building Work and the Tenant Improvement Work so
     that neither party unreasonably interferes with or delays the efforts of
     the other to complete its respective portion of the work within the time
     periods set forth herein; provided, however, that notwithstanding anything
     contained in Section 3.4(A) to the contrary, (i) prior to the occurrence of
     a Delivery Date for a particular Building, Landlord's performance of the
     Base Building Work in such Building shall have priority in terms of access,
     scheduling


                                       36



     and other aspects requiring coordination between Landlord and Tenant and
     (ii) from and after the occurrence of a Delivery Date for a particular
     Building, Tenant's performance of the Tenant Improvement Work in such
     Building shall have priority in terms of access, scheduling and other
     aspects requiring coordination between Landlord and Tenant. Each party may
     inspect the work of the other at reasonable times and shall promptly give
     notice of observed defects. Each party authorizes the other to rely upon
     the approval and other actions on the party's behalf by any Construction
     Representative of the party named in Section 1.1 or any person hereafter
     designated in substitution or addition by notice to the party relying.

     In connection with the foregoing, Landlord and Tenant (together with their
     respective contractors and representatives, as appropriate) agree to hold
     periodic job meetings to discuss the performance and scheduling of the Base
     Building Work and the Tenant Improvement Work. In addition, from time to
     time during the performance of the Base Building Work and the Tenant
     Improvement Work under this Article III, either party may request
     construction information from the other party's Construction Representative
     to the extent reasonably necessary in connection with the performance by
     the requesting party of the work for which it is responsible hereunder.

     In the event of any casualty during the performance of the Base Building
     Work and the Tenant Improvement Work under this Article III, it is
     understood and agreed that each party shall be solely responsible for the
     restoration of their respective components of work.

     (B) Correction of Defects.

     (i)Landlord warrants to Tenant that: (a) the materials and equipment
     furnished in the performance of the Base Building Work will be of good
     quality (except to the extent used by any of the Tenant Parties, as
     hereinafter defined, in the performance of the Tenant Improvement Work);
     (b) the Base Building Work will be free from defects not inherent in the
     quality described in the Base Building Plans and Specifications; and (c)
     the Base Building Work and all components thereof shall be weather-tight
     (except to the extent resulting from particular components of the Tenant
     Improvement Work, such as rooftop penetrations) and otherwise in good
     working order and condition and shall comply with all Legal Requirements as
     of the completion of the Base Building Work. Any portion of the Base
     Building Work not conforming to the foregoing requirements may be
     considered defective. Landlord's warranty hereunder shall not apply to the
     extent of damage or defect caused by (1) the negligent acts or omissions or
     the willful misconduct of Tenant, its employees, agents, contractors,
     sublessees or permitted occupants under Section 5.6.6 below (hereinafter,
     the "Tenant Parties"), (2) improper operation by any of the Tenant Parties,
     or (3) normal wear and tear and normal usage.

     (ii) The warranty contained in the foregoing subsection (i) shall commence
     on the date on which Landlord has completed the Base Building Work under
     Section 3.4(B) above (the "Completion Date") and shall expire on the day
     immediately preceding the first (1st) anniversary of the Completion Date,
     provided that Tenant is required to deliver


                                       37



     notice to Landlord of any defects within three hundred twenty (320) days of
     the Completion Date (the "Warranty Notice Period") in order to permit
     Landlord to take action to enforce Landlord's warranty rights with respect
     to the Base Building Work. In the event that the Completion Date is delayed
     as the result of any Tenant Delay, the Warranty Notice Period shall
     commence on the date that the Base Building Work would have been completed
     but for the Tenant Delay.

     (iii)Landlord agrees that it shall, without cost to Tenant, correct any
     portion of the Base Building Work which during the Warranty Period is found
     not to be in accordance with the warranties set forth in subsection (i)
     above. All defective items shall, subject to Tenant Delays and provided
     that Tenant has afforded Landlord with reasonable access to the Premises
     subject to the terms and provisions of Section 5.9 below in order to
     undertake the work described herein, be completed by Landlord within a
     reasonable period of time to be mutually agreed upon by Landlord and Tenant
     given the nature of the defect at issue after Landlord's receipt of a
     written notice from Tenant setting forth in reasonable detail the nature of
     the defect and Tenant's assessment of why it believes such defect is
     covered by the warranties set forth herein (Landlord hereby agreeing to use
     reasonable efforts to minimize interference with Tenant's use and enjoyment
     of the Premises, consistent with the fact that Landlord is undertaking to
     remedy the defective work).

     (iv) Except to the extent to which Tenant shall have given notice to
     Landlord within the Warranty Notice Period of the respects in which the
     Base Building Work is not in conformance with the warranties set forth in
     subsection (i) above, Tenant shall be deemed conclusively to have approved
     Landlord's construction of the Base Building Work and shall have no claim
     that Landlord has failed to perform any of its obligations under this
     Article III. Notwithstanding the foregoing, Landlord agrees that upon and
     after the expiration of the Warranty Notice Period, Landlord shall, at
     Tenant's request and at Tenant's sole cost and expense, enforce and
     exercise on behalf of Tenant any and all construction and manufacturers'
     warranties and guaranties with respect to the Base Building Work to the
     extent still in force and effect at the time of Tenant's request.

     (D) Time of Essence. Time is of the essence with respect to all of the time
     periods set forth in this Article III. Where no specific time period is
     specified herein for any review, approval, consent, or similar action
     required to be performed by Landlord under this Article III, Landlord shall
     respond to any request from Tenant, and/or Tenant's Construction
     Representative for approvals or information in connection with the work
     contemplated by this Article III within five (5) business days after
     Landlord's receipt of such request. Where no specific time period is
     specified herein for any review, approval, consent, or similar action
     required to be performed by Tenant under this Article III, Tenant shall
     respond to any request from Landlord and/or Landlord's Construction
     Representative for approvals or information in connection with the work
     contemplated by this Article III within five (5) business days after
     Tenant's receipt of such request.


                                       38



3.7  Arbitration

     Any disputes relating to provisions or obligations in this Article III or
     arising from the performance of the parties under this Article III shall be
     resolved by arbitration, under the Construction Industry Rules of the
     American Arbitration Association (the "AAA"), and subject to the provisions
     of Mass. General Laws, c. 251, with hearings conducted as expeditiously as
     practicable and with no undue delay, and in no event later than sixty (60)
     days after the date of demand, in Boston, Massachusetts. Prior written
     notice of application by either party for arbitration shall be given to the
     other at least ten (10) days before filing of any demand for arbitration
     hereunder. Any award of an arbitrator rendered hereunder shall be subject
     to confirmation and entry of judgment thereon in any court of competent
     jurisdiction sitting in Suffolk or Middlesex Counties, Massachusetts, and
     the parties hereby consent to the jurisdiction of such court. The costs and
     administration expenses of each arbitration hereunder and their
     apportionment between the parties shall be borne equally by the parties,
     and each party shall be responsible for its own attorneys' fees and expert
     witness fees. In connection with the foregoing, it is expressly understood
     and agreed that the parties shall continue to perform their respective
     obligations under this Lease during the pending of any such arbitration
     proceeding hereunder (with any adjustments or reallocations to be made on
     account of such continued performance as determined by the arbitrator in
     his or her award).

3.8  Escrow of Funds

     In the event that the Landlord originally named herein transfers, sells,
     assigns or otherwise conveys its interest in the Complex (a "Landlord
     Transfer") prior to the earlier of (i) the date that the Tenant Allowances
     have been fully disbursed by Landlord, and (ii) that date which is thirty
     (30) days from the first anniversary of the Commencement Date (the later of
     (i) and (ii) being referred to as the "Outside TI Date"), then prior to or
     at the time of such Landlord Transfer, the Landlord originally named herein
     shall, at its election, (a) deposit into an escrow account in form and
     substance, and with an escrow agent, reasonably satisfactory to Landlord
     and Tenant, cash in the amount of the undisbursed portions of the Tenant
     Allowances, such escrow account to be used to fund the remaining allowance
     obligations of Landlord under this Lease, or (b) provide Tenant with a
     letter of credit, in form and substance, and from an issuing bank,
     reasonably satisfactory to Tenant in the amount of the undisbursed portions
     of the Tenant Allowances, such letter of credit to be held by Tenant as
     security for the remaining allowance obligations of Landlord under this
     Lease. Any funds remaining in the escrow account, or the letter of credit,
     as the case may be, shall be returned to the Landlord named herein promptly
     after the later of (i) the Outside TI Date and (ii) the repayment of all
     reimbursable amounts of the Tenant Allowances properly and timely requested
     by Tenant in accordance with the provisions of this Lease.


                                       39



                                   ARTICLE IV

                 Landlord's Covenants; Interruptions and Delays

4.1  Landlord Covenants

     Landlord covenants and agrees to the following during the Term:

     4.1.1 Services Furnished by Landlord

          To furnish services, utilities, facilities and supplies set forth in
          Exhibit C attached hereto to the Premises and the Complex in a manner
          equal to that customarily provided by landlords in comparable,
          first-class office/research and development multi-building complexes
          in the Boston Northwest Suburban Market subject to reimbursement in
          accordance with, and as limited by, the provisions of Section 2.6.

     4.1.2 Additional Services Available to Tenant

          To furnish, at Tenant's expense, reasonable additional Building
          operation services which are usual and customary in comparable,
          first-class office/research and development complexes in the Boston
          Northwest Suburban Market upon reasonable advance request of Tenant at
          reasonable and equitable rates from time to time established by
          Landlord. Tenant agrees to pay to Landlord, as Additional Rent, the
          cost of any such additional Building services requested by Tenant and
          for the cost of any additions, alterations, improvements or other work
          performed by Landlord in the Premises at the request of Tenant within
          thirty (30) days after being billed therefor.

     4.1.3 Roof, Exterior Wall, Floor Slab and Common Facility Repairs

          Except for damage caused by fire and casualty and by eminent domain,
          and except as otherwise provided in Article VI and subject to
          reimbursement in accordance with, and as limited by, the provisions of
          Section 2.6, (i) to make such repairs and/or replacements (as
          appropriate) to all structural and non-structural portions and
          components of the roof systems (including roof membranes) and the
          mechanical, electrical, plumbing, sprinkler, fire/life safety and the
          heating, ventilating and air conditioning ("HVAC") systems serving the
          Premises (but exclusive of any specialty installations installed or
          requested by Tenant that exclusively serve the Premises which shall be
          maintained at Tenant's sole cost and expense), the Common Areas and
          the Structural Elements (as hereafter defined) as may be necessary to
          keep them in good and operable condition consistent with the level of
          maintenance and repair customary for comparable, first-class
          office/research and development properties in the Boston Northwest
          Suburban Market, and (ii) to maintain the Complex (exclusive of
          Tenant's responsibilities under this Lease) in a first class manner
          comparable to the


                                       40



          maintenance of similar first-class office/research and development
          complexes in the Boston Northwest Suburban Market. The term
          "Structural Elements" shall mean the structural components of the
          Buildings, including without limitation the roofs, foundations,
          exterior structural walls, floor/ceiling slabs, exterior glass and
          mullions, columns, beams, shafts, elevator cabs and other load-bearing
          elements of the Buildings.

          Within six (6) months following the substantial completion of the Base
          Building Work (but not as a condition of substantial completion),
          Landlord agrees to perform, at its sole cost and expense, an infrared
          scan of the roofs of Buildings C, D and E and to provide Tenant with a
          copy of the results of such scan. In the event that such scan revels
          that the roof systems are not weather-tight (except to the extent
          resulting from particular components of the Tenant Improvement Work),
          Landlord agrees, at Landlord's sole cost and expense and without
          inclusion in Landlord's Operating Expenses, to promptly and diligently
          repair any such problem areas in accordance with good and sound
          construction standards in the commercial roofing industry.

4.2  Interruptions and Delays in Services and Repairs, Etc.

     (A)Except as specifically provided in Section 4.2(C) below, Landlord shall
     not be liable to Tenant for any compensation or reduction of rent by reason
     of inconvenience or annoyance or for loss of business arising from the
     necessity of Landlord or its agents entering the Premises in accordance
     with, and as limited by, the provisions of Section 5.9 below for any of the
     purposes in this Lease authorized, or for repairing the Premises or any
     portion of the Buildings however the necessity may occur. In case Landlord
     is prevented or delayed from making any repairs, alterations or
     improvements, or furnishing any services or performing any other covenant
     or duty to be performed on Landlord's part, by reason of any cause
     reasonably beyond Landlord's control, Landlord shall not be liable to
     Tenant therefor, nor, except as expressly otherwise provided in Section
     4.2(C) or in Article VI, shall Tenant be entitled to any abatement or
     reduction of rent by reason thereof, or right to terminate this Lease, nor
     shall the same give rise to a claim in Tenant's favor that such failure
     constitutes actual or constructive, total or partial, eviction from the
     Premises.

     (B) Landlord reserves the right to stop any service or utility system, when
     necessary by reason of accident or emergency, or until necessary repairs
     have been completed; provided, however, that in each instance of stoppage,
     Landlord shall exercise reasonable diligence to eliminate the cause
     thereof. Except in case of emergency repairs, Landlord will give Tenant
     reasonable advance notice of any contemplated stoppage and will use
     reasonable efforts to avoid unnecessary inconvenience to Tenant by reason
     thereof, including, without limitation, scheduling such stoppage during
     Tenant's non-business hours to the extent commercially practicable under
     the circumstances.

     (C) Notwithstanding anything to the contrary in this Lease contained, if
     due to (i) any repairs, alterations, replacements, or improvements made by
     Landlord, (ii) Landlord's


                                       41



     failure to make any repairs, alterations, or improvements required to be
     made by Landlord hereunder, or to provide any service required to be
     provided by Landlord hereunder, or to remediate any Hazardous Materials (as
     that term is defined in Section 5.3 below) required to be remediated by
     Landlord hereunder, or (iii) failure of electric supply, water and/or sewer
     service, or HVAC service to the Premises, any portion of the Premises
     becomes untenantable so that for the Premises Untenantability Cure Period,
     as hereinafter defined, the continued operation in the ordinary course of
     Tenant's business is materially adversely affected (including, without
     limitation, as the result of the Premises being rendered inaccessible as
     the result of any of the circumstances described in subsections (i), (ii)
     or (iii) above), then, provided that Tenant ceases to use the affected
     portion of the Premises during the entirety of the Premises Untenantability
     Cure Period by reason of such untenantability, and that such
     untenantability and Landlord's inability to cure such condition is not
     caused by the fault or neglect of Tenant or Tenant's agents, employees or
     contractors, Annual Fixed Rent, Operating Expenses Allocable to the
     Premises and Landlord's Tax Expenses Allocable to the Premises shall from
     and after the expiration of the Premises Untenantability Cure Period be
     abated in proportion to such untenantability and its impact on the
     continued operation in the ordinary course of Tenant's business until the
     day such condition is completely corrected. For the purposes hereof, the
     "Premises Untenantability Cure Period" shall be defined as five (5)
     consecutive business days after Landlord's receipt of written notice from
     Tenant of the condition causing untenantability in the Premises, provided
     however, that the Premises Untenantability Cure Period shall be ten (10)
     consecutive business days after Landlord's receipt of written notice from
     Tenant of such condition causing untenantability in the Premises if either
     the condition was caused by causes beyond Landlord's control or Landlord is
     unable to cure such condition as the result of causes beyond Landlord's
     control.

     In addition, if due to (a) any repairs, alterations, replacements, or
     improvements made by Landlord, (b) Landlord's failure to make any repairs,
     alterations, or improvements required to be made by Landlord hereunder or
     to provide any service required to be provided by Landlord hereunder, (c)
     Landlord's Failure to remediate any Hazardous Materials required to be
     remediated by Landlord under this Lease, or (d) the failure of electric
     supply, water and/or sewer service, or HVAC service to the Premises, the
     operation of Tenant's business in the Premises in the normal course is
     materially adversely affected (including, without limitation, as the result
     of the Premises being rendered inaccessible as the result of any of the
     circumstances described in clauses (a), (b), (c) or (d) above) for a period
     of five (5) consecutive months after Landlord's receipt of written notice
     of such condition from Tenant, then, provided that Tenant ceases to use the
     affected portion of the Premises for the period of such untenantability and
     such untenantability and Landlord's inability to cure such condition is not
     caused by the fault or neglect of Tenant, or Tenant's agents, employees or
     contractors, then Tenant may terminate this Lease by giving Landlord
     written notice as follows:

     (i)  Said notice shall be given after said five (5) month period.


                                       42



     (ii) Said notice shall set forth an effective date which is not earlier
          than thirty (30) days after Landlord receives said notice.

     (iii) If said condition is remedied on or before the date thirty (30) days
          after the receipt of such notice, said notice shall have no further
          force and effect.

     (iv) If said condition is not remedied on or before the date thirty (30)
          days after the receipt of such notice for any reason other then
          Tenant's fault, as aforesaid, the Lease shall terminate as of said
          effective date, and the Annual Fixed Rent and Additional Rent due
          under the Lease shall be apportioned (to the extent not abated) as of
          said effective date.

     The remedies set forth in this Section 4.2(C) shall be Tenant's sole
     remedies for the events described herein. The provisions of this subsection
     shall not apply in the event of untenantability caused by fire or other
     casualty, or taking (which shall be subject to the terms and conditions of
     Article VI below).

4.3  Landlord's Insurance

     Landlord shall carry at all times during the Term of this Lease (i)
     commercial general liability insurance with respect to the Buildings in an
     amount not less than $10,000,000.00 combined single limit per occurrence,
     (ii) insurance against loss or damage with respect to the Complex covered
     by the so-called "all risk" type insurance coverage with customary
     exceptions in an amount equal to one hundred percent (100%) of the
     replacement value of all improvements within the Complex and (iii) loss of
     "rental value" insurance in an amount equal to not less than the Annual
     Fixed Rent and payments on account of Operating Expenses Allocable to the
     Premises and Landlord's Tax Expenses Allocable to the Premises payable by
     Tenant under this Lease for not less than a one (1) year period (with a
     customary deductible). Landlord may also maintain such other insurance as
     may from time to time be required by a mortgagee holding a mortgage lien on
     the Buildings. Further, Landlord may also maintain such insurance against
     loss of annual fixed rent and additional rent and such other risks and
     perils as Landlord deems proper. Any and all such insurance (x) may be
     maintained under a blanket policy affecting other properties of Landlord
     and/or its affiliated business organizations, (y) may be written with
     deductibles as reasonably determined by Landlord (which such deductible is
     currently $25,000.00) and (z) shall be subject to reimbursement in
     accordance with Section 2.6.

     Nothing contained herein shall be construed so as to require Landlord to
     maintain terrorism or environmental pollution liability insurance (it being
     acknowledged, however, that Landlord does in fact maintain such coverages
     as of the date of this Lease); provided, however, that in the event the
     Landlord originally named herein shall sell, transfer, assign, convey or
     ground lease its interest in the Complex to an unaffiliated third party,
     such new owner and any subsequent party succeeding to the original
     Landlord's interest as Landlord under this Lease shall not be entitled to
     charge to Tenant at any time during the Term as part of Operating Expenses
     Allocable to the Premises any costs of terrorism


                                       43



     or environmental pollution liability insurance in excess of one hundred ten
     percent (110%) of the costs being paid by Tenant on account of such
     coverages during the last full calendar year immediately prior to the
     conveyance by the original named Landlord.

4.4  Landlord's Indemnity

     Subject to the limitations of Section 8.4 below and to the provisions of
     Section 8.19 below, to the maximum extent this agreement is effective
     according to law and to the extent not resulting from any act, omission,
     fault, negligence or misconduct of Tenant or its contractors, agents,
     licensees, invitees, servants or employees, Landlord agrees to defend with
     counsel first approved by Tenant (counsel appointed by Landlord's insurance
     carrier shall be deemed approved by Tenant and for any other circumstances
     such approval shall not be unreasonably withheld or delayed) indemnify and
     save harmless Tenant and Tenant's beneficiaries, partners, subsidiaries,
     officers, directors, agents, trustees and employees (collectively, the
     "Tenant Parties") from and against any claim arising from any injury to any
     person occurring in the Premises, in the Buildings or on the Site after the
     date that possession of the Premises is first delivered to Tenant and until
     the expiration or earlier termination of the Lease Term, to the extent such
     injury results from the negligence or willful misconduct of Landlord or
     Landlord's agents, employees or contractors provided, however that in no
     event shall the aforesaid indemnity render Landlord responsible or liable
     for any loss or damage to fixtures or personal property of Tenant and
     Landlord shall in no event be liable for any indirect or consequential
     damages; and provided, further, that the provisions of this Section 4.4
     shall not be applicable to the holder of any mortgage now or hereafter on
     the Site or the Buildings (whether or not such holder shall be a mortgagee
     in possession of or shall have exercised any rights under a conditional,
     collateral or other assignment of leases and/or rents respecting, the Site
     and/or Buildings) except to the extent otherwise agreed by such holder in
     any Subordination, Non-Disturbance and Attornment Agreement by and between
     Tenant and such holder.

4.5  Compliance with Laws

     To the best of Landlord's actual knowledge, the Buildings were constructed
     in accordance with the provisions of the Zoning Bylaw for the Town of
     Bedford and other laws, ordinances, rules and regulations applicable to the
     Buildings as of the construction thereof.

4.6  Leasing Restrictions

     Provided that, on the condition that and only so long as (i) Tenant
     directly leases from Landlord at least 75,000 square feet of rentable floor
     area and its Government and Industrial Division is still in occupancy of
     portions of the Premises, (ii) no Event of Default of Tenant exists, (iii)
     this Lease is still in full force and effect, and (iv) Tenant has neither
     assigned this Lease nor sublet the Premises in its entirety (except for an
     assignment or sublease under Section 5.6.1 above or a permitted occupancy
     under Section 5.6.6 below), (a) Landlord shall not hereafter directly enter
     into a lease of other


                                       44



     space in the Complex with any of the "Named Companies" (as hereinafter
     defined), and (b) Landlord agrees to include in all "Future Leases" (as
     hereinafter defined) the same clause as is contained in Section 5.6.2(i)
     below (the "Assignment and Subletting Restriction Clause") which would
     allow Landlord to withhold its consent (and Landlord shall so withhold its
     consent) to a proposed assignment or sublease that would be in violation of
     the restrictions of this Section 4.6. Landlord shall use commercially
     reasonable efforts to enforce the terms of the Assignment and Subletting
     Restriction Clauses in its Future Leases, but in no event shall Landlord be
     liable to Tenant (x) for the failure of other occupants of the Complex to
     comply with the Assignment and Subletting Restriction Clause so long as
     Landlord has withheld its consent and used commercially reasonable efforts
     to enforce the same as aforesaid or (y) to the extent that a court of
     competent jurisdiction determines that the Assignment and Subletting
     Restriction Clause is invalid and/or unenforceable.

     Notwithstanding the foregoing, the provisions of this Section 4.6 shall not
     apply to the Existing Leases set forth in Exhibit O hereto or to any
     business operations or other activities of the holders of the tenant(s)
     interest(s) in the Existing Leases or, to the extent such Existing Leases
     do not contain the Assignment and Subletting Restriction Clause, of the
     subtenants or assignees under the Existing Leases.

     For the purposes hereof:

          (i)  The "Named Companies" are Samsung, LG, Yujin, Foster-Miller,
               Qinetiq, Allen-Vanguard, Northrop Grummann's Remotec division,
               General Dynamics Robotic Systems, and any successor-in-interest
               to the foregoing entities and/or divisions, as the case may be,
               who is engaged in whole or in part in the business of developing
               or manufacturing robotic devices. Landlord agrees during the term
               to reasonably consider requests by tenant to include additional
               or substitute entities to the list of Named Companies provided
               that Tenant can demonstrate to Landlord's reasonable satisfaction
               that such proposed entities are direct and substantial
               competitors of Tenant (provided that in no event shall there be
               more than eight (8) Named Companies at any time).

          (ii) A "Future Lease" shall be a lease entered into after the date of
               this Lease for space in the Complex between Landlord, as
               landlord, and a person or entity (other than Tenant), as tenant,
               but excluding, to the extent herein provided, the Existing Leases
               and the implementation of the provisions of the Existing Leases.

                                    ARTICLE V

                               Tenant's Covenants

     Tenant covenants and agrees to the following during the Term and such
     further time as


                                       45



     Tenant occupies any part of the Premises:

5.1  Payments

     To pay when due all fixed rent and Additional Rent and all charges for
     utility services rendered to the Premises (except as otherwise provided in
     Exhibit C) and, as further Additional Rent, all charges for additional
     services rendered pursuant to Section 4.1.2.

5.2  Repair and Yield Up

     Except as otherwise provided in Article VI and Section 4.1.3 to keep the
     Premises in good order, repair and condition, excepting only reasonable
     wear and tear and damage by fire or taking under the power of eminent
     domain, and all interior glass in windows (except glass in exterior walls
     unless the damage thereto is attributable to Tenant's negligence or misuse)
     and doors of the Premises whole and in good condition with glass of the
     same type and quality as that injured or broken, and at the expiration or
     termination of this Lease peaceably to yield up the Premises with all
     construction, work, improvements, and all alterations and additions thereto
     in good order, repair and condition, reasonable wear and tear and damage by
     fire or taking under the power of eminent domain only excepted, first
     removing all goods and effects of Tenant and (x) to the extent specified by
     Landlord by notice to Tenant given at least sixty (60) days prior to such
     expiration or termination, the wiring for Tenant's computer, telephone and
     other communication systems and equipment whether located in the Premises
     or in any other portion of the Buildings (including all risers) and (y) to
     the extent specified for removal by Landlord at the time Landlord approves
     of the same under Article III above or Section 5.14 below, all alterations
     and additions made by Tenant, and repairing any damage caused by such
     removal and restoring the Premises and leaving them clean and neat. Tenant
     shall not permit or commit any waste, and Tenant shall be responsible for
     the cost of repairs which may be made necessary by reason of damage to the
     Buildings or to the Site or to the Additional Buildings caused by Tenant,
     Tenant's agents, contractors, employees, sublessees, licensees,
     concessionaires or invitees.

5.3  Use

     To use and occupy the Premises for the Permitted Uses only, and not to
     injure or deface the Premises, Buildings, the Additional Buildings, the
     Site or any other part of the Complex nor to permit in the Premises or on
     the Site any auction sale or inflammable fluids or chemicals, or nuisance,
     or the emission from the Premises of any objectionable noise or odor, nor
     to operate in the Premises in such a way as to result in the leakage of
     fluid, and not to use or devote the Premises or any part thereof for any
     purpose other than the Permitted Uses, nor any use thereof which is
     inconsistent with the maintenance of the Buildings as office/research and
     development buildings of the first class in the quality of its maintenance,
     use and occupancy, or which is improper, offensive, contrary to law or
     ordinance or liable to invalidate or increase the premiums for any
     insurance on the Buildings (Landlord hereby representing that to the best
     of its actual knowledge as of the date of this Lease, the Permitted Uses
     will not invalidate or increase the insurance


                                       46



     premiums for the Complex) or its contents or liable to render necessary any
     alteration or addition to the Buildings. Further, except as otherwise set
     forth in this Lease (i) Tenant shall not, nor shall Tenant permit its
     employees, invitees, agents, independent contractors, contractors,
     assignees or subtenants to, keep, maintain, store or dispose of (into the
     sewage or waste disposal system or otherwise) or engage in any activity
     which might produce or generate any substance which is or may hereafter be
     classified as a hazardous material, waste or substance (collectively
     "Hazardous Materials"), under federal, state or local laws, rules and
     regulations, including, without limitation, 42 U.S.C. Section 6901 et seq.,
     42 U.S.C. Section 9601 et seq., 42 U.S.C. Section 2601 et seq., 49 U.S.C.
     Section 1802 et seq. and Massachusetts General Laws, Chapter 21E and the
     rules and regulations promulgated under any of the foregoing, as such laws,
     rules and regulations may be amended from time to time (collectively
     "Hazardous Materials Laws"), (ii) Tenant shall immediately notify Landlord
     of any incident in, on or about the Premises, the Buildings or the Site
     that would require the filing of a notice under any Hazardous Materials
     Laws, (iii) Tenant shall comply and shall cause its employees, invitees,
     agents, independent contractors, contractors, assignees and subtenants to
     comply with each of the foregoing and (iv) Landlord shall have the right,
     at Landlord's sole cost and expense, to make such inspections (including
     testing) as Landlord shall elect from time to time to determine that Tenant
     is complying with the foregoing (provided that Landlord shall promptly
     restore any portions of the Premises that may have been disturbed by such
     inspections).

     Notwithstanding the foregoing, Tenant may use Hazardous Materials and other
     substances typically used by Tenant for the conduct of the Permitted Uses,
     including, without limitation, diesel fuel in such amounts as are
     appropriate for the testing of Tenant's existing and prototype products,
     provided that Tenant uses, stores and disposes of such Hazardous Materials
     and other substances in the manner which they are normally used, and in
     compliance with all Hazardous Materials Laws and other applicable laws,
     ordinances, bylaws, rules and regulations, and Tenant obtains and complies
     with all permits required by Hazardous Materials Laws or any other laws,
     ordinances, bylaws, rules or regulations prior to the use or presence of
     any such substances in the Premises.

     Landlord represents and warrants to Tenant that, except as set forth in
     those certain reports entitled (x) "Report on Phase I Environmental Site
     Assessment Update, 2 to 14 Crosby Drive, Bedford, Massachusetts" prepared
     by Haley & Aldrich, Inc. and dated March 21, 1997 and (y) "Phase IV
     Inspection and Monitoring Report No. 3, 4D Crosby Drive, Bedford,
     Massachusetts" prepared by Sanborn, Head & Associates, Inc and dated May
     17, 2006 (copies of which have been provided to Tenant), to the best of
     Landlord's actual knowledge as of the date of this Lease there are no
     Hazardous Materials in the Buildings or on the Site which are or would be
     required to be removed or otherwise abated in accordance with applicable
     Hazardous Materials Laws. Subject to the limitations of Section 8.4 hereof,
     Landlord shall use reasonable efforts to remove or abate, as required by
     applicable Hazardous Materials Laws, Hazardous Materials on the Site or in
     the Common Areas, the Structural Elements or the base building systems of
     the Complex, provided that the foregoing shall not apply to (i)
     requirements of Hazardous Materials Laws resulting from the use of, or
     additions, alterations or improvements in the


                                       47



     Premises, or (ii) Hazardous Materials which are in the Buildings or on the
     Site because of the action or inaction of any tenant or occupant in the
     Complex, including Tenant, or any employee, agent or contractor thereof, or
     (iii) any tenant space in the Complex, including the Premises, and any
     additions, alterations and improvements therein. In connection with the
     foregoing, Landlord hereby agrees to use best efforts to enforce the terms
     of its leases with other tenants of the Complex in the event of a violation
     of Hazardous Materials Laws resulting from the action or inaction of any
     tenant or occupant of the Complex or any employee, agent or contractor
     thereof; provided, however, that in no event shall Landlord be liable to
     Tenant for any violation of Hazardous Materials Laws by any tenant or
     occupant of the Complex. Subject to the limitations of Section 8.4 hereof,
     Landlord agrees to defend with counsel first approved by Tenant (counsel
     appointed by Landlord's insurance carrier shall be deemed approved by
     Tenant and for any other circumstances such approval shall not be
     unreasonably withheld or delayed), indemnify and save Tenant harmless from
     liability, loss and damage to persons or property and from any claims,
     actions, proceedings and expenses in connection therewith resulting from
     the failure of Landlord to fulfill its obligations under this Section 5.3;
     provided, however, that in no event shall the foregoing indemnity render
     Landlord liable for any loss or damage to Tenant's Property and Landlord
     shall in no event be liable for indirect or consequential damages.

5.4  Obstructions; Items Visible From Exterior; Rules and Regulations

     Not to obstruct in any manner any portion of the Additional Buildings not
     hereby leased or any portions of the Site used by Tenant in common with
     others; not without prior consent of Landlord, except as otherwise
     expressly set forth in this Lease, to permit the painting or placing of any
     signs, awnings, aerials or flagpoles, visible from outside the Premises;
     and to comply with all reasonable Rules and Regulations of general
     applicability to tenants of the Complex now or hereafter made by Landlord,
     of which Tenant has been given notice and which are not inconsistent with
     any of Tenant's rights under this Lease, for the care and use of the
     Buildings and Site and their facilities and approaches. Landlord agrees to
     enforce such Rules and Regulations in a uniform and non-discriminatory
     manner, but in no event shall Landlord be liable to Tenant for the failure
     of other occupants of the Complex to conform to such Rules and Regulations.

5.5  Safety Appliances

     Subject to Landlord's obligations under this Lease, to keep the Premises
     equipped with all safety appliances (including, without limitation, the
     sprinkler and fire suppression systems serving the Premises) required by
     any public authority because of any use made by Tenant other than normal
     office use, and to procure all licenses and permits so required because of
     such use and, if requested by Landlord, to do any work so required because
     of such use, it being understood that the foregoing provisions shall not be
     construed to broaden in any way the Permitted Uses.


                                       48


5.6  Assignment; Sublease

     Except as otherwise expressly provided herein, Tenant covenants and agrees
     that it shall not assign, mortgage, pledge, hypothecate or otherwise
     transfer this Lease and/or Tenant's interest in this Lease or sublet (which
     term, without limitation, shall include granting of concessions, licenses
     or the like) the whole or any part of the Premises without first obtaining
     Landlord's prior written consent, which consent will be governed by the
     terms and provisions of Section 5.6.2 below if Landlord does not exercise
     its rights under Section 5.6.1.1 below. Any assignment, mortgage, pledge,
     hypothecation, transfer or subletting not expressly permitted in or
     consented to by Landlord under Sections 5.6.1-5.6.7 shall be void, ab
     initio; shall be of no force and effect; and shall confer no rights on or
     in favor of third parties. In addition, Landlord shall be entitled to seek
     specific performance of or other equitable relief with respect to the
     provisions hereof.

     5.6.1 Notwithstanding the foregoing provisions of Section 5.6 above and the
          provisions of Sections 5.6.1.1, 5.6.2 and 5.6.4 below, but subject to
          the provisions of the first paragraph of Sections 5.6.3 (the first
          paragraph only) and 5.6.5 below, Tenant shall have the right to assign
          this Lease or to sublet the Premises in whole or in part, without
          Landlord's consent, to any other entity (the "Successor Entity") (i)
          which controls or is controlled by Tenant or Tenant's parent
          corporation, or (ii) which is under common control with Tenant, or
          (iii) which purchases all or substantially all of the assets of
          Tenant, or (iv) which purchases all or substantially all of the stock
          of (or other membership interests in) Tenant or (v) which merges or
          combines with Tenant; provided, that to the extent Tenant does not
          remain in existence after an assignment to or other transaction with a
          Successor Entity, the Successor Entity has a net worth (on a pro forma
          basis using generally accepted accounting principles consistently
          applied after giving effect to the merger, consolidation or purchase
          of assets, stock or other membership interests) reasonably sufficient
          to perform the obligations of the tenant under this Lease. Except in
          cases of statutory merger, in which case the surviving entity in the
          merger shall be liable as the Tenant under this Lease, Tenant shall
          continue to remain fully liable under this Lease, on a joint and
          several basis with the Successor Entity and, following such sublease
          or assignment, Tenant or such Successor Entity, as the case may be,
          shall continue to comply with all of its obligations under this Lease,
          including with respect to the Permitted Uses of the Premises. If any
          affiliate, parent or subsidiary entity of Tenant to which this Lease
          is assigned or the Premises sublet (in whole or in part) without
          Landlord's consent pursuant to this Section 5.6.1 shall cease to be
          such an affiliate, parent or subsidiary entity, such cessation shall
          be considered an assignment or subletting requiring Landlord's
          consent. Landlord agrees that the offer and sale by Tenant (or any
          stockholder of Tenant) of any stock or other membership interests
          pursuant to an effective registration statement filed pursuant to the
          Securities Act of 1933 or pursuant to and in accordance with the
          securities laws of the United States or any foreign country governing
          publicly traded companies and not in violation of U.S. law, shall not
          constitute an assignment of this Lease, and shall


                                       49



          not require the consent or approval of Landlord. To the extent Tenant
          remains in existence after the assignment or sublease to a Successor
          Entity, the continued economic viability of Tenant and the amount of
          the Security Deposit then being held under this Lease shall be taken
          into account when evaluating the ability of the assignee or subtenant
          to perform the obligations of the tenant under this Lease as set forth
          above.

          5.6.1.1 Notwithstanding the provisions of Section 5.6 above, in the
               event Tenant desires to assign this Lease or to sublet the
               Premises and this Section 5.6.1.1 is applicable to the proposed
               transfer, Tenant shall give Landlord a Proposed Transfer Notice
               (as defined in Section 5.6.3 hereof) and in the event of (x) a
               proposed assignment of this Lease or (y) a proposed sublease of
               fifty percent (50%) or more of the Rentable Floor Area of the
               Premises or (z) a proposed sublease of less than fifty percent
               (50%) of the Rentable Floor Area of the Premises for all or
               substantially all of the then-remaining Lease Term (which for the
               purposes hereof shall be defined as any sublease expiring within
               the last eighteen (18) months of the Term of this Lease), then
               Landlord shall have the right at its sole option, to be exercised
               within fifteen (15) business days after receipt of Tenant's
               Proposed Transfer Notice (the "Acceptance Period"), to terminate
               this Lease as of a date specified in a notice to Tenant, which
               date shall not be earlier than the proposed possession date under
               Tenant's proposed sublease or assignment, as applicable;
               provided, however, that (i) upon the termination date as set
               forth in Landlord's notice, all obligations relating to the
               period after such termination date (but not those relating to the
               period before such termination date) shall cease and promptly
               upon being billed therefor by Landlord, Tenant shall make final
               payment of all Annual Fixed Rent and Additional Rent due from
               Tenant through the termination date and (ii) Landlord shall, at
               Landlord's sole cost and expense, remove or close off and secure,
               in compliance with applicable laws, any internal stairways,
               doors, or corridors which connect the terminated portion of the
               Premises from the remainder of the Premises and shall, if
               applicable, install any separate utility meters, corridors and/or
               demising walls required to separate and demise the terminated
               portion of the Premises from the remaining portion of the
               Premises. In the event Landlord exercises its option to terminate
               this Lease as to the portion or, if applicable, the entire
               Premises as and to the extent permitted under this Section
               5.6.1.1, then Tenant may rescind its request for Landlord's
               consent to such transfer by notice to Landlord within ten (10)
               business days following receipt of Landlord's election to
               terminate whereupon Landlord's election to terminate this Lease
               as to the applicable portion of the Premises proposed to be
               transferred shall be null and void.

               Notwithstanding the foregoing, in the event that Tenant shall
               only propose to sublease a portion of the Premises, Landlord
               shall only have the right to so terminate this Lease with respect
               to the portion of the Premises and for


                                       50



               the proposed term of the sublease therefor (if such sublease was
               for less than all or substantially all of the remainder of the
               Term) for which Landlord's rights under this Section 5.6.1.1 are
               or would be triggered (the "Terminated Portion of the Premises")
               and from and after such termination date the Rentable Floor Area
               of the Premises shall be reduced to the rentable floor area of
               the remainder of the Premises and the definition of Rentable
               Floor Area of the Premises shall be so amended and after such
               termination all (and until the proposed expiration date of the
               proposed sublease if such sublease was for less than all or
               substantially all of the remainder of the Term) references in
               this Lease to the "Premises" or the "Rentable Floor Area of the
               Premises" shall be deemed to be references to the remainder of
               the Premises and accordingly Tenant's payments for Annual Fixed
               Rent and its share of operating costs, real estate taxes and
               electricity shall be reduced on a pro rata basis to reflect the
               size of the remainder of the Premises. In the case of an
               assignment or partial subletting where Landlord has exercised its
               termination right pursuant to this Section 5.6.1.1, Tenant shall
               pay to Landlord, as Additional Rent, within thirty (30) days
               after demand therefor, the reasonable costs which Tenant had
               agreed to pay or perform in connection with Tenant's proposed
               sublease to separately physically demise that portion of the
               Premises which are being terminated from the remainder of the
               Premises.

               In the event that Landlord shall exercise its termination right
               hereunder and thereafter relets the portion of the Premises thus
               recaptured from Tenant (the "Recapture Premises") for all or part
               of the then-remaining Lease Term (exclusive of any extension
               options not exercised as of the date of the recapture), Landlord
               shall pay to Tenant, within fifteen (15) days after receipt by
               Landlord, an amount equal to fifty percent (50%) of the excess of
               (i) the fixed rent, additional rent and all other charges and
               sums actually received by Landlord pursuant to such reletting,
               after deducting (x) Landlord's architectural, legal and brokerage
               fees in connection with such reletting and (y) any construction
               expenses incurred by Landlord in connection with such reletting
               and the fair market rental value of the Recapture Premises for
               any period after the recapture and prior to such reletting, over
               (ii) the Annual Fixed Rent, Additional Rent and other charges
               that would have been payable by Tenant for the Recapture Premises
               over the portion of the term of the reletting that falls within
               the then-remaining Lease Term (exclusive of any extension options
               not exercised as of the date of the recapture). Landlord shall
               certify the amounts set forth in subsections (i) and (ii) above
               to Tenant from time to time (but not more often than monthly)
               upon written request. Notwithstanding anything contained herein
               to the contrary, Tenant not be entitled to any sums due under
               this Section 5.6.1.1 until Landlord has fully recovered or been
               credited its costs in connection with the reletting at issue and
               the amount of any excess costs of Landlord may be carried over


                                       51



               to a subsequent year(s) and deducted from the reletting revenues
               for such year(s) until a profit is received. In addition, the
               terms and provisions of this subparagraph shall not apply (and
               Tenant shall not be entitled to received any sums hereunder) in
               the event that the reletting is to a tenant with a significantly
               different use than the Permitted Uses and/or who is making
               significant alterations, additions or improvements to the
               Premises.

               In the event that Landlord shall not exercise its termination
               rights as aforesaid, or shall fail to give any or timely notice
               pursuant to this Section 5.6.1.1 the provisions of Sections 5.6.2
               - 5.6.5 shall be applicable. This Section 5.6.1.1 shall not be
               applicable to an assignment or sublease pursuant to Section 5.6.1
               or an occupancy permitted pursuant to Section 5.6.6.

     5.6.2 Notwithstanding the provisions of Section 5.6 above, but subject to
          the provisions of this Section 5.6.2 and the provisions of Sections
          5.6.3, 5.6.4 and 5.6.5 below, in the event that Landlord shall not
          have exercised the termination right as set forth in Section 5.6.1.1,
          or shall have failed to give any or timely notice under Section
          5.6.1.1, then for a period of one hundred twenty (120) days (i) after
          the receipt of Landlord's notice stating that Landlord does not elect
          the termination right, or (ii) after the expiration of the Acceptance
          Period, in the event Landlord shall not give any or timely notice
          under Section 5.6.1.1 as the case may be, Tenant shall have the right
          to assign this Lease or sublet the Premises in accordance with the
          Proposed Transfer Notice provided that, in each instance, Tenant first
          obtains the express prior written consent of Landlord, which consent
          shall not be unreasonably withheld, conditioned or delayed. It is
          understood and agreed that Landlord's consent shall be deemed given
          hereunder in the event that Landlord shall fail to respond to a
          Proposed Transfer Notice meeting all of the requirements of Section
          5.6.3 below within fifteen (15) business days after receipt of a
          request therefor from Tenant.

          Without limiting the foregoing standard, Landlord shall not be deemed
          to be unreasonably withholding its consent to such a proposed
          assignment or subleasing if:

               (a)  the proposed assignee or subtenant is a tenant elsewhere in
                    the Complex or is or has been in active negotiation with
                    Landlord for premises elsewhere in the Complex within the
                    six (6) month period prior to the proposed effective date of
                    the assignment or sublease (provided, however, that Landlord
                    may not withhold its consent on this basis if Landlord is
                    unable to satisfy such existing or proposed tenant's need as
                    to size of premises and/or length of term in the Complex),
                    or

               (b)  the proposed assignee or subtenant is not of a character
                    consistent with the operation of a first-class
                    office/research and development


                                       52



                    building (by way of example Landlord shall not be deemed to
                    be unreasonably withholding its consent to an assignment or
                    subleasing to any governmental or quasi-governmental agency,
                    unless such agency is currently in occupancy of any portion
                    of the Complex at the time of Tenant's proposed request for
                    consent), or

               (c)  the proposed assignee does not possess adequate financial
                    capability to perform the Tenant obligations as and when due
                    or required or the proposed subtenant does not possess
                    adequate financial capability to perform the obligations of
                    the subtenant under the sublease as and when due or required
                    (taking into account in both cases the continued liability
                    of Tenant notwithstanding such transfer), or

               (d)  the assignee or subtenant proposes to use the Premises (or
                    part thereof) for a purpose other than the purpose for which
                    the Premises may be used as stated in Section 1.1 hereof, or

               (e)  the character of the business to be conducted or the
                    proposed use of the Premises by the proposed subtenant or
                    assignee shall (i) be likely to materially increase
                    Landlord's Operating Expenses beyond that which Landlord now
                    incurs for use by Tenant (unless Tenant or the proposed
                    assignee or subtenant agrees to pay the excess costs
                    attributable thereto); (ii) be likely to materially increase
                    the burden on elevators or other Building systems or
                    equipment over the burden prior to such proposed subletting
                    or assignment (unless Tenant or the proposed assignee or
                    subtenant agrees to pay the excess costs attributable
                    thereto); or (iii) violate or be likely to violate any
                    provisions or restrictions contained herein relating to the
                    use or occupancy of the Premises, or

               (f)  there shall be an existing Event of Default (defined in
                    Section 7.1) or there have been three (3) or more Event of
                    Default occurrences of a material nature during the Term, or

               (g)  if any proposed assignment or sublease shall potentially
                    have any adverse effect on the real estate investment trust
                    qualification requirements applicable to Landlord and its
                    affiliates, or

               (h)  the holder of any mortgage or ground lease on property which
                    includes the Premises does not approve of the proposed
                    assignment or sublease (where such holder has approval
                    rights pursuant to the terms of the mortgage or ground
                    lease), or

               (i)  due to the identity or business of a proposed assignee or
                    subtenant, such approval would cause Landlord to be in
                    violation of any


                                       53



                    covenant or restriction contained in another lease or other
                    agreement affecting space elsewhere in the Complex.

     5.6.3 Tenant shall give Landlord notice (the "Proposed Transfer Notice") of
          any proposed sublease or assignment, and said notice shall specify the
          provisions of the proposed assignment or subletting (or a draft of the
          proposed assignment or sublease document in close-to-final form),
          including (a) the name and address of the proposed assignee or
          subtenant, (b) in the case of a proposed assignment or subletting
          pursuant to Section 5.6.2, such information as to the proposed
          assignee's or proposed subtenant's net worth and financial capability
          and standing as may reasonably be required for Landlord to make the
          determination referred to in Section 5.6.2 above (provided, however,
          that Landlord shall hold such information confidential having the
          right to release same to its officers, accountants, attorneys and
          mortgage lenders on a confidential basis), (c) in the case of a
          proposed assignment or subletting pursuant to Section 5.6.2, all other
          information necessary to make the determination referred to in Section
          5.6.2 above and (d) in the case of a proposed assignment or subletting
          pursuant to Section 5.6.1 above, such information as may be reasonably
          required by Landlord to determine that such proposed assignment or
          subletting complies with the requirements of said Section 5.6.1. In
          the event that Tenant's Proposed Transfer Notice does not contain the
          information required hereunder, Landlord shall provide Tenant with
          written notice setting forth the additional information to be provided
          by Tenant within five (5) business days after Landlord's receipt of
          such Proposed Transfer Notice.

          If Landlord shall consent to the proposed assignment or subletting, as
          the case may be, then, in such event, Tenant may thereafter sublease
          or assign pursuant to Tenant's notice, as given hereunder; provided,
          however, that if such assignment or sublease shall not be executed and
          delivered to Landlord within one hundred twenty (120) days after the
          date of Landlord's consent, the consent shall be deemed null and void
          and the provisions of Section 5.6.1.1 shall be applicable.

     5.6.4 In addition, in the case of any assignment or subleasing as to which
          Landlord may consent (other than an assignment or subletting permitted
          under Section 5.6.1 hereof or an occupancy permitted pursuant to
          Section 5.6.6 hereof) such consent shall be upon the express and
          further condition, covenant and agreement, and Tenant hereby covenants
          and agrees that, in addition to the Annual Fixed Rent, Additional Rent
          and other charges to be paid pursuant to this Lease, fifty percent
          (50%) of the "Assignment/Sublease Profits" (hereinafter defined
          actually received by Tenant), if any, shall be paid to Landlord. The
          "Assignment/Sublease Profits" shall be the excess, if any, of (a) the
          "Assignment/Sublease Net Revenues" as hereinafter defined over (b) the
          Annual Fixed Rent and Additional Rent and other charges provided in
          this Lease (provided, however, that for the purpose of calculating the
          Assignment/Sublease Profits in the case of a sublease, appropriate
          proportions in the applicable Annual Fixed Rent, Additional Rent and
          other charges under this Lease shall be made based on the percentage
          of the Premises


                                       54



          subleased and on the terms of the sublease). The "Assignment/Sublease
          Net Revenues" shall be the fixed rent, additional rent and all other
          charges and sums actually received by Tenant either initially or over
          the term of the sublease or assignment plus all other profits and
          increases actually received by Tenant as a result of such subletting
          or assignment, exclusive of amounts paid to Tenant for the purchase or
          lease of personal property or equipment of Tenant (except to the
          extent such amounts exceed the fair market value or rental value of
          the same), after deducting the reasonable costs of Tenant incurred in
          such subleasing or assignment (the definition of which shall be
          limited to rent concessions, architectural fees, attorneys' fees,
          moving expenses, brokerage commissions and alteration allowances
          associated with the subleasing or assignment at issue, in each case
          actually paid), as set forth in a statement certified by an
          appropriate officer of Tenant and delivered to Landlord within thirty
          (30) days of the full execution of the sublease or assignment
          document. Notwithstanding anything contained herein to the contrary,
          Landlord shall not be entitled to any sums due under this Section
          5.6.4 until Tenant has fully recovered or been credited its costs in
          connection with the transfer at issue and the amount of any excess
          costs of Tenant may be carried over to a subsequent year(s) and
          deducted from the Assignment/Sublease Net Revenues for such year(s)
          until a profit is received.

          All payments of the Assignment/Sublease Profits due Landlord shall be
          made within fifteen (15) days of receipt of same by Tenant.

     5.6.5 (A) It shall be a condition of the validity of any assignment or
          subletting of right under Section 5.6.1 above, or consented to under
          Section 5.6.2 above, that both Tenant and the assignee or sublessee
          enter into a separate written instrument directly with Landlord in a
          form and containing terms and provisions reasonably required by
          Landlord, including, without limitation, the agreement of the assignee
          or sublessee to be bound directly to Landlord for all the obligations
          of the Tenant hereunder, including, without limitation, the obligation
          (a) to pay the rent and other amounts provided for under this Lease
          (but in the case of a partial subletting pursuant to Section 5.6.1,
          such subtenant shall agree on a pro rata basis to be so bound) and (b)
          to comply with the provisions of Sections 5.6 through 5.6.5 hereof.
          Such assignment or subletting shall not relieve the Tenant named
          herein of any of the obligations of the Tenant hereunder and Tenant
          shall remain fully and primarily liable therefor and the liability of
          Tenant and such assignee (or subtenant, as the case may be) shall be
          joint and several. Further, and notwithstanding the foregoing, the
          provisions hereof shall not constitute a recognition of the sublease
          or the subtenant thereunder, and at Landlord's option, upon the
          termination or expiration of the Lease (whether such termination is
          based upon a cause beyond Tenant's control, a default of Tenant, the
          agreement of Tenant and Landlord or any other reason), the sublease
          shall be terminated.

          (B) Tenant shall pay to Landlord as a fee for Landlord's review of any
          proposed assignment or sublease requested by Tenant and the
          preparation of any associated documentation, within thirty (30) days
          after receipt of an invoice from


                                       55



          Landlord, as Additional Rent, an amount equal to the sum of (i)
          $150.00 per hour for in-house staff and/or (ii) reasonable out of
          pocket legal fees or other expenses incurred by Landlord in connection
          with such request (any such legal fees under subsections (i) or (ii)
          above in no event to exceed $5,000.00 in connection with any given
          request for consent).

          (C) If this Lease is assigned, or if the Premises or any part thereof
          be sublet or occupied by anyone other than Tenant, Landlord may upon
          prior notice to Tenant, at any time and from time to time, collect
          rent and other charges from the assignee, sublessee or occupant and
          apply the net amount collected to the rent and other charges herein
          reserved, but no such assignment, subletting, occupancy or collection
          shall be deemed a waiver of this covenant, or a waiver of the
          provisions of Sections 5.6 through 5.6.5 hereof, or the acceptance of
          the assignee, sublessee or occupant as a tenant or a release of Tenant
          from the further performance by Tenant of covenants on the part of
          Tenant herein contained, the Tenant herein named to remain primarily
          liable under this Lease.

          (D) The consent by Landlord to an assignment or subletting under any
          of the provisions of Sections 5.6.1 or 5.6.3 shall in no way be
          construed to relieve Tenant from obtaining the express consent in
          writing of Landlord to any further assignment or subletting.

          (E) On or after the occurrence of an "Event of Default" (defined in
          Section 7.1), Landlord shall be entitled to one hundred percent (100%)
          of any Assignment/Sublease Profits.

          (F) Without limiting Tenant's obligations under Section 5.14, Tenant
          shall be responsible, at Tenant's sole cost and expense, for
          performing all work necessary to comply with Legal Requirements and
          Insurance Requirements in connection with any assignment or subletting
          hereunder including, without limitation, any work in connection with
          such assignment or subletting.

          (G) In addition to the other requirements set forth in this Lease and
          notwithstanding any other provision of this Lease, partial sublettings
          of the Premises shall only be permitted under the following terms and
          conditions: (i) the configuration of both the subleased premises and
          the remainder of the Premises must comply with applicable Legal
          Requirements and be approved by Landlord, including, without
          limitation, all requirements concerning access and egress; (ii) in the
          event the subleased premises are separately physically demised from
          the remainder of the Premises, Tenant shall pay all costs (if any) of
          physically demising the subleased premises (including, without
          limitation, construction and design costs); and (iii) there shall be
          no more than three (3) subleases in effect in any single Building at
          any given time.

     5.6.6 Tenant shall have the right, without the consent of Landlord (but
          upon reasonable prior notice to Landlord), to permit the use or
          occupancy of space in the Premises


                                       56



          by any affiliate, subsidiary or other related entity of Tenant or,
          with respect to a portion of the Premises that is not separately
          demised and consists of not more than 25,000 rentable square feet of
          the Premises in the aggregate for periods of less than one (1) year at
          a time, by persons who have an ongoing contractual or other business
          relationship with Tenant providing for cooperative or collaborative
          research and development such that such occupants have a reasonable
          need to work in proximity with Tenant (such persons who shall be
          permitted to occupy portions of the Premises pursuant to this Section
          5.6.6 being referred to individually as a "Permitted Occupant", or
          collectively as the "Permitted Occupants"); provided that (x) the
          Permitted Occupants shall use the Premises in conformity with all
          applicable provisions of this Lease, (y) such occupancy will terminate
          automatically upon the expiration or earlier termination of this Lease
          and (z) Tenant shall remain fully liable for the acts or omissions of
          the Permitted Occupants in the Premises, within the Complex and/or on
          the Additional Land Areas (as defined in Section 8.27 below).

     5.6.7 At the written request of Tenant, Landlord will approve or disapprove
          of a proposed transferee prior to receiving a final, executed copy of
          the proposed assignment, sublease and other contractual documents,
          provided that (i) Landlord has been provided with sufficient
          information to make such decision, and (ii) any approval by Landlord
          of a proposed transferee shall be conditioned upon Landlord's
          subsequent approval of the actual signed assignment, sublease or other
          contractual documents that are entered into to effectuate the proposed
          Transfer. Notwithstanding the foregoing, Landlord's approval shall be
          null and void and deemed withdrawn if Tenant does not, within one
          hundred twenty (120) days of Tenant's initial request for Landlord's
          approval, enter into an assignment or sublease upon substantially the
          same economic and other material terms as were set forth in the
          documentation previously delivered to Landlord.

5.7  Indemnity; Insurance

     (A) Indemnity. Subject to the limitations of Section 8.4 below and to the
     provisions of Section 8.19 below, to the maximum extent this agreement is
     effective according to law and to the extent not resulting from the
     negligence or willful misconduct of Landlord or its employees, agents or
     contractors, Tenant agrees to defend with counsel first approved by
     Landlord (counsel appointed by Tenant's insurance carrier shall be deemed
     approved by Landlord and for any other circumstances such approval shall
     not be unreasonably withheld or delayed), save harmless, and indemnify
     Landlord and Landlord's managing agent, beneficiaries, partners,
     subsidiaries, officers, directors, agents, trustees and employees
     (collectively, the "Landlord Parties") from any liability for injury, loss,
     accident or damage to any person or property, and from any claims, actions,
     proceedings and expenses and costs in connection therewith (including
     without limitation reasonable counsel fees) (i) arising from or claimed to
     have arisen from (a) the omission, fault, willful act, negligence or other
     misconduct of Tenant or Tenant's contractors, licensees, invitees, agents,
     servants, independent contractors or employees or (b) any use made or thing
     done or occurring on the Premises not due to the omission,


                                       57



     fault, willful act, negligence or other misconduct of Landlord, or (ii)
     resulting from the failure of Tenant to perform and discharge its covenants
     and obligations under this Lease.

     (B) Insurance. To maintain in full force from the date upon which Tenant
     first enters the Premises for any reason, throughout the Term of this
     Lease, and thereafter, so long as Tenant is in occupancy of any part of the
     Premises, commercial general liability insurance or comprehensive general
     liability insurance written on an occurrence basis with a broad form
     comprehensive liability endorsement under which Tenant is the named insured
     and Landlord and Landlord's managing agent (and such persons as are in
     privity of estate with Landlord and Landlord's managing agent as may be set
     out in notice from time to time) are named as additional insureds with
     limits which shall, at the commencement of the Term, be at least equal to
     those stated in Section 1.1 and from time to time during the Term shall be
     for such higher limits, if any, as Landlord may reasonably require provided
     such higher limits are customarily carried by tenants leasing premises in
     comparable, first-class office/research and development complexes in the
     Boston Northwest Suburban Market, and worker's compensation insurance with
     statutory limits covering all of Tenant's employees working in the
     Premises. Tenant shall deposit with Landlord on or before the earlier of
     the date Tenant enters the Premises or the Commencement Date and concurrent
     with all renewals thereof, certificates for any insurance Tenant is
     required to maintain under this Lease, in a form reasonably acceptable to
     Landlord and bearing the endorsement that the insurer will endeavor to
     provide Landlord with thirty (30) days' written notice prior to
     cancellation of the policies. In addition, in the event Tenant hosts a
     function in the Premises, Tenant agrees to obtain and maintain, and cause
     any persons or parties providing services for such function to obtain, the
     appropriate insurance coverages as determined by Landlord (including liquor
     liability, if applicable) and, upon request, provide Landlord with evidence
     of the same. All insurance required to be maintained by Tenant pursuant to
     this Lease shall be maintained with responsible companies qualified to do
     business, and in good standing, in the Commonwealth of Massachusetts and
     which have a rating of at least "A-" and are within a financial size
     category of not less than "Class VIII" in the most current Best's Key
     Rating Guide or such similar rating as may be reasonably selected by
     Landlord if such Guide is no longer published.

5.8  Personal Property at Tenant's Risk

     That all of the furnishings, fixtures, equipment, effects and property of
     every kind, nature and description of Tenant and of all persons claiming
     by, through or under Tenant which, during the continuance of this Lease or
     any occupancy of the Premises by Tenant or anyone claiming under Tenant,
     may be on the Premises or elsewhere in the Buildings or on the Site, shall
     be at the sole risk and hazard of Tenant, and if the whole or any part
     thereof shall be destroyed or damaged by fire, water or otherwise, or by
     the leakage or bursting of water pipes, steam pipes, or other pipes, by
     theft or from any other cause, no part of said loss or damage is to be
     charged to or be borne by Landlord, except to the extent caused by the
     gross negligence or willful misconduct of Landlord and except that Landlord
     shall in no event be indemnified or held harmless or exonerated from any


                                       58



     liability to Tenant or to any other person, for any injury, loss, damage or
     liability to the extent such indemnity, hold harmless or exoneration is
     prohibited by law. Further, Tenant, at Tenant's expense, shall maintain at
     all times during the Term of this Lease business interruption insurance and
     insurance against loss or damage covered by so-called "all risk" type
     insurance coverage with respect to Tenant's fixtures, equipment, goods,
     wares and merchandise, tenant improvements made by or paid for by Tenant
     which are removable by Tenant at the end of the Term of this Lease, and
     other property of Tenant (including, without limitation, the Tenant's
     Equipment as that term is defined in Section 8.26 below) (collectively
     "Tenant's Property"). Such insurance shall be in an amount at least equal
     to the full replacement cost of Tenant's Property. Tenant shall maintain
     all of its equipment, furniture and furnishings in good order and repair.
     In addition, during such time as Tenant is performing work in or to the
     Premises, Tenant, at Tenant's expense, shall also maintain builder's risk
     insurance for the full insurable value of such work.

5.9  Right of Entry

     To permit Landlord and its agents at reasonable times and upon reasonable
     prior notice (except in the event of an emergency) (i) to examine the
     Premises and if Landlord shall be entitled and shall so elect, to make any
     repairs or replacements Landlord may deem necessary; (ii) to remove, at
     Tenant's expense, any alterations, additions, signs, curtains, blinds,
     shades, awnings, aerials, flagpoles, or the like not consented to in
     writing; and (iii) to show the Premises to prospective tenants during the
     twelve (12) months preceding expiration of the Term and to prospective
     purchasers and mortgagees at all reasonable times. Landlord agrees to use
     commercially reasonable efforts to conduct any such entry under this
     Section 5.9 in such a manner and at such times so as to minimize any
     unreasonable interference with Tenant's business operations in the
     Premises, consistent with the reasons for such entry (Landlord hereby
     agreeing to use commercially reasonable efforts to schedule any such access
     hereunder during Tenant's normal business hours and in the presence of a
     representative of Tenant when feasible, except in the event of an
     emergency).

     Notwithstanding anything to the contrary set forth above, Tenant may
     designate certain areas of the Premises as "Secured Areas" should Tenant
     require such areas for the purpose of securing certain valuable property or
     confidential information. Landlord may not enter such Secured Areas except
     in the case of an emergency or in the event of a Landlord inspection (it
     being understood and agreed that prior to commencing any non-emergency
     inspection of the Secured Areas, Landlord shall be required to demonstrate
     reasonable grounds therefor), in which latter case Landlord shall provide
     Tenant with two (2) business days' prior written notice of the specific
     date and time of such Landlord inspection. If Tenant does designate any
     such Secured Areas as aforesaid, Landlord shall have no responsibility
     under this Lease for the provision of any services (other than utility
     services for which Landlord is responsible under this Lease) to such
     Secured Areas (including, without limitation, the non-utility services
     described in Section 4.1 above).


                                       59



5.10 Floor Load; Prevention of Vibration and Noise

     Not to place a load on any floor of the Premises above the ground floor
     exceeding an average rate of 100 pounds of live load per square foot of
     floor area (partitions shall be considered as part of the live load); and
     not to move any safe, vault or other heavy equipment in, about or out of
     the Premises except in such manner and at such time as Landlord shall in
     each instance authorize; Tenant's business machines and mechanical
     equipment which cause vibration or noise that may be transmitted to the
     Building structure or to any other space in the Buildings shall be so
     installed, maintained and used by Tenant so as to eliminate such vibration
     or noise.

5.11 Personal Property Taxes

     To pay promptly when due all taxes which may be imposed upon Tenant's
     Property in the Premises to whomever assessed.

5.12 Compliance with Laws

     To comply with all applicable Legal Requirements now or hereafter in force
     which shall impose a duty on Landlord or Tenant relating to or as a result
     of the use or occupancy of the Premises; provided that Tenant shall not be
     required to make any alterations, additions, upgrades or improvements (i)
     to the Premises, unless the same are required by Legal Requirements that
     first become applicable to the Complex after the completion of the Base
     Building Work and the Tenant Improvement Work as a result of or in
     connection with Tenant's use or occupancy of the Premises for a use other
     than general office use, (ii) to the Common Areas, the Structural Elements
     (as defined in Section 4.1.3) or any of the base building systems serving
     the Complex unless the same are required by Legal Requirements that first
     become applicable to the Complex after the completion of the Base Building
     Work and the Tenant Improvement Work as a result of or in connection with
     Tenant's use or occupancy of the Premises for a use other than general
     office use or (iii) to the Premises or any component of the Buildings or
     the Complex, in order to bring the Buildings and/or the Complex into
     compliance with Legal Requirements of general applicability to the
     Buildings and/or the Complex that first become applicable to the Complex
     after the completion of the Base Building Work and the Tenant Improvement
     Work except to the extent that the non-compliance is triggered by either
     (x) any alterations, additions or improvements being done by or on behalf
     of Tenant in the Buildings or on the Site (other than the Tenant
     Improvement Work) or (y) by Tenant's specific and unique use of the
     Buildings and/or the Site for other than general office use. Tenant shall
     promptly pay all fines, penalties and damages that may arise out of or be
     imposed because of its failure to comply with the provisions of this
     Section 5.12.

5.13 Payment of Litigation Expenses

     As Additional Rent, to pay all reasonable costs, counsel and other fees
     incurred by Landlord in connection with the successful enforcement by
     Landlord of any obligations


                                       60



     of Tenant under this Lease or in connection with any bankruptcy case
     involving Tenant or any guarantor (Landlord hereby similarly agreeing to
     pay all reasonable costs, counsel and other fees incurred by Tenant in
     connection with the successful enforcement by Tenant of any obligations of
     Landlord under this Lease or in connection with any bankruptcy case
     involving Landlord).

5.14 Alterations

     Tenant shall not make alterations and additions to the Premises (including,
     without limitation, the Additional Land Areas as that term is defined in
     Section 8.27 below) except in accordance with plans and specifications
     therefor first approved by Landlord, which approval shall not be
     unreasonably withheld or delayed. However, Landlord's determination of
     matters relating to aesthetic issues relating to alterations, additions or
     improvements which are visible outside the Premises shall be in Landlord's
     sole discretion. Without limiting such standard Landlord shall not be
     deemed unreasonable for withholding approval of any alterations or
     additions (including, without limitation, any alterations or additions to
     be performed by Tenant under Article III) which (a) in Landlord's opinion
     might adversely affect any structural or exterior element of the Buildings,
     any area or element outside of the Premises, or any facility or base
     building mechanical or electrical system serving any area of the Buildings
     outside of the Premises, or (b) involve or affect the exterior design,
     size, height, or other exterior dimensions of the Buildings or (c) will
     require unusual expense to readapt the Premises to normal office use on
     Lease termination or expiration or increase the cost of construction or of
     insurance or taxes on the Buildings or of the services called for by
     Section 4.1 unless Tenant first gives assurance acceptable to Landlord for
     payment of such increased cost and that such readaptation will be made
     prior to such termination or expiration without expense to Landlord, (d)
     enlarge the Rentable Floor Area of the Premises, or (e) except with respect
     to the Tenant Improvement Work, are inconsistent, in Landlord's judgment,
     with alterations satisfying Landlord's standards for new alterations in the
     Buildings. Landlord's review and approval of any such plans and
     specifications and consent to perform work described therein shall not be
     deemed an agreement by Landlord that such plans, specifications and work
     conform with applicable Legal Requirements and requirements of insurers of
     the Buildings and the other requirements of this Lease with respect to
     Tenant's insurance obligations (herein called "Insurance Requirements") nor
     deemed a waiver of Tenant's obligations under this Lease with respect to
     applicable Legal Requirements and Insurance Requirements nor impose any
     liability or obligation upon Landlord with respect to the completeness,
     design sufficiency or compliance of such plans, specifications and work
     with applicable Legal Requirements and Insurance Requirements nor give
     right to any other parties. Further, Tenant acknowledges that Tenant is
     acting for its own benefit and account, and that Tenant shall not be acting
     as Landlord's agent in performing any work in the Premises, accordingly, no
     contractor, subcontractor or supplier shall have a right to lien Landlord's
     interest in the Property in connection with any such work. Within thirty
     (30) days after receipt of an invoice from Landlord, Tenant shall pay to
     Landlord as a fee for Landlord's review of any work or plans (excluding any
     review respecting initial improvements performed pursuant to Article III
     hereof but including any review of plans or work relating to any assignment
     or


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     subletting), as Additional Rent, an amount equal to the sum of: (i) $
     150.00 per hour for time spent by Landlord's in-house personnel, plus (ii)
     third party expenses incurred by Landlord to review Tenant's plans and
     Tenant's work (provided such third party expenses are reasonable and within
     market rates, and are accompanied by receipts and invoices). All
     alterations and additions shall be part of the Building unless and until
     Landlord shall timely specify the same for removal at the time Landlord
     approves of such alteration or additions under this Section 5.14 or under
     Section 3.2(B) above with respect to the Tenant Improvement Work (it being
     understood and agreed that the removal of any alterations or additions that
     do no require Landlord's approval shall be subject to the terms of Section
     5.14.1 below). All of Tenant's alterations and additions and installation
     of furnishings shall be coordinated with any work being performed by
     Landlord and, except as otherwise expressly permitted under Article III
     above with respect to the Tenant Improvement Work, in such manner as to
     maintain harmonious labor relations and not to damage the Buildings or Site
     or interfere with construction or operation of the Buildings and other
     improvements to the Site and, except for installation of furnishings, shall
     be performed by Landlord's general contractor or by contractors or workers
     first approved by Landlord, which approval will not be unreasonably
     withheld, conditioned or delayed. Except for work by Landlord's general
     contractor, Tenant, before its work is started, shall secure all licenses
     and permits necessary therefor; deliver to Landlord a statement of the
     names of all its contractors and subcontractors and the estimated cost of
     all labor and material to be furnished by them and security satisfactory to
     Landlord protecting Landlord against liens arising out of the furnishing of
     such labor and material (it being understood and agreed that no such
     security shall be required to be posted for contracts of less than
     $50,000.00); and cause each contractor to carry worker's compensation
     insurance in statutory amounts covering all the contractor's and
     subcontractor's employees and commercial general liability insurance or
     comprehensive general liability insurance with a broad form comprehensive
     liability endorsement with such limits as Landlord may reasonably require,
     but in no event less than $2,000,000.00 combined single limit per
     occurrence on a per location basis (all such insurance to be written in
     companies approved by Landlord and naming and insuring Landlord and
     Landlord's managing agent as additional insureds and insuring Tenant as
     well as the contractors), and to deliver to Landlord certificates of all
     such insurance. Tenant shall also prepare and submit to Landlord a set of
     as-built plans, in both print and electronic forms, showing such work
     performed by Tenant to the Premises promptly after any such alterations,
     improvements or installations are substantially complete and a set of
     schematic plans, in both print and electronic forms, promptly after any
     wiring or cabling for Tenant's computer, telephone and other communications
     systems is installed by Tenant or Tenant's contractor; provided, however,
     that if the work is not of a nature where as-built plans would customarily
     be prepared, Tenant shall only be required to prepare and submit the type
     of plans that would customarily be prepared in connection with such work.
     Without limiting any of Tenant's obligations hereunder, Tenant shall be
     responsible, as Additional Rent, for the costs of any alterations,
     additions or improvements in or to the Building that are required in order
     to comply with Legal Requirements as a result of any work performed by
     Tenant (expressly including the Tenant Improvement Work being performed by
     Tenant under Article III above). Landlord shall have the right to provide
     such rules and regulations relative to the


                                       62



     performance of any alterations, additions, improvements and installations
     by Tenant hereunder and Tenant shall abide by all such reasonable rules and
     regulations and shall cause all of its contractors to so abide including,
     without limitation, payment for the costs of using Building services (a
     copy of Landlord's current rules and regulations for construction being
     attached hereto as Exhibit F-2). Tenant agrees to pay promptly when due the
     entire cost of any work done on the Premises by Tenant, its agents,
     employees, or independent contractors, and not to cause or permit any liens
     for labor or materials performed or furnished in connection therewith to
     attach to the Premises or the Buildings or the Site and promptly (in no
     event to exceed thirty (30) days) to discharge any such liens which may so
     attach. Tenant shall pay, as Additional Rent, 100% of any real estate taxes
     on the Complex which shall, at any time after commencement of the Term,
     result from any alteration, addition or improvement to the Premises made by
     Tenant. Tenant acknowledges and agrees that Landlord shall be the owner of
     any additions, alterations and improvements in the Premises or the
     Buildings to the extent paid for by Landlord.

     5.14.1 Permitted Alterations

          Notwithstanding the terms of Section 5.14, Tenant shall have the
          right, without obtaining the prior consent of Landlord but upon notice
          to Landlord given ten (10) days prior to the commencement of any work
          (which notice shall specify the nature of the work in reasonable
          detail), to make alterations, additions or improvements to the
          Premises where:

          (i) the same are within the interior of the Buildings (or the interior
          of the Premises from time to time leased by Tenant, if any in the
          Additional Buildings), and do not affect the exterior of the Buildings
          (including no signs on windows);

          (ii) the same do not affect the Structural Elements or the base
          building mechanical, electrical, plumbing, heating, ventilating,
          air-conditioning and fire protection systems of the Buildings;

          (iii) the cost of any individual alteration, addition or improvement
          shall not exceed $25,000.00 and the aggregate cost of said
          alterations, additions or improvements made by Tenant during the Lease
          Term shall not exceed $250,000.00 in cost; and

          (iv) Tenant shall comply with the provisions of this Lease and if such
          work increases the cost of insurance or taxes or of services, Tenant
          shall pay for any such increase in cost;

          provided, however, that Tenant shall, within fifteen (15) days after
          the making of such changes, send to Landlord plans and specifications
          describing the same in reasonable detail and provided further that
          Landlord, by notice to Tenant given within thirty (30) days after
          Landlord's receipt of such plans and specifications, may require
          Tenant to restore the Premises to its condition prior to such
          alteration, addition or improvement at the expiration or earlier
          termination of the Lease Term.


                                       63



          In addition, Tenant shall have the right, without obtaining the prior
          consent of Landlord to from time to time modify the topography of the
          Additional Land Areas (as defined in Section 8.27 below) and erect
          temporary structures thereon in order to simulate user environments.
          This may include, without limitation, bringing sand, dirt, pavement,
          rubble and rocks to the Additional Land Areas, as well as creating
          water features, stairs, levels and obstacles on the Additional Land
          Areas; provided, however, that under no circumstances may Tenant
          excavate or otherwise dig up any portions of the Additional Land Areas
          without Landlord's prior written consent (which Landlord may condition
          on Tenant's expressly acknowledging that it is solely responsible for
          any Hazardous Materials that are disturbed by Tenant's activities).
          Tenant's obligation to restore the Additional Land Areas upon the
          expiration or earlier termination of this Lease shall be as set forth
          in Section 8.27.

     5.14.2 Tenant's Security System

          Tenant may install a security system within the Premises, provided
          such system and its installation (i) shall be subject to Landlord's
          prior written approval, which shall not be unreasonably withheld,
          conditioned or delayed (provided Landlord may deny consent to any
          system which is not compatible with the Complex's overall security and
          fire safety and life safety systems), (ii) shall be in accordance with
          all applicable Legal Requirements, and (iii) shall be performed at
          Tenant's sole expense, and shall otherwise be installed in accordance
          with the provisions governing alterations under this Lease. Tenant
          shall have the right, at Tenant's sole cost and expense, to hire and
          have a security guard stationed at the security desk in the lobby of
          any Building directly leased by Tenant in its entirety at such times
          as Tenant shall elect in Tenant's reasonable discretion. Neither party
          shall have any liability to the other party on account of the failure
          or neglect of any security guard hired by Tenant to stop or prevent
          any theft, damage, crime or other intentional wrongdoing of any person
          in, on or at the Complex.

5.15 Vendors

     Any vendors engaged by Tenant to perform services in or to the Premises
     including, without limitation, janitorial contractors and moving
     contractors shall be coordinated with any work being performed by or for
     Landlord and, except as expressly provided in Article III above with
     respect to the Tenant Improvement Work, in such manner as to maintain
     harmonious labor relations and not to damage the Buildings or the Property
     or interfere with Building construction or operation and shall be performed
     by vendors first approved by Landlord, which approval will not be
     unreasonably withheld, conditioned of delayed.


                                       64


5.16 Patriot Act

     (A) As an inducement to Landlord to enter into this Lease, Tenant hereby
     represents and warrants that: (i) Tenant is not, nor is it owned or
     controlled directly or indirectly by, any person, group, entity or nation
     named on any list issued by the Office of Foreign Assets Control of the
     United States Department of the Treasury ("OFAC") pursuant to Executive
     Order 13224 or any similar list or any law, order, rule or regulation or
     any Executive Order of the President of the United States as a terrorist,
     "Specially Designated National and Blocked Person" or other banned or
     blocked person (any such person, group, entity or nation being hereinafter
     referred to as a "Prohibited Person"); (ii) Tenant is not (nor is it owned,
     controlled, directly or indirectly, by any person, group, entity or nation
     which is) acting directly or indirectly for or on behalf of any Prohibited
     Person; and (iii) from and after the effective date of the above-referenced
     Executive Order, Tenant (and any person, group, entity or nation which owns
     or controls Tenant, directly or indirectly) has not conducted nor will
     knowingly conduct business or has not engaged nor will knowingly engage in
     any transaction or dealing with any Prohibited Person in violation of the
     U.S. Patriot Act or any OFAC rule or regulation, including without
     limitation any assignment of this Lease or any subletting of all or any
     portion of the Premises or the making or receiving of any contribution or
     funds, goods or services to or for the benefit of a Prohibited Person in
     violation of the U.S. Patriot Act or any OFAC rule or regulation. In
     connection with the foregoing, it is expressly understood and agreed that
     (x) any breach by Tenant of the foregoing representations and warranties
     shall be deemed an Event of Default by Tenant under Section 7.1 (a) (iv) of
     this Lease and shall be covered by the indemnity provisions of Section 5.7
     above, and (y) the representations and warranties contained in this
     subsection shall be continuing in nature and shall survive the expiration
     or earlier termination of this Lease. Notwithstanding anything contained
     herein to the contrary, for the purposes of this subsection (A) the phrase
     "owned or controlled directly or indirectly by any person, group, entity or
     nation" and all similar such phrases shall not include any holder of a
     direct or indirect interest in a publicly traded company whose shares are
     listed and traded on a nationally recognized stock exchange.

     (B) As an inducement to Tenant to enter into this Lease, Landlord hereby
     represents and warrants that: (i) Landlord is not, nor is it owned or
     controlled directly or indirectly by, any person, group, entity or nation
     named on any list issued by the Office of Foreign Assets Control of the
     United States Department of the Treasury ("OFAC") pursuant to Executive
     Order 13224 or any similar list or by any law, order, rule or regulation or
     any Executive Order of the President of the United States as a terrorist,
     "Specially Designated National and Blocked Person" or other banned or
     blocked person (any such person, group, entity or nation being hereinafter
     referred to as a "Prohibited Person"); (ii) Landlord is not (nor is it
     owned or controlled, directly or indirectly, by any person, group, entity
     or nation which is) acting directly or indirectly for or on behalf of any
     Prohibited Person; and (iii) from and after the effective date of the
     above-referenced Executive Order, Landlord (and any person, group, or
     entity which Landlord controls, directly or indirectly) has not conducted
     nor will knowingly conduct business nor has engaged nor will knowingly
     engage in any transaction or dealing with any Prohibited


                                       65



     Person in violation of the U.S. Patriot Act or any OFAC rule or regulation,
     including without limitation, the making or receiving of any contribution
     of funds, good or services to or for the benefit of a Prohibited Person in
     violation of the U.S. Patriot Act or any OFAC rule or regulation. In
     connection with the foregoing, is expressly understood and agreed that (x)
     any breach by Landlord of the foregoing representatives and warranties
     shall be covered by the indemnity provisions of Section 4.4 above and (y)
     the representations and warranties contained in this subsection shall be
     continuing in nature and shall survive the expiration or earlier
     termination of this Lease. Notwithstanding anything contained herein to the
     contrary, for the purposes of this subsection (B) the phrase "owned or
     controlled directly or indirectly by any person, group, entity or nation"
     and all similar such phrases shall not include (1) any shareholder of
     Boston Properties, Inc., (2) any holder of a direct or indirect interest in
     a publicly traded company whose shares are listed and traded on a
     nationally recognized stock exchange or (3) any limited partner, unit
     holder or shareholder owning an interest of five percent (5%) or less in
     Boston Properties Limited Partnership or the holder of any direct or
     indirect interest in Boston Properties Limited Partnership.

5.17 Signage

     (A) For so long as Tenant directly leases from Landlord a minimum of one
     (1) full floor in any of the Buildings, Tenant may, at its sole cost and
     expense (subject to the payment of the Signage Allowance described in
     subsection (D) below), install and maintain signage containing Tenant's
     name and corporate logo in one (1) area to be reasonably agreed upon by the
     parties in the main lobby of any such Building where Tenant satisfies the
     minimum leasing requirement described above. In addition, the design,
     proportions and color of such signage shall be subject to the prior
     approval of Landlord, which approval will not be unreasonably withheld,
     conditioned or delayed. Tenant's rights to lobby signage in each of the
     Buildings under this subsection (A) shall be exclusive for so long as
     Tenant leases the entire rentable floor area of the applicable Building in
     its entirety, including in any Additional Buildings leased in their
     entirety by Tenant and, if not leasing the entirety, Tenant's shall have
     the non-exclusive right to building-standard lobby and elevator directory
     signage and suite entry signage.

     (B) (1) In the event at the time Tenant exercises its right under this
     Section 5.17(B)(1), (i) Tenant leases from Landlord a minimum of 100,000
     square feet of rentable floor area in the Complex (including the entirety
     of Building D) and (ii) Tenant has neither assigned this Lease nor sublet
     more than thirty-three percent (33%) of the Rentable Floor Area of the
     Premises (except for an assignment or subletting permitted pursuant to
     Section 5.6.1 or an occupancy permitted under Section 5.6.6), Tenant shall
     be permitted, at Tenant's sole cost and expense (subject to the payment of
     the Signage Allowance described in subsection (D) below), to erect one (1)
     sign on the exterior facade above the roofline of Building D (the "Route 3
     Impact Signage"), which such signage shall contain Tenant's name and logo
     and shall be in a location first reasonably approved by Landlord. Tenant's
     right to erect the Route 3 Impact Signage shall be exclusive for so long as
     Tenant meets the occupancy requirements of this Section 5.17(B)(1).


                                       66



     (2) In the event that Tenant shall cease to meet the occupancy requirements
     set forth in subsection (1) above with respect to the Route 3 Impact
     Signage but shall directly lease from Landlord any of the Buildings or
     Additional Buildings in their entirety, in lieu of the Route 3 Impact
     Signage, Tenant shall be permitted, at its sole cost and expense, to erect
     one (1) sign on a panel to be located on the exterior facade of any of the
     Buildings or Additional Buildings leased by Tenant in their entirety (the
     "Panel Signage"), which signage shall contain Tenant's name and logo and
     shall be in a location first reasonably approved by Landlord. Tenant's
     right to erect the Panel Signage shall be exclusive with respect to any
     Building or Additional Building directly leased by Tenant in its entirety.

     (3) In addition to the Route 3 Impact Signage or the Panel Signage, as the
     case may be, and for so long as Tenant shall directly lease from Landlord
     the entirety of Building D, Tenant shall be permitted, at its sole cost and
     expense (subject to the payment of the Signage Allowance described in
     subsection (D) below), to erect one (1) monument sign at the entrance to
     Building D (the "Monument Signage"), which signage shall contain Tenant's
     name and logo and shall be in a location first reasonably approved by
     Landlord. Tenant's right to erect the Monument Signage shall be exclusive
     for so long as Tenant directly leases Building D in its entirety.

     (4) The design, proportions and color of all such signage described in this
     subsection (B) shall be subject to the prior approval (which approval shall
     not be unreasonably withheld, conditioned or delayed) of Landlord and shall
     be further subject to the requirements of the Zoning By-Law of the Town of
     Bedford and any other applicable laws and to Tenant obtaining all necessary
     permits and approvals therefor. Tenant acknowledges and agrees that, except
     as otherwise provided in this subsection (B) Tenant's right to corporate
     signage on the Site pursuant to this subsection (B) is not on an exclusive
     basis and that Landlord may grant other tenants in the Complex the right to
     maintain signage on the Site; provided, however, that Landlord shall never
     permit or grant any other tenant or occupant of the Complex the right to
     install any exterior signage on any of the Buildings or Additional
     Buildings which are leased entirely to Tenant or to install any exclusive
     monument signage at the entrance to any of the Buildings or Additional
     Buildings which are leased entirely to Tenant.

     (C) In the event that at any time during the Lease Term Tenant ceases to
     meet the applicable occupancy thresholds described in subsections (A) and
     (B) above, Tenant shall, upon Landlord's written request and at Tenant's
     sole cost and expense, remove all or any portion of the Tenant's signage
     described in this Section 5.17 and designated by Landlord for removal and
     restore any areas of the Buildings affected by the installation and
     subsequent removal of Tenant's signage. Notwithstanding the foregoing, in
     the event that Tenant ceases to meet the occupancy threshold under
     subsection (B)(1) above and Landlord requires that the Route 3 Impact
     Signage be removed from Building D, Landlord shall perform such removal and
     restoration work at Landlord's sole cost and expense. In addition, Tenant
     shall be required at its sole cost and expense to remove all of the
     Tenant's signage described in this Section 5.17 and restore any areas of
     the Buildings affected by the installation and subsequent removal of
     Tenant's signage upon


                                       67



     the expiration or earlier termination of the Lease Term.

     (D) Landlord shall provide to Tenant a special allowance of Fifteen
     Thousand and 00/100 Dollars ($15,000.00) (the "Signage Allowance"). The
     Signage Allowance shall be used and applied by Tenant solely on account of
     the purchase and installation of the exterior signage described in
     subsections (A) and (B) above (the "Signage Work"). Provided that the
     Tenant (i) has completed all of such Signage Work in accordance with the
     terms of this Lease, has paid for all of such Signage Work in full, (ii)
     has delivered to Landlord lien waivers from all persons who might have a
     lien as a result of such work, in the recordable forms attached hereto as
     Exhibit F, (iii) has delivered to Landlord its certificate specifying the
     cost of such Signage Work and all contractors, subcontractors and supplies
     involved with Signage Work, together with evidence of such cost in the form
     of paid invoices, receipts and the like, (iv) has satisfied the
     requirements of (i) through (iii) above and made request for such payment
     on or before the Commencement Date, (v) there exists no Event of Default
     under this Lease, and (vi) there are no liens (unless bonded to the
     reasonable satisfaction of Landlord) against Tenant's interest in this
     Lease or against the Buildings or the Site arising out of Signage Work or
     any litigation in which Tenant is a party relating to the Signage Work,
     then within thirty (30) days after the satisfaction of the foregoing
     conditions, Landlord shall pay to Tenant the lesser of the amount of such
     costs so certified or the amount of the Signage Allowance. Notwithstanding
     the foregoing, Landlord shall be under no obligation to apply any portion
     of the Signage Allowance for any purposes other than as provided in this
     subsection (D), nor shall Landlord be deemed to have assumed any
     obligations, in whole or in part, of Tenant to any contractors,
     subcontractors, suppliers, workers or materialmen. Further, in no event
     shall Landlord be required to make application of any portion of the
     Signage Allowance on account of any supervisory fees, overhead, management
     fees or other payments to Tenant, or any partner or affiliate of Tenant. In
     the event that such cost of Signage Work is less than the Signage
     Allowance, Tenant shall not be entitled to any payment or credit nor shall
     there be any application of the same toward Annual Fixed Rent or Additional
     Rent owed by Tenant under this Lease. Landlord shall use reasonable efforts
     to cooperate with Tenant in obtaining the proper governmental approvals and
     permits for Tenant's signage rights under any provisions of this Section
     5.17 which require Tenant to seek the necessary governmental approvals and
     permits for such signage; provided, however that Landlord shall be put to
     no cost or expense in connection therewith.

     (E) Landlord presently maintains monument signs at the Complex identifying
     the tenants or occupants thereof and Tenant shall have the non-exclusive
     right to a listing on each such monument sign (other than those that relate
     solely to buildings within the Complex in which Tenant does not lease any
     space), subject to the terms and provisions of this Section 5.17 and
     subject to Landlord's approval of the final details of such listing, which
     approval will not be unreasonably withheld, conditioned or delayed.

     (F) Landlord shall not grant any other tenant or occupant of the Complex
     the right to erect exterior or interior signage on or in any Building or
     Additional Building directly leased by Tenant in its entirety.


                                       68



                                   ARTICLE VI

                               Casualty and Taking

6.0  Landlord's Restoration Estimate

     In case during the Lease Term the Buildings or Site (which for the purposes
     of this Article VI shall expressly include the parking areas of the Complex
     and Land Recreation Area A, as that term is defined in Section 8.27 below)
     are damaged by fire or other casualty, Landlord shall within sixty (60)
     days after the occurrence thereof notify Tenant in writing of Landlord's
     reasonable estimate of the length of time necessary to repair or restore
     such fire or casualty damage from the time that repair work would commence
     ("Landlord's Restoration Estimate").

6.1  Damage Resulting from Casualty

     In case during the Lease Term, the Premises or the Site are damaged by fire
     or other casualty and, if according to Landlord's Restoration Estimate,
     such fire or casualty damage cannot, in the ordinary course, reasonably be
     expected to be repaired within two hundred forty (240) days from the time
     that repair work would commence, either party may, at its election,
     terminate this Lease by notice given to the other within thirty (30) days
     after the date of Landlord's Restoration Estimate, specifying the effective
     date of termination; provided, however, that (x) Landlord shall only be
     permitted to terminate this Lease on account of such damage if Landlord
     terminates the leases of all other tenants in the Complex similarly
     affected by the casualty (where Landlord has a termination right
     thereunder) and (y) in the event of damage to a single Building which would
     in and of itself trigger any termination right under this Section 6.1, this
     Lease may be terminated by either party (to the extent such party has a
     termination right hereunder) with respect solely to such damaged Building
     but not with respect to the other Buildings not similarly affected by the
     casualty (provided, however, that if Tenant reasonably determines that
     Tenant is unable to continue to operate its business economically and
     efficiently within the undamaged portion of the Premises, Tenant may
     terminate this Lease as to the entire Premises so long as the casualty is
     of such a magnitude as to trigger a termination right hereunder). The
     effective date of termination specified by either party hereunder shall not
     be less than thirty (30) days nor more than forty-five (45) days after the
     date of notice of such termination.

     In case during the last eighteen (18) months of the Lease Term, the
     Premises are damaged by fire or casualty and such fire or casualty damage
     cannot, in the ordinary course, reasonably be expected to be repaired
     within one hundred fifty (150) days (and/or as to special work or work
     which requires long lead time then if such work cannot reasonably be
     expected to be repaired within such additional time as is reasonable under
     the circumstances given the nature of the work) from the time that repair
     work would commence, Tenant may, at its election, terminate this Lease by
     notice given to Landlord within sixty (60) days after the date of such fire
     or other casualty, specifying the effective date of termination. The
     effective date of termination specified by Tenant shall be not


                                       69



     less than thirty (30) days nor more than forty-five (45) days after the
     date of notice of such termination.

     Unless terminated pursuant to the foregoing provisions, this Lease shall
     remain in full force and effect following any such damage subject, however,
     to the following provisions.

     If the Buildings or the Site or any part thereof are damaged by fire or
     other casualty and this Lease is not so terminated, or Landlord or Tenant
     have no right to terminate this Lease, and in any such case the holder of
     any mortgage which includes the Buildings as a part of the mortgaged
     premises or any ground lessor of any ground lease which includes the Site
     as part of the demised premises allows the net insurance proceeds to be
     applied to the restoration of the Buildings (and/or the Site), Landlord
     promptly after such damage and the determination of the net amount of
     insurance proceeds available shall use due diligence to restore the
     Premises and the Buildings in the event of damage thereto (excluding
     Tenant's Property) into substantially the same condition as existed prior
     to the damage and a just proportion of the Annual Fixed Rent, Operating
     Expenses Allocable to the Premises and Landlord's Tax Expenses Allocable to
     the Premises according to the nature and extent of the injury to the
     Premises shall be abated until the earlier to occur of (i) the date the
     Premises is substantially restored to the extent required under this Lease
     and Tenant has had a period of time (in no event to exceed thirty (30) days
     after Landlord has completed its restoration obligations as aforesaid) to
     install its furniture, fixtures and equipment, which Tenant agrees to
     undertake in a reasonably expeditious manner, and (iii) the date Tenant
     commences business operations in the Premises. Notwithstanding anything
     herein contained to the contrary, Landlord shall not be obligated to expend
     for such repair and restoration any amount in excess of the net insurance
     proceeds (provided, however, that if Landlord elects not to expend any sums
     in excess of the net insurance proceeds, Tenant shall have the right to
     terminate this Lease as set forth in the immediately following sentence).
     If such net insurance proceeds are not allowed by such mortgagee or ground
     lessor to be applied to, or are otherwise insufficient for, the restoration
     of the Buildings (and/or the Site) and if Landlord does not otherwise elect
     to spend the additional funds necessary to fully restore the Buildings
     (and/or the Site), then Landlord shall give notice ("Landlord's Proceeds
     Notice") to Tenant within thirty (30) days after the final determination by
     such mortgagee or ground lessor as to the disbursement of proceeds that
     Landlord does not elect to fund the amount of deficiency and Tenant shall
     thereafter have the right to terminate this Lease by providing Landlord
     with a notice of termination within thirty (30) days after Tenant's receipt
     of Landlord's Proceeds Notice (the effective date of which termination
     shall not be less than sixty (60) days after the date of notice of such
     termination).

     Unless such restoration is (x) commenced within six (6) months from the
     date of the casualty or taking (except to the extent such restoration work
     could be completed within the one (1) year period described in subsection
     (y) below, notwithstanding the fact that it did not commence within six (6)
     months from the date of the casualty or taking), such period to be subject,
     however, to extension where the delay in commencement of such work is due
     to Force Majeure, as defined hereinbelow (but in no event beyond ten (10)


                                       70



     months from the date of the casualty or taking) and (y) completed within
     one (1) year from the date of the casualty or taking, such one (1) year
     period to be subject, however, to extension where the delay in completion
     of such work is due to Force Majeure, as defined hereinbelow, (but in no
     event beyond eighteen (18) months from the date of the casualty or taking),
     Tenant, as its sole and exclusive remedy, shall have the right to terminate
     this Lease at any time after the expiration of such six-month or one-year
     (as extended) period, as the case may be, until the restoration is
     substantially completed, such termination to take effect as of the
     thirtieth (30th) day after the date of receipt by Landlord of Tenant's
     notice, with the same force and effect as if such date were the date
     originally established as the expiration date hereof unless, within thirty
     (30) days after Landlord's receipt of Tenant's notice, such restoration is
     commenced or substantially completed, as the case may be, in which case
     Tenant's notice of termination shall be of no force and effect and this
     Lease and the Lease Term shall continue in full force and effect. When used
     in this Article VI, "Force Majeure" shall mean any prevention, delay or
     stoppage due to governmental regulation, strikes, lockouts, acts of God,
     acts of war, terrorists acts, civil commotions, unusual scarcity of or
     inability to obtain labor or materials, labor difficulties, casualty or
     other causes reasonably beyond Landlord's control or attributable to
     Tenant's action or inaction; provided, however, that (1) in no event shall
     Landlord's financial inability constitute a cause beyond Landlord's
     reasonable control and (2) in order for Landlord to claim the benefit of
     any delay due to Force Majeure, Landlord shall be required to use
     reasonable efforts to minimize the extent and duration of such delay and to
     notify Tenant of the existence and nature of the cause of such delay within
     a reasonable time after the delay first commences.

6.2  Uninsured Casualty

     Notwithstanding anything to the contrary contained in this Lease, if the
     Buildings or the Premises shall be substantially damaged by fire or
     casualty as the result of a risk not covered by the forms of casualty
     insurance at the time maintained by Landlord and such fire or casualty
     damage cannot, in the ordinary course, reasonably be expected to be
     repaired within ninety (90) days from the time that repair work would
     commence, either party may, at its election, terminate the Term of this
     Lease by notice to the other party given within sixty (60) days after such
     loss; provided, however that Landlord may not terminate this Lease on
     account of an uninsured casualty and shall restore the Premises, the Common
     Areas and the Complex in accordance with the terms of this Lease, if and to
     the extent such damage would have been covered by the insurance coverages
     required to be carried by Landlord under this Lease. If either party shall
     give such notice, then this Lease shall terminate as of the date of such
     notice with the same force and effect as if such date were the date
     originally established as the expiration date hereof.

6.3  Rights of Termination for Taking

     If (i) the entire Premises, or such portion thereof as to render the
     balance (if reconstructed to the maximum extent practicable in the
     circumstances) unsuitable for Tenant's purposes, or (ii) twenty-five
     percent (25%) or more of the parking areas serving the Complex shall be
     taken by condemnation or right of eminent domain, Landlord or Tenant


                                       71



     shall have the right to terminate this Lease by notice to the other of its
     desire to do so, provided that such notice is given not later than thirty
     (30) days after Tenant has been deprived of possession. In the event of a
     taking of a single Building which would in and of itself trigger any
     termination right under this Section 6.3, this Lease may be terminated by
     either party (to the extent such party has a termination right hereunder)
     solely with respect to the Building that was the subject of the taking but
     not with respect to the other Buildings not similarly affected by the
     taking (provided, however, that if Tenant reasonably determines that Tenant
     is unable to continue to operate its business economically and efficiently
     with the undamaged portion of the Premises, Tenant may terminate this Lease
     as to the entire Premises so long as the taking is of such a magnitude as
     to trigger a termination right hereunder). In addition, Tenant may
     terminate this Lease if fifty percent (50%) or more of Land Recreation Area
     A shall be taken and the remaining portion of Land Area Recreation A is
     insufficient for the Permitted Uses of the Additional Land Areas, as
     determined by Tenant in its reasonable discretion (taking into account the
     continued availability of Land Recreation Area B for such purposes). If
     either party shall give such notice, then this Lease shall terminate as of
     the date of such notice with the same force and effect as if such date were
     the date originally established as the expiration date hereof. For the
     purposes hereof, the work "taking" shall mean and refer to the acquisition
     or taking of property (or any right, title or interest therein) by any
     governmental or quasi-governmental authority acting under power of
     condemnation or eminent domain, and shall encompass contested as well as
     uncontested takings as long as initiated by the applicable governmental or
     quasi-governmental authority and any conveyances in lieu of an initiated
     taking.

     Should any part of the Premises be so taken or condemned during the Lease
     Term hereof, and should this Lease not be terminated in accordance with the
     foregoing provisions, and the holder of any mortgage which includes the
     Premises as part of the mortgaged premises or any ground lessor of any
     ground lease which includes the Site as part of the demised premises allows
     the net condemnation proceeds to be applied to the restoration of the
     Buildings, Landlord agrees that after the determination of the net amount
     of condemnation proceeds available to Landlord, Landlord shall use due
     diligence to put what may remain of the Premises into proper condition for
     use and occupation as nearly like the condition of the Premises prior to
     such taking as shall be practicable (excluding Tenant's Property).
     Notwithstanding the foregoing, Landlord shall not be obligated to expend
     for such repair and restoration any amount in excess of the net
     condemnation proceeds made available to it (provided, however, that if
     Landlord elects not to expend any sums in excess of the net condemnation
     proceeds, Tenant shall have the right to terminate this Lease as set forth
     in the immediately following sentence). If such net condemnation proceeds
     are not allowed by such mortgagee or ground lessor to be applied to, or are
     otherwise insufficient for, the restoration of the Buildings (and/or the
     Site) and if Landlord does not otherwise elect to spend the additional
     funds necessary to fully restore the Buildings (and/or the Site), then
     Landlord shall give notice ("Landlord's Award Notice") to Tenant within
     thirty (30) days after the final determination by such mortgagee or ground
     lessor as to the disbursement of proceeds that Landlord does not elect to
     fund the amount of the insufficiency and Tenant shall thereafter have the
     right to terminate this Lease by providing Landlord with a notice of
     termination within thirty (30)


                                       72



     days after Tenant's receipt of Landlord's Award Notice (the effective date
     of which termination shall not be less than sixty (60) days after the date
     of notice of such termination).

     If the Premises shall be affected by any exercise of the power of eminent
     domain, then the Annual Fixed Rent, Operating Expenses Allocable to the
     Premises and Landlord's Tax Expenses Allocable to the Premises shall be
     justly and equitably abated and reduced according to the nature and extent
     of the loss of use thereof suffered by Tenant; and in case of a taking
     which permanently reduces the Rentable Floor Area of the Premises, a just
     proportion of the Annual Fixed Rent, Tenant's share of operating costs and
     Tenant's share of real estate taxes shall be abated for the remainder of
     the Lease Term.

6.4  Award

     Landlord shall have and hereby reserves to itself any and all rights to
     receive awards made for damages to the Premises, the Building, the
     Additional Buildings, the Complex and the Site and the leasehold hereby
     created, or any one or more of them, accruing by reason of exercise of
     eminent domain or by reason of anything lawfully done in pursuance of
     public or other authority. Tenant hereby grants, releases and assigns to
     Landlord all Tenant's rights to such awards, and covenants to execute and
     deliver such further assignments and assurances thereof as Landlord may
     from time to time request, and if Tenant shall fail to execute and deliver
     the same within fifteen (15) days after notice from Landlord, Tenant hereby
     covenants and agrees that Landlord shall be irrevocably designated and
     appointed as its attorney-in-fact to execute and deliver in Tenant's name
     and behalf all such further assignments thereof which conform with the
     provisions hereof.

     Nothing contained herein shall be construed to prevent Tenant from
     prosecuting in any condemnation proceeding a claim for the value of any of
     Tenant's usual trade fixtures installed in the Premises by Tenant at
     Tenant's expense and for relocation and moving expenses, provided that such
     action and any resulting award shall not affect or diminish the amount of
     compensation otherwise recoverable by Landlord from the taking authority.

6.5  Damage to Parking Areas and Land Recreation Area A

     Notwithstanding anything contained in this Article VI to the contrary,
     Tenant shall have no right to terminate this Lease on account of a casualty
     or taking affecting the parking areas of the Complex unless or until such
     casualty or taking results in a Parking Shortage (as that term is defined
     in Section 2.2.1 above). In addition, if such casualty or taking does
     result in a Parking Shortage, Tenant shall have no right to terminate this
     Lease under this Article VI notwithstanding that Landlord has been unable
     to restore such parking areas and eliminate the Parking Shortage within the
     applicable time periods set forth in this Article VI, if from and after the
     date on which Tenant's termination right would otherwise have been
     exercisable Landlord is able to provide Tenant with Alternative Parking in
     an amount which (together with any parking spaces remaining on


                                       73



     the Site after the casualty or taking) would enable Tenant to fully utilize
     the Number of Parking Spaces provided to it under Section 1.1.

     In addition, Tenant shall not have the right to terminate this Lease on
     account of any casualty or taking affecting Land Recreation Area A to the
     extent that Tenant no longer had the exclusive right to use Land Recreation
     Area A under the terms of Section 8.27(A) above at the time of such
     casualty or taking.

6.6  Allocation of Proceeds Following Termination

     In the event that this Lease is terminated (x) by Landlord under Section
     6.1 or 6.3 above or (y) by Tenant under the provisions of the fourth (4th)
     paragraph of Section 6.1 or the second (2nd) paragraph of Section 6.3 above
     (i.e. on account of Landlord's election not to fund an insufficiency in the
     insurance proceeds or condemnation award necessary to fully restore the
     Buildings and/or the Site), Tenant shall be entitled to receive out of the
     Proceeds or Award Balance (as hereinafter defined) the Book Value of the
     Tenant Improvement Work (as hereinafter defined); provided, however, that
     if the sum of the Book Value of the Tenant Improvement Work and the Book
     Value of the Tenant Allowances (as hereinafter defined) exceed the Proceeds
     or Award Balance, then the Book Value of the Tenant Improvement Work and
     the Book Value of the Tenant Allowances shall be proportionately reduced to
     an amount which, when added together, shall equal the Proceeds or Award
     Balance and in such event Tenant shall be entitled to receive out of the
     Proceeds or Award Balance the amount of the Book Value of the Tenant
     Improvement Work as so reduced. To the extent that the sum of the Book
     Value of the Tenant Improvement Work and the Book Value of the Tenant
     Allowances is less than the Proceeds or Award Balance, Landlord shall be
     entitled to the entire residual balance thereof.

     For the purposes hereof:

          (i)  The "Proceeds or Award Balance" shall be the amount, if any, by
               which the net insurance proceeds or net condemnation award (as
               applicable) exceeds the total of (x) the portion of the proceeds
               or award allocable to the Site (i.e. as if the land were
               unimproved), plus (y) the replacement cost of the Buildings and
               the Additional Buildings (exclusive of the Tenant Improvement
               Work), plus (z) all amounts payable to Landlord's mortgagee or
               ground lessor on account of such casualty or taking.

          (ii) The "Book Value of the Tenant Improvement Work" shall be the then
               unamortized portion of all costs of construction of the Tenant
               Improvement Work under Article III above (less the Tenant
               Allowances), calculated on a straight-line basis over the
               Original Lease Term and determined as of the date of the casualty
               or taking.

          (iii) The "Book Value of the Tenant Allowances" shall be the then
               unamortized portion of the Tenant Allowances, calculated on a
               straight-


                                       74



               line basis over the Original Lease Term and determined as of the
               date of the casualty or taking.

                                   ARTICLE VII

                                     Default

7.1  Tenant's Default

     (a)  If at any time subsequent to the date of this Lease any one or more of
          the following events (herein sometimes called an "Event of Default")
          shall occur:

          (i)  Tenant shall fail to pay the fixed rent, Additional Rent or other
               charges for which provision is made herein on or before the date
               on which the same become due and payable, and the same continues
               for five (5) business days after written notice from Landlord
               thereof; or

          (ii) Landlord having rightfully given the notice specified in
               subsection (a)(i) above twice in any calendar year, Tenant shall
               thereafter in the same calendar year fail to pay the fixed rent,
               Additional Rent or other charges on or before the date on which
               the same become due and payable; or

          (iii) Tenant shall assign its interest in this Lease or sublet any
               portion of the Premises in violation of the requirements of
               Sections 5.6 through 5.6.5 of this Lease and the same continues
               for fifteen (15) business days after written notice from Landlord
               thereof; or

          (iv) Tenant shall neglect or fail to perform or observe any other
               covenant herein contained on Tenant's part to be performed or
               observed and Tenant shall fail to remedy the same within thirty
               (30) days after notice to Tenant specifying such neglect or
               failure, or if such failure is of such a nature that Tenant
               cannot reasonably remedy the same within such thirty (30) day
               period, Tenant shall fail to commence promptly to remedy the same
               and to prosecute such remedy to completion with diligence and
               continuity; or

          (v)  Tenant's leasehold interest in the Premises shall be taken on
               execution or by other process of law directed against Tenant; or

          (vi) Tenant shall make an assignment for the benefit of creditors or
               shall file a voluntary petition in bankruptcy or shall be
               adjudicated bankrupt or insolvent, or shall file any petition or
               answer seeking


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               any reorganization, arrangement, composition, readjustment,
               liquidation, dissolution or similar relief for itself under any
               present or future Federal, State or other statute, law or
               regulation for the relief of debtors, or shall seek or consent to
               or acquiesce in the appointment of any trustee, receiver or
               liquidator of Tenant or of all or any substantial part of its
               properties, or shall admit in writing its inability to pay its
               debts generally as they become due, in all cases which is not
               dismissed within sixty (60) days after filing; or

          (v)  A petition shall be filed against Tenant in bankruptcy or under
               any other law seeking any reorganization, arrangement,
               composition, readjustment, liquidation, dissolution, or similar
               relief under any present or future Federal, State or other
               statute, law or regulation and shall remain undismissed or
               unstayed for an aggregate of sixty (60) days (whether or not
               consecutive), or if any debtor in possession (whether or not
               Tenant) trustee, receiver or liquidator of Tenant or of all or
               any substantial part of its properties or of the Premises shall
               be appointed without the consent or acquiescence of Tenant and
               such appointment shall remain unvacated or unstayed for an
               aggregate of sixty (60) days (whether or not consecutive) --

          then, and in any of said cases (notwithstanding any license of a
          former breach of covenant or waiver of the benefit hereof or consent
          in a former instance), Landlord lawfully may, immediately or at any
          time thereafter, terminate this Lease by notice to Tenant, specifying
          a date not less than ten (10) days after the giving of such notice on
          which this Lease shall terminate, and this Lease shall come to an end
          on the date specified therein as fully and completely as if such date
          were the date herein originally fixed for the expiration of the Lease
          Term (Tenant hereby waiving any rights of redemption), and Tenant will
          then quit and surrender the Premises to Landlord, but Tenant shall
          remain liable as hereinafter provided.

     (b)  If this Lease shall have been terminated as provided in this Article,
          then Landlord may, without notice, re- enter the Premises, either by
          force, summary proceedings, ejectment or otherwise, and remove and
          dispossess Tenant and all other persons and any and all property from
          the same, as if this Lease had not been made, and Tenant hereby waives
          the service of notice of intention to re-enter or to institute legal
          proceedings to that end.

     (c)  In the event that this Lease is terminated under any of the provisions
          contained in Section 7.1 (a) or shall be otherwise terminated by
          breach of any obligation of Tenant, Tenant covenants and agrees
          forthwith to pay and be liable for, on the days originally fixed
          herein for the payment thereof, amounts equal to the several
          installments of rent and other charges reserved as they would, under
          the terms of this Lease, become due if this Lease had not been
          terminated or if Landlord had not entered or re-entered, as aforesaid,
          and whether the Premises be relet or


                                       76



          remain vacant, in whole or in part, or for a period less than the
          remainder of the Term, and for the whole thereof, but in the event the
          Premises be relet by Landlord, Tenant shall be entitled to a credit in
          the net amount of rent and other charges received by Landlord in
          reletting, after deduction of all expenses incurred in reletting the
          Premises (including, without limitation, remodeling costs, brokerage
          fees and the like), and in collecting the rent in connection
          therewith, in the following manner:

               Amounts received by Landlord after reletting shall first be
               applied against such Landlord's expenses, until the same are
               recovered, and until such recovery, Tenant shall pay, as of each
               day when a payment would fall due under this Lease, the amount
               which Tenant is obligated to pay under the terms of this Lease
               (Tenant's liability prior to any such reletting and such recovery
               not in any way to be diminished as a result of the fact that such
               reletting might be for a rent higher than the rent provided for
               in this Lease); when and if such expenses have been completely
               recovered, the amounts received from reletting by Landlord as
               have not previously been applied shall be credited against
               Tenant's obligations as of each day when a payment would fall due
               under this Lease, and only the net amount thereof shall be
               payable by Tenant. Further, amounts received by Landlord from
               such reletting for any period shall be credited only against
               obligations of Tenant allocable to such period, and shall not be
               credited against obligations of Tenant hereunder accruing
               subsequent or prior to such period; nor shall any credit of any
               kind be due for any period after the date when the term of this
               Lease is scheduled to expire according to its terms.

          Landlord agrees to use reasonable efforts to relet the Premises after
          Tenant vacates the same in the event this Lease is terminated based
          upon an Event of Default by Tenant hereunder. The marketing of the
          Premises in a manner similar to the manner in which Landlord markets
          other premises within Landlord's control within the Complex shall be
          deemed to have satisfied Landlord's obligation to use "reasonable
          efforts" hereunder. In no event shall Landlord be required to (i)
          solicit or entertain negotiations with any other prospective tenant
          for the Premises until Landlord obtains full and complete possession
          of the Premises (including, without limitation, the final and
          unappealable legal right to relet the Premises free of any claim of
          Tenant), (ii) relet the Premises before leasing other vacant space in
          the Complex, or (iii) lease the Premises for a rental less than the
          current fair market rent rate then prevailing for similar space in the
          Complex.

     (d)  (i) Landlord may elect, as an alternative, to have Tenant pay
          liquidated damages, which election may be made by notice given to
          Tenant at any time after such termination and whether or not Landlord
          shall have collected any damages as aforesaid, as liquidated final
          damages and in lieu of all other damages beyond the date of such
          notice. Upon such notice, Tenant shall promptly pay to Landlord,


                                       77



          as liquidated damages, in addition to any damages collected or due
          from Tenant for any period prior to such notice and all expenses which
          Landlord may have incurred with respect to the collection of such
          damages, such a sum as at the time of the giving of such notice
          represents the amount of the excess, if any, of (x) the discounted
          present value, at a discount rate of six percent (6%) of the total
          rent and other benefits which would have accrued to Landlord under
          this Lease from the date of such notice for what would be the then
          unexpired Lease Term if the Lease terms had been fully complied with
          by Tenant over and above (y) the discounted present value, at a
          discount rate of six percent (6%), of the then cash rental value (in
          advance) of the Premises for the balance of the Lease Term.

          (ii) For the purposes of this Article, if Landlord elects to require
          Tenant to pay damages in accordance with the immediately preceding
          paragraph, the total rent shall be computed by assuming that Tenant's
          share of excess taxes, Tenant's share of excess operating costs and
          Tenant's share of excess electrical costs would be, for the balance of
          the unexpired Term from the date of such notice, the amount thereof
          (if any) for the immediately preceding annual period payable by Tenant
          to Landlord.

     (e)  In case of any Event of Default, re-entry, dispossession by summary
          proceedings or otherwise, Landlord may (i) re-let the Premises or any
          part or parts thereof, either in the name of Landlord or otherwise,
          for a term or terms which may at Landlord's option be equal to or less
          than or exceed the period which would otherwise have constituted the
          balance of the Term of this Lease and may grant concessions,
          abatements or free rent to the extent that Landlord considers
          advisable or necessary to re-let the same and (ii) may make such
          alterations, repairs and decorations in the Premises as Landlord in
          its sole judgment considers advisable or necessary for the purpose of
          reletting the Premises; and the making of such alterations, repairs
          and decorations shall not operate or be construed to release Tenant
          from liability hereunder as aforesaid. Landlord shall in no event be
          liable in any way whatsoever for failure to re-let the Premises, or,
          in the event that the Premises are re-let, for failure to collect the
          rent under re-letting. Tenant hereby expressly waives any and all
          rights of redemption granted by or under any present or future laws in
          the event of Tenant being evicted or dispossessed, or in the event of
          Landlord obtaining possession of the Premises, by reason of the
          violation by Tenant of any of the covenants and conditions of this
          Lease.

     (f)  The specified remedies to which Landlord may resort hereunder are not
          intended to be exclusive of any remedies or means of redress to which
          Landlord may at any time be entitled lawfully, and Landlord may invoke
          any remedy (including the remedy of specific performance) allowed at
          law or in equity as if specific remedies were not herein provided for.
          Further, nothing contained in this Lease shall limit or prejudice the
          right of Landlord to prove for and obtain in proceedings for
          bankruptcy or insolvency by reason of the termination of this Lease,
          an amount equal to the maximum allowed by any statute or rule of law
          in effect at the time when, and governing the proceedings in which,
          the damages are


                                       78



          to be proved, whether or not the amount be greater, equal to, or less
          than the amount of the loss or damages referred to above.

     (g)  In lieu of any other damages or indemnity and in lieu of the recovery
          by Landlord of all sums payable under all the foregoing provisions of
          this Section 7.1, Landlord may elect to collect from Tenant, by notice
          to Tenant, at any time after this Lease is terminated under any of the
          provisions contained in this Article VII or otherwise terminated by
          breach of any obligation of Tenant and before full recovery under such
          foregoing provisions, and Tenant shall thereupon pay, as liquidated
          damages, an amount equal to the sum of (x) the Annual Fixed Rent and
          all Additional Rent payable for the lesser of (i) the twelve (12)
          months ended next prior to such termination or (ii) the number of
          months then remaining in the Term of this Lease at the time of such
          termination, plus (y) the amount of Annual Fixed Rent and Additional
          Rent of any kind accrued and unpaid at the time of such election plus
          any and all expenses which the Landlord may have incurred for and with
          respect of the collection of any of such rent.

7.2  Landlord's Default

     Landlord shall in no event be in default in the performance of any of
     Landlord's obligations hereunder unless and until Landlord shall have
     failed to perform such obligations within thirty (30) days after notice by
     Tenant to Landlord properly specifying wherein Landlord has failed to
     perform any such obligation; provided that (i) if the alleged breach is of
     such a nature that it cannot reasonably be cured within such thirty (30)
     day period, then Landlord shall not be in default if Landlord commences a
     cure within such thirty (30) day period and diligently thereafter
     prosecutes such cure to completion, and (ii) in the event of an Emergency
     (as hereinafter defined), such grace or cure period shall be shortened as
     reasonably necessary given the scope and nature of the Emergency, provided
     that such shortened grace or cure period shall only apply to permit the
     exercise of Tenant's self-help rights under Section 8.17 below (as opposed
     to determining whether Tenant shall be entitled to exercise any other
     rights and remedies on account of such failure of performance by Landlord).
     In the event of a default by Landlord after expiration of applicable notice
     and cure periods, Tenant shall be entitled to pursue all rights and
     remedies available at law or in equity except as limited by this Lease, and
     in all events excluding indirect or consequential damages. Tenant shall use
     commercially reasonable efforts to mitigate its damages in the event of any
     default by Landlord hereunder. The term "Emergency" shall mean and refer to
     any situation or circumstance where there is an immediate or imminent risk
     of injury or death to persons or material damage to property unless
     immediate action is taken to address such situation or circumstances, as
     determined by the party invoking such term in good faith. Notwithstanding
     anything contained herein to the contrary, except to the extent expressly
     provided in Section 8.17(B) below, Tenant shall not assert any right to
     deduct the cost of repairs or any monetary claim against Landlord from rent
     thereafter due and payable, but shall look solely to the Landlord for
     satisfaction of such claim.


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                                  ARTICLE VIII

                            Miscellaneous Provisions

8.1  Extra Hazardous Use

     Tenant covenants and agrees that Tenant will not do or permit anything to
     be done in or upon the Premises, or bring in anything or keep anything
     therein, which shall increase the rate of insurance on the Premises or on
     the Buildings above the standard rate applicable to premises being occupied
     for the Permitted Uses; and Tenant further agrees that, in the event that
     Tenant shall do any of the foregoing, Tenant will promptly pay to Landlord,
     on demand, any such increase resulting therefrom, which shall be due and
     payable as Additional Rent thereunder.

8.2  Waiver

     Failure on the part of Landlord or Tenant to complain of any action or
     non-action on the part of the other, no matter how long the same may
     continue, shall never be a waiver by Tenant or Landlord, respectively, of
     any of its rights hereunder. Further, no waiver at any time of any of the
     provisions hereof by Landlord or Tenant shall be construed as a waiver of
     any of the other provisions hereof, and a waiver at any time of any of the
     provisions hereof shall not be construed as a waiver at any subsequent time
     of the same provisions. The consent or approval of Landlord or Tenant to or
     of any action by the other requiring such consent or approval shall not be
     construed to waive or render unnecessary Landlord's or Tenant's consent or
     approval to or of subsequent similar act by the other.

     No payment by Tenant, or acceptance by Landlord, of a lesser amount than
     shall be due from Tenant to Landlord shall be treated otherwise than as a
     payment on account. The acceptance by Landlord of a check for a lesser
     amount with an endorsement or statement thereon, or upon any letter
     accompanying such check, that such lesser amount is payment in full, shall
     be given no effect, and Landlord may accept such check without prejudice to
     any other rights or remedies which Landlord may have against Tenant.

8.3  Cumulative Remedies

     Except as expressly provided in this Lease, the specific remedies to which
     Landlord or Tenant may resort under the terms of this Lease are cumulative
     and are not intended to be exclusive of any other remedies or means of
     redress to which such party may be lawfully entitled in case of any breach
     or threatened breach by the other party of any provisions of this Lease. In
     addition to the other remedies provided in this Lease, Landlord and Tenant
     shall be entitled to the restraint by injunction of the violation or
     attempted or threatened violation of any of the covenants, conditions or
     provisions of this Lease or to a decree compelling specific performance of
     any such covenants, conditions or provisions.


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8.4  Quiet Enjoyment

     This Lease is subject and subordinate to all matters of record as of the
     date of this Lease. So long as an Event of Default by Tenant is not in
     existence under this Lease, Tenant shall lawfully, peaceably and quietly
     have, hold, occupy and enjoy the Premises during the Term (exclusive of any
     period during which Tenant is holding over after the expiration or
     termination of this Lease without the consent of Landlord), without
     interference, disturbance, hindrance or ejection by any person claiming by,
     through or under Landlord, subject, however, to the terms of this Lease;
     the foregoing covenant of quiet enjoyment is in lieu of any other covenant,
     express or implied; and it is understood and agreed that this covenant and
     any and all other covenants of Landlord contained in this Lease shall be
     binding upon Landlord and Landlord's successors, including ground or master
     lessees, only with respect to breaches occurring during Landlord's or
     Landlord's successors' respective ownership of Landlord's interest
     hereunder, as the case may be.

     Further, Tenant specifically agrees to look solely to Landlord's then
     equity interest in the Complex (including the rents and other income,
     insurance proceeds and condemnation awards therefrom) at the time owned, or
     in which Landlord holds an interest as ground lessee, for recovery of any
     judgment from Landlord; it being specifically agreed that neither Landlord
     (original or successor), nor any beneficiary of any trust of which any
     person holding Landlord's interest is trustee, nor any member, manager,
     partner, director or stockholder, nor Landlord's managing agent, shall ever
     be personally liable for any such judgment, or for the payment of any
     monetary obligation to Tenant. The provision contained in the foregoing
     sentence is not intended to, and shall not, limit any right that Tenant
     might otherwise have to obtain injunctive relief against Landlord or
     Landlord's successors in interest, or any action not involving the personal
     liability of Landlord (original or successor), any successor trustee to the
     persons named herein as Landlord, or any beneficiary of any trust of which
     any person holding Landlord's interest is trustee, or of any manager,
     member, partner, director or stockholder of Landlord or of Landlord's
     managing agent to respond in monetary damages from Landlord's assets other
     than Landlord's equity interest aforesaid in the Building, but except as
     expressly provided in this Lease to the contrary, in no event shall Tenant
     have the right to terminate or cancel this Lease or to withhold rent or to
     set-off any claim or damages against rent as a result of any default by
     Landlord or breach by Landlord of its covenants or any warranties or
     promises hereunder, except in the case of a wrongful eviction of Tenant
     from the demised premises (constructive or actual) by Landlord continuing
     after notice to Landlord thereof and a reasonable opportunity for Landlord
     to cure the same.

     In no event shall Landlord or Tenant ever be liable to the other party for
     any indirect or consequential damages suffered from whatever cause;
     provided that the foregoing shall not limit or alter any procedural right
     or remedy of Landlord or Tenant under this Lease nor shall the same apply
     to the obligations of Tenant with respect to any hold over by Tenant after
     the expiration or earlier termination of this Lease.


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8.5  Notice to Mortgagee and Ground Lessor

     After receiving notice (together with an address for notices to be sent)
     from any person, firm or other entity that it holds a mortgage which
     includes the Premises as part of the mortgaged premises, or that it is the
     ground lessor under a lease with Landlord, as ground lessee, which includes
     the Premises as a part of the demised premises, no notice from Tenant to
     Landlord shall be effective unless and until a copy of the same is given to
     such holder or ground lessor, and the curing of any of Landlord's defaults
     by such holder or ground lessor within the time periods permitted for a
     cure by Landlord under this Lease shall be treated as performance by
     Landlord. For the purposes of this Section 8.5 or Section 8.15, the term
     "mortgage" includes a mortgage on a leasehold interest of Landlord (but not
     one on Tenant's leasehold interest).

8.6  Assignment of Rents

     With reference to any assignment by Landlord of Landlord's interest in this
     Lease, or the rents payable hereunder, conditional in nature or otherwise,
     which assignment is made to the holder of a mortgage or ground lease on
     property which includes the Premises, Tenant agrees that the execution
     thereof by Landlord, and the acceptance thereof by the holder of such
     mortgage or the ground lessor, shall never be treated as an assumption by
     such holder or ground lessor of any of the obligations of Landlord
     hereunder, unless such holder, or ground lessor, shall, by notice sent to
     Tenant, specifically otherwise elect, or upon foreclosure of such holder's
     mortgage and the taking of possession of the Premises, or, in the case of a
     ground lessor, the assumption of Landlord's position hereunder by such
     ground lessor.

     In no event shall the acquisition of title to the Buildings and the land on
     which the same is located by a purchaser which, simultaneously therewith,
     leases the entire Buildings or such land back to the seller thereof be
     treated as an assumption by such purchaser-lessor, by operation of law or
     otherwise, of Landlord's obligations hereunder, but Tenant shall look
     solely to such seller-lessee, and its successors from time to time in
     title, for performance of Landlord's obligations hereunder subject to the
     provisions of Section 8.4 hereof. In any such event, this Lease shall be
     subject and subordinate to the lease to such purchaser provided that such
     purchaser agrees to recognize the rights of Tenant under this Lease upon
     the payment of rent and other charges payable by Tenant under this Lease
     and the performance by Tenant of Tenant's obligations hereunder and
     provided that Tenant agrees to attorn to such purchaser. For all purposes,
     such seller-lessee, and its successors in title, shall be the landlord
     hereunder unless and until Landlord's position shall have been assumed by
     such purchaser-lessor by notice sent to Tenant or by termination of the
     lease by such purchaser-lessor.

8.7  Surrender

     No act or thing done by Landlord during the Lease Term shall be deemed an
     acceptance of a surrender of the Premises, and no agreement to accept such
     surrender shall be valid, unless in writing signed by Landlord. No employee
     of Landlord or of Landlord's agents


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     shall have any power to accept the keys of the Premises prior to the
     termination of this Lease. The delivery of keys to any employee of Landlord
     or of Landlord's agents shall not operate as a termination of the Lease or
     a surrender of the Premises.

8.8  Brokerage

     (A) Tenant warrants and represents that Tenant has not dealt with any
     broker in connection with the consummation of this Lease other than the
     broker, person or firm, if any, designated in Section 1.1 hereof; and in
     the event any claim is made against the Landlord relative to dealings by
     Tenant with brokers including the Brokers, if any, designated in Section
     1.1 hereof, Tenant shall defend the claim against Landlord with counsel of
     Tenant's selection first approved by Landlord (which approval will not be
     unreasonably withheld) and save harmless and indemnify Landlord on account
     of loss, cost or damage which may arise by reason of such claim.

     (B) Landlord warrants and represents that Landlord has not dealt with any
     broker in connection with the consummation of this Lease other than the
     broker, person or firm, if any, designated in Section 1.1 hereof; and in
     the event any claim is made against the Tenant relative to dealings by
     Landlord with brokers including the Brokers, if any, designated in Section
     1.1 hereof, Landlord shall defend the claim against Tenant with counsel of
     Landlord's selection and save harmless and indemnify Tenant on account of
     loss, cost or damage which may arise by reason of such claim. Landlord
     agrees that it shall be solely responsible for the payment of brokerage
     commissions to the Broker for the Original Term of this Lease, if any,
     designated in Section 1.1 hereof.

8.9  Invalidity of Particular Provisions

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

8.10 Provisions Binding, Etc

     The obligations of this Lease shall run with the land, and except as herein
     otherwise provided, the terms hereof shall be binding upon and shall inure
     to the benefit of the successors and assigns, respectively, of Landlord and
     Tenant and, if Tenant shall be an individual, upon and to his heirs,
     executors, administrators, successors and assigns. Each term and each
     provision of this Lease to be performed by Tenant shall be construed to be
     both a covenant and a condition. The reference contained to successors and
     assigns of Tenant is not intended to constitute a consent to subletting or
     assignment by Tenant.


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8.11 Recording; Confidentiality

     Landlord and Tenant agree, not to record the within Lease, but
     simultaneously with their execution and delivery of this Lease to execute
     and deliver a Notice of Lease in the form attached hereto as Exhibit L. In
     no event shall such document set forth rent or other charges payable by
     Tenant under this Lease; and any such document shall expressly state that
     it is executed pursuant to the provisions contained in this Lease, and is
     not intended to vary the terms and conditions of this Lease.

     Tenant agrees that this Lease and the terms contained herein will be
     treated as strictly confidential and except as required by law (or except
     with the written consent of Landlord) Tenant shall not disclose the same to
     any third party except for Tenant's employees, brokers, agents, partners,
     lenders, accountants and attorneys and like parties who have been advised
     of the confidentiality provisions contained herein and agree to be bound by
     the same. In the event Tenant is required by law to provide this Lease or
     disclose any of its terms, Tenant shall give Landlord prompt notice of such
     requirement prior to making disclosure so that Landlord may seek an
     appropriate protective order. If failing the entry of a protective order
     Tenant is compelled to make disclosure, Tenant shall only disclose portions
     of the Lease which Tenant is required to disclose and will exercise
     reasonable efforts to obtain assurance that confidential treatment will be
     accorded to the information so disclosed. In connection with the foregoing,
     it is acknowledged and agreed that Tenant will be required by applicable
     governmental regulations to disclose this Lease in its public filings with
     the United States Securities and Exchange Commission.

8.12 Notices

     Whenever, by the terms of this Lease, notice shall or may be given either
     to Landlord or to Tenant, such notice shall be in writing and shall be sent
     by overnight commercial courier or by registered or certified mail postage
     or delivery charges prepaid, as the case may be:

          If intended for Landlord, addressed to Landlord at the address set
          forth in Article I of this Lease, with a copy to Landlord, Attention:
          General Counsel at the same address (or to such other address or
          addresses as may from time to time hereafter be designated by Landlord
          by like notice).

          If intended for Tenant, addressed to Tenant at the address set forth
          in Article I of this Lease except that from and after the Commencement
          Date the address of Tenant shall be the Premises, with a copy to
          Tenant, Attention: General Counsel at the same address (or to such
          other address or addresses as may from time to time hereafter be
          designated by Tenant by like notice).

     Except as otherwise provided herein, all such notices shall be effective
     when received; provided, that (i) if receipt is refused, notice shall be
     effective upon the first occasion that such receipt is refused, (ii) if the
     notice is unable to be delivered due to a change of


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     address of which no notice was given, notice shall be effective upon the
     date such delivery was attempted, (iii) if the notice address is a post
     office box number, notice shall be effective the day after such notice is
     sent as provided hereinabove or (iv) if the notice is to a foreign address,
     notice shall be effective two (2) days after such notice is sent as
     provided hereinabove.

     Where provision is made for the attention of an individual or department,
     the notice shall be effective only if the wrapper in which such notice is
     sent is addressed to the attention of such individual or department.

     Any notice given by an attorney on behalf of Landlord or by Landlord's
     managing agent shall be considered as given by Landlord and shall be fully
     effective. Any notice given by an attorney by or on behalf of Tenant shall
     be considered as given by Tenant and shall be fully effective.

     Time is of the essence with respect to any and all notices and periods for
     giving notice or taking any action thereto under this Lease.

8.13 When Lease Becomes Binding

     Employees or agents of Landlord have no authority to make or agree to make
     a lease or any other agreement or undertaking in connection herewith. The
     submission of this document for examination and negotiation does not
     constitute an offer to lease, or a reservation of, or option for, the
     Premises, and this document shall become effective and binding only upon
     the execution and delivery hereof by both Landlord and Tenant. All
     negotiations, considerations, representations and understandings between
     Landlord and Tenant are incorporated herein and may be modified or altered
     only by written agreement between Landlord and Tenant, and no act or
     omission of any employee or agent of Landlord shall alter, change or modify
     any of the provisions hereof.

8.14 Section Headings

     The titles of the Articles throughout this Lease are for convenience and
     reference only, and the words contained therein shall in no way be held to
     explain, modify, amplify or aid in the interpretation, construction or
     meaning of the provisions of this Lease.

8.15 Rights of Mortgagee

     This Lease shall be subject and subordinate to any mortgage now or
     hereafter on the Site, the Buildings, or the Complex, and to each advance
     made or hereafter to be made under any mortgage, and to all renewals,
     modifications, consolidations, replacements and extensions thereof and all
     substitutions therefor provided, however, that in consideration of and as a
     condition precedent to Tenant's agreement to subordinate this Lease with
     respect to mortgages hereafter placed on the Site shall be the receipt of a
     commercially reasonable non-disturbance agreement from and wherein the
     applicable mortgagee expressly recognizes the rights of Tenant under this
     Lease (including the right to use and


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     occupy the Premises and to lease additional premises at the Complex) upon
     the payment of rent and other charges payable by Tenant under this Lease
     and the performance by Tenant of Tenant's obligations hereunder. In
     confirmation of such subordination and recognition, Tenant shall execute
     and deliver promptly such instruments of subordination and recognition as
     such mortgagee may reasonably request subject to receipt of such
     instruments of recognition from such mortgagee as Tenant may reasonably
     request. Tenant hereby appoints such mortgagee (from time to time) as
     Tenant's attorney-in-fact to execute such subordination upon default of
     Tenant in complying with such mortgagee's (from time to time) request. In
     the event that any mortgagee or its respective successor in title shall
     succeed to the interest of Landlord, then, this Lease shall nevertheless
     continue in full force and effect and, provided Tenant has received the
     non-disturbance agreement required under this Section 8.15, Tenant shall
     and does hereby agree to attorn to such mortgagee or successor and to
     recognize such mortgagee or successor as its landlord. If any holder of a
     mortgage which includes the Premises, executed and recorded prior to the
     date of this Lease, shall so elect, this Lease and the rights of Tenant
     hereunder, shall be superior in right to the rights of such holder, with
     the same force and effect as if this Lease had been executed, delivered and
     recorded, or a statutory notice hereof recorded, prior to the execution,
     delivery and recording of any such mortgage. The election of any such
     holder shall become effective upon either notice from such holder to Tenant
     in the same fashion as notices from Landlord to Tenant are to be given
     hereunder or by the recording in the appropriate registry or recorder's
     office of an instrument in which such holder subordinates its rights under
     such mortgage to this Lease.

     Landlord shall obtain and deliver to Tenant, as a condition of the
     effectiveness of this Lease, a non-disturbance agreement from the current
     mortgagee of the Premises and/or the Complex as of the date of this Lease,
     which said non-disturbance agreement shall be in the form attached hereto
     as Exhibit M (as the same may be modified by such changes as Tenant may
     request and such mortgagee may approve).

     Landlord represents and warrants to Tenant that Landlord is the fee simple
     owner of the Complex and, as of the date hereof, the Complex is not subject
     to any ground lease or overlease.

8.16 Status Reports and Financial Statements

     Recognizing that Landlord may find it necessary to establish to third
     parties, such as accountants, banks, potential or existing mortgagees,
     potential purchasers or the like, the then current status of performance
     hereunder, Tenant, on the request of Landlord made from time to time, will
     within fifteen (15) business days after such request furnish to Landlord,
     or any existing or potential holder of any mortgage encumbering the
     Premises, the Buildings, the Site and/or the Complex or any potential
     purchaser of the Premises, the Buildings, the Site and/or the Complex,
     (each an "Interested Party"), a statement of the status of any matter
     pertaining to this Lease, including, without limitation, acknowledgments
     that (or the extent to which) each party is in compliance with its
     obligations under the terms of this Lease. At Tenant's request, Landlord
     shall similarly


                                       86



     within fifteen (15) business days after Tenant's request, furnish to Tenant
     a commercially reasonable statement with similar types of information as
     set forth above, which statement may be relied upon by any actual or
     prospective assignee, subtenant, lender or purchaser of Tenant.

     In addition, Tenant shall deliver to Landlord, or any Interested Party
     designated by Landlord, financial statements of Tenant and any guarantor of
     Tenant's obligations under this Lease, as reasonably requested by Landlord,
     including, but not limited to financial statements for the past three (3)
     years to the extent available and maintained by Tenant, except that so long
     as Tenant's stock is publicly traded on a national exchange that requires
     its financial statements to be publicly disclosed, Tenant shall have no
     obligation to deliver any financial statements to Landlord.

     Landlord shall keep any non-public information provided by Tenant pursuant
     to this Section 8.16 confidential, and shall not disclose the same other
     than (i) to Landlord's officers, employees and consultants (or to any of
     the Interested Parties) or (ii) to the extent required by applicable law or
     by any administrative, governmental or judicial proceeding.

     Any such status statement or financial statement delivered by Tenant
     pursuant to this Section 8.16 may be relied upon by any Interested Party.

8.17 Self-Help

     (A) If an Event of Default of Tenant is in existence and continuing,
     Landlord shall have the right, but shall not be obligated, to enter upon
     the Premises and to perform such obligation notwithstanding the fact that
     no specific provision for such substituted performance by Landlord is made
     in this Lease with respect to such default. In performing such obligation,
     Landlord may make any payment of money or perform any other act as is
     reasonably deemed necessary. All sums so paid by Landlord (together with
     interest at the Default Rate (as defined in Section 8.22 below) and all
     costs and expenses in connection with the performance of any such act by
     Landlord, shall be deemed to be Additional Rent under this Lease and shall
     be payable to Landlord immediately on demand. Landlord may exercise the
     foregoing rights without waiving any other of its rights or releasing
     Tenant from any of its obligations under this Lease.

     (B) In the event that Landlord shall be in default in the performance of
     any of Landlord's obligations under this Lease beyond the expiration of the
     applicable notice and cure periods provided in Section 7.2 above, then if
     Landlord or the holder of any such mortgage (at the option of such
     mortgagee) fails to (i) commence to cure such default within the time
     periods specified in said Section 7.2 and (ii) thereafter prosecute such
     cure to completion with due diligence given the nature thereof, then
     thereafter at any time prior to Landlord's or such mortgagee's commencing
     such cure or subsequent to Landlord or such mortgagee commencing such cure
     if Landlord or such mortgagee has not prosecuted such cure to completion
     with due diligence given the nature of such cure, Tenant may, but need not
     (and without limitation of any other rights and remedies to


                                       87



     which Tenant may be entitled under this Lease, at law or in equity on
     account of such default of Landlord), perform such obligation and charge
     the reasonable cost thereof to Landlord; provided, however, that in the
     case of emergency repairs (i) such notice by Tenant to Landlord and such
     mortgagee need not be in writing, and (ii) Tenant may make such emergency
     repairs and charge the reasonable cost thereof to Landlord if either
     Landlord or such mortgagee has not made such emergency repairs within a
     reasonable time after such notice. All sums so paid by Tenant (together
     with interest at the Default Rate) and all costs and expenses in connection
     with the performance of any such act by Tenant shall be payable to Tenant
     immediately on demand. If Landlord fails to reimburse Tenant for the sums
     paid by Tenant within thirty (30) days of Tenant's demand therefor (such
     demand to include reasonable evidence of the costs so incurred by Tenant),
     and Landlord has not, within ten (10) business days of its receipt of
     Tenant's demand, given written notice to Tenant objecting to such demand
     and submitting the same to arbitration under Section 8.31 below (or if
     Landlord has timely disputed Tenant's demand, has submitted such dispute to
     arbitration in accordance with said Section 8.31 and has thereafter failed
     to pay Tenant the amount of any final, unappealable arbitration award
     against Landlord within thirty (30) days after the issuance thereof) then
     subject to the last sentence of this paragraph, Tenant shall have the right
     to offset the amount of such sums demanded by Tenant against the Annual
     Fixed Rent and Additional Rent payable under this Lease until offset in
     full. Notwithstanding the foregoing, Tenant shall have no right to reduce
     any monthly installment of Annual Fixed Rent by more than ten percent (10%)
     of the amount of Annual Fixed Rent which would otherwise have been due and
     payable by Tenant to Landlord, unless the aggregate amount of such
     deductions over the remainder of the Lease Term (as the same may have been
     extended) will be insufficient to fully reimburse Tenant for the amount
     demanded by Tenant, in which event Tenant may effect such offset by making
     deductions from each monthly installment of Annual Fixed Rent in equal
     monthly amounts over the balance of the remainder of the Lease Term.

8.18 Holding Over

     Any holding over by Tenant after the expiration of the term of this Lease
     shall be treated as a tenancy at sufferance and shall be on the terms and
     conditions as set forth in this Lease, as far as applicable except that
     Tenant shall pay as a use and occupancy charge an amount equal to the
     greater of (x) 150% of the Annual Fixed Rent and Additional Rent calculated
     (on a daily basis) at the highest rate payable under the terms of this
     Lease, or (y) the fair market rental value of the Premises, in each case
     for the period measured from the day on which Tenant's hold-over commences
     and terminating on the day on which Tenant vacates the Premises. In
     addition, Tenant shall save Landlord, its agents and employees harmless and
     will exonerate, defend and indemnify Landlord, its agents and employees
     from and against any and all damages which Landlord may suffer on account
     of Tenant's hold-over in the Premises after the expiration or prior
     termination of the term of this Lease. Nothing in the foregoing nor any
     other term or provision of this Lease shall be deemed to permit Tenant to
     retain possession of the Premises or hold over in the Premises after the
     expiration or earlier termination of the Lease Term. All property which
     remains in the Buildings or the Premises after the expiration or
     termination of this


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     Lease shall be conclusively deemed to be abandoned and may either be
     retained by Landlord as its property or sold or otherwise disposed of in
     such manner as Landlord may see fit. If any part thereof shall be sold,
     then Landlord may receive the proceeds of such sale and apply the same, at
     its option against the expenses of the sale, the cost of moving and
     storage, any arrears of rent or other charges payable hereunder by Tenant
     to Landlord and any damages to which Landlord may be entitled under this
     Lease and at law and in equity.

8.19 Non-Subrogation

     Any insurance carried by either party with respect to the Premises or
     property therein or occurrences thereon shall include a clause or
     endorsement denying to the insurer rights of subrogation against the other
     party to the extent rights have been waived by the insured prior to
     occurrence of injury or loss. Each party, notwithstanding any provisions of
     this Lease to the contrary, hereby waives any rights of recovery against
     the other for injury or loss due to hazards covered by such insurance (or
     which would have been covered had such party carried the insurance required
     to be carried by it under the Lease) to the extent of the indemnification
     received under such insurance policy and to the extent of any deductible
     maintained by such party in excess of $25,000.00. In addition, this waiver
     of rights by the parties shall apply to, and be for the benefit of, the
     Landlord Parties and the Tenant Parties, as applicable.

8.20 Extension Option

     (A) On the conditions (which conditions Landlord may waive by written
     notice to Tenant) that both at the time of exercise of the herein described
     applicable option to extend and as of the commencement of the Extended Term
     in question (i) there exists no monetary or other material Event of Default
     (defined in Section 7.1), (ii) this Lease is still in full force and
     effect, and (iii) Tenant has not sublet more than fifty percent (50%) of
     the Rentable Floor Area of the Premises (except for a subletting permitted
     without Landlord's consent under Section 5.6.1 hereof or any occupancy
     permitted under Section 5.6.6 hereof), Tenant shall have the right to
     extend the Term hereof upon all the same terms, conditions, covenants and
     agreements herein contained (except for the Annual Fixed Rent which shall
     be adjusted during the option periods as hereinbelow set forth) for two (2)
     periods of five (5) years each as hereinafter set forth. Each option period
     is sometimes herein referred to as an "Extended Term." Notwithstanding any
     implication to the contrary Landlord has no obligation to make any
     additional payment to Tenant in respect of any construction allowance or
     the like or to perform any work to the Premises as a result of the exercise
     by Tenant of any such option (although the absence of any construction or
     other refurbishment allowance from Landlord for the Extended Term shall be
     a factor considered by all parties in determining the Prevailing Market
     Rent under this Section 8.20 and Exhibit H).

     (B) If Tenant desires to exercise its applicable option to extend the Term,
     then Tenant shall give notice to Landlord, not earlier than sixteen (16)
     months nor later than twelve (12) months prior to the expiration of the
     Lease Term (as it may have been previously


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     extended hereunder) of Tenant's request for Landlord's quotation to Tenant
     of a proposed Annual Fixed Rent for the applicable Extended Term, which
     quotation Landlord shall deliver to Tenant in writing within fifteen (15)
     business days after receipt of Tenant's request. If at the expiration of
     thirty (30) days after the date when Tenant receives Landlord's quotation
     of the proposed Annual Fixed Rent as aforesaid (the "Negotiation Period"),
     Landlord and Tenant have not reached agreement on a determination of an
     Annual Fixed Rent for the applicable Extended Term and executed a written
     instrument extending the Term of this Lease pursuant to such agreement,
     then Tenant shall have the right, for thirty (30) days following the
     expiration of the Negotiation Period, to make a request to Landlord for a
     broker determination (the "Broker Determination") of the Prevailing Market
     Rent (as defined in Exhibit H) for the applicable Extended Term, which
     Broker Determination shall be made in the manner set forth in Exhibit H. If
     Tenant timely shall have requested the Broker Determination, then the
     Annual Fixed Rent for the applicable Extended Term shall be the greater of
     (a) ninety-five percent (95%) of the Prevailing Market Rent (as defined in
     Exhibit H) as determined by the Broker Determination or (b) the Annual
     Fixed Rent in effect during the last twelve (12) month period of the Lease
     Term immediately prior to such Extended Term. If Tenant shall have failed
     to timely request the Broker Determination, then the Annual Fixed Rent for
     the applicable Extended Term shall be as set forth in Landlord's original
     quotation.

     (C) Upon the giving of notice by Tenant to Landlord exercising Tenant's
     option to extend the Lease Term in accordance with the provisions of
     Section 8.20(B) above, then this Lease and the Lease Term hereof shall
     automatically be deemed extended, for the applicable Extended Term, without
     the necessity for the execution of any additional documents, except that
     Landlord and Tenant agree to enter into an instrument in writing setting
     forth the Annual Fixed Rent for the applicable Extended Term as determined
     in the relevant manner set forth in this Section 8.20; and in such event
     all references herein to the Lease Term or the Term of this Lease shall be
     construed as referring to the Lease Term, as so extended, unless the
     context clearly otherwise requires. Notwithstanding anything contained
     herein to the contrary, in no event shall Tenant have the right to exercise
     more than one extension option at a time and further, Tenant shall not have
     the right to exercise its second extension option unless it has duly
     exercised its first extension option, and in no event shall the Lease Term
     hereof be extended for more than ten (10) years after the expiration of the
     Original Term hereof

8.21 Security Deposit

     (A) Concurrently with the execution of this Lease, Tenant shall pay to
     Landlord a security deposit in the amount of Two Million and 00/100 Dollars
     ($2,000,000.00) and Landlord shall hold the same, throughout the Term of
     this Lease (including the Extended Term, if applicable), unless sooner
     returned to Tenant as provided in this Section 8.21 and subject to the
     provisions of subsection (B) below, as security for the performance by
     Tenant of all obligations on the part of Tenant to be performed under this
     Lease. Such deposit shall be in the form of an irrevocable, unconditional,
     negotiable letter of credit (the "Letter of Credit"). The Letter of Credit
     shall (i) be issued by and drawn on a bank


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     reasonably approved by Landlord and at a minimum having a corporate credit
     rating from Standard and Poor's Professional Rating Service of BBB- or a
     comparable minimum rating from Moody's Professional Rating Service, (ii) be
     substantially in the form attached hereto as Exhibit G, (iii) permit one or
     more draws thereunder to be made accompanied only by certification by
     Landlord or Landlord's managing agent that pursuant to the terms of this
     Lease, Landlord is entitled to draw upon such Letter of Credit, (iv) permit
     transfers at any time without charge, and (v) provide that any notices to
     Landlord be sent to the notice address provided for Landlord in this Lease.
     If the credit rating for the issuer of such Letter of Credit falls below
     the standard set forth in (i) above or if the financial condition of such
     issuer changes in any other material adverse way, Landlord shall have the
     right to require that Tenant provide a substitute letter of credit that
     complies in all respects with the requirements of this Section, and
     Tenant's failure to provide the same within ten (10) business days
     following Landlord's written demand therefor shall entitle Landlord to
     immediately draw upon the Letter of Credit and hold the proceeds as a cash
     security deposit under this Lease. Any such Letter of Credit shall be for a
     term of two (2) years (or for one (1) year if the issuer thereof regularly
     and customarily only issues letters of credit for a maximum term of one (1)
     year) and shall in either case provide for automatic one (1) year renewals
     through the date which is ninety (90) days subsequent to the scheduled
     expiration of this Lease (as the same may be extended) or if the issuer
     will not grant automatic renewals, the Letter of Credit shall be renewed by
     Tenant each year and each such renewal shall be delivered to and received
     by Landlord not later than thirty (30) days before the expiration of the
     then current Letter of Credit (herein called a "Renewal Presentation
     Date"). In the event of a failure to so deliver any such renewal Letter of
     Credit on or before the applicable Renewal Presentation Date, Landlord
     shall be entitled to present the then existing Letter of Credit for payment
     and to receive the proceeds thereof, which proceeds shall be held as
     Tenant's security deposit, subject to the terms of this Section 8.21. Any
     failure or refusal of the issuer to honor the Letter of Credit shall be at
     Tenant's sole risk and shall not relieve Tenant of its obligations
     hereunder with regard to the security deposit. Upon the occurrence of any
     Event of Default, Landlord shall have the right from time to time without
     prejudice to any other remedy Landlord may have on account thereof, to draw
     on all or any portion of such deposit held as a Letter of Credit and to
     apply the proceeds of such Letter of Credit or any cash held as such
     deposit, or any part thereof, to Landlord's damages arising from such Event
     of Default on the part of Tenant under the terms of this Lease. If Landlord
     so applies all or any portion of such deposit, Tenant shall within seven
     (7) days after notice from Landlord deposit cash with Landlord in an amount
     sufficient to restore such deposit to the full amount stated in this
     Section 8.21. While Landlord holds any cash deposit Landlord shall have no
     obligation to pay interest on the same and shall have the right to
     commingle the same with Landlord's other funds. Neither the holder of a
     mortgage nor the Landlord in a ground lease on property which includes the
     Premises shall ever be responsible to Tenant for the return or application
     of any such deposit, whether or not it succeeds to the position of Landlord
     hereunder, unless such deposit shall have been received in hand by such
     holder or ground Landlord.

     (B) Landlord shall return the security deposit to Tenant in accordance with
     the schedule set forth below (or if such deposit is in the form of a Letter
     of Credit, Landlord


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     shall either exchange the Letter of Credit for a Letter of Credit delivered
     by Tenant which reduces the amount secured by the Letter of Credit by the
     amount stated below and otherwise in strict conformity with the
     requirements herein or accept and consent to an amendment to the existing
     Letter of Credit which reduces the amount thereof to the amount required
     below) if as of each Scheduled Reduction Date set forth below (i) Tenant
     has met the corresponding Total Stockholder Equity Threshold and Prior
     Twelve Month Total Revenue Threshold, (ii) Tenant is not then in default
     under the terms of this Lease without the benefit of notice or grace
     (provided that such return or reduction shall be made upon the curing of
     any such default), and (iii) there have been no more than four (4) monetary
     and other material Event of Default occurrences during the Term
     (subsections (i), (ii) and (iii) being hereinafter referred to as the
     "Reduction Conditions").



Scheduled Reduction                          Remaining      Total Stockholder      Prior Twelve Month
        Date          Reduction Amount   Security Deposit    Equity Threshold   Total Revenue Threshold
- -------------------   ----------------   ----------------   -----------------   -----------------------
                                                                    
3/1/10                   $250,000.00       $1,750,000.00     $ 99,800,000.00        $250,000,000.00
3/1/11                   $250,000.00       $1,500,000.00     $104,800,000.00        $250,000,000.00
3/1/12                   $250,000.00       $1,250,000.00     $110,000,000.00        $275,000,000.00
3/1/13                   $250,000.00       $1,000,000.00     $115,500,000.00        $275,000,000.00
3/1/14                   $250,000.00       $  750,000.00     $121,300,000.00        $300,000,000.00
3/1/15                   $250,000.00       $  500,000.00     $127,400,000.00        $300,000,000.00


     If Tenant believes that it has satisfied all of the Reduction Conditions,
     then it shall request such reduction in writing to Landlord, which request
     shall certify to Landlord that all such Reduction Conditions have been
     satisfied and shall be accompanied by appropriate documentation evidencing
     the same. If Landlord determines that all of the Reduction Conditions are
     met, the security deposit shall be so reduced in accordance with this
     Section 8.21(B). No Letter of Credit shall automatically reduce, but any
     reduction in the amount thereof shall require Landlord's prior written
     notice or consent to the issuer of the Letter of Credit of the reduced
     amount. Promptly after Landlord's receipt of Tenant's request for a
     reduction as described above, Landlord shall determine whether such a
     reduction is permitted in accordance with this Section 8.21(B), and if it
     is, Landlord shall notify the issuer of the Letter of Credit of the amount
     to which the Letter of Credit shall be reduced.

     In connection with the foregoing, it is understood and agreed that:

          (i)  The Total Stockholder Equity and Prior Twelve Month Total Revenue
               shall be determined based on the information contained in the
               audited


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               annual financial statements set forth in Tenant's Form 10-K
               Annual Report filed with the Securities and Exchange Commission
               for the most recent fiscal year immediately preceding the
               Scheduled Reduction Date at issue (it being understood and agreed
               that if Tenant ceases to be a publicly-held company whose shares
               are traded on a national stock exchange, Tenant shall provide
               Landlord with a certified copy of its most recent audited annual
               financials statements at the time it submits its request for
               reduction as set forth above, and the foregoing thresholds or
               their reasonable equivalents shall be determined based on such
               audited annual financial statements).

          (ii) To the extent that Tenant fails to meet the applicable Total
               Stockholder Equity Threshold and/or Prior Twelve Month Total
               Revenue Threshold for a given Scheduled Reduction Date, such
               Scheduled Reduction Date and all of the Scheduled Reduction Dates
               thereafter shall be postponed for one (1) year. By way of
               example, if on March 1, 2010 Tenant does not have $99,800,000.00
               in Total Stockholder Equity and $250,000,000.00 in Prior Twelve
               Month Total Revenue, Tenant shall not be entitled to a return of
               a $250,000.00 portion of the security deposit until March 1, 2011
               (assuming the foregoing thresholds have been met) and on March 1,
               2012 Tenant shall be entitled to a return of another $250,000.00
               portion of the security deposit only if it has $104,800,000.00 in
               Total Stockholder Equity and $250,000,000.00 in Prior Twelve
               Month Total Revenue.

     Any disputes under this Section 8.21(B) as to whether or not the Reduction
     Conditions have been satisfied may be resolved by arbitration under Section
     8.31 below.

     (C) Tenant not then being in default and having performed all of its
     obligations under this Lease, including the payment of all Annual Fixed
     Rent, Landlord shall return the deposit, or so much thereof as shall not
     have theretofore been applied in accordance with the terms of this Section
     8.21, to Tenant on the expiration or earlier termination of the term of
     this Lease (as the same may have been extended) and surrender possession of
     the Premises by Tenant to Landlord in the condition required in the Lease
     at such time.

8.22 Late Payment

     If Landlord shall not have received any payment or installment of Annual
     Fixed Rent or Additional Rent (the "Outstanding Amount") on or before the
     date on which the same first becomes payable under this Lease (the "Due
     Date"), the amount of such payment or installment shall incur a late charge
     equal to the sum of: (a) three percent (3%) of the Outstanding Amount for
     administration and bookkeeping costs associated with the late payment and
     (b) interest on the Outstanding Amount from the Due Date through and
     including the date such payment or installment is received by Landlord, at
     a rate (the "Default Rate") equal to the lesser of (i) the rate announced
     by Bank of America, N.A. (or its successor) from time to time as its prime
     or base rate (or if such rate is no longer available, a comparable rate
     reasonably selected by Landlord), plus two percent (2%), or


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     (ii) the maximum applicable legal rate, if any. Such interest shall be
     deemed Additional Rent and shall be paid by Tenant to Landlord upon demand.
     Landlord agrees to waive the late charge due hereunder for the first late
     payment by Tenant under this Lease per calendar year provided that Landlord
     receives such payment from Tenant within five (5) business days after the
     Due Date.

8.23 Tenant's Payments

     Each and every payment and expenditure, other than Annual Fixed Rent, shall
     be deemed to be Additional Rent or additional rent hereunder, whether or
     not the provisions requiring payment of such amounts specifically so state,
     and shall be payable, unless otherwise provided in this Lease, within ten
     (10) days after written demand by Landlord, and in the case of the
     non-payment of any such amount, Landlord shall have, in addition to all of
     its other rights and remedies, all the rights and remedies available to
     Landlord hereunder or by law in the case of non-payment of Annual Fixed
     Rent. Unless expressly otherwise provided in this Lease, the performance
     and observance by Tenant of all the terms, covenants and conditions of this
     Lease to be performed and observed by Tenant shall be at Tenant's sole cost
     and expense. If Tenant has not objected to any statement of Additional Rent
     which is rendered by Landlord to Tenant within ninety (90) days after
     Landlord has rendered the same to Tenant (or such longer period of time as
     provided to Tenant under Section 2.6.1 above to the extent that the item of
     Additional Rent in question is covered by Tenant's audit rights as set
     forth in said Section 2.6.1), then the same shall be deemed to be a final
     account between Landlord and Tenant not subject to any further dispute. In
     the event that Tenant shall seek Landlord's consent or approval under this
     Lease, then Tenant shall reimburse Landlord, upon demand, as Additional
     Rent, for all reasonable costs and expenses, including legal and
     architectural costs and expenses, incurred by Landlord in processing such
     request, whether or not such consent or approval shall be given.

8.24 Waiver of Trial By Jury

     Landlord and Tenant each hereby waive any right to trial by jury in any
     action, proceeding or counterclaim brought by either Landlord or Tenant on
     any matters whatsoever arising out of or any way connected with this Lease,
     the relationship of the Landlord and the Tenant, the Tenant's use or
     occupancy of the Premises and/or any claim of injury or damage, including
     but not limited to, any summary process eviction action.

8.25 Governing Law

     This Lease shall be governed exclusively by the provisions hereof and by
     the law of the Commonwealth of Massachusetts without regard to conflict of
     law principles, as the same may from time to time exist.

8.26 Tenant's Equipment

     (A) Subject to the terms and provisions of this Section 8.26, Tenant shall
     be permitted


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     to install (x) telecommunications equipment, television antennas, related
     receiving equipment, related cable connections and other related
     telecommunications equipment (collectively, the "Telecom Equipment") and
     (y) HVAC equipment and any and all related equipment to accommodate
     Tenant's excess HVAC requirements (collectively, the "HVAC Unit") in a
     location or locations on the rooftop of any of the Buildings in which
     Tenant directly leases Premises from Landlord in an area to be mutually
     agreed upon the parties, provided that (i) such installation and the
     operation thereof shall not cause any measurable interference with any
     existing communication equipment in the Complex, and (ii) such installation
     does not adversely affect the structural elements or the visual aesthetic
     of the Buildings as determined by Landlord in its sole discretion. In
     addition, Landlord shall have the option upon notice to Tenant to relocate
     the Telecom Equipment and/or the HVAC Unit to other areas on the rooftop of
     the Buildings at Landlord's sole cost and expense and so long as such
     relocation does not materially adversely affect Tenant's use of the
     Premises. Tenant shall have no right to license, sublease, assign or
     otherwise transfer its rights to install and use Telecom Equipment and the
     HVAC Unit on the Buildings and/or the Site (other than to an assignee or
     subtenant permitted or consented to under this Lease). Landlord hereby
     reserves the right (at its sole discretion) to install and to permit others
     to install, use and maintain telecommunications equipment, antennas and
     similar installations on the rooftop of the Buildings and elsewhere on the
     Site provided that any agreement with a third party granting the right to
     install telecommunications equipment subsequent to the Commencement Date
     hereof shall contain language prohibiting interference with Tenant's
     Telecom Equipment then existing and shall provide Landlord with a
     termination right if such interference is not remedied after a reasonable
     period of time. If measurable interference shall occur, Tenant shall
     provide notice thereof to Landlord and Landlord shall use reasonable
     efforts to cause the same to be remedied, however, if despite such efforts
     the same are not remedied within a period reasonably necessary to cure such
     interference, Landlord shall exercise the termination right set forth in
     its agreement with such interfering party.

     (B) Subject to the provisions of this Section 8.26, Tenant shall have the
     right to install a generator, related connections and a diesel fuel tank or
     similar fuel storage compartment (collectively, the "Generator") in an area
     on the Site to be mutually agreed upon by Landlord and Tenant (it being
     understood and agreed that the Generator may not be installed on the roof
     of any of the Buildings or on Land Recreation Area B, as that term is
     defined in Section 8.27 below).

     (C) Tenant's use of the Telecom Equipment, the HVAC Unit and the Generator
     (collectively, the "Tenant's Equipment") shall be upon all of the
     conditions of the Lease, except as modified below:

     (i)  It is understood and agreed that Tenant shall be responsible, at its
          sole cost and expense, for installing the Tenant's Equipment. In
          addition to complying with the applicable construction provisions of
          this Lease, Tenant shall not install or operate any portion of the
          Tenant's Equipment until Tenant shall have obtained Landlord's prior
          written approval, which approval will not be unreasonably


                                       95



          withheld or delayed, of Tenant's plans and specifications therefor.
          Landlord shall inform Tenant at the time of its review of the plans
          and specifications for the Generator whether Landlord will require the
          same to be removed by Tenant upon the expiration or earlier
          termination of this Lease.

     (ii) Landlord shall have no obligation to provide any services to the
          Tenant's Equipment, provided Tenant shall have the right to connect
          Tenant's Equipment to existing base building utility systems, subject
          to Landlord's right to reasonably approve such connections. Tenant
          shall, at its sole cost and expense and otherwise in accordance with
          the provisions of this Section 8.26, arrange for all utility services
          required for the operation of the Tenant's Equipment.

     (iii) Tenant shall have no right to make any changes, alterations or other
          improvements to the Tenant's Equipment without Landlord's prior
          written consent, which consent shall not be unreasonably withheld or
          delayed; provided, however, that Tenant shall have the right to
          maintain and make repairs to the Tenant's Equipment.

     (iv) Tenant shall be responsible for the cost of repairing any damage to
          the Complex caused by the installation, use and removal of the
          Tenant's Equipment.

     (v)  Except for assignees of this Lease or subtenants of all or a portion
          of the Premises, no other person, firm or entity (including, without
          limitation, other tenants, licensees or occupants of the Complex)
          shall have the right to connect to the Tenant's Equipment other than
          Tenant.

     (vi) To the maximum extent permitted by law, Tenant's use of the Tenant's
          Equipment shall be at the sole risk of Tenant, and Landlord shall have
          no liability to Tenant in the event that the Tenant's Equipment is
          damaged for any reason.

     (vii) Landlord shall have the right, upon no less than ninety (90) days
          notice to Tenant and at Landlord's sole cost and expense, to relocate
          portions of the Tenant's Equipment to another area within the Complex
          reasonably acceptable to Tenant. Landlord and Tenant shall cooperate
          with each other in good faith to schedule such relocation work on
          nights and weekends so as to minimize interference with Tenant's
          business operations. Any such relocation by Landlord shall not
          independently (i.e., in the absence of another cause) be deemed to
          constitute a failure of electric supply under Section 4.2(C) above.

     (viii) In addition to the indemnification provisions set forth in this
          Lease (which shall be applicable to the Tenant's Equipment), Tenant
          shall, to the maximum extent permitted by law, indemnify, defend, and
          hold Landlord, its agents, contractors and employees harmless from any
          and all claims, losses, demands, actions or causes of actions suffered
          by any person, firm, corporation, or other entity arising from the
          installation, use or removal of the Tenant's Equipment.


                                       96



     (C) Tenant shall, at its sole cost and expense, secure the approvals of all
     governmental authorities and all permits required by governmental
     authorities having jurisdiction over such approvals for the Tenant's
     Equipment, and shall provide Landlord with copies of such approvals and
     permits prior to commencing any work with respect thereto. In addition,
     Tenant shall be solely responsible for all costs and expenses in connection
     with the installation, maintenance, use and removal of the Tenant's
     Equipment, except that Tenant will not be obligated to pay Landlord any
     rental for that portion of the Buildings and/or the Site on which the
     Tenant's Equipment is located. In connection therewith, Tenant shall
     provide Landlord with evidence on an annual basis of the existence of a
     maintenance contract for the Generator with a service provider reasonably
     acceptable to Landlord. Tenant shall have access to those portions of the
     Buildings and/or the Site on which the Tenant's Equipment is located for
     the purposes of inspecting, repairing, maintaining and replacing the same,
     subject in all events to Landlord's reasonable rules and regulations
     regarding such access (it being understood and agreed, without limiting the
     generality of the foregoing, that access to the rooftops of the Buildings
     is controlled by Landlord).

8.27 Land Recreation Space

     (A) For so long as (i) Tenant directly leases from Landlord at least
     150,000 square feet of rentable floor area, (ii) there have been no more
     than four (4) monetary or other material Event of Default occurrences
     during the Term, (iii) this Lease is still in full force and effect, and
     (iv) Tenant has not assigned this Lease (except for an assignment under
     Section 5.6.1 above or any occupancy permitted under Section 5.6.6 above),
     Tenant shall have the exclusive right to use the portion of the Site shown
     on Exhibit I-1 attached hereto (such area being hereinafter referred to as
     "Land Recreation Area A") for the Permitted Uses of the Additional Land
     Areas set forth in Section 1.1. Landlord agrees, at its sole cost and
     expense, to construct a fence and gate in the areas shown on Exhibit I-1 to
     segregate Land Recreation Area A from the remainder of the parking area in
     that portion of the Complex.

     Notwithstanding the foregoing, in the event that Tenant shall cease to
     directly lease Building E in its entirety but shall continue to directly
     lease Buildings C and D in their entirety, Tenant shall have the right to
     use only that portion of Land Recreation Area A as shown on Exhibit I-1
     attached hereto as the "Reduced Land Recreation Area A" for the purposes
     described in this Section 8.27 (it being understood and agreed that (x) the
     remainder of Land Recreation Area A may be used by Landlord for any purpose
     so long as Tenant is still provided with access to the Reduced Land
     Recreation Area A and (y) Landlord shall at its sole cost and expense
     construct or relocate a fence and gate to segregate Reduced Land Recreation
     Area A from the remainder of Land Recreation Area A).

     (B) (1) For so long as (i) Tenant directly leases from Landlord at least
     75,000 square feet of rentable floor area, (ii) there have been no more
     than four (4) monetary or other material Event of Default occurrences
     during the Term, (iii) this Lease is still in full force and effect, and
     (iv) Tenant has not assigned this Lease (except for an assignment


                                       97



     under Section 5.6.1 above or a permitted occupancy under Section 5.6.6
     above), Tenant shall have the exclusive right to use the area adjacent to
     the Site shown on Exhibit I-2 attached hereto (such area being hereinafter
     referred to as "Land Recreation Area B" and collectively with Land
     Recreation Area A as the "Additional Land Areas") for the Permitted Uses of
     the Additional Land Areas set forth in Section 1.1. Notwithstanding the
     foregoing, in the event that Tenant shall meet the requirements of
     subsections (ii) - (iv) above but shall directly lease from Landlord less
     than 75,000 square feet of rentable floor area, Tenant shall still have the
     right to use Land Recreation Area B on an exclusive basis but Tenant shall
     be required to pay to Landlord, as Additional Rent, its pro rata share of
     the rent payable to MHD under the MHD Lease (as those terms are defined in
     subsection (B)(2) below) in the inverse proportion that the rentable floor
     area of the remainder of the Premises then leased by Tenant bears to the
     Rentable Floor Area of the Premises originally set forth in Section 1.1
     above (e.g., if Tenant is directly leasing 50,000 square feet of rentable
     floor area, then Tenant shall pay two-thirds of the rent associated with
     the MHD Lease).

     (2) In connection with the foregoing, it is understood and agreed that Land
     Recreation Area B is located on property owned by the Massachusetts Highway
     Department ("MHD") and is the subject of a lease (the "MHD Lease") between
     MHD and Landlord, a copy of which is attached hereto as Exhibit J. On or
     before the Commencement Date, Landlord shall, at Landlord's sole cost and
     expense, install a fence around Land Recreation Area B of a type, quality
     and in a location selected by Landlord (it being understood and agreed that
     if Tenant wants to install additional screening, it shall be done at
     Tenant's sole cost and expense and shall be undertaken in accordance with
     the terms and provisions of the MHD Lease). Tenant acknowledges and agrees
     that the MHD Lease provides, among other things, for a term of five (5)
     years with one (1) five (5) year renewal option, and accordingly that the
     term of the MHD Lease will expire prior to the expiration of the Original
     Term of this Lease (Landlord making no representation about its ability to
     negotiate for any further extension of the MHD Lease beyond the original
     5-year term and 5-year extension option period). Tenant shall have the
     right to direct Landlord to exercise or not exercise the renewal option
     available to Landlord under the MHD Lease; provided, however, that if
     Tenant directs Landlord not to exercise the renewal option, Landlord shall
     nonetheless have the right to exercise the same, in which event (x) Tenant
     shall have no right to use Land Recreation Area B under this Section 8.28
     from and after the expiration of the initial lease term under the MHD Lease
     and (y) Tenant shall not be required to pay any costs and expenses
     associated with Land Recreation Area B as part of Landlord's Operating
     Expenses Allocable to the Premises or otherwise (unless and only to the
     extent that Land Recreation Area B is used as a parking area serving the
     tenants of the Complex and the costs of maintaining the same are chargeable
     to the tenants of the Complex as a part of Landlord's Operating Expenses
     under Section 2.6 above). For so long as Tenant shall have the right to use
     Land Recreation Area B and shall actually be using the same in accordance
     with the terms and provisions of this Section 8.27 (B), Landlord covenants
     and agrees: (i) to comply with all of the terms and obligations of
     Landlord, as tenant, under the MHD Lease; (ii) not to act or omit to act in
     any manner that would result in a default of Landlord, as tenant, under the
     MHD Lease; and (iii) not to voluntarily terminate or


                                       98


     surrender the MHD Lease without Tenant's prior written consent, which
     consent shall be in Tenant's sole and unfettered discretion. Tenant
     covenants and agrees not to use Land Recreation Area B in any manner that
     would be in violation of the terms and provisions of the MHD Lease or would
     cause Landlord to be in default of its obligations thereunder (it being
     understood and agreed that Landlord shall in no way be liable to Tenant for
     any breach of the covenants of Landlord set forth in the immediately
     preceding sentence or in the event that the MHD Lease is terminated as the
     result of any failure by Tenant to comply with the terms and provisions of
     the MHD Lease as applicable to Tenant's use of Land Recreation Area B).

     (3) In the event that Tenant is prevented from using (and in fact ceases to
     use) Land Recreation Area B as the result of either (x) a default by MHD
     under the MHD Lease or (y) a casualty or taking affecting Land Recreation
     Area B, Landlord shall use commercially reasonable efforts to enforce the
     terms of the MHD Lease. To the extent that the foregoing condition
     continues for a period of more than thirty (30) days and that Landlord is
     no longer required to make payments to MHD under the MHD Lease on account
     thereof, Landlord shall pay to Tenant an amount equal to the monthly
     payment Landlord would have otherwise been required to pay under the MHD
     Lease for each month for the period from and after the thirty-first (31st)
     day that Tenant is unable to use Land Recreation Area B as aforesaid until
     the first to occur of such time as (1) the condition causing the same has
     been cured, (2) Landlord has obtained rights to an alternative parcel of
     land to be substituted for Land Recreation Area B (as set forth below) or
     (3) Tenant has terminated this Lease (as set forth below).

     In addition, if Tenant is prevented from using (and in fact ceases to use)
     Land Recreation Area B as the result of the circumstances described in
     subsections (x) or (y) of the immediately preceding paragraph for a period
     of eleven (11) consecutive months after Landlord's receipt of written
     notice of such condition from Tenant, then Tenant may terminate this Lease
     by giving Landlord written notice as follows:

          (i)  Said notice shall be given after said eleven (11) month period.

          (ii) Said notice shall set forth an effective date which is not
               earlier than thirty (30) days after Landlord receives said
               notice.

          (iii) If said condition is remedied on or before the date thirty (30)
               days after the receipt of such notice, said notice shall have no
               further force and effect.

          (iv) If said condition is not remedied on or before the date thirty
               (30) days after the receipt of such notice, this Lease shall
               terminate as of said effective date, and the Annual Fixed Rent
               and Additional Rent due under this Lease shall be apportioned as
               of said effective date.

     Notwithstanding the foregoing, Tenant shall have no right to terminate this
     Lease in the event that Landlord has made available to Tenant another
     parcel of land consisting of one and one-half (1 1/2) acres or more and
     located within a ten (10) mile radius of the


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     Complex, which may be used by Tenant for all of the same purposes as Land
     Recreation Area B hereunder (Landlord hereby acknowledging that Landlord
     shall be solely responsible for all costs associated with obtaining the
     rights to such alternative parcel, notwithstanding that such costs may
     exceed what would have been payable under the MHD Lease, provided that
     Tenant shall still be responsible for any costs that Landlord is otherwise
     entitled to pass through to Tenant on account of Land Recreation Area B in
     accordance with Section 2.6 above). In the event any zoning relief or
     changes need to be obtained for such alternate land in order to permit
     Tenant's use of the same for the same purposes as Land Recreation Area B,
     Landlord shall be responsible, at Landlord's sole cost and expense, for
     obtaining any and all of such necessary zoning relief and/or changes.

     The remedies set forth in this Section 8.27(B)(3) shall be Tenant's sole
     remedies for the events described herein.

     (C) Landlord shall deliver possession of the Additional Land Areas in the
     condition required under this Lease to Tenant in the condition required by
     this Lease on or before the Commencement Date. Except as expressly provided
     in subsection (B) above, Tenant shall not be required to pay any rent or
     use and occupancy charge with respect to the Additional Land Areas
     (provided, however, that Tenant shall be required to pay all maintenance
     costs and real estate taxes associated therewith as part of Operating
     Expenses Allocable to the Premises under Section 2.6 above). The Additional
     Land Areas shall be deemed to be a part of the Premises for the purposes of
     the covenants and agreements of Tenant under Article V of this Lease;
     provided, however, that Tenant shall not have the right to assign its
     rights under this Section 8.27 or to sublease all or any portion of the
     Additional Land Areas, other than in connection with an assignment or
     sublease under Section 5.6.1 above or a permitted occupancy under Section
     5.6.6 above. Without limiting the generality of the foregoing, it is
     expressly understood and agreed that the indemnification provisions of
     Section 5.7 of this Lease shall be deemed to include any claims,
     liabilities, damages and expenses, including reasonable attorney's fees,
     relating to, or claimed to relate to, Tenant's use of the Additional Land
     Areas (including, without limitation, any claims that may arise under the
     MHD Lease). In addition, in the event that Tenant shall cease to meet the
     respective requirements set forth in subsections (A) and (B) above,
     Landlord shall have the right to require Tenant to discontinue its use of
     Land Recreation Area A and/or Land Recreation Area B, as applicable, and to
     yield up such area to Landlord in the condition required by Section 5.2
     above (provided, however, that Tenant shall not have any obligation to
     remove any pavement or fences installed by or on behalf of Tenant in either
     of the Additional Land Areas, so long as Tenant delivers such areas to
     Landlord in a level condition).

8.28 Tenant's Expansion Rights: Buildings F, G and H

     (A) On the conditions (which conditions Landlord may waive by written
     notice to Tenant at any time), that as of both the time that any portion of
     the RFO Premises (as hereinafter defined) becomes available for reletting
     (as hereinafter defined) and as of the commencement date of Tenant's
     leasing of such portion of the RFO Premises: (i) Tenant


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     directly leases from Landlord at least 75,000 square feet of rentable floor
     area, (ii) no monetary or other material Event of Default of Tenant exists
     and there have been no more than two (2) monetary or other material Event
     of Default occurrences during the Lease Term, (iii) this Lease is still in
     full force and effect, and (iv) Tenant has neither assigned this Lease nor
     sublet more than fifty percent (50%) of the Total Rentable Floor Area of
     the Buildings (except for an assignment or sublease under Section 5.6.1
     above or an occupancy permitted pursuant to Section 5.6.6 above), Tenant
     shall have a right of first offer ("Right of First Offer") to lease the RFO
     Premises, as hereinafter defined.

     For the purposes hereof, the "RFO Premises" shall be defined as any and all
     space in Buildings F, G and H of the Complex as and when such space becomes
     available for reletting (as hereinafter defined); provided, however, that
     Landlord shall have the right to reconfigure portions of the RFO Premises
     (e.g. to subdivide an existing space or to combine several spaces to create
     one larger space) prior to offering the same to Tenant hereunder if in
     Landlord's reasonable judgment such reconfiguration is necessary or
     desirable to create a commercially rentable layout.

     (B) When any portion of the RFO Premises becomes available for reletting,
     as hereinafter defined, Landlord shall notify Tenant ("Landlord's RFO
     Premises Notice") of the availability of such space, which notice shall
     contain the size, configuration, location and date of availability of such
     RFO Premises, the Annual Market Rent, and the other business terms upon
     which Landlord is willing to so lease such space. The net effective rental
     rate set forth in Landlord's RFO Premises Notice expressed by the (i)
     Annual Market Rent for the RFO Premises quoted by Landlord, (ii) amount of
     Base Taxes and Base Operating Expenses, (iii) free rent or "build-out"
     period, if any, after the commencement of the lease term, (iv) tenant
     improvement allowance, if any, and (v) length of the lease term, shall
     hereinafter be referred to as "Landlord's Offered Rental Terms."

     For the purposes hereof:

          (1)  The "Annual Market Rent" shall be the annual fair market rent for
               such space as of the date when the same becomes available for
               reletting, based upon the use of such space as first class
               office/research and development space utilizing properties of
               similar character within the Boston Northwest Suburban Market.

          (2)  RFO Premises shall be deemed "available for reletting" when
               Landlord, in its sole judgment, determines that the then current
               tenant of the RFO Premises will vacate the RFO Premises at the
               expiration or earlier termination of such tenant's lease.

     In connection with the foregoing, it is understood and agreed that Tenant's
     rights under this Section 8.28 shall be subject and subordinate to the
     rights of the existing tenants in Buildings F, G and H as of the date of
     this Lease (the "Existing Tenants") as set forth on Exhibit O attached
     hereto (the terms of any leases with the Existing Tenants, including,


                                      101



     but not limited to, the original terms thereof and options to extend the
     terms thereof contained in lease documents executed prior to the date
     hereof are hereinafter individually and collectively called the "Existing
     Leases").

     (C) If Tenant wishes to exercise Tenant's Right of First Offer, Tenant
     shall do so, if at all, by giving Landlord notice ("Tenant's RFO Exercise
     Notice") of Tenant's desire to lease either:

          (i)  the entire amount of space designated in Landlord's RFO Premises
               Notice; or

          (ii) in the case of Building F only, a portion of the space designated
               in Landlord's RFO Premises Notice containing not less than 10,000
               contiguous rentable square feet of floor area of the RFO
               Premises; or

          (iii) in the event that Landlord designates the entirety of Building
               G, a portion thereof consisting of one (1) full floor of the
               Building; or

          (iv) in the event that Landlord designates the entirety of Building H,
               a portion thereof consisting of one (1) full floor of the
               Building.

     within ten (10) business days after receipt of Landlord's RFO Premises
     Notice, time being of the essence. Tenant shall in Tenant's RFO Exercise
     Notice specify whether it shall be leasing the applicable portion of the
     RFO Premises for (1) the lease term specified in Landlord's RFO Premises
     Notice or (2) a lease term that is coterminous with the Term of this Lease
     with respect to the original Premises (it being understood and agreed that
     if less than thirty-six (36) months then remain in the Lease Term at the
     time Tenant delivers the Tenant's RFO Exercise Notice and Tenant desires
     that the lease term with respect to the RFO Premises be coterminous with
     the Lease Term with respect to the original Premises and if such period is
     shorter than the lease term offered in Landlord's RFO Premises Notice,
     Tenant must simultaneously exercise its extension option under Section 8.20
     with its exercise of its rights under this Section 8.28 and that if no such
     extension option is then available to Tenant then the term with respect to
     the RFO Premises shall automatically be as specified in Landlord's RFO
     Premises Notice) (the lease term as determined under subsection (1) or (2)
     being hereinafter referred to as the "Designated RFO Lease Term"). In the
     event that Tenant shall elect to lease less than the entirety of the space
     designated in Landlord's RFO Notice in accordance with subsections (ii),
     (iii) and/or (iv) above, (x) the part of the RFO Premises not accepted by
     Tenant shall be in a commercially rentable configuration, (y) Tenant shall
     pay all costs and expenses associated with subdividing and separately
     physically demising the portion of the RFO Premises accepted by Tenant from
     the remainder of the RFO Premises and (z) Tenant acknowledges that the
     rentable floor area of the portion of the RFO Premises accepted by it and
     other economic terms associated therewith may be reasonably adjusted based
     on the conversion of the Building from a single-tenant to a multi-tenant
     building. In addition to the requirements set forth in the immediately
     preceding sentence, in the


                                       102



     event that Landlord has offered the entirety of Building H to Tenant and
     Tenant exercises its rights hereunder only with respect to one (1) full
     floor of Building H in accordance with subsection (iv) above, Landlord
     shall have a period of ninety (90) days from the date of Tenant's RFO
     Exercise Notice to negotiate with prospective third-party tenants for a
     lease of the entirety of Building H and if Landlord shall sign a letter of
     intent with a third-party tenant for the entirety of Building H within said
     ninety (90) day period, then Tenant's RFO Exercise Notice shall be deemed
     null and void and of no further force or effect (it being understood and
     agreed that if Landlord shall not sign a letter of intent with a
     third-party tenant for the entirety of Building H within said ninety (90)
     day period, then Tenant shall proceed to lease the portion of Building H
     designated in Tenant's RFO Exercise Notice in accordance with the terms and
     provisions of this Section 8.28).

     If Tenant shall give a Tenant's RFO Exercise Notice the same shall
     constitute an agreement to enter into an instrument in writing to lease the
     RFO Premises identified in Tenant's RFO Exercise Notice within a reasonable
     time period after receipt of a first draft of such amendment to this Lease
     adding the RFO Premises to the Premises upon all of the same terms and
     conditions in this Lease, except to the extent inconsistent with the
     provisions of this Section and except that (x) the Annual Fixed Rent shall
     be equal to the Annual Market Rent as quoted by Landlord, (y) the lease
     term with respect to the RFO Premises shall be the Designated RFO Lease
     Term, and (z) the lease amendment shall also reflect such other business
     terms as were set forth in Landlord's RFO Premises Notice.

     (D) If Tenant shall not timely exercise its rights under this Section 8.28
     within such period (or if Tenant shall timely exercise such right to lease
     only with respect to a portion of the RFO Premises in accordance with the
     provisions of subsections (C)(ii), (iii) and (iv) above), time being of the
     essence in respect to such exercise, Landlord shall be free to lease the
     RFO Premises (or that portion of the RFO Premises not accepted by Tenant in
     Tenant's RFO Exercise Notice in accordance with the provisions of
     subsections (C)(ii), (iii) and (iv) above) for two hundred seventy (270)
     days after the date of Landlord's RFO Premises Notice for a net effective
     rental rate which is not less than 90% of Landlord's Offered Rental Terms
     contained in Landlord's RFO Premises Notice without again offering such
     space to Tenant for lease; provided, however, that (i) Landlord shall
     reoffer the applicable RFO Premises to Tenant in accordance with the terms
     and provisions of this Section 8.28 if (a) Landlord does not so lease such
     space during such two hundred seventy (270) day period, or (b) if Landlord
     proposes to lease such space in larger or smaller increments, or (c) if
     Landlord proposes to lease such space during such two hundred seventy (270)
     day period for a net effective rental rate which is less than 90% of
     Landlord's Offered Rental Terms contained in Landlord's RFO Premises
     Notice, and (ii) the terms of this Section 8.28 shall continue to apply to
     the remainder of the RFO Premises, if any, not included in Landlord's RFO
     Premises Notice and to RFO Premises included in Landlord's RFO Premises
     Notice and not leased by Tenant which is subsequently leased to another
     tenant in accordance with this Section 8.28 and thereafter becomes
     available for reletting.

     (E) If Tenant shall exercise any such Right of First Offer and if,
     thereafter, the then


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     occupant of the RFO Premises with respect to which Tenant shall have so
     exercised such right wrongfully fails to deliver possession of such
     premises at the time when its tenancy is scheduled to expire, Landlord
     shall use reasonable efforts and due diligence (which shall be limited to
     the commencement and prosecution of eviction proceeding within sixty (60)
     days after the date on which the hold-over commences, but shall not require
     the taking of any appeal) to evict such occupant from such space and to
     recover from such occupant any Hold-Over Premium (as defined below) payable
     by such occupant. In such event, the commencement of the term of Tenant's
     occupancy and lease of such additional space shall, in the event of such
     holding over by such occupant, be deferred until possession of the
     additional space is delivered to Tenant. The failure of the then occupant
     of such premises to so vacate shall not constitute a default or breach by
     Landlord and shall not give Tenant any right to terminate this Lease or to
     deduct from, offset against or withhold Annual Fixed Rent or Additional
     Rent (or any portions thereof); except that if such hold over exceeds sixty
     (60) days, then Tenant may cancel the exercise of its option to lease such
     portion of the RFO Premises by giving to Landlord a written cancellation
     notice (provided, however, that if Landlord delivers such RFO Premises to
     Tenant on or before the date thirty (30) days after Landlord receives such
     cancellation notice, such cancellation notice shall be void and without
     further force or effect).

     Alternatively, in lieu of canceling the exercise of such option, Tenant
     shall have the right to require Landlord to pay to Tenant the net (i.e. net
     of the costs and expenses, including, attorneys' fees, incurred by Landlord
     in obtaining such Hold-Over Premium) amount of any Hold-Over Premium
     received by Landlord from such hold-over occupant relative to periods from
     and after the sixty-first (61st) day of any hold-over, when and if Landlord
     receives any such payment. For the purposes hereof, the term "Hold-Over
     Premium" shall be defined as the amount (if any) which a hold-over occupant
     of any portion of the RFO Premises is required to pay to Landlord in
     respect of its hold-over in the premises (whether characterized as rent,
     damages, or use and occupation) in excess of the amount of fixed rent and
     other charges which the tenant under whom such occupant claims would have
     been required to pay to Landlord had the term of such tenant's lease been
     extended throughout the period of such hold-over at the same rental rate as
     such tenant was required to pay during the last month of its tenancy.

     In the event that Tenant elects to cancel its exercise of its option
     hereunder as the result of a holding over by the existing occupant of the
     applicable portion of the RFO Premises, Landlord shall reoffer the space to
     Tenant at such time as the hold-over tenant is evicted from the space upon
     the same terms and conditions as set forth in Tenant's RFO Exercise Notice
     with respect to such space (and otherwise in accordance with the terms and
     provisions of this Section 8.28).

     (F) Landlord shall use reasonable efforts to keep Tenant informed with
     semi-annual written updates of the expected availability of the leaseable
     areas in Buildings F, G and H; provided, however, that Landlord's failure
     to provide such updates shall in no way be deemed to be a default of
     Landlord under this Lease or otherwise give rise to any liability on
     Landlord's part.


                                       104



8.29 Tenant's Expansion Rights: Buildings A and B

     (A) As long as (i) Tenant directly leases from Landlord at least 150,000
     square feet of rentable floor area, (ii) no monetary or other material
     Event of Default of Tenant exists and there have been no more than two (2)
     monetary or other material Event of Default occurrences during the Lease
     Term, (iii) this Lease is still in full force and effect, and (iv) Tenant
     has neither assigned this Lease nor sublet all or any portion of the
     Premises (except for an assignment or sublease under Section 5.6.1 above or
     any occupancy permitted pursuant to Section 5.6.6 above), Landlord agrees
     not to enter into a lease or letter of intent with a third party to lease
     all or any portion of Building B during the period commencing on the date
     of this Lease and expiring on March 31, 2008 (the "Lock-Out Period").

     (B) Landlord agrees that if at any time during the Term of this Lease from
     and after (i) the date hereof with respect to Building A and (ii) the
     expiration of the Lock-Out Period with respect to Building B, Landlord
     estimates that it will be entering into a letter of intent with a third
     party within fifteen (15) business days to lease all or any portion of
     Buildings A or B (the "First Refusal Space") then, provided that, (i)
     Tenant directly leases from Landlord at least 150,000 square feet of
     rentable floor area, (ii) there exists no monetary or other material Event
     of Default and there have been no more than two (2) monetary or other
     material Event of Default occurrences during the Term, (iii) this Lease is
     still in full force and effect and (iv) Tenant has neither assigned this
     Lease nor sublet more than twenty-five percent (25%) of the Total Rentable
     Floor Area of the Buildings of the Premises (except for an assignment or
     sublease permitted under Section 5.6.1 above or an occupancy permitted
     pursuant to Section 5.6.6 above), Landlord shall give notice of the
     availability of such space to Tenant and the business terms which Landlord
     is willing to lease such space to said third party tenant ("Landlord's
     Submitted Offer").

     (C) Tenant shall have the right to accept Landlord's Submitted Offer by
     giving Landlord notice ("Tenant's RFR Exercise Notice") of Tenant's
     acceptance within ten (10) business days after its receipt of Landlord's
     Submitted Offer and, if so accepted, Landlord and Tenant shall endeavor to
     execute, within thirty (30) days after Tenant's RFR Exercise Notice, an
     amendment to this Lease incorporating the First Refusal Space into the
     Premises upon the terms contained in Landlord's Submitted Offer and
     otherwise as substantially the same terms and conditions as contained in
     this Lease; provided, however, that the failure of the parties to so enter
     into such amendment with the aforesaid 30-day period shall not negate the
     exercise by Tenant of its rights under this Section 8.29 and Tenant shall
     be deemed to be leasing the applicable First Refusal Space on the terms and
     provisions set forth in Landlord's Submitted Offer.

     (D) If at the expiration of ten (10) business days after Tenant's receipt
     of Landlord's Submitted Offer, Tenant shall not have accepted Landlord's
     Submitted Offer by timely delivering Tenant RFR Exercise Notice, time being
     of the essence in respect to all of the same, Landlord shall be free for
     one hundred eighty (180) days after the date of Landlord's Submitted Offer
     to consummate a lease for the First Refusal Space subject to


                                       105



     Landlord's Submitted Offer upon terms no less favorable to the Landlord
     than contained in Landlord's Submitted Offer without again offering such
     space to Tenant for lease, it being agreed that if Landlord does not so
     lease such First Refusal Space during such one hundred eighty (180) day
     period or if Landlord proposes to lease such First Refusal Space upon terms
     less favorable to Landlord than contained in Landlord's Submitted Offer
     during such one hundred eighty (180) day period, the terms of this Section
     shall continue to apply to such First Refusal Space subject to Landlord's
     Submitted Offer. The right under this Section 8.29 is granted to Tenant to
     become effective from time to time as and when Landlord anticipates leasing
     any First Refusal Space, and said right may become effective more than once
     during the Lease Term, as it may be extended.

     (E) If Tenant shall accept Landlord's Submitted Offer as provided above and
     if, thereafter, the then occupant of the space with respect to which Tenant
     shall have so accepted Landlord's Submitted Offer wrongfully fails to
     deliver possession of such space at the time when its tenancy is scheduled
     to expire, Landlord shall use reasonable efforts and due diligence (which
     shall be limited to the commencement and prosecution thereafter of eviction
     proceedings within sixty (60) days after the date on which the hold-over
     commences, but which shall not require the taking of any appeal) to evict
     such occupant from such additional space and to recover from such occupant
     any Hold-Over Premiums payable by such occupant. In such event,
     commencement of the term of Tenant's occupancy and lease of such additional
     space shall, in the event of such holding over by such occupant, be
     deferred until possession of such additional space is delivered to Tenant.
     The failure of the then occupant of such space to so vacate shall not give
     Tenant any right to terminate this Lease or to deduct from, offset against
     or withhold Annual Fixed Rent or Additional Rent (or any portions thereof);
     except that if such hold over exceeds sixty (60) days, then Tenant may
     cancel the exercise of its option to lease such portion of the First
     Refusal Space by giving to Landlord a written cancellation notice
     (provided, however, that if Landlord delivers such First Refusal Space to
     Tenant on or before the date thirty (30) days after Landlord receives such
     cancellation notice, such cancellation notice shall be void and without
     further force or effect).

     Alternatively, in lieu of canceling the exercise of such option, Tenant
     shall have the right to require Landlord to pay to Tenant the net (i.e. net
     of the costs and expenses, including, attorneys' fees, incurred by Landlord
     in obtaining such Hold-Over Premium) amount of any Hold-Over Premium
     received by Landlord from such hold-over occupant relative to periods from
     and after the sixty-first (61st) day of any hold-over, when and if Landlord
     receives any such payment.

     In the event that Tenant elects to cancel its exercise of its option
     hereunder as the result of a holding over by the existing occupant of the
     applicable portion of the First Refusal Space, Landlord shall reoffer the
     space to Tenant at such time as the hold-over tenant is evicted from the
     space upon the same terms and conditions as set forth in Landlord's
     Submitted Offer with respect to such space (and otherwise in accordance
     with the terms and provisions of this Section 8.29).


                                       106



     (F) Landlord shall use reasonable efforts to keep Tenant informed with
     semi-annual written updates of the expected dates of availability of the
     leaseable areas in Buildings A and B; provided, however, that the failure
     of Landlord to provide such updates shall in no way be deemed to be a
     default of Landlord under this Lease or otherwise give rise to any
     liability on Landlord's part.

     (G) Notwithstanding anything contained in this Section 8.29 or in Section
     8.28 above to the contrary, in the event that Tenant directly leases from
     Landlord less than 150,000 square feet of rentable floor area but more than
     100,000 square feet of rentable floor area, Tenant shall no longer have a
     right of first refusal under this Section 8.29 with respect to Buildings A
     and B but such space shall thereafter become part of the RFO Premises under
     Section 8.28 above; provided, however, that in the event the entirety of
     Building A is offered to Tenant under Section 8.28, Tenant shall have the
     right to either accept Building A in its entirety or to accept only one
     full floor of Building A.

8.30 Waiver of Landlord's Lien

     From time to time upon Tenant's reasonable written request, Landlord agrees
     to furnish Tenant or any vendor or other supplier under any conditional
     sale, chattel mortgage or other security arrangement, any consignor, any
     holder of reserved title or any holder of a security interest, with a
     waiver of Landlord's lien upon Tenant's trade fixtures, furnishings, signs,
     equipment, machinery, inventory and personal property in or on the
     Premises, which such lien waiver shall be in the form attached hereto as
     Exhibit N.

8.31 Arbitration

     Any disputes (i) under Section 2.6.1 above as to whether Tenant has
     overpaid or underpaid Operating Expenses Allocable to the Premises and/or
     Landlord's Tax Expenses Allocable to the Premises relating to matters in
     excess of One Hundred Thousand and 00/100 Dollars ($100,000.00), (ii) under
     Section 8.17(B) above as to whether Landlord is required to reimburse
     Tenant for costs incurred by Tenant in connection with the exercise of its
     self-help rights and/or (iii) under Section 8.21(B) above as to whether or
     not the Reduction Conditions have been satisfied, shall be submitted to
     arbitration in accordance with the provisions of applicable Massachusetts
     state law, as from time to time amended. Arbitration proceedings, including
     the selection of an arbitrator, shall be conducted pursuant to the rules,
     regulations and procedures from time to time in effect as promulgated by
     the American Arbitration Association. Prior written notice of application
     by either party for arbitration shall be given to the other at least ten
     (10) days before submission of the application to the said Association's
     office in Boston, Massachusetts. Any award of an arbitrator rendered
     hereunder shall be subject to confirmation and entry of judgment thereon in
     any court of competent jurisdiction sitting in Suffolk or Middlesex
     Counties, Massachusetts, and the parties hereby consent to the jurisdiction
     of such court. The costs and administration expenses of each arbitration
     hereunder and their apportionment between the parties shall be borne
     equally by the parties, and each party shall be responsible for its own
     attorneys' fees and expert witness fees. In connection with the foregoing,
     it is expressly understood and agreed that


                                       107



     the parties shall continue to perform their respective obligations under
     this Lease during the pending of any such arbitration proceeding hereunder
     (with any adjustments or reallocations to be made on account of such
     continued performance as determined by the arbitrator in his or her award).

8.32 Temporary Space

     Upon reasonable prior notice from Tenant to Landlord, Landlord agrees to
     provide Tenant with temporary space (the "Temporary Space") on either the
     second floor of Building A or the second floor of Building B of a size and
     in a location to be mutually agreed upon by Landlord and Tenant for a
     period of time commencing no earlier than sixty (60) days from the date of
     Tenant's notice requesting that the Temporary Space be made available and
     expiring on the Commencement Date of this Lease. Tenant's occupancy of the
     Temporary Space shall be subject to all of the terms and conditions of this
     Lease to the extent appropriate, except that (i) Annual Fixed Rent for the
     Temporary Space shall be payable at the annual rate equal to the product of
     (x) $4.00 and (y) the rentable floor area of the Temporary Space, (ii) for
     the purposes of determining Tenant's payments on account of Landlord's
     Operating Expenses under Section 2.6 above and Landlord's Tax Expenses
     under Section 2.7 with respect to the Temporary Space, the "Rentable Floor
     Area of the Premises" shall be deemed to be the rentable floor area of the
     Temporary Space and (iii) the Temporary Space shall be delivered to Tenant
     in its "as is" condition and no improvement allowance or brokerage
     commission shall be payable with respect thereto. In addition, it is
     acknowledged and agreed that if Tenant shall elect to lease any Temporary
     Space hereunder, Tenant shall be occupying such Temporary Space while
     Landlord is proceeding with components of the Base Building Work in
     Buildings A and B and accordingly that Tenant shall use and occupy the
     Temporary Space in such as manner as to minimize any unreasonable
     interference with Landlord's performance of the Base Building Work.

                            (signatures on next page)


                                       108



EXECUTED as a sealed instrument in two or more counterparts each of which shall
be deemed to be an original.

WITNESS:                               LANDLORD:

- -------------------------------------  BOSTON PROPERTIES LIMITED PARTNERSHIP

                                       By: Boston Properties, Inc., its general
                                           partner


                                       By: /s/ James Rosenfeld
                                           -------------------------------------
                                       Name: James Rosenfeld
                                             -----------------------------------
                                       Title: Senior Vice President, Development
                                              ----------------------------------


                                       TENANT:

ATTEST:                                IROBOT CORPORATION


By:                                    By: /s Colin Angle
    ---------------------------------      -------------------------------------
Name:                                  Name: Colin Angle
      -------------------------------        -----------------------------------
Title: Secretary or Assistant          Title: President or Vice President
       Secretary                              Hereto duly authorized


                                       By:
                                           -------------------------------------
                                       Name:
                                             -----------------------------------
                                       Title: Treasurer or Assistant Treasurer
                                              Hereto duly authorized


                                      109



                                    EXHIBIT A

                               DESCRIPTION OF SITE

Those certain parcels of land (with the buildings thereon) situated in Bedford,
Middlesex County, Massachusetts bounded and described as follows:

PARCELS 1 and 2

Two certain parcels of land situated in Bedford, Middlesex County,
Massachusetts, shown as Lot 1 and 2 on a plan entitled "Plan of Land in Bedford,
Mass." dated March 1, 1962 by Raymond C. Pressey, Inc., recorded with Middlesex
South District Deeds as Plan No. 487 of 1962 in Book 10022, Page 278, and
together bound and described as follows:

             
SOUTHWESTERLY   by Crosby Road by three lines measuring respectively two hundred
                eighty-three and 01/100 (283.01) feet, twenty-one and 27/100
                (21.27) feet and four hundred eighty-three and 43/100 (483.43)
                feet; thence

SOUTHERLY       by said Crosby Road by a curved line, one hundred nineteen and
                36/100 (119.36) feet; thence

SOUTHEASTERLY
SOUTHERLY and
SOUTHWESTERLY   by said Crosby Road by several lines measuring respectively two
                hundred ninety-three and 04/100 (293.04) feet, three hundred
                fifty-three and 04/100 (353.04) feet and two hundred twenty and
                97/100 (220.97) feet; thence

NORTHEASTERLY   by the parcel marked "Reserved for Town of Bedford" on said
                plan, sixteen hundred forty-six and 81/100 (1646.81) feet; and
                thence

NORTHWESTERLY   by land now or late of The Worcester Corp., by two lines
                measuring respectively 305.23 feet and 294.24 feet and by land
                now or late of Douglas by two lines measuring respectively
                170.33 feet and 64.34 feet, to the place of beginning.



For Title see Deed recorded with the Middlesex South District Registry of Deeds
in Book 12926, Page 233.

PARCEL 3

A certain parcel of land situated in said Bedford, shown on a plan of land in
Bedford, Mass. Dated June 5, 1961 by Raymond C. Pressey, Inc., Registered Land
Surveyors, recorded with

                                    Exhibit A


                                   Page 1 of 2



Middlesex South District Registry of Deeds at the end of Book 9844, bounded and
described as follow:

             
SOUTHWESTERLY   by Crosby Road, two hundred ninety-eight and 63/100 (298.63)
                feet;

NORTHWESTERLY   by land now or formerly of the Worcester Corporation, two
                hundred nine and 95/100 (209.95) feet;

NORTHEASTERLY   by land now or formerly of the Worcester Corporation, two
                hundred fifty and 57/100 (250.57) feet; and

SOUTHEASTERLY   by land now or formerly of Sinbad Realty Corporation by two
                lines respectively measuring one hundred seventy and 33/100
                (170.33) feet and sixty-four and 34/100 (64.34) feet.



Containing approximately 60,951 square feet of 1.4 acres according to said plan.

For Title see Deed from Cecil N. Douglas and Priscilla M. Douglas recorded with
the Middlesex South District Registry of Deeds in Book 13539, Page 732.

PARCEL 4

All right, title and interest in and to (i) that portion of Crosby Road
described in that certain Deed (a) recorded with the Middlesex South District
Registry of Deeds in Book 14013, Page 486 and (b) filed with the Middlesex South
Registry District of the Land Court as Document No. 599584 as to which
Certificate of Title No. 161163 in Registration Book 936, Page 13 was issued;
and (ii) such other applicable portions of Crosby Road abutting the westerly
boundaries of Parcels 1, 2 and 3.

Parcels 1, 2, 3 and 4 are subject to and together with the benefit of easements,
agreements restrictions, rights of way and takings of record at said Registry of
Deeds and Registry District if and to the extent in force and applicable.


                                        2



                                   EXHIBIT B-1

                          LANDLORD'S BASE BUILDING WORK

A.   BUILDING EXTERIOR

     (1)  All existing bronze colored insulated glass units at Buildings A, B,
          C, D, E & G will be removed and replaced with new, Low-E, insulated
          glass units. Caulking and glazing gaskets will be replaced as
          required.

     (2)  Existing 36" high x 68" wide windows located at the first floor of
          Building C & D will be replaced with full-height, inoperable,
          aluminum-framed, insulated windows. Windows at sensitive locations
          such as restrooms or water main equipment locations will be frosted.
          The number and location of first floor windows is as follows:



          LOCATION             NUMBER OF WINDOWS
          --------             -----------------
                            
Building C - North Elevation           13
Building C - South Elevation           22
Building D - North Elevation            1
Building D - West Elevation            21
Building D - South Elevation           12


     (3)  All exterior metal elements including window frames and existing
          storefront entrances will be painted.

B.   BUILDING D ENTRANCE LOBBY

Landlord will renovate the main entrance at the southwest corner of Building D
as illustrated schematically in the attached renderings. Interior elements
included in the renovation are as follows:

     (1)  Existing stair railing to be replaced with painted metal and glass
          railing of a similar finish to that designed by ADD Inc. at 14 Crosby
          Drive and installed in 2005. The gypsum enclosure below the stair is
          to be removed and the structure revealed. The stair tread is to be
          covered with new carpet.

     (2)  The brick planter between the upper and lower lobby is to be removed
          and replaced with painted metal and glass railing of similar design to
          the stair rail.

     (3)  Floor finishes in the lower lobby are to be a ceramic tile mutually
          agreed upon by Boston Properties and iRobot (Allowance: $30psf
          Installed).

     (4)  Floor finishes in the upper lobby and on the stair are to be carpet
          mutually agreed upon by Boston Properties and iRobot (Allowance:
          $30per yard Installed).

     (5)  Remaining dry-wall elements (i.e. the lower lobby east wall) are to be
          painted a mutually agreeable color.

                                   Exhibit B-2


                                   Page 1 of 5



     (6)  New recessed ceiling lighting is to be provided at the upper and lower
          level lobby. Junction boxes will be provided at the drop ceiling area
          in the center of the lower lobby and above the reception desk.

     (7)  The two-story, north wall of the upper lobby is to be drywall with
          standard latex painted finish (two-coats).

     (8)  iRobot is responsible for interior furniture, millwork, reception
          desk, etc.

C.   LANDSCAPING

The landscaping and sidewalks at the entrance to Building D (Southwest corner)
will be replaced to allow for integrated pedestrian access from the visitor
parking and employee parking areas.

D.   ELEVATORS

A new two-stop hydraulic elevator will be installed in the southern end of
Building D in a location mutually agreed upon by Boston Properties and iRobot
and located generally adjacent to the renovated entrance lobby and iRobot
reception area. The elevator will have a standard cab and be manufactured by
Otis, Thyssen Krup, or equal.

Existing freight elevator at Building E will be upgraded to include an automated
door opener.

E.   ROOFING

     (1)  A new EPDM roofing system with a 10-year warranty is to be installed
          at Building C.

     (2)  Six months after installation of the new roof top units, Boston
          Properties will conduct an infrared test on roofs at D and E to
          confirm roofing performance on these buildings and repair any
          potential defects.

F.   HEATING, VENTILATION, AND AIR CONDITIONING

     (1)  Two new rooftop units are to be provided at Building C and one new
          rooftop unit at Building D. Rooftop units to be Mammoth, AAON, or
          equal. Rooftop units will be sized to service one floor in each
          building at a ratio of 300SF/ton.

     (2)  Control units for the existing building management system will be
          expanded to incorporate the building rooftop units.

     (3)  Duct work for new units will be stubbed into the respective ceiling
          plenums of the first and second floor to allow for iRobot to connect
          their distribution ductwork. No more than 5 feet of horizontal duct
          will be provided.

G.   ELECTRICAL SYSTEMS

New electrical panel will be provided at Building D.

H.   COMMON AREA AMENITIES

                                   Exhibit B-2


                                   Page 2 of 5



(1)  Boston Properties will construct a common interior corridor from Building C
     to A for access to new common area amenities in Building A.

(2)  A new fitness center will be built within Building A including restrooms,
     showers, and a locker-room area. The finishes and equipment will be of
     similar quality to other fitness centers built and managed by Boston
     Properties in our suburban assets (i.e. Prospect Place, Waltham-Weston
     Corporate Center).

(3)  The existing cafeteria facility in Building A will painted and new carpet
     will be installed in the seating area.

                                   Exhibit B-2


                                   Page 3 of 5



                                    EXHIBIT C

                               LANDLORD'S SERVICES

I.   CLEANING

     Cleaning and janitorial services shall be provided as needed Monday through
     Friday (starting at or after 6pm), exclusive of holidays, Saturdays and
     Sundays.

     A.   OFFICE AREAS

          Cleaning and janitorial services to be provided in the office areas
          shall include:

          1.   Vacuuming, damp mopping of resilient floors and trash removal
               (nightly M-F).

          2.   Dusting of horizontal surfaces within normal reach (tenant
               equipment to remain in place). Hand dust all horizontal surfaces
               with treated cloths to include exposed furniture, office
               equipment, window sills, door ledges, chair rails, baseboards,
               convector tops, etc. within normal reach (minimum 1 x week).

          3.   High dusting and dusting of vertical blinds to be rendered as
               needed (minimum 1 x year).

     B.   LAVATORIES

          Cleaning and janitorial services to be provided in the common area
          lavatories of the building shall include:

          1.   Dusting, damp mopping of resilient floors, trash removal,
               sanitizing of basins, bowls and urinals as well as cleaning of
               mirrors and bright work (nightly M-F).

          2.   Refilling of soap, towel, tissue and sanitary dispensers to be
               rendered as necessary (nightly M-F).

          3.   High dusting to be rendered as needed (minimum 1 x year).

          4.   Wash down interior walls and partitions (monthly).

     C.   WINDOW CLEANING

          All exterior windows shall be washed on the inside and outside
          surfaces at a frequency necessary to maintain a first class appearance
          (minimum 1 x year).

     D.   PUBLIC AREAS

                                    Exhibit D


                                   Page 1 of 2



               -    Spot clean entrance doors/all glass at interior doors
                    (nightly).

               -    Vacuum all carpets and walk-off mats (nightly).

               -    Damp mop all resilient floors (nightly).

               -    Clean & sanitize all drinking fountains (nightly).

               -    Spray Buff or high-speed burnish all resilient floors if
                    required by manufacturer specifications (weekly).

               -    Vacuum passenger elevator in Building D and wipe down all
                    surfaces (every other night).

               -    Sweep all stairways (weekly).

               -    Police Tenant designated smoking area every other day or
                    night.

     E.   GENERAL

          Landlord shall provide the following special services, for which
          Tenant shall pay all costs and a fee equal to fifteen (15%) of such
          costs:

               -    Strip and wax all resilient tile floors (one time per year).

               -    Shampoo all carpeting (one time per year).

               -    Wash down and sanitize Coffee Station(s) and Breakroom
                    counters and sinks (weekly).

II.  HVAC

     A.   Heating, ventilating and air conditioning equipment will be provided
          with sufficient capacity to accommodate a maximum population density
          of one (1) person per one hundred fifty (150) square feet of useable
          floor area served, and a combined lighting and standard electrical
          load of 3.0 watts per square foot of useable floor area. In the event
          Tenant introduces into the Premises personnel or equipment which
          overloads the system's ability to adequately perform its proper
          functions, Landlord shall so notify Tenant in writing and
          supplementary system(s) may be required and installed by Landlord at
          Tenant's expense, if within fifteen (15) days Tenant has not modified
          its use so as not to cause such overload.

          Operating criteria of the basic system shall not be less than the
          following:

               i.   Cooling season indoor temperature of not in excess of 73 -
                    79 degrees Fahrenheit when outdoor temperature is 91 degrees
                    Fahrenheit ambient.

               ii.  Heating season minimum room temperature of 68 - 75 degrees
                    Fahrenheit when outdoor temperature is 6 degrees Fahrenheit
                    ambient.

     B.   Landlord shall provide heating, ventilating and air conditioning as
          normal seasonal charges may require during the hours of 7am to 9pm
          Monday through Friday (legal holidays in all cases excepted) at
          Tenant's expense.

                                    Exhibit D


                                   Page 2 of 2



          If Tenant shall require air conditioning (during the air conditioning
          season) or heating or ventilating during any other time period,
          Landlord shall use landlord's best efforts to furnish such services
          for the area or areas specified by written request of Tenant delivered
          to the Building Superintendent or the Landlord before 3:00 p.m. of the
          business day preceding the extra usage.

III. ELECTRICAL SERVICES

     A.   Landlord shall provide electrical power for a combined load of 3.0
          watts per square foot of useable area for lighting and for office
          machines through standard receptacle for the typical office space.

     B.   Landlord will furnish and install at Tenant's expense, all replacement
          lighting tubes, lamps and ballasts required by Tenant. Landlord will
          clean lighting fixtures on a regularly scheduled basis at the Tenant's
          expense.

IV.  ELEVATORS

     Landlord will provide passenger elevator service in Building D and freight
     elevator service in Building D and E.

V.   WATER

     Landlord will provide hot water for lavatory purposes and cold water for
     drinking, lavatory, and toilet purposes.

VI.  SECURITY

     Landlord will provide, through a third party security services contactor,
     random security patrols of the building perimeter and parking areas during
     non-business hours.

                                    Exhibit D


                                   Page 3 of 2



                                    EXHIBIT E

                       FORM OF COMMENCEMENT DATE AGREEMENT

     DECLARATION AFFIXING THE COMMENCEMENT DATE OF LEASE

     THIS AGREEMENT made this __ day of ________ 200_, by and between __________
________________________________ (hereinafter "Landlord") and _________________
(hereinafter "Tenant").

                                 WITNESSETH THAT:

1.   This Agreement is made pursuant to Section ___ of that certain Lease dated
     _____, between the parties aforenamed as Landlord and Tenant (the "Lease").

2.   It is hereby stipulated that the Lease Term commenced on __________, (being
     the "Commencement Date" under the Lease), and shall end and expire on
     __________, unless sooner terminated or extended, as provided for in the
     Lease.

WITNESS the execution hereof under seal by persons hereunto duly authorized, the
date first above written.

                                        LANDLORD:


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                        TENANT:


ATTEST:                                 ----------------------------------------


By:                                     By:
    ---------------------------------       ------------------------------------
Name:                                   Name:
      -------------------------------         ----------------------------------
Title:                                  Title:
       ------------------------------          ---------------------------------
                                               Hereunto duly authorized

                                                 (CORPORATE SEAL)

                          COMMONWEALTH OF MASSACHUSETTS

                                    Exhibit E


                                   Page 1 of 2



COUNTY OF SUFFOLK

On this ___ day of __________, 200_, before me, the undersigned notary public,
personally appeared _____________________________, proved to me through
satisfactory evidence of identification, which were
_________________________________, to be the person whose name is signed on the
preceding or attached document in my presence.

- -------------------------------------
NOTARY PUBLIC
My Commission Expires:

                          COMMONWEALTH OF MASSACHUSETTS

COUNTY OF ___________________________

On this ___ day of __________, 200_, before me, the undersigned notary public,
personally appeared _____________________________, proved to me through
satisfactory evidence of identification, which were
_________________________________, to be the person whose name is signed on the
preceding or attached document, and who swore or affirmed to me that the
contents of the documents are truthful and accurate to the best of [his] [her]
knowledge and belief.


- -------------------------------------
NOTARY PUBLIC
My Commission Expires:

                                    Exhibit E


                                   Page 2 of 2


                                   EXHIBIT F-1

                              FORMS OF LIEN WAIVERS

              CONTRACTOR'S PARTIAL WAIVER AND SUBORDINATION OF LIEN

STATE OF ____________________________   Date: __________________________________

______________________________ COUNTY   Application for Payment No.: ___________

OWNER: _________________________________________________________________________

CONTRACTOR: ____________________________________________________________________

LENDER / MORTGAGEE: None

                                     
1.  Original Contract Amount:           $_______________________________________

2.  Approved Change Orders:             $_______________________________________

3.  Adjusted Contract Amount:           $_______________________________________
    (line 1 plus line 2)

4.  Completed to Date:                  $_______________________________________

5.  Less Retainage:                     $_______________________________________

6.  Total Payable to Date:              $_______________________________________
    (line 4 less line 5)

7.  Less Previous Payments:             $_______________________________________

8.  Current Amount Due:                 $_______________________________________
    (line 6 less line 7)

9.  Pending Change Orders:              $_______________________________________

10. Disputed Claims:                    $_______________________________________



The undersigned who has a contract with _________________________ for furnishing
labor or materials or both labor and materials or rental equipment, appliances
or tools for the erection, alteration, repair or removal of a building or
structure or other improvement of real property known and identified as located
in ____________ (city or town), _________County,

                                   Exhibit F-1


                                   Page 1 of 7



_________________________ and owned by _________________, upon receipt of
__________ ($__________) in payment of an invoice/requisition/application for
payment dated __________________ does hereby:

     (a)  waive any and all liens and right of lien on such real property for
          labor or materials, or both labor and materials, or rental equipment,
          appliances or tools, performed or furnished through the following date
          ________________ (payment period), except for retainage, unpaid agreed
          or pending change orders, and disputed claims as stated above;

     (b)  subordinate any and all liens and right of lien to secure payment for
          such unpaid, agreed or pending change orders and disputed claims, and
          such further labor or materials, or both labor and materials, or
          rental equipment, appliances or tools, except for retainage, performed
          or furnished at any time through the twenty-fifth day after the end of
          the above payment period, to the extent of the amount actually
          advanced by the above lender/mortgagee through such twenty-fifth day.

     Signed under the penalties of perjury this _________ day of ________, 20__.

WITNESS:                                CONTRACTOR:


- -------------------------------------   ----------------------------------------
Name:                                   Name:
     --------------------------------         ----------------------------------
Title:                                  Title:
       ------------------------------          ---------------------------------

                                   Exhibit F-1


                                   Page 2 of 7



                           SUBCONTRACTOR'S LIEN WAIVER

General Contractor: ____________________________________________________________

Subcontractor: _________________________________________________________________

Owner: _________________________________________________________________________

Project: _______________________________________________________________________

                                     
Total Amount Previously Paid:           $_______________________________________

Amount Paid This Date:                  $_______________________________________

Retainage (Including This Payment)
   Held to Date:                        $_______________________________________



In consideration of the receipt of the amount of payment set forth above and any
and all past payments received from the Contractor in connection with the
Project, the undersigned acknowledges and agrees that it has been paid all sums
due for all labor, materials and/or equipment furnished by the undersigned to or
in connection with the Project and the undersigned hereby releases, discharges,
relinquishes and waives any and all claims, suits, liens and rights under any
Notice of Identification, Notice of Contract or statement of account with
respect to the Owner, the Project and/or against the Contractor on account of
any labor, materials and/or equipment furnished through the date hereof.

The undersigned individual represents and warrants that he is the duly
authorized representative of the undersigned, empowered and authorized to
execute and deliver this document on behalf of the undersigned and that this
document binds the undersigned to the extent that the payment referred to herein
is received.

The undersigned represents and warrants that it has paid in full each and every
sub-subcontractor, laborer and labor and/or material supplier with whom
undersigned has dealt in connection with the Project and the undersigned agrees
at its sole cost and expense to defend, indemnify and hold harmless the
Contractor against any claims, demands, suits, disputes, damages, costs,
expenses (including attorneys' fees), liens and/or claims of lien made by such
sub-subcontractors, laborers and labor and/or material suppliers arising out of
or in any way related to the Project. This document is to take effect as a
sealed instrument.

                                   Exhibit F-1


                                   Page 3 of 7



Signed under the penalties of perjury as of this ______ day of __________, 20__.

SUBCONTRACTOR:                          Signature and Printed Name of Individual
                                        Signing this Lien Waiver


- -------------------------------------   ----------------------------------------

                                        ----------------------------------------

WITNESS:


- -------------------------------------
Name:
      -------------------------------
Title:
       ------------------------------
Dated:
       ------------------------------

                                   Exhibit F-1


                                   Page 4 of 7



         CONTRACTOR'S WAIVER OF CLAIMS AGAINST OWNER AND ACKNOWLEDGMENT
                                OF FINAL PAYMENT

Commonwealth of Massachusetts                  Date: ___________________________

COUNTY OF ___________________________   Invoice No.: ___________________________

OWNER:          ________________________________________________________________

CONTRACTOR:     ________________________________________________________________

PROJECT:        ________________________________________________________________

                                           
1. Original Contract Amount:                  $_________________________________

2. Approved Change Orders:                    $_________________________________

3. Adjusted Contract Amount:                  $_________________________________

4. Sums Paid on Account of Contract Amount:   $_________________________________

5. Less Final Payment Due:                    $_________________________________



The undersigned being duly sworn hereby attests that when the Final Payment Due
as set forth above is paid in full by Owner, such payment shall constitute
payment in full for all labor, materials, equipment and work in place furnished
by the undersigned in connection with the aforesaid contract and that no further
payment is or will be due to the undersigned.

The undersigned hereby attests that it has satisfied all claims against it for
items, including by way of illustration but not by way of limitation, items of:
labor, materials, insurance, taxes, union benefits, equipment, etc. employed in
the prosecution of the work of said contract, and acknowledges that satisfaction
of such claims serves as an inducement for the Owner to release the Final
Payment Due.

The undersigned hereby agrees to indemnify and hold harmless the Owner from and
against all claims arising in connection with its Contract with respect to
claims for the furnishing of labor, materials and equipment by others. Said
indemnification and hold harmless shall include the reimbursement of all actual
attorney's fees and all costs and expenses of every nature, and shall be to the
fullest extent permitted by law.

The undersigned hereby irrevocably waives and releases any and all liens and
right of lien on such real property and other property of the Owner for labor or
materials, or both labor and materials, or rental equipment, appliances or
tools, performed or furnished by the undersigned, and anyone claiming by,
through, or under the undersigned, in connection with the Project.

                                   Exhibit F-1


                                   Page 5 of 7



The undersigned hereby releases, remises and discharges the Owner, any agent of
the Owner and their respective predecessors, successors, assigns, employees,
officers, shareholders, directors, and principals, whether disclosed or
undisclosed (collectively "Releasees") from and against any and all claims,
losses, damages, actions and causes of action (collectively "Claims") which the
undersigned and anyone claiming by, through or under the undersigned has or may
have against the Releasees, including, without limitation, any claims arising in
connection with the Contract and the work performed thereunder.

Notwithstanding anything to the contrary herein, payment to the undersigned of
the Final Payment Due sum as set forth above, shall not constitute a waiver by
the Owner of any of its rights under the contract including by way of
illustration but not by way of limitation guarantees and/or warranties. Payment
will not be made until a signed waiver is returned to Owner.

The undersigned individual represents and warrants that he/she is the duly
authorized representative of the undersigned, empowered and authorized to
execute and deliver this document on behalf of the undersigned.

                                   Exhibit F-1


                                   Page 6 of 7



Signed under the penalties of perjury as a sealed instrument as of this ___ day
of ________________, _____.

                                        ____________________________ Corporation


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------
                                               Hereunto duly authorized

                          COMMONWEALTH OF MASSACHUSETTS

COUNTY OF SUFFOLK

     On this ___ day of __________, 20___, before me, the undersigned notary
public, personally appeared _____________________________, proved to me through
satisfactory evidence of identification, to be the person whose name is signed
on the preceding or attached document, and acknowledged to me that he/she signed
it as ______________ for ______________, a corporation/partnership voluntarily
for its stated purpose.


- -------------------------------------
NOTARY PUBLIC
My Commission Expires:

                                   Exhibit F-1


                                   Page 7 of 7



                                   EXHIBIT F-2

                       CONSTRUCTION RULES AND REGULATIONS

                                BOSTON PROPERTIES

                                    SUBURBAN

                         BUILDING RULES AND REGULATIONS
                                       FOR
                       RENOVATION / CONSTRUCTION PROJECTS

                                   Exhibit F-2


                                  Page 1 of 22



                                    SUBURBAN

              Regulations for Building Improvements and Renovations

INTRODUCTION

The following regulations have been developed to ensure that modifications or
improvements to the buildings and/or building systems and equipment are
completed to Boston Properties quality standards while maintaining a level of
safety consistent with industry standards.

These regulations are not intended to be all inclusive with regard to the design
and renovation of any building, or installation of any building systems and
equipment, nor are they intended to replace and/or reduce any national, state or
local code or regulations that may be in effect at the time of design,
construction and/or installation. The purpose of this document is to provide
standard operating procedures for contractors while working in Boston Properties
Buildings, and in some cases to clarify some issues regarding optional design
methods.

In addition to the codes, standards, regulations and other design considerations
referenced in this document, the designer/engineer of record and/or the
applicable contractor is expected and responsible to ensure that all code and
regulatory requirements are met. If there is a conflict between this document
and any national, state or local code or regulatory requirements, it is the
responsibility of the applicable contractor and/or the designer/engineer of
record to bring them to the attention of Boston Properties Management.

These regulations apply to all modifications and improvements within any
building, or to building systems and equipment, at all Boston Properties
facilities and all contractors working therein.

                                   Exhibit F-2


                                  Page 2 of 22


PREREQUISITES

PLAN SUBMITTAL & REVIEW

A full set of plans (wet signed/stamped) is to be submitted to Boston
Properties, Inc. for review and written approval to proceed prior to start of
work. Plan review may take approximately two to four weeks depending upon
project scope. A complete set of as-builts, and an electronic CAD Disk is to be
submitted to the management office upon projection completion.

Boston Properties specifically denies any liability in connection with the
approval of plans. The review of plans and/or specifications by Boston
Properties and/or their insurers, consultants or other representatives, does not
imply that any plans so reviewed comply with applicable laws, ordinances, codes,
standards or regulations.

CITY PERMITS/CERTIFICATES

Copies of all relevant permits (demolition, building, electrical, plumbing,
etc...) must be submitted to Boston Properties, Inc. prior to start of work.
Note that the city or town requires a separate permit for both low and high
voltage wiring. Upon completion of project, copies of all completed permits as
well as certificate of occupancy (if applicable) are to be submitted to Boston
Properties, Inc.

INSURANCE REQUIREMENTS

- -    Certificates of insurance, as detailed below, must be submitted to Boston
     Properties before any work is started.

- -    All policies (except for workers' compensation coverage) shall be endorsed
     to name the entities listed on Attachment A "Owner Entities", their
     subsidiaries, officers, agents and employees and any owner entity specified
     by Owner, as additional insured as respects to the work being performed at
     the property. The endorsement shall further provide that additional
     insureds shall not be affected by any breach by the Contractor of any
     provision of said policy.

- -    All policies of insurance shall be with an insurance company with a current
     A.M. Best Rating of A-VIII or better; and licensed to do business in the
     Commonwealth of Massachusetts.

- -    All policies shall contain a minimum of 30 days notice of cancellation.

                                   Exhibit F-2


                                  Page 3 of 22


- -    Contractor shall furnish certificates of insurance prior to the start of
     the work and provide renewal certificates within 60 days prior to the
     expiration of the policies.

- -    All insurance policies shall include a clause stating that each underwriter
     will waive all rights of recovery, under subrogation or otherwise, against
     the Owner Entities.

- -    Listed below are the required standard policy coverages and limits
     (provided, however, should these coverages differ from the coverages
     required in any contract you have with Owner, the amounts in such contract
     shall prevail).

                                                                  
A.   Workers' Compensation........................................   Statutory limits
B.   Employers' Liability.........................................   $1,000,000
C.   Commercial General Liability including Contractual Liability:
        General Aggregate.........................................   $2,000,000
        Products/Completed Operations Aggregate...................   $2,000,000
        Each Occurrence...........................................   $1,000,000
     Personal & Advertising Injury................................   $1,000,000
     Medical Payments (per person)................................   $    5,000
     Evidence of Products/Completed Operations coverage must be
        shown for a minimum of two years following completion
        of work.
D.   Automobile Liability.........................................   $1,000,000
E.   Umbrella/Excess Liability:
        General Aggregate.........................................   $5,000,000
        Each Occurrence...........................................   $5,000,000



- -    Contractor shall ensure that all sub-contractors and sub-sub-contractors
     also maintain the same insurance requirements and coverage's as required in
     any contract with Owner or otherwise as referenced above, including naming
     the additional insured on their respective liability policies.

- -    List of additional insureds is per specific locations and can be identified
     on Attachment "A" attached.

LICENSES

Licensed trades must provide copies of current licenses.

OWNER APPROVAL

Municipality may require written owner approval. Such applications must be
submitted to the management office before start of work. Allow five days for
processing owner approval applications.

                                   Exhibit F-2


                                  Page 4 of 22



WRITTEN SCHEDULE/PROJECT COORDINATION

General contractor must submit a written schedule to the Construction Management
or Property Management office to accommodate staff/tenant notification. Any
schedule modifications must be brought to the attention of the management office
as soon as possible. Project coordination must be accomplished in conjunction
with Boston Properties' Construction Management office at 781-530-1900 or the
Property Management offices in Waltham at 781-530-1900. Emergency assistance may
be coordinated through Boston Properties' Tenant Control Center at 877-297-4411.

ON-SITE REQUIREMENTS

BUILDING ACCESS

Access to the building is gained via the main entrance twenty-four hours per day
seven days per week with prior written approval from Boston Properties, Inc.
Access information is to be provided to Boston Properties, Inc. by the tenant.
Written access approval will be posted at the security desk. Access to building
will be denied if Boston Properties' written approval is not posted. (If
applicable)

Vendor will be required to sign into the building log upon arrival. In
Cambridge, Security will issue "contractor" badge to vendor. "Contractor" badge
must be worn on the vendor's person while on site. Security will direct vendor
to appropriate floor/location and provide access as needed. Upon departure,
vendor will be required to sign out of the building log and return the
"contractor" badge to security personnel. In all other suburban facilities
contractors are required to have their own form of visible identification i.e.
card or shirt.

LOADING DOCK ACCESS

The loading dock is open weekdays between 7:00 a.m. and 5:30 p.m. Access to the
building is gained with prior written approval from Boston Properties, Inc.
Access information is to be provided to Boston Properties, Inc. by the tenant.
Written access approval will be posted at the security desk. Access to building
will be denied if Boston Properties' written approval is not posted. (If
applicable)

AFTER-HOURS LOADING DOCK ACCESS

Loading dock access outside of weekday timeframe must be scheduled twenty-four
hours in advance to coordinate security coverage. Security details are required
for access to the loading dock "after-hours". The tenant on a work order basis
schedules security details through the property management office. (If
applicable)

Written access approval will be posted at the security desk. Access to building
will be denied if Boston Properties' written approval is not posted. (If
applicable)

                                   Exhibit F-2


                                  Page 5 of 22



Use of the freight elevator on weeknights after 6:00 p.m. must be coordinated to
accommodate waste removal from the building from approximately 7:00 p.m. through
8:30 p.m. Security personnel will be required after hours, and must be approved
by the Tenant via a work order.

FLOOR-TO-FLOOR ACCESS & EGRESS

Floor-to-floor access and egress via stairwells is prohibited excluding
emergency egress. Elevator access may be restricted at the discretion of the
management office.

BASE BUILDING AREA ACCESS

Boston Properties, Inc. maintenance staff or security staff, will provide access
to base building areas outside of tenant office space with prior notice by
vendor. These base building areas include, but are not limited to the mechanical
closets, electrical closets, main telephone closet and roof.

MATERIALS/EQUIPMENT DELIVERY & REMOVAL

All wheeled deliveries are prohibited through the main entry. Delivery of tools
and materials must be made through the loading dock and into the building via
the freight elevator.

Materials loading for large projects may be accomplished via crane; however,
this must be coordinated two weeks in advance with the management office.
Contractor will be responsible for all required permitting. If applicable,
copies of permits are required in advance of work being performed.

Contractor must remove all materials and/or equipment from base building areas.
Tenant will be charged on a work order basis for any materials and/or equipment
removal not accomplished by contractor.

TENANT OFFICE SPACE ACCESS

Access to tenant office space outside of work area will be provided by Boston
Properties, Inc. maintenance staff or security staff with prior notice by
vendor. A security detail may be necessary to accompany vendor while inside
tenant office space. The tenant on a work order basis schedules security details
through the property management office.

RESTROOM/SLOP SINK ACCESS

If restroom/slop sink access is required, cleaning requirements will be
applicable. Material disposal via the slop sink/restrooms is prohibited. If
necessary, any related drain cleaning/clearing costs will be billed to the
tenant on a work order basis.

                                   Exhibit F-2


                                  Page 6 of 22



NO SMOKING POLICY

Per city and state ordinances, smoking is prohibited inside the office building.
In addition, Boston Properties, Inc. prohibits smoking at the main entry to the
property and within the construction work area this shall be enforced at all
times.

WASTE REMOVAL

Materials and/or equipment cannot be stored at the loading dock or in any area
outside the work area. All packing materials including pallets must be removed
from the loading dock. Any materials left at the dock will be removed at the
tenant's and/or contractor's cost on a work order basis.

Open top containers may be maintained at the property if scheduled in advance
with the property management office. It may be necessary to coordinate location,
delivery and pick-up of open top containers after hours, and on a daily basis.

PARKING

On-site parking may be available. There are no available discount rates.
Building management cannot validate parking. Parking is prohibited in the
building's loading dock and loading dock ramp areas. Any vehicles parking in
unauthorized areas will be towed from the site at the cost of the vehicle owner.
The use of on grade parking is available at some locations but contractors must
use the parking stalls that are furthest from the building.

Most cities do not allow on street parking and will tow vehicles from the site
at the cost of the vehicle owner.

BUILDING SYSTEMS

SAFETY AND LOSS CONTROL PROCEDURES

GENERAL

Contractors shall comply with all safety standards that include, but are not
limited to, federal, state, local, OSHA, NFPA regulations or codes.

- -    Contractor shall take all necessary precautions to safeguard all contractor
     personnel and the public from accident and to preserve all private and
     public property.

- -    Contractor will perform no overhead work where, as a result of that work,
     there is a possibility of objects falling, striking and/or causing injury
     to any person. Where necessary

                                   Exhibit F-2


                                  Page 7 of 22



     or required, Contractor shall provide nets, tarpaulins, scaffolds, and
     warning signs for the protection of personnel and equipment. Contractor may
     be required to schedule such work to avoid work disruptions and minimize
     risks of injury.

- -    Where tarpaulins are required for protection against hot slag, dust, paint
     drippings, or as temporary barriers, they shall be furnished by Contractor,
     be flame resistant, and in good condition. Contractor shall be responsible
     for the installation of scaffolds where necessary or required to the
     performance of the work. Contractor shall ensure compliance with all
     appropriate safety regulations.

- -    Contractor shall furnish all necessary or required safety warning signs,
     barriers, or barricades.

EXITS AND EVACUATION GUIDELINES

- -    Exits should be provided, as required by code, from the construction area.

- -    Exits should be clearly marked and maintained unobstructed and accessible
     at all times.

- -    All Contractor personnel must evacuate the work area immediately upon
     activation of the fire alarm, evacuation announcement, or instructions from
     Security. (Fire evacuation drills also apply.) Contractor personnel should
     use the most direct route to reach the designated relocation areas.
     Elevators are not to be used during emergency evacuations.

TEMPORARY LIGHTING

- -    Where temporary lighting is utilized, installation should closely follow
     construction and be provided in stairwells and other exit ways, where
     necessary. Provisions for night lighting should be provided. All wiring
     should be installed in accordance with The National Fire Protection
     Association's National Electrical Code, NFPA70-1999.

- -    All temporary lighting and receptacles should be removed at the end of the
     construction period.

FIRE PROTECTION SAFEGUARDS

- -    A minimum of two (2) portable multi-purpose Type A-B-C dry chemical fire
     extinguishers shall be provided in all work areas. Re-deployment of any
     existing building fire extinguishers to meet this requirement is
     prohibited.

- -    Ready access to all construction work areas shall be maintained for the
     Local Fire Department. Fire hose connections and extinguishers shall be
     clearly visible, never blocked and maintained accessible at all times.

- -    All fire alarm communication devices shall remain visible and uncovered at
     all times.

                                   Exhibit F-2


                                  Page 8 of 22



- -    All penetrations through fire-rated walls and floors shall be temporarily
     packed during construction and then sealed permanently in a manner that
     will restore the fire rating. Contractor is solely responsible for
     providing approved firestopping material, as specified by Boston Properties
     Management, and having it installed by a certified installer where
     necessary, especially in any penetrations or openings that may have
     occurred, or that are discovered, during construction.

- -    Hot applications of mastics or insulating materials should be avoided
     inside of the building. Where this type of application is necessary in the
     building interior, adequate ventilation should be provided to prevent the
     build-up of flammable vapor concentrations. Appropriate fire extinguishing
     equipment should be maintained in the area during the entire operation.

- -    The building's fire alarm system will be left operational, wherever
     feasible, during construction to offer a maximum amount of protection. See
     "Fire Alarm System Impairments" below and Attachment B "Regulations for Hot
     Work Operations" for more information regarding all required deactivations.

- -    Life Safety equipment such as emergency generators, fire pumps, fire pump
     controllers and the fire alarm system shall not be taken out of service
     during normal building hours.

LIFE SAFETY/FIRE ALARM SYSTEMS

Disconnects from the main city box must be scheduled with a minimum of 24 hours
notice by the tenant on a work order basis. Same day reconnects are required.
All related dis/reconnect charges are to be billed back to the tenant on a work
order basis.

Disconnects from the main city box and fire alarm panel operation adjustments
may be necessary to accommodate hot work (brazing, soldering, etc.)

Hot work/impairment/lock-out/tag-out procedures are to be followed. Applicable
paperwork is to be completed in conjunction with management office.

- -    Contractor must adhere to the Boston Properties Hot Works Program, attached
     as Attachment C, whenever any welding, cutting, burning, spark producing
     work is being done. Hot Works permits can be obtained from on site
     engineer. Schedule work for early morning because you are required to:

     1.   Provide a fire watch one hour after the hot works has been completed
          to insure that no fire exists.

     2.   You must also monitor the area four hours beyond the fire watch.

Fire watch requirements must be met with approved personnel.

Any fire alarm system work must be reviewed and approved by Boston Properties,
Inc. A

                                   Exhibit F-2


                                  Page 9 of 22



vendor authorized by Boston Properties, Inc must complete all related fire alarm
system work. It is the responsibility of the vendor to confirm that existing
fire alarm system can support any additional alarm notification/suppression
system devices.

Sprinkler system drain downs must follow Boston Properties Impairment procedures
and be coordinated with management office at least twenty-four hours in advance.
Same day refills are required. Any associated labor costs will be billed back to
tenant on a work order basis.

Any life safety/fire alarm system testing must be conducted after hours. Any
associated charges will be billed back to tenant on a work order basis.

The local Fire Department may require verification of hydraulic calculations for
the building's sprinkler system pursuant as well as a copy of the most recent
fire pump test report (performance curve and written report). Boston Properties,
Inc. will provide, if available, original hydraulic calculation information as
well as fire pump test reports upon request.

ELECTRICAL SYSTEM

Any partial or full power shutdowns must be scheduled in advance (a minimum of
two weeks). Full power shutdowns required coordination with the utility, City
and electrician approved by Boston Properties, Inc. as well as Boston
Properties, Inc. maintenance staff.

Lock-out/tag-out procedures are to be followed. Applicable paperwork is to be
completed in conjunction with management office.

MECHANICAL SYSTEM

Any work that may affect the operation of the mechanical system must be
coordinated in advance with the management office. Such work may be scheduled to
take place after hours at the discretion of the management office.

Vendor is required to balance the system and submit a written report to the
management office. Diffuser and thermostat operation is to be verified and
documented as well.

Construction filters are to be removed and replaced post-construction.

KEYING/ACCESS/HARDWARE SYSTEMS

All keying/hardware systems must match existing building standards. Keying
system must incorporate building grand master/master. Vendor must provide
management office with one copy of each changed key.

Tenant access systems must be tied into the life safety/fire alarm system of the
building. Work to be coordinated with management office. All associated expenses
will be billed back to tenant

                                   Exhibit F-2


                                  Page 10 of 22



on a work order basis.

DEMOLITION/CONSTRUCTION

Controlled demolition is allowed during business hours if it does not impact
business operations outside the work area. Management office may require
suspension of demolition.

Any excessively noisy work (coring, track shooting, etc.) must be completed
before 8:00 a.m. on weekdays, after 6:00 p.m. on weeknights or weekends.
Weeknight or weekend access must be scheduled in advance.

Dust protection is required throughout the demolition/construction period and
may include, but is not limited to construction air filters at all
mechanical/air conditioning units and intakes, poly protection at all egress
points, and walk-off mats at each elevator entrance area.

Any second/third shift work will require security details and, at the discretion
of the management office, building personnel details. Associated costs will be
billed to the tenant on a work order basis.

ANY EXPOSED GLASS ENTRIES MUST BE COVERED WITH BROWN PAPER DURING CONSTRUCTION
AND MAINTAINED THROUGHOUT THE PROJECT.

Any water infiltration must be handled in a manner to prevent mold, mildew and
the like and in a manner satisfactory to Boston Properties. If there shall occur
water infiltration of any type (Including, but not limited to, water from storms
or piping or spillage) Contractor and/or Tenant shall immediately notify Boston
Properties and shall immediately rectify the problem.

                                   Exhibit F-2


                                  Page 11 of 22



GENERAL

All on-site contractor/subcontractor personnel are expected to behave in a
professional manner commensurate with a business environment. Courteous and
polite interaction with building staff and occupants is required at all times.

CONSTRUCTION DOCUMENTS

At the completion of any office building construction project construction
drawings shall be provided to Boston Properties. The requirements are as
follows:

- -    Drawings will be provided in electronic and paper formats.

     Note: Drawings should incorporate all sketches, revisions, addendums,
     bulletins, etc.

- -    Paper copies of drawings shall be half size.

- -    Electronic versions shall be provided in AutoCAD dwg (preferred) or dxf. If
     possible, do not bind x-refs.

- -    Please provide all of the following that apply:

          Software & Version
          Base Drawings (specify scale if not 1:1)
          Layer Standards (Color, Linetypes, Lineweights, etc.)
          Title Sheet
          Fonts (if not standard provided by program)
          Plot configuration files (CTB or STB)

Logos or any bitmap images associated

                                   Exhibit F-2


                                  Page 12 of 22



                                  ATTACHMENT A

OWNER ENTITIES



LOCATION                        NAMED INSUREDS (OWNERS AND MANAGEMENT)
- --------              ----------------------------------------------------------
                   
Bedford Office Park   Boston Properties Limited Partnership, a Delaware limited
                      partnership

                      Boston Properties, Inc., a Delaware Corporation
                      BP Management, L.P., a Delaware limited partnership


                                   Exhibit F-2


                                  Page 13 of 22



                                  ATTACHMENT B

                                   Exhibit F-2


                                  Page 14 of 22



                       Regulation for Hot Work Operations

I. HOT WORK PROJECT PLANNING

Hot work may be conducted as a repair measure or on larger scale during
construction or tenant buildouts. Historically, hot work operations have
contributed significantly in large loss fires. In order to prevent losses, the
following guidelines are provided for your consideration in managing hot work
projects:

1.   If possible, hot work should be scheduled for periods when the building is
     unoccupied.

2.   Plan all work to minimize the exposure to fire. If possible, remove and
     relocate system/equipment component(s) to be worked on to an exterior area
     or an area designed for hot work.

3.   Hot work should not take place until all personnel, material and equipment
     are at the work location and all approvals have been provided.

4.   Do not conduct hot work in an area where the sprinkler system is impaired.
     If the hot work must be conducted in an area of sprinkler impairment or if
     sprinklers are not installed, hose lines and/or other special arrangements
     should be made in addition to these operational guidelines.

5.   Smoke detection devices should be reviewed in area of hot work. Steps to
     prevent activation of the fire alarm system due to hot work should be
     taken. Smoke detection devices sharing sprinkler waterflow alarm zones
     should not be zoned out.

6.   Special attention to the transfer of flying sparks to adjacent areas should
     be evaluated and controlled. Consideration should be given to floor and
     wall openings and air transfer systems.

7.   Building furnishings and interior finishes may have flammability
     characteristics that are unknown and should be covered with fire resistant
     materials.

8.   The products of combustion from hot work may become a problem if large
     concentrations are accumulated in an area without proper ventilation.

9.   The products of combustion from hot work may become a problem if they are
     transferred into occupied tenant areas by the air handling equipment or
     other building ventilation systems. All systems should be arranged to
     prevent transfer of products of combustion.

10.  Hot work in or near air handling units should be conducted when building is
     not occupied and the unit should be shut off.

                                   Exhibit F-2


                                  Page 15 of 22



11.  Spare fire extinguishers should be used to support fire watch operations.
     Relocation of existing building fire extinguishers may cause a delay in
     others trying to retrieve extra units from known locations. The proper
     class of fire extinguisher should be selected based on combustibles in area
     and building construction.

12.  Communication systems for reporting fire emergencies should be available to
     the fire watch and tested prior to the start of the job.



STEP   RESPONSIBILITY               ACTION
- ----   --------------               ------
                              
 1.    HOT WORK COORDINATOR (HWC)   manages all hot work projects as follows:

                                    -   coordinates hot work with property
                                        management.

                                    -   reviews scope of work.

                                    -   reviews hot work permit.

                                    -   reviews contractor's hot work program
                                        and monitors activities related to
                                        meeting Boston Properties' requirements.

                                    -   secures/reviews permits required by
                                        local authority having jurisdiction.

                                    directs staff in monitoring of project.

                                    completes all items on yellow Hot Work
                                    Permit tag (Part A) - [contact risk
                                    management for additional tags]

                                    inspects area where hot work will be
                                    performed prior to the start of the work.

                                    inspects condition of equipment to be used
                                    to perform hot work to determine that it is
                                    in good condition.

                                    verifies that fire watch personnel are
                                    trained in:

                                    -   preparing the area for hot work.

                                    -   following emergency guidelines for
                                        Fire/Explosion.

                                    -   operating portable fire extinguishers.

                                    -   implementing fire watch
                                        responsibilities.

                                    verifies that the sprinkler system in the
                                    area is not impaired and that additional
                                    portable fire extinguishers are brought to
                                    the area for use by the fire watch.


                                   Exhibit F-2


                                  Page 16 of 22



                              
                                    posts yellow Hot Work Permit work tag(s) in
                                    area.

                                    implements Impairment Guidelines as
                                    required. (See Section 3 of this Manual.)

2.     PROPERTY MANAGER             coordinates with the HWC, engineering staff,
                                    contractors and tenants as necessary.

                                    notifies tenants of the project if it will
                                    affect their operations.

                                    terminates or suspends any operations that
                                    threatens the safety of the occupants of the
                                    building or could cause damage to the
                                    property.

3.     CHIEF BUILDING ENGINEER      reviews scope of work and supports project
                                    as required.



II. FIRE WATCH

NOTE: If contractor fire watches are being provided, they must meet the minimum
standards as outlined below.



STEP   RESPONSIBILITY               ACTION
- ----   --------------               ------
                              
1.     FIRE WATCH                   verifies that the HWC has inspected area and
                                    that yellow Hot Work Permit tag (Part A) has
                                    been completed and signed.

                                    maintains area free of combustible material
                                    as indicated on yellow Hot Work Permit tag
                                    (Part A)

                                    verifies that all floor openings and
                                    communicative openings to adjacent areas are
                                    covered/closed.

                                    maintains portable fire extinguisher ready
                                    for use and has, at a minimum, one back-up
                                    extinguisher.

                                    maintains a two-way radio, telephone or
                                    other means of quickly reporting a fire
                                    emergency. Emergency telephone numbers
                                    should be in possession of fire watch.

                                    conducts visual surveillance of the hot work
                                    area for possible sparks or fires during
                                    work.

                                    conducts inspections of the work area at the
                                    completion of work.

2.     HWC                          inspects work area at least once during the
                                    work day.

                                    implements corrective actions as necessary.


                                   Exhibit F-2


                                  Page 17 of 22



                              
                                    suspends work if sprinkler system in area
                                    becomes impaired.



III. POST-JOB INSPECTION AND REVIEW



STEP   RESPONSIBILITY               ACTION
- ----   --------------               ------
                              
1.     FIRE WATCH                   verifies that all equipment used to perform
                                    hot work has been properly secured and/or
                                    removed from area.

                                    conducts inspection of work area and
                                    adjacent areas at conclusion of hot work to
                                    look for sparks or smoldering fires.

                                    restores all fire protection and building
                                    systems to normal operation and notifies
                                    Impairment Coordinator of system(s) status.

                                    conducts follow-up inspection of area for
                                    four hours after the completion of work.

                                    removes yellow Hot Work Permit tag at
                                    conclusion of final inspection (four hours).

                                    completes yellow Hot Work Permit tag (Part
                                    B).

                                    notifies the HWC.

2.     HWC                          inspects area.

                                    reviews completed yellow Hot Work Permit tag
                                    (Part B).

                                    completes Impairment Guidelines as
                                    necessary.

                                    notifies Property Manager and Chief Engineer
                                    of job completion.

                                    maintains completed yellow Hot Work Permit
                                    tag(s) in file.


                                   Exhibit F-2


                                  Page 18 of 22



                                  ATTACHMENT C

       CONTRACTOR'S INFORMATIONAL DATA FORM AND PRE-CONSTRUCTION CHECKLIST

THIS FORM SHALL BE COMPLETED AND RETURNED TO BOSTON PROPERTIES MANAGEMENT
OFFICE, INCLUDING ALL ATTACHMENTS AS INDICATED IN THE PRE-CONSTRUCTION
CHECKLIST, PRIOR TO THE START OF ANY WORK.

Location and Tenant Name: ______________________________________________________

Name of Contractor: ____________________________________________________________

Contractor's 24-Hour Phone Number: _____________________________________________

Name of Contractor's Foreman: __________________________________________________

Building Permit Number: ________________________________________________________

Scheduled Start Date: __________________________________________________________

Scheduled Completion Date: _____________________________________________________

PRE-CONSTRUCTION CHECKLIST

_____   Full Set of Plans.

_____   Original Building Permit.

_____   Fire Department Permit (where applicable) upon issuance.

_____   Certificate of Insurance.

_____   Schedule of Work.

_____   List of Subcontractors and Phone Numbers.

_____   Two (2) Keys for Construction Locks.

_____   MSDS log.

I CERTIFY THAT I HAVE READ AND THOROUGHLY UNDERSTAND THE ATTACHED REGULATIONS
FOR BUILDING IMPROVEMENTS AND RENOVATIONS AND AGREE TO COMPLY WITH ALL THE TERMS
AND CONDITIONS.

                                        ----------------------------------------
                                        Signature                      Date

                                        ----------------------------------------
                                        Contractor Name

                                        ----------------------------------------
                                        Local Address

                                        ----------------------------------------
                                        City/State/Zip

                                   Exhibit F-2


                                  Page 19 of 22



                                  ATTACHMENT D

                           POST-CONSTRUCTION CHECKLIST

THIS FORM SHALL BE COMPLETED AND RETURNED TO BOSTON PROPERTIES MANAGEMENT
OFFICE, INCLUDING ALL ATTACHMENTS AS INDICATED IN THE POST-CONSTRUCTION
CHECKLIST, PRIOR TO THE CONTRACTOR LEAVING THE PREMISES.

Location and Tenant Name: ______________________________________________________
Name of Contractor: ____________________________________________________________
Name of Contractor's Foreman: __________________________________________________
Actual Start Date: _____________________________________________________________
Actual Completion Date: ________________________________________________________

POST-CONSTRUCTION CHECKLIST

_____   Boston Properties Management Punch List Completed.

_____   Certificate of Occupancy (Temporary approval from the City )

_____   Certified Air Balance Report.

_____   Hydrostatic Sprinkler System Test Certificate.

_____   Fire Alarm System Test.

_____   Hard Copy of As-Built Drawing as well as CAD Electronic Files of Both
        Mechanical and Architectural.

_____   Operating Manuals.

_____   Copies of Applicable Warranties.

_____   Signed affidavit for Sprinkler System from Design Engineer of record.

_____   Approved firestopping material installed for all vertical and horizontal
        penetrations.

Contractor agrees to be responsible for assuring that any and all lien claims
(filed or unfiled) pursuant to Chapter 254 of the Massachusetts General Laws as
amended arising as a result of Contractor and/or Contractor's sub-contractors
and supplier's activities are released, terminated, or otherwise disposed of
without cost or expense to the Owner (Boston Properties), and Contractor agrees
to indemnify and hold the Owner (Boston Properties) harmless from all such lien
claims except those arising from the actions or inactions of the Owner(Boston
Properties).


                                        ----------------------------------------
                                        Signature                      Date

                                        ----------------------------------------
                                        Contractor Name

                                        ----------------------------------------
                                        Local Address

                                        ----------------------------------------
                                        City/State/Zip

                                   Exhibit F-2


                                  Page 20 of 22



                                  ATTACHMENT E

                                  Fee Schedule

All rates listed below are maximum numbers to be used for budgetary purposes.
Actual charges may vary based upon project size.

- -    Exclusive Use of Freight Elevators:   $25.00 per hour

- -    Oversized Deliveries Requiring Elevator Technicians:

               Foreman:    Regular Time $219.49   Premium Time $353.39
               Mechanic:   Regular Time $195.12   Premium Time $314.15
               Helper      Regular Time $156.04   Premium Time $251.32

One mechanic is required to run the elevator with the hatch opened. To rig items
   on top or under the car requires a minimum of one mechanic and one helper.

- -    Removal, Cleaning and Storage of Blinds         $10 per blind

- -    Construction Debris Clean-up                    Time and Material

- -    Building Access Fee

        Vendors (ie. Telephone, Data, Furniture)     $500.00 per project

        General Contractor

           Project Cost less than $500,000           $1,000 per project

           Project Cost greater than $500,000        $2,500 per project

- -    Electric Shutdown Fee (If Required)             Building Electrician Time

                                   Exhibit F-2


                                  Page 21 of 22



                                    EXHIBIT G

                 BROKER DETERMINATION OF PREVAILING MARKET RENT

     Where in this Lease to which this Exhibit is attached provision is made for
a Broker Determination of Prevailing Market Rent, the following procedures and
requirements shall apply:

1.   Tenant's Request. Tenant shall send a notice to Landlord by the time set
     for such notice in the applicable section of this Lease, requesting a
     Broker Determination of the Prevailing Market Rent, which notice to be
     effective must (i) make explicit reference to this Lease and to the
     specific section of this Lease pursuant to which said request is being
     made, (ii) include the name of a broker selected by Tenant to act for
     Tenant ("Tenant's Broker"), which broker shall be affiliated with a major
     Boston commercial real estate brokerage firm selected by Tenant and which
     broker shall have at least ten (10) years experience dealing in properties
     of a nature and type generally similar to the Building located in the
     Boston Northwest Suburban Market, and (iii) explicitly state that Landlord
     is required to notify Tenant within ten (10) days of an additional broker
     selected by Landlord.

2.   Landlord's Response. Within ten (10) days after Landlord's receipt of
     Tenant's notice requesting the Broker Determination and stating the name of
     the broker selected by Tenant, Landlord shall give written notice to Tenant
     of Landlord's selection of a broker having at least the affiliation and
     experience referred to above ("Landlord's Broker").

3.   Selection of Third Broker. Within ten (10) days thereafter the two (2)
     brokers so selected shall select a third such broker also having at least
     the affiliation and experience referred to above (the "Third Broker").

4.   Rental Value Determination. Within thirty (30) days after the selection of
     the third broker, Landlord's Broker and Tenant's Broker shall each make a
     determination of the annual fair market rental value in as-is condition of
     the applicable space for the applicable period of time under this Lease.
     Such annual fair market rental value determination (i) may include
     provision for annual increases in rent during said term if so determined,
     (ii) shall take into account the as-is condition and location in the
     Building of the applicable space; (iii) shall take account of, and be
     expressed in relation to, the tax and operating cost bases and provisions
     for paying for so-called tenant electricity as contained in this Lease and
     (iv) shall take into account all other relevant factors.

     Landlord's Broker and Tenant's Broker shall each submit their individual
     determinations in writing to the Third Broker, and within thirty (30) days
     after its receipt of the two determinations, the Third Broker shall
     determine whether the proposed annual fair market rental value submitted by
     Landlord's Broker or by Tenant's Broker is closer to the actual prevailing
     market rent for the Premises (taking into account the requirements of
     Section 8.20 and this Exhibit H), and the individual determination thus
     selected by the Third

                                   Exhibit G


                                  Page 1 of 2



     Broker shall thereafter be referred to as the Prevailing Market Rent.

5.   Costs. Each party shall pay the costs and expenses of the broker selected
     by it and each shall pay one half (1/2) of the costs and expenses of the
     Third Broker.

6.   Failure to Select Broker or Failure of Broker to Serve. If Tenant shall
     have requested a Broker Determination and Landlord shall not have
     designated a broker within the time period provided therefor above, then
     Tenant's Broker shall request the Greater Boston Real Estate Board to
     designate Landlord's Broker. If Tenant's and Landlord's Brokers have been
     designated but the two brokers so designated do not, within a period of
     fifteen (15) days after the appointment of the second broker, agree upon
     and designate the Third Broker willing so to act, the Tenant, the Landlord
     or either broker previously designated may request the Greater Boston Real
     Estate Board, Inc. to designate the Third Broker willing so to act. In case
     of the inability or refusal to serve of any person designated as a broker,
     or in case any broker for any reason ceases to be such, a broker to fill
     such vacancy shall be appointed by the Tenant, the Landlord, the brokers
     first appointed or the said Greater Boston Real Estate Board, Inc., as the
     case may be, whichever made the original appointment, or if the person who
     made the original appointment fails to fill such vacancy, upon application
     of any broker who continues to act or by the Landlord or Tenant, such
     vacancy may be filled by the said Greater Boston Real Estate Board, Inc.
     Any broker appointed by the Greater Boston Real Estate Board, Inc.,
     pursuant to the provisions hereof shall, for all purposes, have the same
     standing and powers as though he had been originally appointed by the party
     originally designated to make such appointment by the terms hereof.

                                   Exhibit G


                                  Page 2 of 2



                                    EXHIBIT H

                            FORM OF LETTER OF CREDIT

BENEFICIARY:                            ISSUANCE DATE:

_____________________________________   ______________ 200___
_____________________________________   IRREVOCABLE STANDBY
_____________________________________   LETTER OF CREDIT NO. _______
_____________________________________

ACCOUNTEE/APPLICANT:                    MAXIMUM/AGGREGATE
                                        CREDIT AMOUNT: US$__________
____________________________            USD: _______________________

LADIES AND GENTLEMEN:

     We hereby establish our irrevocable letter of credit in your favor for
account of the applicant up to an aggregate amount not to exceed
______________________ and __/100 US Dollars (US $_______________________)
available by your draft(s) drawn on ourselves at sight accompanied by:

     Your statement, signed by a purportedly authorized officer/official
certifying that the Beneficiary is entitled to draw upon this Letter of Credit
(in the amount of the draft submitted herewith) pursuant to the Lease (the
"Lease") dated _______________ by and between ______________, as Landlord, and
____________________, as Tenant, together with the original copy of this Letter
of Credit and any amendments thereto which have been accepted by you.

     Draft(s) must indicate name and issuing bank and credit number and must be
presented at this office.

     You shall have the right to make partial draws against this Letter of
Credit, from time to time.

     This Letter of Credit is transferable at any time and from time to time
without cost to Beneficiary.

     Except as otherwise expressly stated herein, this Letter of Credit is
subject to the "Uniform Customs and practice for Documentary Credits,
International Chamber of Commerce, Publication No. 500 (1993 Revision)."

                                   Exhibit J


                                  Page 1 of 1



     This Letter of Credit shall expire at our office on _______ ____, 200_ (the
"Stated Expiration Date"). It is a condition of this Letter of Credit that the
Stated Expiration Date shall be deemed automatically extended without amendment
for successive one (1) year period s from such Stated Expiration Date, unless at
least forty-five (45) days prior to such Stated Expiration Date ) (or any
anniversary thereof) we shall notify you at the address specified in this Letter
of Credit (or at such other address of which you may have notified us in
writing) and the Accountee/Applicant in writing by registered mail (return
receipt) that we elect not to consider this Letter of Credit extended for any
such additional one (1) year period.

                                   Exhibit J


                                  Page 2 of 1



                                    EXHIBIT K

                      LEASE AUDIT CONFIDENTIALITY AGREEMENT

                                                      _______________ ___, 20___

     RE: LEASE DATED ______ (THE "LEASE") BETWEEN ___________ ("LANDLORD") AND
________ ("TENANT") RESPECTING CERTAIN PREMISES LOCATED AT _________ (THE
"PROPERTY") AS MORE PARTICULARLY DESCRIBED IN THE LEASE.

To whom it may concern:

     You have been engaged by Tenant to review the books and records of Landlord
respecting _________ operating expenses for the Property for calendar years
________ and/or ______ real estate taxes for fiscal years _______.

     Landlord is willing to allow you to review such books and records subject
to and in consideration of the terms and conditions set forth below:

     1.   All information made available to you pursuant to this letter, whether
          oral or written, shall be hereinafter referred to as the "Evaluation
          Material." All Evaluation Material provided to you shall remain the
          property of the Landlord. The Evaluation Material shall be handled by
          you in a confidential manner. You shall establish procedures that
          assure that such Evaluation Material shall remain confidential while
          in your possession.

     2.   The review of such books and records shall take place at Landlord's
          offices in Boston, Massachusetts during normal business hours. In no
          event shall any such audit be conducted on a contingency fee basis
          paid to you but shall be contracted and paid for on a fixed-fee basis.

     3.   The Evaluation Material shall be used only for the purpose of
          reviewing the operating expense charges and/or real estate taxes paid
          by Tenant pursuant to the Lease. To this end, you may disclose same to
          your partners, officers, directors and employees, provided, however,
          that you inform each partner, officer, director and employee who has
          access to the Evaluation Material of your obligations under this
          letter. The Evaluation Material may not be disclosed to any third
          party including, without limitation, any other tenant at the Property.

     4.   It is understood and agreed that money damages would not be sufficient
          remedy for any breach of this agreement and that Landlord shall be
          entitled to specific performance and injunctive or other equitable
          relief as a remedy for any such breach and you further agree to waive
          any requirement for the security or posting of any bond in connection
          with such remedy. Such remedy shall not be deemed

                                    Exhibit K


                                   Page 1 of 2



          to be the exclusive remedy for breach of this agreement but shall be
          in addition to all other remedies available at law or equity to the
          Landlord.

     5.   In the event of litigation relating to this agreement, if a court of
          competent jurisdiction determines in a final, non-appealable order
          that a party has breached this agreement, then such party shall be
          liable and pay to the non-breaching party the reasonable legal fees
          such non-breaching party has incurred in connection with such
          litigation, including any appeal therefrom.

     6.   You agree to indemnify, defend and hold the Landlord, its affiliates
          and agents (including Boston Properties, Inc. and its principals and
          affiliates), and their respective officers, directors, employees and
          representatives harmless, from and against any and all claims, causes
          of action, expenses, fees (including attorney's fees) arising out of
          your actual breach of the provisions of this letter as determined in
          appropriate legal proceedings. The Landlord's and Boston Properties,
          Inc.'s affiliates who have not executed this letter are acknowledged
          to be third party beneficiaries of the provisions hereof.

     7.   This letter sets forth the entire agreement of the parties with
          respect to the subject matter hereof and supersedes all prior
          understandings (whether written, verbal, implied or otherwise) with
          respect thereto. No term or condition of this letter may be waived or
          otherwise modified except by a writing executed by both parties.

     8.   This letter shall be governed by, and construed in accordance with,
          the laws of the Commonwealth of Massachusetts.

                                        Very truly yours,

                                        [Landlord]


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Its:
                                             -----------------------------------

AGREED TO BY:
[Audit Company]


By:
    ---------------------------------
Name:
      -------------------------------
Its:
     --------------------------------
Date:
      -------------------------------


AGREED TO BY:
[Tenant]


By:
    ---------------------------------
Name:
      -------------------------------
Its:
     --------------------------------
Date:
      -------------------------------

                                    Exhibit K


                                   Page 2 of 2



                                    EXHIBIT L

                                 NOTICE OF LEASE

     Notice is hereby given, pursuant to the provisions of Massachusetts General
Laws Chapter 183, Section 4, of the following Lease:

                                       
LANDLORD:                                 Boston Properties Limited Partnership,
                                          a Delaware limited partnership

TENANT:                                   iRobot Corporation, a Delaware
                                          corporation

DATE OF EXECUTION:                        February __, 2007

ORIGINAL TERM COMMENCEMENT DATE:          The earlier of (a) the Substantial
                                          Completion Date (as determined in
                                          accordance with Section 3.4(D) of the
                                          Lease), and (b) that date that Tenant
                                          commences occupancy of any portion of
                                          the Premises for the Permitted Uses.

DESCRIPTION OF LEASED PREMISES:           157,776 rentable square feet in the
                                          buildings designated as Building C,
                                          Building D and Building E situated at
                                          4-18 Crosby Drive, Bedford, MA and
                                          more particularly shown on Exhibit A
                                          to the Lease. For legal description of
                                          the property, see Exhibit A attached
                                          to this Notice of Lease.

ORIGINAL TERM:                            One Hundred Forty-Four (144) calendar
                                          months plus the partial month, if any,
                                          immediately following the Commencement
                                          Date.

EXTENSION RIGHTS:                         Two (2) consecutive options to extend
                                          the Original Term for an additional
                                          five (5) years each.

EXPANSION RIGHTS: BUILDINGS F, G AND H:   Tenant has certain rights of first
                                          offer to lease any available space in
                                          Buildings F, G and H at the Property,
                                          all as more particularly described in
                                          Section 8.28 of the Lease.

EXPANSION RIGHTS: BUILDINGS A AND B:      Tenant has certain rights of first
                                          refusal to lease any available space
                                          in Buildings A and B at the Property,
                                          all as more particularly described in
                                          Section 8.29 of the Lease.

RIGHTS TO USE LAND RECREATION SPACE:      Tenant has certain rights to use
                                          certain areas of the land and a
                                          portion of land adjacent to the
                                          Property, all as more particularly
                                          described in Section 8.27 of the
                                          Lease.



     The foregoing is a summary of certain terms of the Lease for purposes of
giving notice thereof,

                                    Exhibit L


                                   Page 1 of 5



and shall not be deemed to modify or amend the terms of the Lease. For
Landlord's title to the Property, see deeds recorded with the Middlesex South
District Registry of Deeds in Book 12926, Page 233 and in Book 13539, Page 732.

     Executed as a sealed instrument on this ____ day of February, 2007.

                                          LANDLORD:

                                          BOSTON PROPERTIES LIMITED PARTNERSHIP


                                          By:
                                              ----------------------------------
                                          Name:
                                                --------------------------------
                                          Title:
                                                 -------------------------------


                                          TENANT:

                                          iROBOT CORPORATION


                                          By:
                                              ----------------------------------
                                          Name:
                                                --------------------------------
                                          Title:
                                                 -------------------------------

                                    Exhibit L


                                   Page 2 of 5



COMMONWEALTH OF MASSACHUSETTS )
                              )
COUNTY OF ___________________ )

     On this ___ day of February, 2007, before me, the undersigned notary
public, personally appeared ________________________, proved to me through
satisfactory evidence of identification, which were
_____________________________________, to be the person whose name is signed on
the preceding or attached document and acknowledged to me that (he)(she) signed
it voluntarily for its stated purpose, as __________________________ for Boston
Properties Limited Partnership,


                                         ---------------------------------------
                                         (Official Signature and Seal of Notary)
                                         My Commission Expires:

COMMONWEALTH OF MASSACHUSETTS )
                              )
COUNTY OF ___________________ )

     On this ___ day of February, 2007, before me, the undersigned notary
public, personally appeared ________________________, proved to me through
satisfactory evidence of identification, which were
_____________________________________, to be the person whose name is signed on
the preceding or attached document and acknowledged to me that (he)(she) signed
it voluntarily for its stated purpose, as __________________________ for iRobot
Corporation,


                                         ---------------------------------------
                                         (Official Signature and Seal of Notary)
                                         My Commission Expires:

                                    Exhibit L


                                   Page 3 of 5


                                    EXHIBIT A
                          LEGAL DESCRIPTION OF PROPERTY

Those certain parcels of land (with the buildings thereon) situated in Bedford,
Middlesex County, Massachusetts bounded and described as follows:

PARCELS 1 and 2

Two certain parcels of land situated in Bedford, Middlesex County,
Massachusetts, shown as Lot 1 and 2 on a plan entitled "Plan of Land in Bedford,
Mass." dated March 1, 1962 by Raymond C. Pressey, Inc., recorded with Middlesex
South District Deeds as Plan No. 487 of 1962 in Book 10022, Page 278, and
together bound and described as follows:

             
SOUTHWESTERLY   by Crosby Road by three lines measuring respectively two hundred
                eighty-three and 01/100 (283.01) feet, twenty-one and 27/100
                (21.27) feet and four hundred eighty-three and 43/100 (483.43)
                feet; thence

SOUTHERLY       by said Crosby Road by a curved line, one hundred nineteen and
                36/100 (119.36) feet; thence

SOUTHEASTERLY
SOUTHERLY and
SOUTHWESTERLY   by said Crosby Road by several lines measuring respectively two
                hundred ninety-three and 04/100 (293.04) feet, three hundred
                fifty-three and 04/100 (353.04) feet and two hundred twenty and
                97/100 (220.97) feet; thence

NORTHEASTERLY   by the parcel marked "Reserved for Town of Bedford" on said
                plan, sixteen hundred forty-six and 81/100 (1646.81) feet; and
                thence

NORTHWESTERLY   by land now or late of The Worcester Corp., by two lines
                measuring respectively 305.23 feet and 294.24 feet and by land
                now or late of Douglas by two lines measuring respectively
                170.33 feet and 64.34 feet, to the place of beginning.



For Title see Deed recorded with the Middlesex South District Registry of Deeds
in Book 12926, Page 233.

PARCEL 3

A certain parcel of land situated in said Bedford, shown on a plan of land in
Bedford, Mass. Dated June 5, 1961 by Raymond C. Pressey, Inc., Registered Land
Surveyors, recorded with Middlesex South District Registry of Deeds at the end
of Book 9844, bounded and described as follows:

                                    Exhibit L


                                   Page 4 of 5



             
SOUTHWESTERLY   by Crosby Road, two hundred ninety-eight and 63/100 (298.63)
                feet;

NORTHWESTERLY   by land now or formerly of the Worcester Corporation, two
                hundred nine and 95/100 (209.95) feet;

NORTHEASTERLY   by land now or formerly of the Worcester Corporation, two
                hundred fifty and 57/100 (250.57) feet; and

SOUTHEASTERLY   by land now or formerly of Sinbad Realty Corporation by two
                lines respectively measuring one hundred seventy and 33/100
                (170.33) feet and sixty-four and 34/100 (64.34) feet.



Containing approximately 60,951 square feet of 1.4 acres according to said plan.

For Title see Deed from Cecil N. Douglas and Priscilla M. Douglas recorded with
the Middlesex South District Registry of Deeds in Book 13539, Page 732.

PARCEL 4

All right, title and interest in and to (i) that portion of Crosby Road
described in that certain Deed (a) recorded with the Middlesex South District
Registry of Deeds in Book 14013, Page 486 and (b) filed with the Middlesex South
Registry District of the Land Court as Document No. 599584 as to which
Certificate of Title No. 161163 in Registration Book 936, Page 13 was issued;
and (ii) such other applicable portions of Crosby Road abutting the westerly
boundaries of Parcels 1, 2 and 3.

Parcels 1, 2, 3 and 4 are subject to and together with the benefit of easements,
agreements restrictions, rights of way and takings of record at said Registry of
Deeds and Registry District if and to the extent in force and applicable.

                                    Exhibit L


                                   Page 5 of 5



                                    EXHIBIT M

                        CURRENT MORTGAGEE'S FORM OF SNDA

             SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT

     THIS AGREEMENT is made and entered into as of the ____day of __________
2007, by and among IROBOT CORPORATION, a Delaware corporation ("Tenant"), whose
principal address is 63 South Avenue, Burlington, Massachusetts 01803, and NEW
YORK LIFE INSURANCE COMPANY, a New York mutual insurance company ("Lender"),
whose principal address is 51 Madison Avenue, New York, New York 10010, and
BOSTON PROPERTIES LIMITED PARTNERSHIP, a Delaware limited partnership
("Borrower"), whose address is 111 Huntington Avenue, Suite 300, Boston,
Massachusetts 02199.

                                    RECITALS:

     A. Lender has agreed to make a mortgage loan (the "Loan") to Borrower in
the amount of $______ to be secured by, among other things, a mortgage [or deed
of trust] (the "Mortgage") on the real property legally described in Exhibit "A"
attached hereto (the "Premises");

     B. Tenant is the present lessee under a lease dated ______, 2007 made by
Boston Properties Limited Partnership, ("Landlord"), demising a portion of the
Premises (said lease and all amendments now or hereafter executed with respect
thereto being referred to as the "Lease");

     C. The Loan terms require that Tenant subordinate the Lease and its
interest in the Premises in all respects to the lien of the Mortgage and that
Tenant attorn to Lender; and

     D. In return, Lender is agreeable to not disturbing Tenant's possession of
the portion of the Premises covered by the Lease (the "Demised Premises"), so
long as Tenant is not in default under the Lease.

     NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:

                                   AGREEMENTS:

     1. Subordination. The Lease, and the rights of Tenant in, to and under the
Lease and the Demised Premises are hereby subjected and subordinated to the lien
of the Mortgage and to any modification, reinstatement, extension, renewal,
supplement, consolidation or replacement thereof as well as any advances or
re-advances with interest thereon and to any other mortgages or deeds of trust
on the Premises which may hereafter be held by Lender.

     2. Tenant Not to Be Disturbed. In the event it should become necessary to
foreclose the Mortgage or Lender should otherwise come into possession of title
to the Premises, Lender will not

                                    Exhibit M


                                   Page 1 of 8



join Tenant in summary or foreclosure proceedings unless required by law in
order to obtain jurisdiction, but in such event no judgment foreclosing the
Lease will be sought, and Lender will not disturb the use and occupancy of
Tenant under the Lease so long as Tenant is not in default under the Lease
beyond applicable notice and cure periods provided for therein, and the sale of
the Premises in any such action or proceeding shall be made subject to all
rights of Tenant set forth in the Lease.

     3. Tenant to Attorn to Lender. Tenant agrees that in the event of a
foreclosure of the Mortgage or upon a transfer of the Premises pursuant to a
deed in lieu of foreclosure, it will attorn to the purchaser (including Lender)
as the landlord under the Lease. The purchaser by virtue of such foreclosure or
deed in lieu of foreclosure shall be deemed to have assumed and agreed to be
bound, as substitute landlord, by the terms and conditions of the Lease until
the resale or other disposition of its interest by such purchaser, except that
such assumption shall not be deemed of itself an acknowledgment by such
purchaser of the validity of any then existing claims of Tenant against any
prior landlord (including Landlord). All rights and obligations under the Lease
shall continue as though such foreclosure proceedings had not been brought,
except as aforesaid. Tenant agrees to execute and deliver to any such purchaser
such further assurance and other documents, including a new lease upon the same
terms and conditions of the Lease, confirming the foregoing as such purchaser
may reasonably request. Tenant waives the provisions (i) contained in the Lease
or any other agreement relating thereto and (ii) of any statute or rule of law
now or hereafter in effect which may give or purport to give it any right or
election to terminate or otherwise adversely affect the Lease and the
obligations of Tenant thereunder by reason of any foreclosure proceeding.

     4. Limitations. Notwithstanding the foregoing, neither Lender nor such
other purchaser shall in any event be:

     (a)  liable for any act or omission of any prior landlord (including
          Landlord), except to the extent any such act or omission of which
          Tenant has notified Lender or purchaser constitutes a continuing
          default under the Lease after Lender or purchaser has accepted title
          to the Premises;

     (b)  obligated to cure any defaults of any prior landlord (including
          Landlord) which occurred prior to the time that Lender or such other
          purchaser succeeded to the interest of such prior landlord under the
          Lease, except to the extent Tenant has notified Lender or purchaser of
          such default and the same constitutes a continuing default under the
          Lease after Lender or purchaser has accepted title to the Premises;

     (c)  subject to any offsets or defenses which Tenant may be entitled to
          assert against any prior landlord (including Landlord), except to the
          extent such offsets or defenses arise out of any breach of the Lease
          to the extent such breach continues after the date Lender or such
          purchaser has accepted title to the Premises and Lender has been
          notified of the same;

     (d)  bound by any payment of rent or additional rent by Tenant to any prior
          landlord (including Landlord) for more than one month in advance;

                                    Exhibit M


                                   Page 2 of 8



     (e)  bound by any amendment or modification of the Lease made without the
          written consent of Lender or such other purchaser, provided, however,
          Lender's or purchaser's consent shall not be required for amendments
          or modifications that are made in connection with Tenant's exercise of
          its rights under Section 8.20, Section 8.28 and/or Section 8.29 of the
          Lease; or

     (f)  liable or responsible for, or with respect to, the retention,
          application and/or return to Tenant of any security deposit paid to
          any prior landlord (including Landlord), whether or not still held by
          such prior landlord, unless and until Lender or such other purchaser
          has actually received for its own account as landlord the full amount
          of such security deposit.

     5. Acknowledgment of Assignment of Lease and Rent. Tenant acknowledges that
it has notice that the Lease and the rent and all other sums due thereunder have
been assigned or are to be assigned to Lender as security for the Loan secured
by the Mortgage. In the event that Lender notifies Tenant of a default under the
Mortgage and demands that Tenant pay its rent and all other sums due under the
Lease to Lender, Tenant agrees that it will honor such demand and pay its rent
and all other sums due under the Lease directly to Lender or as otherwise
required pursuant to such notice. By its execution hereof, Borrower expressly
consents to the foregoing.

     6. Limited Liability. Tenant acknowledges that in all events, the liability
of Lender and any purchaser shall be limited and restricted to their interest in
the Premises (including the rents, proceeds and other income therefrom) and
shall in no event exceed such interest.

     7. Lender's Right to Notice of Default and Option to Cure. Tenant will give
written notice to Lender of any default by Landlord under the Lease by mailing a
copy of the same by certified mail, postage prepaid, addressed as follows (or to
such other address as may be specified from time to time by Lender to Tenant):

To Lender: NEW YORK LIFE INSURANCE COMPANY
           c/o New York Life Investment Management LLC
           51 Madison Avenue
           New York, New York 10010-1603
           Attn: Real Estate Group
           Director - Loan Administration Division
           Loan No.: 372-0055

Upon such notice, Lender shall be permitted and shall have the option, in its
sole and absolute discretion, to cure any such default during the period of time
during which the Landlord would be permitted to cure such default, but in any
event Lender shall have a period of thirty (30) days after the receipt of such
notification to cure such default; provided, however, that if such default does
not prevent the continued operation of Tenant's business at the Demised
Premises, Lender may have a period of not more than one hundred eighty (180)
days to effectuate such cure. Notices to Tenant shall be sent to Tenant pursuant
to the terms of the Lease.

     8. Successors and Assigns. The provisions of this Agreement are binding
upon and shall

                                    Exhibit M


                                   Page 3 of 8



inure to the benefit of the heirs, successors and assigns of the parties hereof.

     9. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.

     10. Governing Law. This Agreement shall be construed and enforced according
to the law of the state in which the Premises are located, other than such law
with respect to conflicts of law.

     IN WITNESS WHEREOF, the parties hereto have executed these presents as of
the day and year first above written.

                           [SIGNATURE PAGES TO FOLLOW]

                                    Exhibit M


                                   Page 4 of 8



                                        TENANT

                                        IROBOT CORPORATION
                                        (Printed Name of Tenant)
                                        a Delaware corporation


                                        By:
                                            -----------------------------------
                                        (Signature)

                                        ---------------------------------------
                                        (Printed Name of Signatory)

                                        Its:
                                        ---------------------------------------
                                        (Title)

COMMONWEALTH OF MASSACHUSETTS )
                              )
COUNTY OF ________________    )

     On this ___ day of _____________, 200__, before me, the undersigned notary
public, personally appeared ________________________, proved to me through
satisfactory evidence of identification, consisting of ________________________,
to be the person whose name is signed on the preceding or attached document and
acknowledged to me that (he)(she) signed it voluntarily for its stated purpose,
as __________________________ for _______________________________,


                                        ----------------------------------------
                                        (Official Signature and Seal of Notary)
                                        My Commission Expires:

                                    Exhibit M


                                   Page 5 of 8



                                        LENDER

                                        NEW YORK LIFE INSURANCE COMPANY,  a
                                        New York mutual insurance company


                                        By:
                                            ------------------------------------
                                        (Signature)

                                        ----------------------------------------
                                        (Printed Name)

                                        Its:

                                        ----------------------------------------
                                        (Title)

STATE OF _______________ )
                         ) SS:
COUNTY OF ______________ )

                     [ADD STATE APPROPRIATE ACKNOWLEDGMENT]

                                    Exhibit M


                                   Page 6 of 8



The terms of the above Agreement are hereby consented, agreed to and
acknowledged.

                                        BORROWER

                                        ----------------------------------------
                                        (Printed Name of Borrower)
                                        a
                                          --------------------------------------


                                        By:
                                            ------------------------------------
                                        (Signature)

                                        ----------------------------------------
                                        (Printed Name of Signatory)

                                        Its:
                                             -----------------------------------

                                        ----------------------------------------
                                        (Title)

COMMONWEALTH OF MASSACHUSETTS )
                              )
COUNTY OF ___________________ )

     On this ___ day of _____________, 200__, before me, the undersigned notary
public, personally appeared ________________________, proved to me through
satisfactory evidence of identification, consisting of ________________________,
to be the person whose name is signed on the preceding or attached document and
acknowledged to me that (he)(she) signed it voluntarily for its stated purpose,
as __________________________ for __________________________,


                                        ----------------------------------------
                                        (Official Signature and Seal of Notary)
                                        My Commission Expires:

                                    Exhibit M


                                   Page 7 of 8



THIS INSTRUMENT WAS PREPARED BY AND
WHEN RECORDED SHOULD BE RETURNED TO:

_______________________, ESQ.
NEW YORK LIFE INSURANCE COMPANY
OFFICE OF THE GENERAL COUNSEL
51 MADISON AVENUE
NEW YORK, NEW YORK 10010

                                    Exhibit M


                                   Page 8 of 8



                                    EXHIBIT N

                         FORM OF LANDLORD'S LIEN WAIVER

Re:  Lease dated _______________ __, 20__ by and between ____________________,
     as landlord ("Landlord") and _____________________________, as tenant
     ("Tenant") respecting certain premises (the "Premises") containing
     approximately ______ square feet of rentable floor area in the building
     known as and numbered ______________________ ___________________________
     (the "Lease").

     FOR VALUABLE CONSIDERATION, the Landlord hereby waives all claims against
or liens upon the personal property owned by Tenant and the proceeds therefrom
(and replacements, substitutions and additions for or to the foregoing)
installed or to be installed in the Premises in which
___________________________ (the "Bank"), its successors or assigns now or
hereafter holds a security interest other than additions, alterations or
improvements which are the property of the Landlord or shall remain in the
Premises upon the expiration or earlier termination of the Lease term pursuant
to the terms of the Lease (the "Collateral"), until such time as the earlier of
the following occurs: (i) all moneys due the Bank by the Tenant shall have been
paid in full or (ii) fourteen (14) days after Tenant is no longer in lawful
possession of the Premises. Notwithstanding the foregoing, Landlord does not
waive, relinquish or modify (i) any and all claims for rent and additional rent
under the Lease or (ii) any obligations on the part of the Tenant to be
performed under the Lease.

     Until the date which is fourteen (14) days after Tenant is no longer in
lawful possession of the Premises, Landlord agrees to interpose no objections to
the entry by the Bank, its successors and assigns, upon the Premises for the
purpose of removing and/or liquidating the Collateral in the event of default by
the Tenant in its obligations to the Bank, provided that (a) the Bank restores
any walls, windows, doors, partitions, roofs, floors or other parts of the
Premises damaged by it in the course of removal, to their condition at the time
of the Bank's entry into the Premises, (b) said entry is made during normal
business hours with prior written notice to Landlord and (c) no sale or viewing
of the Collateral shall take place on the Premises.

     SIGNED and SEALED on behalf of the successors and assigns of the
undersigned this ____ day of _________, 1997.

                                        LANDLORD:


                                        By:
                                            ------------------------------------

Tenant hereby consents to and agrees to be bound by the terms set forth herein.


By:
    ---------------------------------
Name:
      -------------------------------
Title:
       ------------------------------
Date:
      -------------------------------

                                    Exhibit O


                                   Page 1 of 3

EX-23.1

                                                                    EXHIBIT 23.1


            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-129576) of iRobot Corporation of our report dated
February 28, 2007 relating to the financial statements, management's assessment
of the effectiveness of internal control over financial reporting and the
effectiveness of internal control over financial reporting, which appears in
this Form 10-K.


/s/ PricewaterhouseCoopers

PricewaterhouseCoopers LLP
Boston, Massachusetts
February 28, 2007

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Colin M. Angle, certify that:

1.	I have reviewed this annual report on Form 10-K of iRobot Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 2, 2007

/s/ Colin M. Angle  

Colin M. Angle 

Chief Executive Officer 

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Geoffrey P. Clear, certify that:

1.	I have reviewed this annual report on Form 10-K of iRobot Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 2, 2007

/s/ Geoffrey P. Clear  

Geoffrey P. Clear 

Chief Financial Officer 

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report on Form 10-K of iRobot Corporation (the “Company”) for the year ended December 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we Colin M. Angle, the Chief Executive Officer of the Company and Geoffrey P. Clear, the Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to our knowledge that:

1.	the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and
2.	the information in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

This certification is being provided pursuant to 18 U.S.C. 1350 and is not to be deemed a part of the Report, nor is it to be deemed to be “filed” for any purpose whatsoever.

Dated: March 2, 2007	/s/ Colin M. Angle
	Colin M. Angle
	Chief Executive Officer
Dated: March 2, 2007	/s/ Geoffrey P. Clear
	Geoffrey P. Clear
	Chief Financial Officer